Electric bills for the average Chattanooga homeowner will drop by more than $5 a month in January because of declining fuel prices, TVA announced Thursday.

The Tennessee Valley Authority is cutting its wholesale power rates by 6 percent on bills mailed out in January to reflect the drop this fall in the price of natural gas and power purchased from other generators.

The cut is the biggest since TVA adopted its quarterly fuel-cost adjustment on electricity prices two years ago. But it still will offset less than one-fifth of the combined 34 percent of increases from TVA over the past year.

“We need any relief we can get, but my power bill still seems ridiculous,” said Louise Whitner, an East Lake duplex resident who got a $435.51 electric bill this month from EPB.

In October, TVA boosted its wholesale rates by 20 percent, primarily because of the soaring cost of natural gas, coal and power purchased earlier this year. With the slowing economy, however, natural gas and oil prices have dropped nearly in half from their summertime peaks, according to the Energy Information Administration.

TVA adjusts its rates every three months to reflect the changing cost of the fuel used to generate electricity. January’s price drop is only the second decrease since 2006, compared with seven increases under the utility’s quarterly fuel-cost adjustment.

“Recent reductions in purchased power and natural gas prices have helped reduce our actual costs and forecast for the second quarter of 2009,” TVA Chief Financial Officer Kim Greene said in an announcement Thursday about the rate cut. “Unfortunately, coal prices remain significantly higher than they were a year ago, and sustained drought conditions across the Tennessee Valley have cut TVA’s hydro generation by more than 50 percent, preventing TVA’s fuel costs from dropping further.”

About 60 percent of TVA’s power supply comes from fossil fuels, primarily coal and natural gas.

TVA announced the January price cut as many consumers are trying to pay higher bills from the increases implemented in the past year. TVA boosted electricity prices by more than 12 percent in April, another 2.1 percent in July and 20 percent in October.

Despite those increases, TVA residential electric rates remain about 24 percent below the U.S. average, according to a recent study by the TVA inspector general.

TVA sells its power through 159 distributors, including EPB in Chattanooga; Volunteer Energy Coop in Decatur, Tenn.; and North Georgia Electric Membership Corp. in Dalton, Ga.

While TVA is cutting rates in January, Dalton Utilities plans to raise its industrial electric rates by 12 percent and its commercial electric rates by 11 percent. Dalton Utilities is not raising residential electric rates next year, however, and its residential rates remain about 16 percent below those of the North Georgia Electric Co-op.

TVA’s rate increases during 2008 pushed up Brenda Harris’ monthly electric bill at her downtown apartment from $51 a month to $67.48 a month under EPB’s levelized billing plan.

“It’s hard to absorb that kind of an increase when my work hours are being cut and everything else is costing more,” she said. “We need some rate relief.”