Rising Fuel Costs Force FMPA to Raise Wholesale Energy Rates
ORLANDO, Fla., June 24, 2008 — A significant increase in fuel costs forced the Florida Municipal Power Agency (FMPA) to raise its wholesale costs for electricity by approximately 7.5 percent. Actual costs for individual cities served by FMPA may vary from this overall average depending on a city’s electric use characteristics.
In May, FMPA’s cost of natural gas rose from $10.38 per million BTU to $11.71, a 13 percent increase. Fuel is the largest variable operating expense for electric utilities, and natural gas fueled 68 percent of FMPA’s energy sources in May. FMPA’s energy rate—which is only one portion its total wholesale cost—increased 11 percent for May compared to the previous month. Upward pressure on fuel costs also has increased the Agency’s 60-day working capital requirements, a Board-approved rate-setting criteria.
FMPA does not earn a profit from its electric sales because the Agency is a nonprofit, member-owned organization. Under utility rate regulation, fuel costs are passed along to electric customers at cost.
“We know that higher electric bills will not be welcome news for customers,” said FMPA’s General Manager and CEO Roger Fontes. “This comes at a difficult economic time when increasing gasoline prices are also raising the costs of many goods and services. We are doing all we can to modernize our power plants so we use fuel more efficiently and better control our costs. Moreover, we are hedging a significant portion of our fuel to minimize fuel price spikes, but we cannot completely insulate ourselves from such a dramatic increase in energy costs, as has been experienced worldwide.”
FMPA serves the wholesale power needs of 15 municipal electric utilities, including Bushnell, Clewiston, Fort Meade, Fort Pierce, Green Cove Springs, Havana, Jacksonville Beach, Key West, Kissimmee, Lake Worth, Leesburg, Newberry, Ocala, Starke and Vero Beach.
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 electric bills of retail customers is determined by each individual city. Rising natural gas prices is an industry-wide trend forcing many utilities in Florida to increase rates.
Minimize the Increase by Reducing Electricity Usage
A retail customer’s monthly electric bill is determined by two factors: 1) their local utility’s rate per kilowatt hour, and 2) the customer’s usage. A customer has control over how much electricity they use. To reduce usage, consider these measures:
- In Florida, air conditioning is usually the largest user of electricity in homes. To conserve energy and save money, raise your air conditioning thermostat to 78 degrees or warmer during summer. Raise your thermostat to 82 degrees or warmer when you are away from home for extended hours. Save yourself effort and make daily temperature adjustments more dependable by installing a programmable thermostat. Every month, clean or replace the unit’s air filter. Once a year, inspect duct work and repair leaking ducts. Always keep windows and doors closed when the air conditioning is on. Use ceiling fans to aid room comfort, but turn funs off when rooms are not occupied. Close curtains or blinds on east- and west-facing windows during the day to reduce heat from the sun.
- Water heating is generally the second largest energy user. To save energy, reduce the temperature setting on the water heater to 120 degrees or lower if you do not use a dishwasher or if your dishwasher has a heating element. Install a timer that can automatically turn the water heater off at night and on in the morning. Consider using only cold water for clothes washing.
- Replace your most frequently used lights with compact fluorescent light bulbs. Compact fluorescents last longer than incandescent bulbs and produce the same amount of light using significantly less electricity. Always turn off lights in any room that is not occupied.
- Limit the number of household refrigerators.
- Turn personal computers off when not in use.
- Limit the time a pool pump runs to six hours per day in summer. More importantly, if you avoid running the pool pump in the late afternoon, you will reduce the utility’s peak demand, which reduces costs for the utility and utility customers alike.
- Limit pre-rinsing of dishes before putting them in the dishwasher. If you avoid running the dishwasher in the late afternoon, you will reduce the utility’s peak demand, which reduces costs for the utility and utility customers alike.
FMPA Improves Power Plant Fuel Economy
Like cars, some power plants use fuel more efficiently than others. FMPA is modernizing its energy sources to improve its power plant fuel economy.
On May 31, FMPA began operation of a new power plant that is one of the highest efficiency plants in Florida. This plant located in St. Lucie County generates electricity 40 percent more efficiently than the generation it replaces. This means the new plant uses less fuel, creates fewer emissions per kilowatt hour and generates more power than older, less efficient units.
FMPA Hedges Fuel Costs
For several years FMPA has hedged the price of natural gas used for fuel in its power plants. Hedging is a strategy to offset risk. For example, through a combination of techniques—such as buying physical gas in advance or using financial instruments like options and futures—it is possible to offset, in varying degrees, exposure to price variations in commodities like natural gas. The goal of FMPA’s fuel hedging program is to remove sharp spikes in fuel prices to protect its customers from price volatility.
This program is reducing the impact of rising natural gas prices on FMPA’s member utilities, but recent fuel price increases have been so dramatic that rates will still go up, just not as much as if FMPA did not hedge fuel costs.
FMPA Offers Energy Conservation Programs
Customers are encouraged to use electricity as efficiently as possible to minimize their electric bill. FMPA offers services to its members to help retail customers conserve electricity.
- ENERGY STAR®: FMPA has a partnership agreement with ENERGY STAR, a government program helping businesses and individuals protect the environment through superior energy efficiency. Partnering with ENERGY STAR and working together through FMPA makes it convenient and cost effective for FMPA’s members to offer energy efficiency programs. For more information about ENERGY STAR, visit the ENERGY STAR website at www.energystar.gov.
- Energy Depot: FMPA has an agreement with Enercom to provide FMPA members with “Energy Depot for Homes,” an online energy audit for retail customers. The Web-based software offers a do-it-yourself home energy audit, energy calculator to enable customers to estimate energy use, an energy library on a wide range of home energy systems and efficiency opportunities, and an energy advisor e-mail question and answer tool that allows customers to receive answers to energy questions.
- Energy Services: FMPA offers access to a key accounts program for FMPA members to provide energy conservation programs for large customers. FMPA coordinates the relationship between participating members and contractors to provide services, such as lighting retrofits, HVAC upgrades, and energy management system services.
- Energy Auditor Program: FMPA coordinates training and roundtable meetings for Energy Auditors from member utilities. The program provides a forum for energy auditors to exchange information and ideas. In addition, FMPA coordinates training sessions and presentations as part of the roundtable.
- Conservation Program: FMPA established a task force in May to investigate a conservation program. The purpose of the program is to reduce electricity use by promoting energy efficiency and conservation concepts to customers. The task force expects to make a final recommendation in July.
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Florida Municipal Power Agency (FMPA) is a wholesale power company owned by 30 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 2 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.