Big disparities in utility rates may stunt Florida's economic growth

Sharply different electric rates grate on me. They should bug you, too.

If you are in Tampa Electric territory, you are better off than Progress Energy customers across the bay. But all of you pay a lot more than your counterparts south of Tampa Bay.

The gap between the highest and the lowest price is enormous. And it may grow larger in coming years.

The difference has grown so noticeable that it may start influencing where people and new business choose to live and operate. That would place parts of Tampa Bay at a competitive disadvantage.

Electricity prices "are a critical factor in economic development," says Florida Retail Federation CEO Rick McAllister. "People look at that."

Let the rubbernecking begin.

Florida Power & Light, whose service territory stretches from South Florida to the southern borders of Pinellas and Hillsborough counties, charges just $94.62 (before fees and taxes) for 1,000 kilowatt hours of electricity. That amount is about what a small residence uses in an average month.

Progress Energy Florida currently charges $123.19 for that amount of electricity. That's one-third more than Florida Power & Light, an annual difference of about $336 — no small sum in these lean times.

The third big utility here serving Hillsborough and parts of some adjacent counties, Tampa Electric, charges residential customers $106.90 — still 13 percent cheaper than Progress Energy.

The difference in residential rates generally holds true for the rates the same utilities charge businesses, from retail stores to big industrial plants. Florida Power & Light is cheapest. Tampa Electric is mid-priced. Progress Energy Florida is the most expensive.

Why do power companies with monopoly control in adjacent service territories charge wildly different prices for the same basic commodity?

Utilities say their costs vary based on the types, age and quality of power plants they own, the kinds of fuels (natural gas, coal, oil, nuclear and alternative energy like solar) they use to generate electricity, the accuracy of their own fuel forecasts, and even environmental issues.

That complex mix is reflected in the price they then charge customers.

No argument there. But let's add another factor. Management — the ability to operate efficiently and control internal costs — also factors heavily in whether electricity prices are lean or bloated.

Some things especially aggravate me:

• Progress, with its high rates, also ranks dead last in both residential and business customer satisfaction in the latest J.D. Power regional surveys. High rates, low customer satisfaction — not the best pitch for attracting new companies to the area.

• Progress Energy, headquartered in North Carolina, charges significantly lower electric rates to its Carolina customers than it does in Florida. And its Carolina utilities rank higher in customer satisfaction among their peers in J.D. Power surveys.

• Progress Energy Florida and Florida Power & Light, Florida's two operators of nuclear power plants, benefit from a Florida law passed in 2006 that lets them charge their customers long in advance for proposed nuclear power plants — in Levy County, north of Tampa Bay, for Progress Energy and in South Florida for Florida Power & Light.

That pay-in-advance law will raise Progress Energy's rate from $123.19 to $128.12 next year. In similar fashion, Florida Power & Light expects to raise its price by about $6.80 a month, subject to state approval, which will still keep its rates among the lowest in the state.

• If Progress Energy commits to build the Levy County nuclear plants, then the pay-in-advance fees it can levy on customers will spike significantly to cover rising plant costs. (Florida Power & Light's prices also will increase.) Translation? The $128 price tag Progress Energy will charge next year may soon look like a bargain.

• Another wild card: Progress' sole nuclear plant in Florida is broken and has been out of commission since 2009. If the Crystal River plant is repaired, and for now that remains unclear, it won't be fixed until at least 2014. The repair bill and extra costs of buying replacement electricity will also affect future rates.

None of this bodes well for Florida Gov. Rick Scott's quest to make Florida a super-low-cost place for business.

Statewide, Florida's electricity rates already fare poorly compared to other Southern states. A report issued last fall by Theodore Kury at the University of Florida Public Utility Research Center concluded that electricity costs in Florida "appear to be higher on average than costs in neighboring states."

Now add to that expert forecasts that electricity rates will generally rise in the coming decades. And the rates at some utilities clearly will rise faster than others.

That's hardly reassuring for an area desperate to get back in the economic fast lane.

Robert Trigaux can be reached at trigaux@tampabay.com.

Big disparities in utility rates may stunt Florida's economic growth

02/25/12 [Last modified: Saturday, February 25, 2012 3:31am]

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