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More expensive fuel needs fuel power bills surge

By Asjylyn Loder, Times Staff Writer
In print: Sunday, June 29, 2008

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Food costs a fortune. The dollar keeps sinking. Gas prices push upward. Now power companies want to dig their hands a little deeper into your pocket.

Get used to it. Electric bills from Florida's three largest utilities point inexorably upward, driven by the rising cost of fuel and the rigors of keeping the lights on without harming the climate. All three utilities, serving 6.7-million customers throughout the state, plan to raise bills by 10 percent or more within the next year.

Tampa Electric wants to increase base rates next year to pay for the rising cost of labor and supplies. Progress Energy and Florida Power & Light want customers to pay $30-billion for two new nuclear plants. All three utilities plan to build new natural gas plants. Carbon regulation, its price tag unknown, looms on the horizon. The next upward surge in power bills will likely kick off Tuesday, when state regulators consider increases for Progress Energy and Florida Power & Light.

"The villain here is fuel prices," said Charlie Beck, deputy public counsel with the Florida Office of Public Counsel.

This from the guy who represents Florida's utility customers. If he's saying the price appears to be justified, it's pretty much a foregone conclusion: Bills are heading up.

Welcome to the freakonomics of fuel.

• • •

Imitation is the hidden bummer of American convenience.

Over the last 20 years, Americans have built bigger houses, plugged in second refrigerators, charged up the iPods. Progress Energy estimates that its customers use nearly 20 percent more power than they did in 1988. We use more energy per capita than any other country in the world.

Word got out. A bunch of people in China and India thought washing machines and other conveniences, like heat and air conditioning, sounded like pretty cool. Even better, they were flush with cash from selling us stuff like T-shirts and pet food. Of course, imitating American convenience takes electricity.

The growth in China's energy demand from 2000 to 2005 equaled the entire energy demand of Japan, explained Sasha Weintraub, who runs the fuel purchasing program for Progress Energy. The country's energy demand is expected grow 9 percent a year between now and 2030.

So when Weintraub goes shopping for fuel used to run Progress Energy's power plants, the market is a lot more crowded. China used to export coal, but is now burning it at home, shipping less to Europe. So Europeans go shopping. Because the euro is worth more than the dollar, Europeans turn to cheap American coal. They outbid us for it, driving the price up. Spot coal prices have more than doubled since January.

Fuel markets are so tight that the smallest disruption in supply sends prices for a wild ride, Weintraub said.

Japan had an earthquake last year, disabling a crucial nuclear plant. To make up for the lost power, the country turned to natural gas. To entice tankers of liquified natural gas to steer their way, the country offered higher prices for it.

"On a global scale, now you're competing with other countries who are willing to pay more," Weintraub said. "People ask me, 'Are prices going to come back down to where they were?' The short answer is, no, they're not."

Here's another bummer. If fuel prices continue to rise as predicted, the increases approved Tuesday won't be the last. According to Public Service Commission documents, Progress Energy will likely ask for another fuel increase in less than six months.

• • •

It's cold (or perhaps hot) comfort to the increasing number of Floridians sitting around in the dark because their power was turned off for nonpayment, but utilities aren't allowed to profit from fuel.

When fuel price go up, the utility passes that cost through to the customer. Every now and then, customers get lucky. Last year, fuel costs came down and made monthly bills cheaper.

No such luck this year. The Energy Information Administration, the statistical branch of the U.S. Department of Energy, estimates that utilities this year will pay 33 percent more for natural gas, 54 percent more for oil, and 6 percent more for coal than they did last year. Florida's utilities often pay a premium on top of those increases for the diesel fuel that runs the trains and barges that bring coal into the state.

"It's just part of the larger economic malaise," said Bill Newton, executive director of the Florida Consumer Action Network. "Our members are mightily upset about this, and even more upset because there isn't much they can do about it."

If soaring fuel costs are inescapable, why isn't Tampa Electric raising fuel rates? More bad news. Tampa Electric just isn't raising fuel rates yet.

Usually, utilities set their fuel prices every fall for the following year. The companies can only alter the price midyear if their estimates were off by 10 percent or more. In this case, Progress Energy and FP&L met that threshold, Beck said.

Tampa Electric doesn't have a secret stash of cheap coal squirreled away. The utility is paying more for fuel this year than it did last year, like everybody else. Just not 10 percent more. Unless fuel prices suddenly dip, Tampa Electric customers can expect a fuel rate increase starting in January.

Asjylyn Loder can be reached at aloder@sptimes.com or (813) 225-3117.