Dramatic Rise in Fuel Prices Prompts Proposed Cost-Recovery Increase in N.C. Rates

Dramatic Rise in Fuel Prices Prompts Proposed Cost-Recovery Increase in N.C.
Rates
Fuel component in customer rates tied to spiking costs for coal, other fuels

RALEIGH, N.C., June 6 /PRNewswire-FirstCall/ -- The same global economic
influences that have caused prices to rise dramatically at the gas pump have
pushed up the cost of other fuels in recent months. The increase -
particularly in the price of coal used in electricity generation - has
prompted Progress Energy Carolinas to seek an increase in the fuel component
of the rates paid by the company's N.C. customers.
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The company today filed a petition to increase rates by about $424
million, to address the significant under-recovery of fuel expenses from prior
years and the anticipated higher expense of fuel for the next year. The
company also has filed to recover expenses associated with the implementation
of energy-efficiency and demand-side management programs, as well as a
renewable energy portfolio standard, both of which are required under the
state's energy law enacted in 2007.
If approved, the changes would equate to an increase of about 16.2 percent
for residential customers using 1,000 kilowatt-hours (kWh) of electricity per
month, including a 13.61 percent increase for fuel expenses, 2 percent to
recover energy-efficiency and demand-side management expenses and a flat
monthly charge of 46 cents for renewable energy costs.
As filed, the increase would raise the monthly residential price of 1,000
kWh to $112.57 from the current $96.86. The increase would take effect Dec. 1.
Progress Energy Carolinas makes a fuel cost-recovery filing annually in
North Carolina, to recover the cost of fuel used to provide electric service
to the company's 1.25 million N.C. customers. The Utilities Commission reviews
Progress Energy Carolinas' fuel costs and adjusts the fuel component of
customer rates accordingly. By law, the company makes no profit from the fuel
component of rates. In April, the company made its annual fuel expense filing
in South Carolina.
Commercial and industrial customers in North Carolina would see the same
fuel-related percentage increase, 13.61 percent. For commercial and industrial
customers, the energy-efficiency and demand-side management and renewable
energy costs vary based on size of the customer, energy usage and other
factors.
Progress Energy Carolinas has maintained a deferred fuel balance
(unrecovered fuel expenses) since 2000 in an effort to minimize the impact of
rate increases on customers. Over time, that balance has grown and is expected
to be approximately $300 million by the end of 2008.
After a slight increase in 2007, the prices of coal and other fuels used
to produce electricity have risen sharply. Since June 2007, the market price
for coal has increased more than 160 percent and has established several
records thus far in 2008; natural gas prices have risen 55 percent; fuel oil
prices have risen 87 percent. Meanwhile, demand for coal in developing
countries, particularly China and India, continues to rise, creating global
supply and price issues.
Coal fueled about half the electricity that Progress Energy Carolinas
generated for its customers in 2007. The company's nuclear plants accounted
for about 44 percent. Plants that use natural gas and oil accounted for about
5 percent, with the remaining generation coming from hydroelectric plants in
central and western North Carolina.
The other major component of the rates, the base rate, has not been
increased since 1988. In fact, since 1991, the total price of electricity for
Progress Energy Carolinas' N.C. customers has increased only about 15 percent,
while the U.S. Consumer Price Index, a measure of overall inflation, has
increased about 58 percent in that time.
"Any price increase has an impact on our customers, and we are very
sensitive to that fact," said Lloyd Yates, CEO and president of Progress
Energy Carolinas. "Rising fuel prices are a new energy reality, and we will
continue to work to meet the challenges of a growing service area reliably,
affordably and in an environmentally sound manner. Even though we cannot
control global economics that affect fuel prices, we are focused on managing
the costs that we do have control over. We're doing all we can to operate our
plants and facilities as efficiently as possible. We're pursuing a balanced
energy strategy that includes investments in renewable energy sources, new
programs to help our customers use energy wisely every day, and a
state-of-the-art power system."
The company has filed a number of proposed energy-efficiency and
demand-side management programs and will introduce additional programs this
year. Meanwhile, customers can save up to 20 percent on their energy costs by
making simple changes at home. Cleaning air filters, replacing incandescent
light bulbs with compact-fluorescent bulbs, adjusting the thermostat and
sealing windows and doors can result in noticeable savings. For more than 100
energy-efficiency tips, visit the company's Web site at
http://www.savethewatts.com.
Progress Energy, headquartered in Raleigh, N.C., is a Fortune 250 energy
company with more than 21,000 megawatts of generation capacity and $9 billion
in annual revenues. The company will observe a century of operation in 2008.
Progress Energy includes two major utilities that serve 3.1 million customers
in the Carolinas and Florida. Progress Energy is the 2006 recipient of the
Edison Electric Institute's Edison Award, the industry's highest honor, in
recognition of its operational excellence. The company also is the first
utility to receive the prestigious J.D. Power and Associates Founder's Award
for customer service. Progress Energy serves two fast-growing areas of the
country, and the company is pursuing a balanced approach to meeting the future
energy needs of the region. That balance includes increased energy efficiency
programs, investments in renewable energy technologies and a state-of-the-art
electricity system. For more information about Progress Energy, visit the
company's Web site at http://www.progress-energy.com.
SOURCE Progress Energy Carolinas

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