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TECO Wins Rate Increase, But Bills Probably Will Shrink

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State regulators have granted TECO a $104 million a year rate increase.

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By RUSSELL RAY | The Tampa Tribune

Published: March 17, 2009

TAMPA - After months of testimony and debate, state regulators Tuesday approved a $104 million-a-year-increase in electric rates for Tampa Electric Co., well below the utility's request for $228 million.

The increase approved by the Florida Public Service Commission, however, is more than the staff recommendation of $87.5 million, and about three times the increase proposed by Florida's Office of Public Counsel, which represents the state's ratepayers.

Exactly how much residential bills will rise isn't yet known because regulators haven't determined how the increase will be distributed among residential, commercial and industrial customers. The commission will set specific rates during a hearing on April 7.

TECO estimates the change would equate to an increase of less than $5 a month for 1,000 kilowatt hours. The new rates will take effect in May.

But there's a twist. TECO customers might actually see lower _ not higher _ electric bills in May.

That's because although base service rates will rise, the utility plans to lower its fuel charges by about $13 a month for 1,000 kilowatt hours.

If approved by regulators, the decrease in fuel charges would be greater than the rate increase approved on Tuesday, TECO officials said. In effect, the cost of 1,000 kilowatt hours would drop by about $8 in May instead of rise by $5.

Under TECO's base rate proposal, electric bills for residential customers would have risen 8 percent, adding $10 to the cost of 1,000 kilowatt hours.

"Although the company did not receive its entire request, we respect the commission's decision and will continue to work to provide our customers with the quality service they have come to know," TECO President Chuck Black said in a statement.

The rate plan approved Tuesday will give TECO an 11.25 percent return on its investments, down from its current rate of return of 11.75 percent.

Commissioner Nancy Argenziano argued for the staff recommendation of 10.75 percent.

"In my opinion, the consumers are not served here," Argenziano said.

The increase in base service rates will be the first since 1993. Since then, TECO said, it has added 200,000 customers, invested $3.4 billion in new projects and seen its costs for labor and materials soar.

TECO also won approval to raise rates another $33.5 million beginning next year to cover the cost of adding five new gas-fired generation units at Bayside and Big Bend power stations.

Electric bills have two major components: a base rate from which utilities earn an approved rate of return and a fuel charge that reflects the utility's cost for coal, natural gas and other fuels used to generate electricity. By law, utilities are not allowed to profit from the fuel portion of the bill.

BY THE NUMBERS:

$104 million: Annual rate increase approved by regulators Tuesday

$228 million: Rate increase requested by TECO

$87.5 million: Rate increase recommended by Public Service Commission staff

$5: Estimated monthly increase for customers using 1,000 kilowatt hours

$13: Estimated monthly decrease on the fuel portion of the average bill

$8: When all is said and done, the amount the average residential customer's bill should drop as of May

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