The electric utility industry possesses its own set of acronyms, PCRF is one of those. PCRF is an acronym for Power Cost Recovery Factor and it is something HILCO Electric Cooperative deals with on a monthly basis. The PCRF is the rate component, on all electric bills, that is a direct reflection of the fluctuating cost of fuel required to run an electric generation plant.
Since HILCO is a distribution cooperative, we purchase our wholesale power from a generation company, Brazos Electric Power Cooperative. Brazos generates approximately 84% of its electricity and purchases the remaining amount needed to meet its demand.
When fuel prices rise, it costs Brazos more to produce electricity and those costs are passed through to HILCO and its members by an increase in the PCRF. So while HILCO's rate for the price of electricity has not changed, members will pay more with an increased PCRF.
One way to think about PCRF is to compare it to the cost of gasoline for your car. Even though your monthly car payment (the rate) hasn't gone up, the car you drive is costing more to operate now because just as fuel prices have risen, for generated electricity, so have gasoline prices at the pump (the PCRF).
Increases in fuel prices do not just affect HILCO or Brazos - nearly every electric utility in the nation is facing this same issue. The demand for electric generation continues to increase. As we all know, with demand high and supplies lower, the price is going to rise.
To minimize the impact of this charge on our members, every attempt is made to "level" the PCRF monthly, rather than to pass on the sometime extreme monthly fluctuations from our wholesale supplier. However, significant changes in fuel charges may make it necessary to adjust the PCRF more dramatically.
The main advantage of monthly changes in the PCRF is that it is more responsive to changes in fuel costs. If fuel costs go down our members are not stuck with a higher cost indefinitely. Investor owned utilities, such as TXU, can only make rate adjustments for changes in fuel costs twice annually and must gain approval from the Public Utility Commission of Texas to do so. This means their fuel cost adjustments may remain higher for their customers for an indefinite period of time and no one knows for certain when or if fuel prices will decrease from their current levels.