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The Budget-Jolting Prospect Of Electric Bills Going Up 31%

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The Tampa Tribune

Published: August 25, 2008

If the Public Service Commission approves a two-stage rate increase requested by Tampa Electric Co., a typical homeowner could pay about $50 more a month for electricity.

The company has not increased base rates for 16 years, so the chances are good it will get most if not all it wants.

The increase will take money out of the family budget and hurt the local economy. It will put a huge strain on businesses, whose increases will be slightly higher than for homes. Add a 35 percent higher electric bill to the property taxes, insurance and fuel costs paid by businesses, and there's not much left in the profit column.

Florida utilities are regulated and are guaranteed a profit of around 10 percent. The Legislature should take a look at that number and make sure it isn't too high at a time when many companies are struggling just to make payroll.

TECO is currently paying a dividend of 4.7 percent to shareholders. There are no guarantees, but a well-run, state-regulated utility is not considered a high-risk investment.

In comparison, higher-risk Exxon Mobil has a similar profit margin of about 10 percent and is paying a 2 percent dividend.
TECO President Chuck Black points out that a financially sound company gets lower rates on loans and attracts money from private investors. The challenge for the PSC is to make absolutely sure TECO does not charge customers more than is justified.

The PSC is expected to rule on a fuel-cost increase of more than 22 percent this year and on a 7.5 percent increase in base rates by January. Customers can't count on the rate increase being denied because since its last increase, TECO has made huge investments in cleaning up its emissions. It has provided service to 200,000 more customers while reducing its workforce. It has kept raises for employees reasonable and merit-based, but has seen other costs, such as for gasoline, copper and steel, rapidly rise.

The largest part of its requested rate hike reflects higher costs for natural gas and coal, which TECO burns to generate electricity. No matter how efficiently the local utility is run, those costs must be passed on.

That reality raises the question of how best to share a community's electricity bill among thrifty ratepayers, average users and energy hogs. Florida can do better.

Until now, TECO's basic rate per kilowatt hour has been flat. That means every customer has paid the same rate no matter how much they use.

Under the new proposal, customers will pay a slightly higher rate for electricity that exceeds 1,000 kilowatts a month. In round numbers, people will pay about $120 for the first 1,000 kilowatts and about $140 for the second. A typical air-conditioned house might use 1,500 kilowatt hours per month in the summer.

The Legislature should investigate how to make the rate structure even more progressive to give a bigger reward to those who take conservation seriously.

It should also look into ways to better reward electric utilities whose customers cut usage.

At the national level, Congress needs to get moving on a rational response to rising fuel costs.

"Our customers, state and country would be better off if we could develop a comprehensive energy policy," says Chuck Black, TECO president.

The nation's approach to coal is an example of energy confusion. In the past year, central Appalachian coal has increased from $45 a ton to $140, according to the Department of Energy. The increase is not because companies like TECO are burning more. TECO last year scrapped plans to build a new coal plant because of the uncertainty of environmental rules.

This year U.S. coal consumption is expected to be up less than one half of one percent. But coal exports are expected to be up 45 percent. If the goal is to reduce carbon emissions worldwide, burning more natural gas at home and more less-expensive coal abroad is not the way to do it.

TECO's parent company, TECO Energy, owns coal mines in Tennessee, Kentucky and Virginia, but sells no coal to its Tampa utility.

Black tells us that coal delivered to Tampa costs about $3 for every 1 million units of energy it produces. Natural gas now costs $8 for the same energy, and TECO has paid as high as $20.

"That's the price we're paying for environmental benefits," he says.

To be more precise, TECO is passing it on. We customers are paying.

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