Rising fuel costs for utility companies, coupled with rising temperatures, could lead to much higher electric bills for homeowners in the very near future.
Utilities such as Duke Energy Florida and Tampa Electric say they will spend nearly $3.4 billion more than expected on fuel for power plants this year.
Florida residents and businesses are likely to continue to feel the economic consequences of high natural gas prices when they pay electric bills next year. That’s because all Florida utilities are seeing an increase in energy prices, the cost of producing electricity. In most cases, it’s being passed on to customers. Those charges and high temperatures are the reason why electric bills are so high and making a lot of people sweat (Piggot, 2022).
According to a report this month from the U.S. Energy Information Administration, natural gas prices rose steadily from January through May before falling in June. It pointed to a combination of reasons for the price volatility, including “uncertainty in global natural gas markets that preceded and followed Russia’s full-scale invasion of Ukraine on February 24, as well as weather-related fluctuations in natural gas demand.”
Utilities can generally recover their fuel costs. Therefore, it is likely that utilities will attempt to collect that money on customer bills next year. – Along with power plant fuel costs in 2023.
Florida utilities rely heavily on natural gas and have been dealing with high gas prices for months. FPL, for example, said in an April filing with the Florida Public Service Commission that natural gas prices were significantly higher than expected.
“The natural gas market has not stabilized in the intervening three months,” FPL said in its Wednesday filing with the commission. “In fact, market conditions have become even more volatile since then.”
Likewise, LCEC spokesperson Karen Ryan mentioned that “most power is generated with natural gas. Therefore, when natural gas prices go up, the cost of electricity goes up as well.” (Scott, 2022)
Average cost corrections
Each year, utilities submit their fuel cost projections for the following year to the commission. The commission sets the amounts that utilities will be able to charge customers during the following year. However, these projections may increase throughout the year.
If, during the year, costs are substantially higher than projected, utilities can request what are known as “average cost corrections,” which allow them to increase the amounts customers pay. FPL, Duke, and Tampa Electric each received such average cost corrections after the amounts for 2022 were set.
FPL estimated it will have an “under-recovery” of $1,658,287,443 this year, while Duke projected its under-recovery at $1,308,956,670 and Tampa Electric came in at $411,964,625, according to the filings.
“The primary reason for the projected under-recovery in 2022 is a substantial increase in the price of natural gas compared to the company’s original projection for 2022,” W. Ashley Sizemore, a Tampa Electric official, said in written testimony that was part of the company’s filing Wednesday.
The utilities have until Sept. 2 to submit projected fuel costs for 2023. The commission plans to hold a hearing starting Nov. 1 on the portion of the costs that will be passed on to consumers next year.
FPL suggested in Wednesday’s filing that its inadequately hedged 2022 costs should not be considered during the November hearing. It said it would like the commission to consider the costs in late 2022 or early 2023, “based on an updated estimate.”
Combatting Rising Electricity Rates with Solar
Solar power is an alternative that offers clarity on the future of electric bills. As we have seen over the past few years, it is safe to say that electricity rates will follow historical trends and increase in the future, so securing long-term rate clarity may be one of the best reasons to install solar on your home. Solar will provide a clear and transparent view for the next 20-25 years of electricity bills. There are no renegotiations every few months, and on day one the customer is shown the exact amount they will pay for their system for the duration of the contract.
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Power Through Uncertainty
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References:
Piggott, J. (2022). FPL, Clay Electric, other utility customers also feeling heat of high electric bills. https://www.news4jax.com/news/local/2022/07/27/let-us-know-are-you-having-trouble-paying-your-fpl-clay-electric-or-beaches-energy-bill/
Scott, K. (2022). ‘It’s very frightening:’ Cape Coral businesses deal with high electric bills. https://www.fox4now.com/news/local-news/lee-county/its-very-frightening-cape-coral-businesses-deal-with-high-electric-bills