Rising Fuel Prices Force FMPA to Raise Wholesale Energy Rates

ORLANDO, Fla., Oct. 1, 2003 – Sustained high natural gas prices forced the Florida Municipal Power Agency (FMPA) to raise its wholesale energy rate effective Oct. 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 cities it serves, FMPA provides
economies of scale in power generation and related services to support community-owned electric utilities.

The members of FMPA voted Sept. 26 to increase the rate they charge to recover fuel costs. Fuel costs are passed along at cost and represent one portion of the total electric bill. As a result of the rate increase, FMPA’s total cost to its wholesale customers is projected to increase approximately 2.7 percent on an annual basis. Actual costs for individual cities may vary from the overall average depending on a city’s load characteristics. FMPA does not earn a profit from its electric sales because the Agency is a nonprofit, member-owned organization.

While natural gas is a clean-burning fuel, making it desirable from an environmental perspective, the downside is that the price of this commodity is volatile. Natural gas prices rose dramatically in late-2000 and 2001 and then again this year. Expectations are that natural gas prices will continue to be volatile and that the base price will continue to be higher in the coming year compared to the current year.

In most of FMPA’s member cities, the wholesale price 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.

“It is disappointing to incur these extra costs,” said Roger Fontes, FMPA General Manager and CEO. “It’s not just FMPA that’s being affected, though. Utilities around Florida and throughout the nation are raising rates to compensate for increased costs,” Fontes said.

“FMPA recognizes the impact that higher natural gas prices are having on our costs and how this impacts consumers. We are working hard to address this situation,” Fontes said. “In the shortterm, we launched a risk management and fuel hedging program that is helping avoid dramatic spikes in our natural gas costs. Looking ahead, we are pursuing several other options to mitigate our exposure to volatile fuel prices.”

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