Peru Utilities buys all electric energy from the Indiana Municipal Power Authority (IMPA) and delivers it to Peru’s customers. The wholesale price of electricity changes frequently. It is especially sensitive to the cost of fuel used to produce electricity whether the generation is powered by natural gas, coal, or nuclear fuels.
Even small changes in our cost of energy can have a significant impact on our local operations. As the wholesale cost of our electricity increases or decreases from the cost basis included in our rate, we are permitted to pass the change through, up or down, to our customers, in the form of the Tracker.
The tracker mechanism assures our customers that they receive credits when credits are due. It also allows us to adjust prices without requesting a base rate change every time fuel prices fluctuate. The tracker is a fixed surcharge per kWh of energy we expect to sell during the next quarter. It is fixed for 3 months at a time but fluctuates from quarter to quarter.
Here is how it works: We estimate that we project our wholesale cost of power will be looking ahead 3 months. At the end of each quarter, we compare the usage and cost we projected 3 months earlier to what actually has happened. Any variance is added to or subtracted from the tracker calculation we make up for the next quarter.
In short, the Tracker surcharge is based on an estimate of utilization for the next quarter after adjusting for any variances between the estimated and actual utilization in the prior quarter.