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Decoding Fuel Costs in Electric Bills

Decoding Fuel Costs in Electric Bills

Full Title: Decoding Fuel Costs in Electric Bills
Author(s): Maggie Shober and George Cavros
Publisher(s): Southern Alliance for Clean Energy (SACE)
Publication Date: April 15, 2023
Full Text: Download Resource
Description (excerpt):

Over the last few years, electric customers across the Southeast have felt the increase and volatility of natural gas prices directly on electric bills. Utilities in the region pass fuel costs directly on to customers, removing the risk of high and volatile fuel prices from a utility and placing it solely on the utility’s customers. Exactly how utilities pass these costs through varies by state, for instance some adjust a fuel cost portion of electric rates annually, some monthly, and some at more varied intervals. But for most of these utilities, those adjustments need the approval of state regulators. The dockets where utilities propose adjustments to fuel cost rates have become more contentious, and though we have yet to see a regulator in the region disapprove of a utility passing 100% of fuel costs on to customers, there have been measures used to soften the impact on customer bills. It’s been a confusing process, and in this paper, we’ll break it down, and use three utilities in Florida as examples.

The main reason fuel costs are so impactful in the Southeast, and particularly in Florida, is that utilities rely heavily on gas-fired power plants to generate electricity for customers. Utilities across the Southeast increased reliance on this volatile and climate crisis-inducing fossil fuel. By doing so, utilities have opened their customers to more and more risk of bill increases due to fuel costs, often without much discussion of this risk and certainly without the typical electric customer understanding the full potential impact such a build-out of gas infrastructure could have on bills.

In fact, this trend continues, as several utilities in the region have planned new gas-fired power plants. Increasing our reliance on gas will only lead to more issues with power bill volatility and unreliable electric systems in extreme weather, while slowing the transition to low-cost and clean energy. Key ways to mitigate high and volatile electric bills are to increase energy efficiency, renewable energy, and storage, and to update regulations so that utilities bear some fuel cost risk.

All statements and/or propositions in discussion prompts are meant exclusively to stimulate discussion and do not represent the views of, its Partners, Topic Directors or Experts, nor of any individual or organization. Comments by and opinions of Expert participants are their own.

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