Southwestern Electric Power Co. (SWEPCO) announced Tuesday (Sept. 27) a rate hike for its Arkansas customers that will increase their bills by about $12 per month amid the rising cost of natural gas. It’s the second rate rise for customers announced in the past four months.
According to a news release, the hike that will start with October bills and remain in effect through March 2023 is expected to help recover “higher-than-expected fuel costs during the summer months.”
On Sept. 21, SWEPCO filed an adjustment to the energy cost recovery rate with the Arkansas Public Service Commission (PSC) that will change the fuel factor rate from $0.037 to $0.064. In the PSC filing, the company said its “under recovery” loss between January and August was $44.623 million.
The release shows that lower customer base rates for the winter period starting in October will help to mitigate the overall impact on customers. SWEPCO residential customers in Arkansas using 1,000 kilowatt-hours can expect an increase of about $12.05 monthly. The impact of the new rates varies by rate class and usage characteristics for commercial, industrial, municipal and lighting rate classes.
The energy cost recovery rate is typically set in the spring using a 12-month market forecast for the cost to purchase fuel used to generate electricity. SWEPCO can request adjustments throughout the year if the cost of fuel is significantly higher or lower than the annual rate set for customers. According to the release, the cost of natural gas, which is a key driver impacting customers’ bills based on normal usage, has been two to three times higher compared to last summer. The cost to purchase fuel is passed through to Arkansas customers with no profit to the company. Natural gas accounts for 39% of SWEPCO’s generation mix, with coal and lignite accounting for up to 40% and wind comprising the remaining 21%.
“While we cannot prevent increases in fuel costs, we are continuing our commitment to adding renewable energy to help reduce our reliance on purchasing fuel to generate electricity,” said Malcolm Smoak, SWEPCO president and chief operating officer. “As we increase our generation mix to include more wind and solar energy, we can help offset the cost to purchase fuel and ultimately provide savings to our customers.”
The company has plans for more than one-third of its capacity to comprise wind and solar resources. In March, the North Central Energy Facilities began operating in Oklahoma and provides 268 megawatts to SWEPCO customers in Arkansas. The company recently announced plans to add 1,071 megawatts of wind and solar energy. These projects are expected to start operating in 2025.
The rate increase follows an approval in June 2022 from the Arkansas Public Service Commission for a $13.02 per month increase for customers using 1,000 kilowatt-hours (kWh). That increase was part of a base rate increase request and an interim fuel adjustment for the 2021 winter storm fuel recovery cost.
SWEPCO, a subsidiary of Columbus, Ohio-based American Electric Power (AEP), has more than 543,000 customers in three states, including Arkansas. On July 27, AEP reported that second-quarter net income fell to $524.5 million, from $578.2 million in the same period in 2021. Revenue rose to $4.6 billion, from $3.8 billion.