What is the LEAC?

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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.

What Charges are in the Fuel Surcharge (LEAC)?

July - September 2014

$0.400476/kWh

Pie chart: Fuel 85.22, Finance 1.25, Deferred Fuel 8.02, Rate Fin Mechanism 5.52
  • FUEL
    ($0.360) 89.99%
    The projected cost of fuel for the 3 month LEAC period.

  • FINANCE AND REGULATORY COSTS
    ($0.006) 1.43%
    Principal and Interest. On a general obligation note of $40 million borrowed in 2008 to pay for past-due invoices owed to the fuel supplier.
    Docket 289. Public Services Commission charges passed on to WAPA customers on LEAC related matters.

  • ULTRAPURE/RO CHARGE
    ($0.004) 0.93%
    These costs reflect the costs associated with RO production.

  • UNDERRECOVERY/DEFERRED FUEL COSTS
    ($0.008) 1.91%
    The amount paid to the fuel supplier not yet collected from customers. The present under recovery is approximately $50 million.

  • RATE FINANCING MECHANISM
    ($0.023) 5.74%
    These costs reflect the operating costs of the leased emergency generating unit plus a source of cash for the rehabilitation of specific generating units, spare parts and the services of an indepentent advisor.

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