The City of Claremore submitted this information in response to frequently asked questions pertaining to power cost adjustment pricing adjustments.
Why have there been changes to my electric bill?
The City of Claremore purchases electric through an electric wholesaler. In the fall of 2018, our wholesale partner began the process of restructuring billing procedures. Due to the Power Cost Adjustments (PCA) ordinance and the City of Claremore being in the middle of a cost of service study, the City was unable to change internal accounting practices to account for the shift in procedures. Therefore, electric customers received higher PCA charges on their electric bill. These will be returned in the form of a credit and through an electric improvement fund.
On September 23, 2019, the Claremore City Council approved amendments to the ordinance allowing the city to make administrative changes to our billing practices.
What is PCA and why does it fluctuate?
PCA is Power Cost Adjustment and is a line item on your statement each month. The PCA reflects the increases and decreases in the cost of power production. The PCA changes because the price of fuel used to generate electricity can change just like any other stock or commodity on the market.
How did wholesale pricing change?
Our wholesale power provider changed the way they allocated PCA costs. While PCA costs increased, there is a reduction in the cost of energy charge to offset these changes, meaning there will be a net zero effect to customers.
How will the new ordinance affect electricity rates?
The first step was to amend the existing ordinance allowing the City Manager to make an administrative change to internal billing practices for situations such as this, and for this amendment to have an emergency clause effective immediately - prior to the October billing cycle. On September 23, the City Council approved an amendment to the City of Claremore Code, Title V, Chapter 50 by adding Section 50.06A pertaining to the modification of the power cost adjustment by the City Manager.
The new ordinance will allow Claremore to adjust rates to respond to billing changes by the wholesale provider. Administrative changes to billing practices will be subject to City Council approval.
What was the average impact to households?
While the costs for each individual household varies based on usage rates, the average residential household impact was less than $90 for the five-month period.
Will the electric customers receive a credit for the PCA charges?
Yes, there will be a credit and improvements to the electric infrastructure.
The City of Claremore operates its fiscal year (the timeframe for financial reporting and budgeting) from July 1 to June 30. According to an analysis completed by the City of Claremore, an additional $1.2 million was collected during the current fiscal year in July through September of 2019 and will be returned to customers in the form of a credit. Customers will not be charged a PCA fee until the new rate structure is in place. There will be a credit on the PCA for the months of October and November. An additional $1.2 million will be put into an electricity improvement fund for previous fiscal year collections that occurred April through June of 2019. Due to Oklahoma constitutional provisions, funds from a previous fiscal year are prohibited from being returned and will be earmarked for improvements to the electricity infrastructure serving customers.
When will I receive a credit?
PCA charges collected during fiscal year 2020 (our current fiscal year) during July through September of 2019 will be returned to customers in the form of a credit. Customers will not be charged a PCA fee until the new rate structure is in place and the remaining credit will occur in October and November based on average usage. The City of Claremore is in the process of conducting a comprehensive cost of service study, which will determine the new rate structure.
What improvements are going to be made?
The funds collected in April through June of 2019 during the previous fiscal year of 2019 (the 2019 fiscal year ended June 30, 2019) will be used for electric infrastructure improvements such as transformer replacements and power line improvements. These enhancements will improve the delivery and efficiency of electricity to customers.
Why weren’t these ordinances changed earlier?
The cost of service study was originally scheduled to be completed in early Summer of 2019. To avoid implementing two ordinance changes in a very short period of time, the City opted to wait for the completion of the cost of service study to address the rate changes in one action. However, the completion of the study has been delayed due to the amount and complexity of the data. We expect the full results in the near future.
How can a situation such as this be prevented in the future?
By amending the PCA ordinance, through a vote of the City Council, the City Manager can make the needed changes to internal billing practices to ensure this does not occur again.