LEAC is an acronym for the Levelized Energy Adjustment Clause. Simply put, LEAC is fuel consumption and related costs. The Public Services Commission (PSC) authorized the LEAC factor in 1989 to allow WAPA to recover fuel costs used to produce electricity and water for our customers.
Approximately 76% of WAPA’s budget is expended on fuel costs, which are highly susceptible to wide market fluctuations. These costs are recovered through the LEAC factor. About 24% of WAPA’s budget pays for personnel, transmission, distribution, debt service, maintenance, insurance, and other costs that are reasonably predictable and necessary. These operating costs are recovered through base rate revenues (non-fuel related costs presently labeled as “consumption” on customers’ bills) and not through the LEAC factor. As is the case with most utilities, fuel costs are passed on to customers. Fuel costs have always been included in WAPA's rates.
WAPA does not set the LEAC factor. The utility presents the PSC with all related data when it files a petition for a LEAC factor adjustment at least 45 days before the proposed effective date. PSC members scrutinize the filing based on detailed technical reports from its staff and an independent technical consulting firm. As required by law, the PSC then holds a public hearing prior to making a final decision about adjustments in the LEAC factor.
Prior to 2003, a portion of the cost of fuel was contained in the base or energy consumption charge. When the price of fuel became so volatile, the PSC determined that WAPA should remove fuel costs from the base rate and put all related fuel expenses into the LEAC factor. When the PSC considers changes in the LEAC factor, any under-recovery or over-recovery is trued up during the review process. In the event that WAPA’s fuel forecasts indicate an under-recovery, the utility is allowed an adjustment that is generally recouped in the LEAC surcharge over a six to twelve month period.