Progress Seeks 31% Rate Increase

By RUSSELL RAY

The Tampa Tribune

Published: August 30, 2008

TAMPA - Customers of Progress Energy Florida are expected to pay a lot more for electricity next year, the St. Petersburg-based utility said Friday.

The utility is seeking permission to increase electric bills 31 percent in 2009 to cover costs for fuel, the construction of two nuclear reactors in Levy County and reducing emissions from the company's coal-fired power plants.

Progress Energy is Central Florida's largest supplier of electricity, serving 1.7 million customers in 35 counties, including Pinellas, Pasco and Polk.

The proposal would add slightly more than $34 to the monthly bill of a customer using 1,000 kilowatt-hours a month. Monthly bills would rise from $110.59 to $144.86 in January. The Florida Public Service Commission, which regulates electric utilities, is expected to issue a decision by year's end.

The bulk of the increase - about $21 - stems from skyrocketing fuel costs. The utility expects to spend $3 billion on fuel next year.
Coal accounts for 43 percent of the power generated by Progress Energy's power plants. Natural gas is used to make 34 percent of the utility's power, and oil accounts for 7 percent.

"The price of coal has increased almost 268 percent in the last five years," said Jeff Lyash, president and chief executive officer of Progress Energy Florida. "We do all that we can to mitigate that. Our hedging program has saved our customers $600 million since we put it in place in 2003."

Lyash said the soaring cost of fuel is why the company wants to build two nuclear reactors in Levy County. In addition to lowering consumer fuel costs by $1 billion a year, it would help reduce air emissions from coal- and gas-fired power plants, he said.

"Each megawatt of nuclear construction we build displaces a megawatt of coal, gas or oil and eliminates that risk of future price increases and volatility for our customers," Lyash said.

The two new reactors would generate up to 2,200 megawatts of electricity, enough power for nearly 1.4 million Florida homes. The two-reactor project, if approved by federal regulators, would begin generating electricity in 2017.

Under new state law, Progress Energy can pass on to customers the cost of building a nuclear plant years before the plant begins generating power. Under the utility's plan to increase monthly electric bills next year, about $11 of the increase reflects pre-construction costs for the nuclear project.

The company also is spending $1.3 billion to reduce emissions of nitrogen oxide, sulfur dioxide and mercury from two coal-fired units in Crystal River. A portion of that cost -about $2.50 - would be recovered from customers each month next year.

The improvements would lower emissions of nitrogen oxide and sulfur dioxide, the primary causes of smog and acid rain, by more than 90 percent, Lyash said.

Progress Energy isn't the only electric utility seeking a substantial increase in electric bills to cover the soaring cost of fuel.

Tampa Electric, Hillsborough County's chief power provider, underestimated its fuel costs for this year by $209 million, or 20 percent. The utility will ask regulators in September for permission to recover those costs in 2009, in addition to the $1.4 billion the utility expects to spend on fuel next year.

If the fuel-recovery plan is approved, it would add $25.62 to the $114.38 bill of a Tampa Electric customer who uses 1,000 kilowatt-hours a month.

Tampa Electric also has asked for a 9 percent increase in base electric rates. If the higher rates are approved, it would add another $10.62 to a customer's monthly bill. By next summer, Tampa Electric customers using 1,000 kilowatt-hours a month could see their bills rise to more than $150 a month.

Tampa Electric serves 667,000 customers in Hillsborough County and portions of Pinellas, Polk and Pasco counties.

BY THE NUMBERS

$110.59: What a Progress Energy customer using 1,000 kilowatt-hours a month now pays each month

$144.86: What a Progress Energy customer using 1,000 kilowatt-hours a month would pay beginning in January if regulators approves the company's cost-recovery plan for fuel, nuclear construction and environmental improvements.

$3 BILLION: What Progress Energy expects to spend on fuel next year

1.7 MILLION: Florida customers served by Progress Energy

$150: What a Tampa Electric customer using 1,000 kilowatt-hours a month would pay next summer if regulators approve requests to raise rates and consumer fuel costs

667,000: Customers served by Tampa Electric

Reporter Russell Ray can be reached at (813) 259-7870 or rray@tampatrib.com