As part of its annual fuel filing before the Florida Public Service Commission, FPL submitted information indicating that fuel cost increases would drive a 1,000 kilowatt-hour residential bill in 2005 from $86.43 to $90.35. Fuel costs in 2005 would account for 44 percent of a customer's bill and when added to other clauses - purchased power, environmental and conservation adjustments - would account for 54 percent of a 1,000 kilowatt-hour bill. The remaining portion of the bill - aside from taxes and franchise fees where applicable - is FPL's base rates, which cover the costs of producing and delivering electricity to our customers.
The company cautioned that continued extraordinary increases in oil and natural gas prices in the coming months could require a further increase in the fuel adjustment during 2005.
"What is happening to fuel prices from events around the country and the world has been a tremendous frustration to our customers and all of us at FPL who have worked so hard to keep bills low," said Armando Olivera, president of FPL. "Since 1999, we have been able to reduce our base rates for electricity by 15 percent. By reducing these non-fuel costs, we have helped to offset somewhat the doubling of our fuel costs over that same period."
FPL expects its total fuel costs for 2005 to top $4 billion, up from $3.7 billion in 2004, a $339 million differential attributable to continuing increases in oil and natural gas prices.
As an example of fuel price increases anticipated in 2005, residual fuel oil prices on a dollars-per-million BTU basis are projected to rise 19 percent (from $4.20 to $4.99 per million BTUs), while natural gas prices are projected to climb 22 percent (from $5.90 to $7.18 per million BTUs).
Oil and gas prices have almost tripled since 1999, but because FPL uses a diversity of fuel sources - including nuclear and purchased power from coal-fired generators -- it has been able to hold down costs for its customers. It has taken a number of additional steps to mitigate the impact of fuel price volatility, such as minimizing the use of higher-priced natural gas by "fuel-switching" at power plants capable of burning both oil and natural gas; selling excess generation on the market and returning profits to customers through the fuel clause, and utilizing fuel hedging to provide some insurance against spikes in fuel prices in the future.
"FPL is a strong proponent of diversity in the fuel we use for generation," Olivera said. "And that's why our nuclear power plants and our purchases of electricity from lower-cost, coal-generated electricity from other utilities benefit our customers in helping to moderate overall fuel costs."
Olivera said the company, over the past several years, has converted older, less efficient oil burning power plants to more efficient, cleaner gas-fired plants and also has built new gas-fired units. Today, the company's fuel mix is about 35 percent natural gas. "Although the price of gas today is higher than what we would like to see, we do believe the environmental benefits of gas are significant," he said. "Yet, we will continue to seek additional diversity of fuels used to help ensure enhanced reliability and affordability for our customers."
The fuel clause includes the costs of fuel that the company predicts it will use to generate electricity in a given year, plus the overrun or under-run of reimbursement for the cost of fuel used in the prior year. If costs are predicted to go up, the fuel clause would reflect an increase. If costs are predicted to go down, customers would benefit from anticipated lower fuel costs. The fuel clause is adjusted annually and becomes effective January 1 of each year. However, if the company experiences a cost change greater than 10 percent - either up or down from the beginning of the calendar year - it may file for an additional adjustment.
Florida Power & Light Company is the principal subsidiary of FPL Group, Inc. (NYSE:FPL), nationally known as a high quality, efficient and customer-driven organization focused on energy-related products and services. With annual revenues of more than $9 billion and a growing presence in 26 states, FPL Group is widely recognized as one of the country's premier power companies. Florida Power & Light Company serves more than 4.2 million customer accounts in Florida. FPL Energy, LLC, FPL Group's wholesale electricity generating subsidiary, is a leader in producing electricity from clean and renewable fuels. Additional information is available on the Internet at http://www.FPL.com, http://www.FPLGroup.com and http://www.FPLEnergy.com.
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