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Progress Energy agrees to freeze base rate; other charges will still fluctuate

Progress Energy reached an agreement with the state to freeze the "base rate" on customers' bills until January 2013.

The agreement, however, does not mean consumers' bills will not change for the next two years. Other charges still could rise or even fall, including fees to cover the construction on a Levy County nuclear plant and the fuel charge that is passed directly to customers for the fuel needed to produce electricity.

And even the base rate could change if Progress makes too much or too little profit.

J.R. Kelly, the state public counsel, said the agreement was necessary at a time when Progress Energy's sales have fallen short of expectations. The agreement helps ensure consumers do not see their bills skyrocket.

"We think it's a huge benefit to the ratepayer," Kelly said. "Without this agreement, Progress Energy would probably in the next few months be asking for a rate increase."

Bill Newton, executive director of the Florida Consumer Action Network, said the agreement does not go far enough.

"This strikes me as kind of a PR move," said Newton, who says consumers need a decrease in the various fees charged by the utility, not a single freeze. "It's not very meaningful."

Newton added that the base rate does not increase very often anyway.

To keep base rates from increasing, the state Office of the Public Counsel twice in the last 10 years reached settlement agreements that led to a freeze.

Currently, residential customers who use 1,000 kilowatt-hours a month pay $48.58 in base rates now.

Regardless of the agreement, if the utility's returns do not fall within the 9.5 percent to 11.5 percent range set by the Public Service Commission, commissioners could adjust rates to compensate for it by raising or lowering the base rate. But other aspects of the agreement are expected to help protect the utility's profits.

In addition to the base rate freeze, Progress Energy also will be allowed to spread over three years the reduction of its depreciation reserves, the amount charged to customers for the decrease in value of equipment the company uses. Depreciation is a charge all utilities pass to consumers.

The state public counsel contended in Progress Energy's last rate case that the utility had charged consumers too much for depreciation.

By giving Progress Energy three years to reduce the depreciation reserves, it reduces the utility's ongoing expenses and increases its potential for profits. This helps the utility attract capital and to borrow money at better interest rates.

"The settlement provides some regulatory stability, especially during this economy," said Cherie Jacobs, a Progress Energy spokeswoman. "We are being mindful and responsive to the Public Service Commission's desire to limit rate increases in the short term."

The commission still must approve the agreement. Commissioners are scheduled to consider the issue at their meeting June 1.

Ivan Penn can be reached at ipenn@sptimes.com or (727) 892-2332. Follow him on Twitter at twitter. com/consumers_edge and on the Consumer's Edge on Facebook.

Progress Energy agrees to freeze base rate; other charges will still fluctuate 05/10/10 [Last modified: Tuesday, May 11, 2010 5:04pm]
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