Fuel costs to increase electricity prices for Tampa Electric customers
Continued energy commodity price escalation leads to substantial jump in 2009 fuel charge
TAMPA, July 18, 2008
Today, Tampa Electric notified the Florida Public Service Commission (FPSC) that based on its most recent analysis of actual and projected fuel costs for 2008, total fuel costs for the year will exceed original projections. Costs experienced so far exceed projections by 9 percent, but with no relief expected for the balance of the year and the continuation of increased costs, the company estimates that by year-end, it will be under-recovered by $209 million, or about 20 percent.
Under Florida’s regulated system, when a utility becomes aware that its projected fuel revenues will result in an over- or under-recovery in excess of 10 percent of its projected fuel costs for the period, the utility must notify the FPSC.
Given the proximity to the scheduled annual fuel filing in September, the company has chosen not to seek to adjust its fuel charge mid-year. Instead, it intends to address the under-recovery through its 2009 fuel charge.
While a substantial portion of an electric bill, fuel costs are what is known as a “pass-through” component. They are collected from customers by the utility and used to pay fuel suppliers, typically the large oil and coal companies. Tampa Electric makes no profit on the fuel charge portion of the bill.
Fuel cost increases
The cost of fuels, including those used to produce power, has risen dramatically in the past eight years and especially the past year:
July 2007 (%)
Based on current market price levels, Tampa Electric’s 2009 fuel costs are expected to be about $1.4 billion, which is $278 million or 25 percent greater than the company’s original 2008 projection filed with the FPSC in September 2007.
Due to the $209 million under-recovery for 2008, combined with current projections for 2009 fuel costs, the company estimates that starting in January 2009, the bill for a residential customer using 1,000 kilowatt-hours of electricity per month will be about $140, compared to the present bill of $114.38. This 2009 bill is a projection and may vary depending on factors like fuel market price fluctuations, hurricane events and other bill impacts. It does not reflect the company’s recently announced plans to request an increase to its base rates and service charges, which would be effective in May 2009.
President Chuck Black said, “Fuel costs today make up more than half of a typical electric bill. Over the past year, natural gas costs have nearly doubled. All of us at Tampa Electric share our customers’ frustration. We have worked continually to minimize costs and improve efficiencies throughout our business on all the aspects that are within our control, but fuel costs continue to overshadow all of these efforts.”
In 2000, the average cost for natural gas was $2.60 for one million British thermal units (MMBtu). That price is now $12-13/MMBtu, which is almost double what it was in the fall of 2007.
Black added that the company has avoided seeking a mid-course correction in 2008 by maximizing the amount of electricity it generates from coal, which is priced lower than natural gas. The company continually strives to manage costs by hedging natural gas and using diversified fuel sources.
Energy efficiency programs
To help manage the increase, customers have a wide variety of energy efficiency programs available through Tampa Electric.
Tampa Electric recently added 12 new energy efficiency programs to its roster; the company also made improvements to several longtime programs. The company received approval from the FPSC to expand its innovative Energy Planner pilot program to all new qualified Energy Planner customers.
Energy Planner allows customers to make energy consumption decisions based on near real-time energy prices by using a programmable “smart” thermostat provided by the company at no charge. Customers participating in the pilot study saved an average of a month’s worth of electricity over the course of a year. Other new programs include a Low Income program, where qualified customers can receive a number of items geared toward increasing their home’s energy efficiency.
Continuing the company’s efforts to offer innovative energy efficiency solutions to all customer groups, the company also recently launched a new program for commercial customers. Known as Demand Response, the program will pay incentives to participating commercial customers when they conserve energy at times of peak demand.
Through these programs, Tampa Electric believes that the average user of electricity can help minimize the impact of electricity price increases.
For more information on the company’s energy efficiency programs, visit online: www.tampaelectric.com .
Tampa Electric Company is the principal subsidiary of TECO Energy, Inc. (NYSE: TE), an energy-related holding company with regulated utility operations in Florida, including both Tampa Electric and Peoples Gas System . Tampa Electric serves almost 667,000 customers in West Central Florida. Other subsidiaries include TECO Coal, which owns and operates coal production facilities in Kentucky and Virginia, and TECO Guatemala, which is engaged in electric power generation and distribution and energy-related businesses in Guatemala.Note: This release contains forward-looking statements, which are subject to the inherent uncertainties in predicting future results and conditions. Actual results or outcomes may differ materially from those forecasted. The forecasted information is based on the company’s current expectations and assumptions, and the company does not undertake to update that information or any other information contained in this release, except as may be required by law. Fuel prices are dependent on market conditions, and customer rates are dependent on many factors, including actions by the FPSC. Additional information is contained under “Risk Factors” in TECO Energy, Inc.’s and Tampa Electric Company’s combined Annual Report on Form 10-K for the period ended Dec. 31, 2007.