Seasonal Rate Structure
TVA's wholesale rate change, which includes a time-of-use structure, was implemented in April 2011. At that time, Appalachian Electric Cooperatives's wholesale power bill from TVA will consist of a peak demand component and on-peak and off-peak energy billing on all kilowatt-hours that we purchase. A separate component representing TVA's actual fuel cost to generate electricity will continue to change monthly, as it does now, and will also be part of the monthly wholesale bill. Keep in mind that the wholesale power cost that AEC pays to TVA amounts to nearly 80 percent of your monthly electric bill, and yes, as individuals, we can make an impact on that portion of our electric bill.
During the summer months of June through September, hot temperatures necessitate generation plants to run at their highest limits. This is the most costly period of time for the generation of electricity. In these four summer months, weekday afternoon hours between 1 and 9 p.m. are even more critical and costly. Beginning in these summer months of 2011, AEC will pay TVA a higher price per kilowatt-hour used during the projected on-peak hours from 1 to 9 p.m. The four winter months of December through March, although not as critical as the four summer months, will also have a higher on-peak price per kilowatt-hour from 5 through 11 a.m. each weekday morning. The transition months of October, November, April and May, when capacity for electricity generation is in excess, will be priced at a lower rate than the summer and winter months.
Cost and quantity of fuel, particularly coal and natural gas, during the high-use months also play a role in our higher electric bills. Please realize the economic theory of supply and demand and understand the price impact that this fuel has on our electric rates. Therefore, the TVA monthly fuel cost impact to our electric bills, because of its higher price and greater fuel demand, will typically be greater in the summer months than any other time of the year.
Now this brings up two questions. First, what can (or should) we do about the situation? We have to learn that we must not only use electricity wisely, but we must consider the impact we have on the price of electricity during the peak or critical hours of the day, particularly during the summer months. Initially, each of us can adjust our thermostats up a couple of degrees during the on-peak afternoon hours and even wait until after 9 p.m. to take our showers. Better yet, invest in a smart thermostat and a timer for your hot water heater. Paying attention to the little things that are using electricity during the peak hours will also help. Secondly, when will AEC start billing us on time-of-use rates (Retail), where the on-peak rate is three to four times higher than the off-peak rate? Effective April 2011, AEC members will see the impact of TVA's rate change through retail rates that reflect the seasonal price changes over the three categories of months already discussed. It is still unknown when (or if) the time-of-use retail rates would be mandatory in the future. There are many other parts of the country where time-of-use rates are already in effect and are mandatory to the ratepayers. Regardless of when or how the time-of-use rates are developed, the time for education is now. Using off-peak electricity will become more important than ever as time goes on. We will keep you informed as changes occur via this website and our quarterly section of The Tennessee Magazine.