Tracker Factor Works Both Ways for the Customer and Frankfort Utilities

On your utility bill that you receive every month, there is an item called the “tracker factor” which can help or hinder that bill. However, most people don’t understand it or know what it is.

“We purchase our power from IMPA (Indiana Municipal Power Agency) and it’s going up three millions dollars in 2023,” said Utility Service Board Chairman Kent Brewer. “It went from one million (dollars) in 2022 and we ran with a negative tracker factor for three fourths of a year.”

Brewer presented a power points discussion on the tracker factor at the USB meeting Monday night. He added with the cost going up, it means that the utility bill customers will see an average increase of $7.94 monthly beginning next year.

Before going any further, the tracker factor can work both ways. The amount that FMU (Frankfort Municipal Utilities) didn’t pay because of the tracker factor was $3,983,348.55 from 2018 through 2022. The amount that the IMPA bill changed for the same period of time was 69,400.598.

The definition of tracker factor is “a tracker is an Automatic Adjustment Clause which allows a utility to automatically change the rates charged to customers to track changes in the cost of purchased power and fuel costs. A municipal utility is a not-for-profit entity and normally operates on narrow margins. Purchased power power costs are typically 75 to 80 percent of the utility’s operating costs. The price that the utility pays for wholesale power is outside the control of the utility and tends to be variable. The variability can be caused by swings in fuel costs (coal, natural gas, etc.), generating plant outages, the purchase of replacement power in the energy market and the utility’s monthly load factor (which causes month to month variations).”

“Our costs has gone up on the rate that is approved by the IURC (Indiana Utility Regulatory Commission),” said Brewer.

The tracker is a mathematical formula included as part of the utility’s approved rates which makes the adjustment in retail rates which are necessary to reflect changes in power costs, whether increases of decreases. Also, the tracker factor is calculated every three months.

Despite this, Frankfort residents pay the third-lowest utility rate of the dozen utilities mentioned by the IURC’s 2022 residential bill survey. In fact, the IURC’s latest residential bill survey found that CenterPoint residential customers using 1,000 kilowatt hours in a month paid $168.47 on average, almost twice as much as the cheapest of the utilities listed.

Brewer said the tracker factor finally went up towards the end of this year and it’s going to take a colossal jump for the first three months of 2023. He also said the tracker factor is money that the customer doesn’t have to pay, but the utility does.

“If you look at your electric bill, you’ll have a base rate,” said Brewer. “The tracker factor, if you follow it all the way over, it’s a negative. If you have an $85 dollar bill and the tractor factor is a negative, it may also subtract only 34 cents. But it may also subtract $7.20. That comes off your bill.

“Over the past five years, we have gave back $3.9 million on that tracker factor and our IMPA bill is pretty much the same,” continued Brewer. “We had to operate with $3.9 million less.”

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