Fuel Adjustment Clause Q&A

What is the Fuel Adjustment Clause?

The Fuel Adjustment Clause (FAC) is a mechanism established by Missouri legislation in response to the highly volatile prices of fuels needed to generate electricity. These fuel costs include natural gas, coal and associated freight costs, as well as purchased power costs. The FAC is a rate adjustment to reflect increases or decreases in fuel costs, allowing customers to benefit immediately from lower market prices, or be asked to pay higher than anticipated fuel costs. In the past such costs were included in a rate case that normally takes 11 months to complete. Aquila received Missouri Public Service Commission (MPSC) approval in its most recent rate case in June 2007 to implement an FAC.

How does the FAC work?

Aquila tracks its fuel-related costs and on a six-month basis calculates whether these actual costs are higher or lower than those set in its most recent rate case in June 2007. If there is a variance, Aquila must file with the MPSC to add or credit those costs to customers' bills.

How often will Aquila file for an FAC adjustment?

Aquila is required to file its fuel costs with the MPSC at least once annually. If the company's actual fuel costs are the same as the amount allowed in current rates, the company would not request any change. If the actual fuel costs are higher, Aquila will request an FAC increase, and if fuel costs are lower, Aquila will request an FAC decrease.

When was the current FAC increase effective and how much is it?

Aquila received MPSC approval for an FAC increase effective March 1, 2008, based on fuel costs from June 1, 2007 through Nov. 30, 2007. The increase is $0.0020 per kWh for customers in the Missouri Public Service territory (principally southwest Missouri) and $0.0015 for customers in the St. Joseph Light & Power territory (northwest Missouri).

How much is the current FAC increase for residential customers?

For the typical residential customer using 1,000 kWh per month in the MPS territory, the monthly increase is approximately $2.00 a month; for customers in the L&P territory, the monthly increase is about $1.50.

How much is the current FAC increase for commercial customers?

Commercial customers will have the same increase per kWh as residential customers, however since commercial customers use more electricity, their total monthly increase will be more.

Will the increase affect St. Joseph customers on the Weather Friendly rate?

No.

How long will the current FAC increase be in effect?

The current FAC will be in effect for 12 months, until February 2009. Aquila is tracking its fuel costs for the next 6-month period, Dec. 1, 2007 through May 31, 2008 and will file a new FAC with the MPSC in July 2008 to be effective September 1, 2008. If those actual fuel costs are higher than what is in the current rate, the FAC will be increased if approved by the MPSC. If the fuel costs are lower than what is in the current rate, the FAC will be reduced.

Can Aquila increase a customer's rate without filing with the MPSC?

No.

What incentives does Aquila have to reduce its fuel costs, or keep them from increasing, when under current law it can just pass those higher costs on to the customer?

The FAC approved for Aquila by the MPSC includes a sharing mechanism. Aquila must absorb five percent of any increased fuel cost, which is an incentive to keep fuel costs as low as possible.

Is the FAC increase in any way related to the proposed sale of the company to Black Hills and Great Plains Energy?

No.

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