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Progress Energy Seeks Rate Hike

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By RUSSELL RAY

rray@tampatrib.com

Published: March 21, 2009

Three days after telling customers to expect a big decrease in next month's electric bill, Progress Energy asked regulators Friday for a hefty increase in base service rates.

After winning approval to lower bills about $15 for 1,000 kilowatt hours, the St. Petersburg-based utility filed a proposal with the Public Service Commission that would raise the cost of 1,000 kilowatt hours by $14 beginning next year.

Bottom line: Customers next year would be paying about the same as they are now, if the utility's plan to raise base rates by $499 million a year is approved.

The utility won approval earlier this week to lower electric bills 11 percent. The company agreed to lower charges for fuel and preconstruction costs for a nuclear plant in Levy County. The decrease - $15 for 1,000 kilowatt hours - will be passed on to customers beginning in April.

The company requested an increase a few days later because the utility needs to charge higher rates to cover the cost of complying with new requirements to reduce carbon emissions, said Jeff Lyash, president and chief executive of Progress Energy Florida.

"Raising rates is something we never like to do," Lyash said. "We are actively working with policymakers to find ways to minimize these price impacts, especially in this down economy."

A portion - $76 million - of the increase would be applied to customer bills in July, raising the cost of 1,000 kilowatt hours by $4.88.

The company wants to begin collecting a portion of the increase this year to cover the $795 million cost of converting an oil-fired power plant in St. Petersburg into a natural gas-fired plant with double the generation capacity. The plant will be placed into service in June.

"We're faced with increasing costs to generate power and deliver our service," said Progress Energy spokeswoman Suzanne Grant. "We believe we won't be able to provide reliable and efficient electrical service without requesting part of that base rate increase in 2009."

Part of the reason for the roller-coaster aspect to the rates is that energy bills are divided into two parts: the base service rate and the cost of fuel the utility uses to produce energy. By law, the company cannot profit from the cost of fuel.

The utility sought the decrease after it raised electric bills 24 percent in January to pay for higher fuel costs in 2008 and its nuclear plant in Levy County. The request came after customers and lawmakers complained about the sharp increase.

But the price relief may be temporary if regulators approve the rate plan Progress Energy submitted Friday.

Progress Energy serves more than 1.6 million customers in north and central Florida.

COST OF 1,000 KILOWATT HOURS

$137.87: What Progress Energy customers are paying now

$122.79: What customers will pay beginning in April

$127.67: What customers might be paying beginning in July

$136.97: What customers might be paying beginning in January

Source: Progress Energy

Reporter Russell Ray can be reached at (813) 259-7870.

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