Independence utility fuel charge

By Mike Genet
The Examiner

Independence Power & Light told utility customers this week that February’s cold snap will lead to a slightly higher bill for about six months starting in April.

That bout of cold weather, which affected more than half the country for a few days, led to unprecedented power usage and short, rolling blackouts to avoid large-scale failure from a strained power grid. It also caused fuel and power costs to spike across the Central Plains and much of the country, with some supplies temporarily unavailable.

To recover these costs, IPL says, customers will see an increase of $9 to $10 in the fuel-cost-adjustment portion of their bill for several months.

The fuel-cost adjustment is a normal industrywide practice and has been part of Independence’s rate schedules since the 1970s, IPL Director Jim Nail said. The base electric rates are set using assumed fuel costs based on industry projections. The adjustment applies to any cost (or, in some cases, savings) compared with the projected cost and is part of the regular bill.

In a normal month, IPL said in its message to customers, the utility spends about $2 million to $3 million on power and fuel. After February’s cold spell, the bill for that month was $11 million. Some utilities have passed along that cost in one bill, while IPL is mirroring the approach of some others and is spreading it out over several bills. 

Over the past year, the IPL’s fuel-adjustment charge has averaged about 2.5 cents per kilowatt hour, varying a few tenths of a cent from month to month, Nail said. For an average customer bill using 600 kwh, that means about $15 per month.

“The extraordinary costs of the winter storm would result in a much higher adjustment,” Nail said, and IPL chose to limit that adjustment to about 1.5 cents higher than average. For the average customer bill, that equates to $9 to $10 per month.

Independence had to implement some rolling blackouts in February because of its membership with the Southwest Power Pool, the wholesale power broker that includes utilities across the central plains. SPP schedules the most cost-effective power units to cover the varying day-to-day needs. IPL’s combustion turbines have served as peaking units, and as an old, peaking unit, the since-shuttered Blue Valley Power Plant was called upon infrequently.

If IPL was a standalone utility, Nail explained, it would be subject to market power rates outside of its own generation. In February, those market rates soared, and natural gas, which had powered Blue Valley’s boilers, briefly spiked to more than 100 times its normal cost. As such, IPL’s costs likely would have been “substantially higher” than they were with SPP, he said.

Around the same time as the cold spell, the Independence City Council had voted to use excess reserve funds in IPL to repay some bonds early – saving millions of dollars in interest over the long term – and provide electric utility customers a $193 credit. Since the fuel-cost adjustment is part of normal billing, to use that excess reserve to absorb a fuel spike cost, Nail said, would be an “extraordinary measure” and not part of normal business practices.

Utility customers with questions about their bill or who wish to set up a payment arrangement should call 816-325-7930 during normal business hours. The lobby of the Independence Utilities Center at R.D. Mize Road and 23rd Street is open 8 a.m.-5 p.m. Mondays, Tuesdays and Thursdays, with expanded hours starting later in April.