What exactly is the fuel factor for generation charge on texas, reliant energy bills? Why only in texas?

Answer 1

This has a lot to do with regulation of the power production industry by governement. It works this way:

The government WANTED to freeze how much people pay for power. But you can't just say "You can't charge more than [some dollar amount] for electricity"... what if for some reason it became really expensive for the power companies to MAKE the electricity? They'd all go out of business!

So what the Texas legislature did was they split power bills into TWO parts: the 'base rate' and the 'fuel factor'. The 'fuel factor' has to do with the cost of making the energy... presumably as long as long as this is adjusted properly the companies can at least break even. The 'base rate' is like a service charge and the like.

Having split up the costs, they regulate each differently. If there's a reason why it becomes more expensive to produce power (say, natural gas prices hit a record, or a major coal company stops producing) then the comany can request an increase in the 'fuel factor'. The 'bate rate' has been frozen for years.

Link below for a longer discussion. Hope that helps!

Answer 2

An Affiliate Retail Electric Provider is allowed to recover its costs for the fuel used to generate electricity, such as coal, natural gas, wind, water, nuclear, etc., through the fuel factor. This cost is set by the Public Utility Commission of Texas and charged on each customer’s bill, based on kilowatt-hour (kWh) usage. An Affiliate Retail Electric Provider is prohibited from making a profit on fuel costs.