Utilities work hard to avoid price volatility; in fact that effort is one of the main drivers of how the economic structure of the electric market is designed.
There are a number of tools they use to hedge against large price fluctuations. One of them is built around the term dealt with in fuel contracts. The spot market for a given fuel might be high or low at any given time, but the way those spot market prices are determined is affected by the amount of the resource that is already sold to meet contracts that might have been signed years ago. The long term contract works well to hedge against price increases, but it obviously exposes the buyer to risk if the price of the commodity declines, like gas has done. This leads the buyer to purchase some of their fuel on the spot market. Usually though, most of their fuel will have been purchased last month, last year or even during the last decade.
Another approach is the 'fuel surcharge' that many utilities use. That is approved by the regulator and is determined by a baseline formula. The results appear as a line item on the customer's electric bill and will track the changes in fuel costs from the baseline.
Fla. PSC denies Gulf Power nuclear plan rate hike
TALLAHASSEE, Fla. — Florida regulators again have denied Gulf Power Co.'s request to increase rates for acquisition and evaluation of a possible nuclear power plant site.
The Public Service Commission originally declined in February to include those costs in the Pensacola-based utility's base rate. The panel on Tuesday in Tallahassee rejected Gulf's request to reconsider that decision. Gulf Power is a unit of Southern Co.
The plant costs would have added about 20 cents to a typical residential customer's monthly bill.
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Since then, the PSC has cut Gulf's fuel cost fee, reducing a typical monthly bill by $9.92 to $116.61.
http://www.cbsnews.com/8301-505245_162-57474023/fla-psc-denies-gulf-power-nuclear-plan-rate-hike/
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