Continued High Fuel Costs Will Increase Electricity Prices

Today, Tampa Electric made its annual fuel filing with the Florida Public Service Commission (FPSC). As the company originally announced in July, based on its most recent analysis of actual and projected fuel costs for 2008, total fuel costs for the year will exceed original projections and are expected to remain high through 2009.

Costs experienced through July exceeded projections by 9 percent, but with no relief expected for the balance of the year, as well as some hurricane activity in the Gulf of Mexico and the continuation of increased costs projected in 2009, the company estimates that by year-end, it will be under-recovered by $209 million, or about 20 percent. The company is not seeking a surcharge this year to address the under-recovery. Instead, it intends to address it through its 2009 fuel charge.

President Chuck Black said, “Just as fuel is used to power cars, fuel is also used to power electric generators. This unprecedented run up in fuel prices has been frustrating for our entire team and truly challenging for our customers on all energy fronts. As we produce and deliver electricity, we are doing all we can to minimize our fuel costs through hedging purchases where appropriate and maximizing our use of coal, a more affordable fuel.”

Tampa Electric’s fuel mix is primarily made up of coal and natural gas. While substantial and growing portion of an electric bill, fuel costs are what is known as a “pass-through” component. They are collected from customers by the utility and used to pay fuel suppliers, typically the large oil and coal companies, without any mark-up. This keeps electricity prices as low as possible to customers.

Fuel Cost Increases

The cost of fuels, including those used to produce power, has risen dramatically in the past eight years and especially in the past year. Based on current market price levels, Tampa Electric’s 2009 fuel costs are expected to be about $1.4 billion, which is $278 million or 25 percent greater than the company’s original 2008 projection filed with the FPSC in September 2007.

Due to the $209 million under-recovery for 2008, combined with recent projections for 2009 fuel costs, the company estimates that starting in January 2009, the bill for a residential customer using 1,000 kilowatt-hours of electricity per month will be about $140, compared to the present bill of $114. This 2009 bill is a projection and may vary depending on factors like fuel market price fluctuations, hurricane events and other bill impacts.