ATLANTA – Georgia Power customers will pay 14 percent less for the fuel portion of their electricity bills starting next month thanks to an agreement announced Monday by the company and regulators.
The company had notified the Public Service Commission in September that declining natural-gas prices justified an 11 percent reduction in the fuel portion. It was revised in Monday’s announcement because forecasts showed further price decreases.
Altogether, customers will save $424 million. State law doesn’t allow Georgia Power to make a profit on the fuel it uses. The law also requires that the commission ensure customers cover the full cost, reimbursing the utility what it pays for coal, natural gas and nuclear fuel.
During a hearing before the commission, none of the representatives from consumer or industrial groups raised any objections. So, when the commission votes later this month, it is almost certain to approve the new reduction.
The savings will subtract $5 from the average residential bill.
However, it’s coming along with two scheduled increases in other aspects of the bill. One increases the base rate, designed to cover the costs of equipment and wires as well as pollution controls. The other is part of the phase in of the financing costs for constructing two nuclear reactors at Plant Vogtle.
After the additions and subtractions, the average residential bill is still expected to be $2 lower every month, according to Georgia Power spokesman John Kraft.
While no one objected at the hearing to lower fuel bills, there was a disagreement on whether the company should be allowed to use some sophisticated financial instruments called “swaps” as a way to hedge against fluctuating fuel prices on the global market.
Commission staffer Tom Newsome recommended continuing the restrictions on the techniques the company uses.
“The problem is if the gas price drops below a fixed price, you’re sending the counterparty a payment, and you don’t know what that payment is going to be,” he said.
Commissioner Stan Wise argued that other electricity utilities and other corporations often use hedging techniques to keep costs predictable.
“Almost any company in this world that uses a significant amount of a commodity is doing the things that are being proposed,” he said. “Why should a regulated entity be precluded from using procedures that the business community considers sound?”
Georgia Power Comptroller Jeffrey Weathers told the commissioners swaps would save electricity customers from the volatility of natural gas with no upfront costs, compared to the other hedging techniques that Newsome has no objection to.
“Because of the increased reliance on natural gas, changes in the price of natural gas will have an even larger impact on customers,” he said.
Natural gas was just 14 percent of the fuel used to generate electricity in 2007. Now that Georgia Power has shuttered 15 coal-fired generators, gas will be 46 percent of what it burns next year.
A $1 increase in natural gas would have cost customers $100 million in 2007 but would equal $300 million today, he said
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