Friday, May 02, 2008; Posted: 06:40 AM
The Raleigh electric utility is seeking a 6 percent rate increase in South Carolina to cover rising fuel costs and is expected to make a similar request in this state in June.
The typical residential customer's bill would increase from $97 a month to $103 a month if Progress Energy's rate request in North Carolina mirrors the South Carolina proposal and wins regulatory approval.
A typical Progress Energy customer uses an average of 1,000 kilowatt hours a month, with heavier use in the summer and winter.
One big culprit for the higher rates: coal.
Progress Energy relies on coal to generate half its electricity in the Carolinas. Coal is considered an economical fossil fuel, but it has significantly jumped in price in recent months amid global energy demand, especially in India and China.
"All of a sudden, since December is when we've seen huge increases," said Progress Energy spokesman Mike Hughes. "The runup in coal has just been astronomical."
The surge in electricity costs will come as households are paying record prices for gasoline and some are cutting back on expenses. Rising energy costs exacerbate a sluggish economy that has been battered by the housing crisis, forcing households to spend more of their income on necessities.
Progress is allowed by law to pass along the costs of fuel to its ratepayers. But state regulators will need to determine whether the higher costs are justified.
The average price of coal paid by Progress has increased from about $70 a ton to about $90 a ton, including delivery by rail. The company buys coal on long-term contracts to lock in prices. A big portion of the company's cost is eaten up by rail transport. Progress projects a 25 percent increase in the cost of transporting the coal.
The drain on global energy supplies is pushing up the cost of oil and natural gas, which account for about 5 percent of Progress Energy's electricity generation in the Carolinas.
Natural gas prices are closely pegged to the price of crude oil, which is trading at record high prices and driving up the cost of gasoline.
Natural gas costs have soared nearly 50 percent in the past year, squeezing the households that use the fuel.
PSNC boosts rates
That fuel factor is leading PSNC Energy, the Triangle's natural gas utility, to seek an increase of nearly 8 percent, to take effect June 1.
The PSNC request would increase the typical residential natural gas bill by $1.60 a month in the summer when household natural gas use dips, and by $9.40 a month next winter when natural gas use increases for heating. Those costs assume that PSNC won't request future increases to keep up with rising fuel prices.
Natural gas utilities can pass on fuel costs once a month in North Carolina, whereas electric utilities can pass on fuel costs only once a year.
Duke Energy, the state's largest electricity provider, is seeking a 4 percent increase to pay for its fuel.
In the 1990s, fuel costs went down in several years, which utilities passed on to their customers by reducing rates.
But fuel is becoming a bigger component of the household electricity bill, a trend that concerns state regulators and public officials. Three years ago, Progress Energy proposed a 9 percent residential rate increase to cover rising fuel costs but settled with state regulators for a 4.4 percent increase.
Then two years ago, Progress again proposed a 9 percent increase, but this time agreed with state regulators and industrial customers to spread out the economic pain over three years.
The utility has collected two years of that cost increase and will collect the third installment in the coming year, at a time when it is also seeking to overlay another rate increase to account for subsequent fuel costs.
Getting close scrutiny
In North Carolina, Progress Energy's rate increase would go into effect Dec. 1. In South Carolina, it would take effect July 1. In both states, the requests will undergo close scrutiny.
"We will be doing a thorough audit to make sure the expenditures claimed were actually made," said C. Dukes Scott, the consumer advocate in South Carolina. "So it's not a rubber stamp."
About 1 percent of the rate increase would be used to pay for materials and chemicals, such as limestone and ammonia, used to trap sulfur dioxide and nitrogen oxides emitted by the utility's coal-burning power plants. The legislatures in both states approved comprehensive energy laws last year that included provisions allowing electric utilities to recover those pollution cleanup costs, along with their annual fuel costs. Previously, electric utilities couldn't pass on the costs annually to their customers.
john.murawski@newsobserver.com or (919) 829-8932
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