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August 26, 2008


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NEWS

Electric Rates to Jump 20 Percent in October

By Linda Bolton
linda@mckenziebanner.com

Carroll County Electric customers will experience a 20 percent increase in bills beginning with October statements, pending approval of the board August 28, according to Mark Burden, office manager at Carroll County Electric. The increase is a pass along from TVA’s recently announced 20 percent rise in wholesale power rates.

The average residential electric customer in Carroll County will see a $24 rise in their bill, based on the use of 1,500 kilowatt hours a month or previous charge of $120, he said. Those figures are based on a 12-month average.

Most of the rate hike includes a 17 percent fuel cost adjustment that varies quarterly. A smaller portion of the hike is a 3 percent TVA base rate change.

The combined rate increase is the largest at Knoxville-based TVA since a 20.2 percent hike in 1974, and follows a 7 percent increase in April. TVA officials said similar increases are being implemented throughout the utility industry.

“It’s going to be rough,” added CCE Manager Lynn Compton. “The sad news is, I don’t think the (fuel cost adjustment) increases are over. I think we’ll see some in 2009.”

However, Compton stated that even with this rate increase, TVA is still cheaper than power suppliers in other areas of the country.

TVA board approved a 2009 budget that includes $12,613 billion to cover operating expenses and $2.088 billion in capital investments.

“We recognize that the increased costs TVA is experiencing are also driving up costs for the families and businesses we serve,” said TVA President and CEO Tom Kilgore. “The last thing we want to do is tell customers that our product is going up in price, but we have no alternative for paying for fuel.”

“We must generate and deliver the electricity that our customers depend on, and we must maintain our generating and transmission equipment so we can continue to provide a reliable power supply,” said Kilgore. “Unfortunately, the cost of providing fuel to operate the power system reliably has increased sharply.”

The Fuel Cost Adjustment is a mechanism used in most parts of the country to recover the costs utilities must pay for fuel and purchased power, so there is a better match between revenues and the actual expenses for fuel. Price increases for fuel, including coal and natural gas, and purchased power are driving TVA’s costs up by more than $2 billion in FY 2009, compared to FY 2008.

In addition, continuing drought conditions mean that TVA has been able to generate only about half as much inexpensive hydropower this year as it would generate in an average year. When TVA cannot generate hydropower, it must buy replacement power at market prices. Those power prices are much greater than hydropower costs and were even higher this summer, averaging 63 percent higher than last summer.

The rest of the increase includes firm wholesale electric rates to cover higher costs in several related areas.

These include the cost of working capital, costs related to fuel inventory that are not covered in the Fuel Cost Adjustment, the cost of reserving power for future purchase to get better prices, and investments in TVA’s work to reduce the rate of growth in the region’s power demand. That effort is designed to reduce the amount of money TVA must invest in the future in additional generating capacity.

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August 26, 2008