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Power Companies Contend With Escalating Fuel Costs

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By CHUCK BLACK and BILLCANTRELL

Special to the Tribune

Published: August 14, 2008

Every day, we are bombarded with information about the skyrocketing costs of oil and gasoline, and the impact they have on our economy and personal finances.

Less reported, and not as visible, is the cost of another fuel critical to our way of life: natural gas, which fuels, among other things, a large portion of the electricity generated in our state, a percentage only set to increase. Natural gas is also used as a direct energy source for hundreds of thousands of homes and businesses throughout the state.
Gasoline prices are 38 percent higher than one year ago. Natural gas prices, while consumers feel them less directly, have nearly doubled over the same timeframe.

In September 2007the price for natural gas was $6.36 per million British thermal units (MMBtu). In June, it was closer to $12 per MMbtu.

Fuel, which has normally been just one of several components of an electric or gas bill, is rapidly taking the lion's share of our customers' monthly energy costs - and pushing them ever higher.

On the surface, there is no reason for this. Utilities don't profit whatsoever on fuel - it is a "pass-through" cost, collected from customers and used to pay fuel suppliers.

Natural gas is not a foreign product - with as much as 98 percent of it produced in North America, it is a domestic fuel that we're told is in ready supply. Yet the market continues to demand ever-increasing prices.

We purchase natural gas from fuel suppliers to run our power plants and for input to our natural gas distribution system. As consumers and policymakers look into the causes of price increases in fuel, natural gas should be included.

Coal, which is about a third the cost of natural gas, is not currently an option for new power plants in our state. Until nuclear plants and substantial quantities of alternative technologies can be developed, our state is heavily reliant on natural gas.

With lower emissions, natural gas has the environmental potential to be a bridge fuel to get us to a low-carbon future when alternative energy sources are available, but at these costs and even more cost escalation expected, there are challenges. Both of our utility businesses have worked continually to keep down the non-fuel costs related to our business.

Through constant efforts to improve efficiency and manage the costs associated with our business, Tampa Electric has avoided asking for an increase to its base rates for 16 years. Peoples Gas has gone six years without an increase.

These longstanding base rates have been possible despite 70 percent or greater increases in essential commodities like labor, steel and concrete.

We have done all the things within our control to keep the fuel cost increases lower than they otherwise would have been, such as maximizing the amount of electricity we generate from coal. Although coal prices have also been increasing, coal is still much less expensive than natural gas.

Unfortunately, these efforts by our team have been overshadowed by fuel costs, something that is largely outside our control.

The problem is larger than our local utilities and the state of Florida. This is a national issue, and unfortunately, there is no single "silver bullet" answer. It will take "silver buckshot" - efforts at all levels of the economy.

A comprehensive national energy policy is a good starting point, one that addresses economics and reliability, as well as the environmental aspects of energy.

To be successful we must engage this issue on all fronts, and balance the environmental, energy reliability and economics.

Customers have a role in reducing costs and protecting the environment, too. There are simple things we can all do to improve our energy efficiency and our "green" profile.

By replacing four less-efficient electric appliances with their highly efficient natural gas equivalents, an average home's carbon footprint can decrease by as much as 4,000 pounds per year. Peoples Gas offers a variety of energy efficiency rebates to make the switch affordable.

Tampa Electric offers a long roster of energy efficiency programs for homes and businesses. A new addition, Energy Planner, gives customers near real-time price signals on their energy usage and allows them to curtail usage at times of peak demand.

On average, customers in the Energy Planner pilot study saved a month's worth of electricity over a year's time.

Energy-saving tips and more information on both companies' programs are available online: www.peoplesgas.com and www.tampaelectric.com.

Chuck Black is president of Tampa Electric Co., and Bill Cantrell is president of Peoples Gas. TECO is seeking a 22.3 percent rate increase to cover fuel prices.

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