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Progress Energy Rates May Drop This Year, Rise In 2010

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If state regulators approve the plan, customers would see the decrease in their April bills.

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By RUSSELL RAY | The Tampa Tribune

Published: February 12, 2009

Updated: 02/12/2009 03:02 pm

Progress Energy today yielded to consumers and lawmakers angry about skyrocketing electric bills, saying it will seek an 11-percent reduction in electricity costs for residential customers.

But for one state lawmaker, the fight for lower electric bills isn't over.

State Sen. Mike Fasano, R-New Port Richey, pledged to stop the St. Petersburg-based utility from recovering from customers any costs related to the construction of a $17 billion nuclear plant in Levy County.

In addition to lowering fuel charges for 2009, Progress Energy said it would defer the bulk of this year's charge for preconstruction costs of the nuclear plant.

The utility began recovering a portion of those costs from customers last month, adding $11.42 to the cost of 1,000 kilowatt hours. That charge would be reduced to $3.62 under Progress Energy's proposal.

"We can suspend that for a period of time without jeopardizing the project," said Jeff Lyash, president and chief executive officer of Progress Energy Florida. "We thought it was the right thing to do."

Altogether, the proposal would reduce the cost of 1,000 kilowatt hours by $15.08 to $122.79.

Customers would see the decrease in their April bills, if state regulators approve the plan.

Part of the decrease includes a $6.90 reduction in consumer fuel charges.

"We are managing fuel costs full time," Lyash said. "When we capture value, we will pass it on to our customers by reducing the fuel factor. We will continue to do that."

Fasano, however, described today's announcement as a "small victory" for consumers.

"The greater challenge will continue as we work to slow or halt all future advance cost recovery rate increases tied to the nuclear power plant construction," he said.

Last month, Progress Energy imposed a 25 percent increase in electric bills to cover higher fuel costs and to pay for preconstruction costs of the nuclear plant. Fasano and State Rep. Peter Nehr of Tarpon Springs urged the utility to suspend its plan to recover the cost of the nuclear project early to ease the financial burden for consumers.

In 2006, the Legislature passed a law that allows companies to recover the cost of building a nuclear plant years before the first of watt of power is produced. The aim was to help utilities absorb the high cost of constructing a nuclear facility.

"This issue has been vetted and policy decisions have been made," Lyash said. "Those policy decisions have prompted us to take action."

A repeal of the 2006 law is unlikely, Lyash said.

"That would certainly place the project in some jeopardy," he said.

But the price relief being offered by Progress Energy may be temporary.

The utility also said today that it plans to seek an increase in base service rates for 2010.

The company said it needs to increase base rates by at least $475 million annually to pay for improvements to power plants, power lines and substations. Since 1993, the utility has spent $4.5 billion on such improvements.

Those improvements include the installation of emission-reduction equipment at coal-fired plants and the conversion of an oil-fired plant in St. Petersburg into a cleaner-burning gas-fired facility.

"Base rates for Progress Energy have remained relatively flat. In fact, they've only increased 1 percent since 1993," said company spokeswoman Suzanne Grant.

Exactly how much more Progress Energy customers would be paying each month has not been determined, Grant said.

Higher rates also are needed to help pay for the cost of complying with the state's plan to reduce emissions of carbon dioxide, a greenhouse gas linked to global warming, utility officials said.

"We are implementing that policy with significant capital investment in a state-of-the-art electricity system," Lyash said.

Progress Energy is Central Florida's largest power provider, serving nearly 1.7 million customers.

Reporter Russell Ray can be reached at rray@tampatrib.com or (813) 259-7870.

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