Rising Fuel Costs Force FMPA to Raise Wholesale Energy Rates
ORLANDO, Fla., Nov. 1, 2004 – Persistently high natural gas prices, unusually high coal prices and disrupted deliveries of coal into Florida have forced the Florida Municipal Power Agency (FMPA) to raise its wholesale energy rate effective Nov. 1 for 15 Florida cities.
FMPA is a nonprofit organization that supplies the wholesale power needs of 15 municipal electric utilities in Florida. The cities are Bushnell, Clewiston, Fort Meade, Fort Pierce, Green Cove Springs, Havana, Jacksonville Beach, Key West, Kissimmee, Lake Worth, Leesburg, Newberry, Ocala, Starke and Vero Beach. Owned by the municipal utilities it serves, FMPA provides economies of scale in power generation and related services to support community-owned electric utilities.
While FMPA has an active program for managing natural gas prices, continued high prices for natural gas and oil have pushed FMPA’s expected costs above its current budget forecast. Industry experts predict that oil and natural gas prices will remain high for the foreseeable future. Without FMPA’s fuel price risk management program—known as hedging—a higher percentage increase would have been necessary. Other electric utilities are experiencing similar cost increases that are likely to result in rate increases.
Damage to railroad lines from recent hurricanes, which hit Florida and moved into the Northeast coal production areas, has strained an already overburdened coal delivery system. This has depleted coal inventories following the summer peak electric use season. Low coal inventory levels have caused curtailment of some coal-based generation throughout Florida, forcing FMPA to rely more heavily than expected on more costly natural gas-fired generation.
Because of this situation, the members of FMPA voted to increase the rate charged to recover fuel costs. Fuel costs are passed along at cost and represent one portion of FMPA’s total wholesale electric bill. As a result of the rate change, FMPA’s cost to its wholesale customers is projected to rise approximately 2.9 percent. Actual costs for individual cities may vary from the overall average depending on a city’s electric use characteristics and rate structure. FMPA does not earn a profit from its electric sales because the Agency is a nonprofit, member-owned organization.
In most of FMPA’s member cities, the wholesale rate increase is likely to result in increased retail costs. How much and when this might impact the bills of retail customers is determined by each individual city.
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Florida Municipal Power Agency (FMPA) is a wholesale power company owned by 29 municipal electric utilities. FMPA provides economies of scale in power generation and related services to support community-owned electric utilities. The members of FMPA serve approximately 1.8 million Floridians. FMPA’s members include Alachua, Bartow, Bushnell, Chattahoochee, Clewiston, Fort Meade, Fort Pierce, Gainesville, Green Cove Springs, Havana, Homestead, Jacksonville Beach, Key West, Kissimmee, Lake Worth, Lakeland, Leesburg, Moore Haven, Mount Dora, New Smyrna Beach, Newberry, Ocala, Orlando, Quincy, St. Cloud, Starke, Vero Beach, Wauchula and Williston. Additional information is available on the Internet at www.fmpa.com.