How Your SRP Rates Are Determined

A Guide to the SRP Pricing Process, and SRP FPPAM Adjustments

As a customer of Salt River Project (SRP), you may have noticed fluctuations in your power bill over time. These changes are not random but are the result of two key processes SRP uses to determine its rates: the SRP Pricing Process and the Fuel and Purchased Power Adjustment Mechanism (FPPAM). Understanding these mechanisms can help you anticipate how and when your rates might change.

SRP Pricing Process: Long-Term Rate Setting

Every few years, SRP conducts a comprehensive review of its rates through what is known as the SRP Pricing Process. This process involves a detailed evaluation of SRP's costs, revenue needs, and the economic environment. The goal is to set rates that are fair, equitable, and sufficient to cover the costs of providing reliable electricity while ensuring the utility’s long-term financial stability.

The SRP Pricing Process is a public and transparent procedure, often involving input from various stakeholders, including customers, business groups, and public officials. During this process, SRP assesses the costs associated with maintaining and upgrading its infrastructure, investing in new energy sources, and meeting regulatory requirements. Once these costs are determined, SRP proposes new rates that are then reviewed and approved by the SRP Board.

These rate adjustments are typically implemented gradually over several years, offering customers a predictable and stable billing environment. However, while the SRP Pricing Process sets the base rates, it doesn’t account for the day-to-day fluctuations in energy costs, which is where the FPPAM comes into play.

Fuel and Purchased Power Adjustment Mechanism (FPPAM): Market-Responsive Rate Adjustments

Unlike the SRP Pricing Process, which occurs infrequently, the Fuel and Purchased Power Adjustment Mechanism (FPPAM) is a more dynamic process that can lead to rate changes more frequently. The FPPAM adjusts rates based on the actual costs SRP incurs for fuel and purchased power, which can vary widely due to factors such as fuel prices, energy market conditions, and weather patterns.

The FPPAM operates somewhat like the stock market—it can go up or down depending on current conditions. However, in recent years, SRP customers have seen more increases than decreases in their bills due to rising energy costs. These adjustments are necessary to cover the costs of producing and purchasing electricity, but they can also result in higher bills for customers.

Upcoming FPPAM Vote and Its Potential Impact

On August 22, 2024, SRP’s Power Committee is scheduled to vote on another FPPAM increase, which, if approved, could affect your November 2024 power bill. This proposed increase reflects ongoing rises in energy costs, driven by higher fuel prices and increased electricity demand.

If the Power Committee approves the FPPAM adjustment, it will then go to the full SRP Board for a final vote in September 2024. Should the board approve the increase, customers can expect to see the new rates reflected in their November bills. While the FPPAM process allows SRP to adjust to changing market conditions, it also means that customers need to be aware of potential rate increases and plan their budgets accordingly.

What This Means for You

Understanding how SRP determines its rates can help you better manage your energy costs. While the SRP Pricing Process provides a stable foundation for your rates, the FPPAM introduces variability that reflects the real-time costs of energy production and procurement.

As SRP navigates the complexities of the energy market, these processes ensure that the utility can maintain reliable service while adapting to changing economic conditions. Staying informed about these adjustments, such as the upcoming FPPAM vote, can help you anticipate changes in your power bill and make more informed decisions about your energy use.

For more details on SRP’s rate-setting processes and to stay updated on upcoming votes and decisions, visit SRP’s official website or visit our website at srplandownersalliance.com for insights and opinions.