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America's Power-Coal "The Facts"
By Jo MANAGER’S MEMO Higher fuel prices are forcing up your electric billAs member load has continued to grow, we – and just about every other Florida electric utility – have become increasingly reliant on natural gas to produce our electricity. Unfortunately, our increased demand for natural gas has coincided with what can only be described as soaring natural gas prices, and we must once again pass along these higher fuel costs to our members. It’s little consolation to know we’re not alone in dealing with soaring fuel costs. • On May 21 the President of Florida Power & Light Co. publicly stated that soaring costs for oil and natural gas already have pushed FPL’s projected fuel expenditures this year up by $400 million. • That same week, St. Petersburg-based Progress Energy Florida (PEF) told the Palm Beach Post that if fuel prices – “which they have little control over” – continue to escalate, their customers can expect to pay more for fuel next year than they are paying this year. “How much, no one knows,” its spokesperson added.*¹ • On May 20, the Board of JEA, the Jacksonville-owned municipal utility, approved a $15 increase to the average customer’s fuel charges (based on 1000 kilowatt hours use) to help offset a projected $61 million deficit due to soaring fuel costs. Its financial officer told JEA’s Board that the price of coal has doubled in the past year and natural gas is up 45% over budget, adding that JEA has no choice but to raise rates to deal with the “shock and awe” of higher fuel prices.*² In 2003, the fuel we used to produce electricity cost just under three cents per kWh. Today the cost of fuel is nearly five cents per kWh – a 60% increase. This increase is primarily attributable to higher natural gas costs. From 1997 to 2007, natural gas prices increased nearly 300%.*³ Just over the past year we have seen a 57% increase.*4 Last year the market forecast predicted the average price of natural gas in 2008 would be around $8 per decatherm. Currently natural gas is trading at close to $12 per decatherm in the near term – nearly 5 times more coal, comparing both fuels on the basis of energy produced *5 – and at almost $13 per decatherm for the early part of 2009.6 As a result of these higher natural gas prices, fuel as a percentage of our total wholesale energy cost has increased by 7 percentage points (i.e., from 57% to 64%) over the last five years.*7 Seminole Electric Cooperative, our non profit power supplier, had projected fuel cost of approximately $801 million for 2008 based on forecast member demand and market forecasts of fuel prices. It now projects its 2008 fuel costs will be 5.4% higher, which translates to $43 million more in fuel costs this year – a substantial difference.*8 To date, Seminole has been able to buffer the impact of higher natural gas prices on our power costs because of its coal – fueled generating units. Those coal units now supply about 60% of our energy. Seminole purchases about 70% of the coal it needs at very favorable prices through long term commodity contracts. The rest of the coal that it needs is supplied through spot market purchases. Unfortunately, the cost of spot market coal recently has increased due to higher demand for U.S. coal (both in the U.S. and overseas). Based on market forecasts Seminole now expects a minimum increase of 120% next year in the delivered cost of spot market coal. To put that into perspective, 1999 through 2007, spot coal increases averaged 2.5% a year. In the near future we expect we will rely even more on natural gas to meet our energy needs, due to several factors – continued increases in member demand, U.S. policy that has precluded the development of new nuclear power plants over the past 30 years, and climate change concerns that more recently have stalled construction of new clean coal generating units, including our planned clean coal project. We also expect to see rising fuel costs over the next 12-24 months, with natural gas leading the way. Seminole is continuing to work to reduce the impacts of higher fuel costs on our wholesale power costs. They continuously survey the market for opportunities to replace higher cost power resources whenever possible with lower cost power resources. Seminole also continues to pursue approval for its planned clean coal unit, and a share of several proposed new nuclear units in Florida. Diversification of our resources will help keep your energy prices more stable. Increasing your efforts to conserve energy can help reduce the impact of rising fuel costs on your electric bill. Go to our website and click on “safety, weather and energy” links to learn how. 1 Palm Beach Post, May 22, 2008 2 Florida Times – Union, May 21, 2008 3 EIA Monthly Energy Review - $2.32 wellhead 1997, compared to $6.39 well head 2007 4 M. Hewitt and D. White per NYMEX data – 7,172 Jan. to 11.28 May 5 J. Reid 6 M. Hewitt 7 M. Hewitt 8 Note: The T-U story previously quoted said JEA says its fuel cost of ’08 will be 24% higher than budget; it gets 60% from coal and 34% from petcoke/natural gas.
TRIVIA AND FUN FACTS
• The human brain is about 85% water.
"Owned By Those We Serve"
Suwannee Valley Electric Cooperative, Inc. 11340 100th Street ~32060 PO Box 160 ~ 32064 Tel. 386-362-2226 Fax 386-364-5008
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HOME | MEMBER SERVICES | SURGE PROTECTION | SUWANNEE VALLEY NEWS | SAFETY, WEATHER, AND ENERGY LINKS | BOARD OF TRUSTEES | CONTACT US | Last Updated 09/06/2008
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