Was this in your TEP bill this month?

Just got my TEP bill.
I usually ignore the inserts that talk about the random programs- I’ve kind of considered them advertisements/spam (conditioned by years of inserts in all bills, I guess…)

Anyways, the insert this month caught my eye because it said something that stood out to me as immediately suspect. (Natural gas prices)

The title of the insert is:

“Passing Along Higher Energy Costs”

To paraphrase-
Our “Purchased Power and Fuel Adjustment Charge (PPFAC)” has nearly doubled from .0150706 to .0283760 per kilowatt hour because natural gas prices had gone up so much.

There’s basically an electronic version of the insert on the TEP website here:
https://www.tep.com/ppfac/

Now, here’s where I found something a bit suspect. I (kind of) trade a few things and natural gas is one of the things I follow in that amateur endeavor…

According to the insert, the PPFAC was raised in early May 2023 in response to higher natural gas prices from 2021/2022. The strange thing is that while prices did go up in 2021/2022, they peaked around August 2022 and then dropped so far and fast that by February 2023 it set all new lows (going back more than a decade).

Now, I am sure the Arizona Corporation Commission and TEP have our best interests at heart and I am assuming that the PPFAC rise that came 3 months after new record lows for natural gas prices came because that process takes time to request and get approval.

Meaning, the higher prices of 2021/2022 were absorbed by TEP and now we are paying them back for those higher costs during that time via the PPFAC. That assumption then might logically include the idea that our prices should be dropping soon enough due to the record low prices of natural gas now.

Pictures, in this case, might show much better what I am referring to so here’s a few graphs of the price action of UNG (United States Natural Gas Fund LP) on the daily charts. I’ve doctored them up a little and each one should allow you to see the story…

First, a look at the daily chart over the last approx 3 years
https://tucsonsolarinsider.com/wp-content/uploads/sites/9893/2023/06/UNG-june-2023-daily-view-for-3-years.png

Second, a look at the last 10 years, shows that we are at a 10 year record low price for Natural Gas which begs the question if they will be as eager to lower the PPFAC as they were to raise it…
https://tucsonsolarinsider.com/wp-content/uploads/sites/9893/2023/06/UNG-june-2023-daily-view-for-10-year.png

My analysis/opinion (more opinion, really):
There was a big jump in Natural Gas prices over much of late 2021up to the fall of 2022. This was a significant increase and it very likely caused a very hard operating environment for any power plant that uses Natural Gas.

TEP had to pay higher prices but couldn’t recoup those costs until approved by the ACC- with took time. Therefore TEP needs to recoup those costs in the future (kind of like we need to pay TEP back for their ‘covering’ the higher costs).

Now that Natural Gas prices have dropped to a decade (or more) low- I assume this means TEP is paying much less for their gas so they ‘should’ be able to recoup those losses ‘faster’ for one, and for two- ‘should’ be able to lower the PPFAC as a result of the record low prices.

That’s my question… Once the excess costs of 2021/2022 are recouped, will the PPFAC be lowered with the same timeliness as it was raised with? Dunno, but I will be watching with curiosity…

One way to shield myself from these issues is to make my own power with rooftop solar. As much as possible, making my own power and not relying on TEP (or any randomly assigned monopolistic utility if not in Tucson) gives me freedom from these unilateral price changes they come up with as well as giving me some level of security to operate independently during a power outage.

Win/Win in my book.

If you are looking into rooftop solar for your home or business, click here to get notified when I release Tucson Solar Insider Desk Guide for Buying Solar… I’m sure you’ll be glad you did.

Be Good!
Curtis