Rates FAQs
How are utility rates determined?
Like most businesses, utility rates are set, considering ordinary operating expenses such as labor and capital investments — costs for providing utility services to homes and businesses. Unlike most companies, BVU Authority is a federally-regulated monopoly. In return for monopoly status, utilities must serve all customers. The TVA regulates BVU Authority and similar utilities and their rates. When the BVU Authority Board of Directors requests a rate change, the TVA reviews the request.
As an Authority of the Commonwealth of Virginia, BVU Authority is unlike other utilities. Some publicly-owned utilities belong to specific municipalities, and investor-owned utilities are operated for profit.
We're different. BVU Authority is locally focused and service driven. We exist for no other reason except to provide the best service at the lowest possible price for our customers - that's why we've worked to reduce electric rates five times in the last two years. As Virginia's lowest-cost electricity provider, we keep our customers in mind. That means the revenues we collect are returned to your utility to help it run efficiently - instead of being returned to investors or owners.
How often does BVU Authority adjust its rates?
The frequency that BVU Authority may adjust its rates depends on economic factors and the need to recover the utility service costs. Historically, BVU Authority has worked to manage rate adjustments once each fiscal year. However, most recently, BVU Authority has actually reduced electric rates numerous times in the last few years. One exception is how BVU Authority and wholesale electric provider, TVA, handle volatile fuel costs. These costs are collected using an adjustable monthly fee.
When demand for electricity falls, will rates go down?
Utility rates are tied to the cost of providing utility service – the cost of building and maintaining infrastructure. Unlike the fuel used to power them, the cost to build and maintain these assets is there regardless of how much electricity is used during a given year. These are called fixed costs. Customers can, however, reduce their utility bills by using less. Using fewer means customers don’t pay the costs, like fuel, that vary with usage, and they spend a smaller proportion of the fixed costs than customers that don’t conserve. Ultimately, using less can and will decrease a customer’s utility bill.
Why aren’t utility rates more closely tied to the rate of inflation?
A large portion of costs incurred by a utility is for the cost of infrastructure. Utilities often go through building cycles when the construction of facilities occurs at an accelerated pace to keep up with demand. From the mid-1980s to the mid-1990s, there was relatively little construction of utility plants taking place, and fuel costs were low and stable, leaving rates at that time essentially unchanged. Since that time, both those conditions have changed. However, over the last 20-25 years, electricity bills have increased less than the inflation rate.
If I use less energy, why are utility rates not coming down?
Utilities are among the most capital-intensive sectors, with many of their costs stemming directly from investments in and maintenance of the distribution lines, equipment, and structures that are used to deliver electricity, water, and wastewater. These fixed infrastructures and operating and maintenance costs are reflected in and must be covered in utility rates.
Most of the revenue BVU Authority receives is used to pay wholesale power costs, operating, and maintenance costs. Purchased power and fuel are among a utility's most significant operating expenses. The cost of salaries, materials, supplies, services, and a variety of other expenses also must be met.
While electric consumption has changed in the last decade, primarily due to current economics and many customers using less energy, the resulting utility savings on fuel costs are insufficient to cover utility fixed, infrastructure, operating, and maintenance costs, and ongoing investments. Utilities continue to face steadily increasing costs to generate and deliver electric service to homes, businesses, and industries.
