Tampa Electric to file for first base rate adjustment since 1992
Proposed rates reflect costs of environmental improvements, reliability requirements, increased costs of doing business
TAMPA, June 12, 2008
Tampa Electric today notified the Florida Public Service Commission (FPSC) that it plans to file for an increase to its base rates, the first time the company has made such a request since 1992. Since Tampa Electric’s last base rate adjustment went into effect, the company serves 200,000 additional customers, with a peak demand increase of nearly 50 percent. At the same time, it has significantly reduced air emissions compared to 1998 levels, including carbon dioxide (CO2).
President Chuck Black said, “Our entire team has worked to continually increase our efficiency, which has allowed us to delay the need to adjust our base rates for 16 years, but unfortunately the time has come when we must do so.”
Black noted that since 1992 business costs have increased dramatically, notably for essential commodities like labor, steel and concrete, which have gone up by more than 70 percent each. The expected increase to a residential bill for a customer using 1,000 kilowatt-hours (kWh) of electricity per month would be about 9 to 10 percent if this request is approved.
Base rates apply to the costs of building, maintaining and operating the electrical system, including power plants, transmission and distribution lines and facilities to serve customers. They are periodically adjusted to reflect the current cost of doing business. Under Florida regulation, a utility is required to serve all customers within its defined service area and to make required investments in the electrical system to do so. A utility is allowed the opportunity to recover its costs, including a fair return on those investments, which is essential for continued access to capital markets to finance them.
Other components of customer bills include fuel, purchased power, certain environmental initiatives and energy conservation programs. The cost of fuel, which is the single largest bill component and is adjusted annually, is passed through from customers to fuel suppliers with no markup or profit to the company.
As indicated in today’s notification, Tampa Electric will file all details related to its proposal in 60 days. That filing will start an eight-month process during which the request for new base rates is considered by the FPSC, with new rates effective at its conclusion.
Environmental and reliability investments
To serve its customers in an environmentally responsible and reliable way, from its last rate case through 2009, Tampa Electric will have made a total infrastructure investment of $3.4 billion in its system. That includes $1.7 billion to add 1,700 megawatts (MW) of power generation and $1.5 billion to make significant transmission and distribution investments, in addition to other investments in the system.
Tampa Electric’s single largest capital investment during this time has been the repowering of the 1,800-MW H.L. Culbreath Bayside Power Station. The repowering project was the centerpiece of a 10-year, $1.2 billion environmental plan that resulted in significant emission and greenhouse gas reductions. Notably, the company’s systemwide emissions of CO2 – a targeted greenhouse gas – has declined by more than 20 percent. In addition, these investments resulted in reductions ranging from 70 to 90 percent on traditional pollutants like sulfur dioxide, nitrogen oxides, particulate matter and mercury. All reductions listed are compared to 1998 levels.
The company’s second-largest capital investment was the 250-MW Unit 1 of Polk Power Station, recognized as the cleanest coal-fired power plant in North America. Unlike conventional coal plants, Polk 1’s integrated gasification combined cycle, or IGCC, technology offers the most promise for future capture and storage of carbon. Capital investment at the Polk facility also includes four natural gas-fired peaking units with a combined generating capacity of 720 MW.
Tampa Electric has also invested significantly in projects to meet increasing reliability standards, including new “storm hardening” requirements following the 2004 and 2005 hurricane seasons and transmission upgrades to meet new federal standards following the Northeast blackout in 2003. Since 1992, Tampa Electric has added 100 net miles of transmission equipment to serve its customers.
Continued cost escalation
“None of us at Tampa Electric wants to see even a minimal increase to electricity prices for our customers, especially during this difficult economy. However, we must seek rates that address the investments we’ve made to serve our growing area, to enhance our service reliability and to improve our environmental performance,” said Black.
Since 1992, inflation (as measured by the Consumer Price Index) has increased by 48 percent. The costs of commodities essential to the production and distribution of electricity have also increased dramatically since that time:
- Labor – 77 percent
- Steel – 72 percent
- Concrete – 73 percent
Compared to other consumer goods, the cost of electricity has stayed relatively stable. Since 1992, the cost of a gallon of gasoline has gone up more than 180 percent and a loaf of bread has gone up more than 84 percent, according to the Bureau of Labor Statistics.
Energy efficiency programs
Customers have a wide variety of energy efficiency programs available through Tampa Electric to help them mitigate increased energy costs and protect the environment.
Tampa Electric recently added 12 new energy efficiency programs to its roster; the company also made improvements to several longtime programs. The company received approval from the FPSC to expand its innovative Energy Planner pilot program to all new qualified customers.
Energy Planner allows customers to make energy consumption decisions based on near real-time energy prices by using a programmable “smart” thermostat provided by the company at no charge. Customers participating in the pilot study saved an average of a month’s worth of electricity. Other new programs include a Low Income program, where qualified customers can receive a number of items geared toward increasing their home’s energy efficiency.
Continuing the company’s efforts to offer innovative energy efficiency solutions to all customer groups, the company also recently launched a new program for commercial customers. Known as Demand Response, the program will pay incentives to participating commercial customers when they conserve energy at times of peak demand.
Through these programs, Tampa Electric believes that the average user of electricity can help minimize the impact of electricity price increases.
For more information on the company’s energy efficiency programs, visit online: www.tampaelectric.com.
The FPSC will assign a docket number and will publish a schedule for the case approximately 10-14 days from today. Once documents relating to the case are filed, they will be available on the FPSC Web site at www.psc.state.fl.us or through a link on the Investors section of the TECO Energy Web site at www.tecoenergy.com.
About Tampa Electric
Tampa Electric Company is the principal subsidiary of TECO Energy, Inc. (NYSE: TE), an energy-related holding company with regulated utility operations in Florida, including both Tampa Electric and Peoples Gas System. Tampa Electric serves almost 667,000 customers in West Central Florida. Other subsidiaries include TECO Coal, which owns and operates coal production facilities in Kentucky and Virginia, and TECO Guatemala, which is engaged in electric power generation and distribution and energy-related businesses in Guatemala.
Note: This press release contains forward-looking statements, which are subject to the inherent uncertainties in predicting future results and conditions. Actual results may differ materially from those forecasted. The forecasted results are based on the company’s current expectations and assumptions, and the company does not undertake to update that information or any other information contained in this report, except as may be required by law. Additional information is contained under “Risk Factors” in TECO Energy, Inc.’s and Tampa Electric Company’s combined Annual Report on Form 10-K for the period ended Dec. 31, 2007.