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State spreads Progress Energy's rate hike over 17 months

First, the good news: Out of consideration for struggling Florida families, state regulators on Tuesday cut Progress Energy's rate increase to about half of what the utility requested.

Starting in August, instead of a $12 increase for 1,000 kilowatt hours, customers will see about $6.

Now the bad news: Customers will pay up next year, plus interest. Starting in January, customers will see an increase of $13.55 for 1,000 kilowatt hours.

So if you're thinking ahead to that holiday shopping spree, build that into your budget. You might also want to take into account the planned increase to pay for the utility's $17-billion nuclear project ($7.50), clean air upgrades ($3.75), and the possibility that soaring fuel prices could drive electric bills still higher.

Starting in January, Progress Energy customers could be paying more than $135 for 1,000 kilowatt hours — $27 more than it costs today.

After several hours of debate Tuesday, the Florida Public Service Commission voted 3-2 to spread the fuel cost recovery over the next 17 months.

Florida's utilities aren't allowed to profit from fuel. It's a "pass through" to consumers. The utilities have been paying more because of increased demand from developing countries like India and China, and because of the falling dollar.

"It's real and it hurts," said Commissioner Lisa Polak Edgar. Edgar moved to spread the increase over 17 months instead of paying it over the next five months, despite the interest costs associated with waiting.

Customers simply can't afford to pay for this now, agreed Commissioner Nathan Skop. The housing market is in a steep decline, wages are stagnant, and unemployment on the rise. Floridians are struggling with higher prices for insurance, food and gasoline. Waiting helps families now, and its cost is low.

Edgar and Skop were joined by Commission Chairman Matthew Carter in the 3-2 vote.

C.J. Drake, a Progress Energy spokesman, responded to the decision, "We understand and respect the commission's decision to balance the recovery of legitimate fuel costs with the current economic situation facing our customers."

The $6 increase starting in August will be eased by the elimination of a $3.61 storm surcharge that helps the utility pay for hurricane-related costs. The commission voted to remove that charge from bills starting in August.

• • •

Utilities nationwide are raising electricity prices to pay for the rising cost of natural gas, oil and coal. The Energy Information Administration, the statistical arm 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 Power & Light, the state's largest utility with 4.4-million customers, also won a fuel rate increase Tuesday. The Juno Beach utility also saw its requested increase spread out over the next 17 months.

Commissioner Katrina McMurrian cast one of two dissenting votes. She argued that it would be better and cheaper for customers to pay in 2008 for the expensive fuel used to run power plants in 2008. Putting it off until next year just adds interest charges. If fuel prices continue their relentless climb, next year Florida's electric customers could wind up still paying off 2008 fuel while contending with 2009 increases.

Commissioner Nancy Argenziano, a well-known firebrand and former state legislator, cast the second dissenting vote. Argenziano argued for a broad review of electricity rates.

"I do not believe we can continue to grant piecemeal rate increases," Argenziano said.

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

State spreads Progress Energy's rate hike over 17 months 07/01/08 [Last modified: Friday, July 4, 2008 1:38pm]
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