Power Rates Spike in Some States


Consumers already jarred by high food, gasoline and heating oil prices in many states now face another financial burden: skyrocketing electricity bills.

Around the country, electric utilities' requests for rate increases have spiked in recent weeks, stemming from high-priced fuels such as coal and natural gas that are used to generate power. Those fuel price hikes - blamed on an increase in worldwide energy demand - are being passed on to ratepayers.

In West Virginia, the state's largest natural gas utility is asking for a 42 percent rate increase. In Virginia, millions of Dominion Virginia Power customers are seeing their bills rise an average of 18 percent, the largest one-time rate hike there in three decades. And Ohio's largest electric utility is seeking a 15 percent rate increase annually for the next three years because of high coal prices and a new state environmental law governing emissions that will cost the company money, a spokesman says.

"There's no question that rising fuel prices have been driving utility bills higher," said Tyson Slocum, director of the energy program at Public Citizen, a consumer advocacy group based in Washington, D.C.

Addressing the problem, the Louisiana Public Service Commission declared the state's first energy emergency Aug. 12, which allows elderly, disabled and low-income customers to hold off paying part of their electricity bills for up to a year.

At the state level, regulatory commissions that act as gatekeepers to ensure fair rate hikes for consumers can do little to halt the trend, because utilities say they are merely recouping costs.

"They can't just say, 'Coal went up, so give us money,'" said Rob Thormeyer, spokesman for the National Association of Regulatory Utility Commissions. "They have to prove what they're saying. If it's a cost of fuel, it's documented, and they're buying it, they have a right to request for a rate increase."

Nationwide, residential electricity prices are projected to increase by an average of 5 percent in 2008 and 10 percent in 2009, according to the federal Energy Information Association (EIA). That compares with an increase of 2.2 percent in 2007.

The cost of natural gas for the electric power sector in March was 25 percent higher than a year earlier, but prices have fallen slightly during the past few weeks, stoking hopes of lower-than-anticipated prices in the future.

Governors in the northeast are particularly concerned with energy costs as winter approaches and heating oil prices remain high. Connecticut, Maine and New Hampshire are considering scheduling special energy legislative sessions. But even in energy-rich states, consumer prices are high. Sharing its energy revenues with consumers, Alaska passed a one-time resource rebate Aug. 8 that pays each resident $1,200 and suspended the state's 8-cent motor fuel tax.

Electricity prices have steadily risen for about the last seven years, EIA statistics show. Nobody tracks the number of utilities putting in rate requests to recoup fuel costs, but some experts pegged the number around 30.

In Pennsylvania, where rate caps are set to expire at the end of 2010, some state lawmakers fear that prices will shoot as high as 60 percent above current levels. Residents in Maryland can expect much the same once rate caps expire Dec. 31 of this year.

Texas has been slammed particularly hard with high electricity prices since it deregulated its electricity market six years ago. Half of the state's power is supplied from natural gas, and its transmission superhighway was designed on a system not meant to handle today's demand - the highest in the nation.

In response, the Texas Public Utilities Commission last month approved a plan proposed by Gov. Rick Perry (R) to double the number of in-state nuclear power plants in the next 10 years, push for the development of biofuels, and increase the production and use of wind energy. The commission also approved the construction of high-tension power lines between wind farms in west Texas and high-demand areas in the state's metropolitan areas.

Utility companies say aging and inadequate transmission lines have caused part of the rising power costs. Overburdened transmission lines cause gridlock, a condition comparable to not having enough highway to handle rush hour traffic, said Ed Legge, spokesman for the Edison Electric Institute, the industry group representing utilities. Gridlock plagues Mid-Atlantic states and California, he said.

"What is true is that we don't have adequate infrastructure," Legge said. "The whole reason electricity has been affordable - as a utility, not a luxury - is that we could … get it to as many people as possible all the time. That totally depends on generating it in one place and moving it to another."

In Connecticut, for example, customers of Connecticut Electric Light & Power pay millions of dollars in congestion charges because of difficulty in transferring power to the southwestern part of the state.

The EIA's projection that energy demand will rise by 30 percent by the year 2030 comes at a time when the high cost of building materials makes improving infrastructure less appealing for many electric utilities. And the possibility of future federal climate legislation - and the emission standards it would almost certainly impose - has clouded utilities' ability to judge the costs of building new plants.

As a result, many states and utilities that once eschewed calls for conservation are now drumming up support for the idea, including Wyoming, which announced on Aug. 11 a campaign to promote energy efficiency.

"Some states that didn't have the need to be all that efficient are now learning it," NARUC's Thormeyer said. "The specter of climate legislation makes it difficult to make decisions and get financing. All of these issues are making efficiency the best option because people recognize this is not an interim thing."

Still, some states - rebuffed by an unresponsive administration and Congress - are searching for long-term solutions by pursing more nuclear, solar and biofuel power options.

Duke Energy has submitted a proposal to build a nuclear facility in South Carolina, and the Florida Public Service Commission last month unanimously backed a project to build a nuclear plant and additional solar facilities.

Arizona, California, Delaware, Maryland, New Jersey, New Mexico have the most aggressive statewide solar initiatives, with requirements for at least 2 percent of their generation to come from solar power by 2019 at the earliest, according to the Database of State Incentives for Renewables & Efficiency. Ohio and Pennsylvania just recently announced programs of their own, and Gov. Chet Culver (D) of Iowa Aug. 9 called on Iowa to make the state a leader in developing solar technology.

"The American way is to figure out the silver bullet and fire away," said Legge, the utility group spokesman. "But we believe we need everything. We need to eliminate carbon. We're going to need to find other sources of energy."


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