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JEA Boards Calls February Hearing on Fuel Adjustment Rate
Jacksonville, FL (January 18, 2005) - Citing continually rising fuel costs since last summer, the JEA Board of Directors has scheduled a public hearing next month to propose an increase to the fuel rate charged to all electric customers.
The public hearing will take place at 11 a.m. Tuesday, February 15 at the JEA Tower, 21 West Church St.
The percentage and dollar amount of the increase, along with other rate-setting and financial issues, will be discussed at a JEA Board Workshop that will occur within the next few weeks - prior to the public hearing.
JEA CEO Jim Dickenson said that fuel prices have risen higher than expected compared to fuel cost projections made last June.
"When we were developing our budget for the current fiscal year eight months ago, we thought the fuel increase that took effect in November would be adequate," Dickenson said. "However, even the price of our least expensive fuel (petcoke) has risen by 50 percent during that time period, as have nearly all the fuels we use to produce electricity."
Fuel and purchased power make up 40 percent of the utility's annual budget.
Even with the proposed rate changes, Dickenson expects JEA rates will remain among the lowest in Florida - and in the Southeast US - for some years to come.
Last November, after 14 years with no change in rates, JEA increased rates by 5.5 percent per 1,000 kilowatt hours - which raised the average residential electric bill from $2 to $5. The average residential customer uses 1,200 kilowatts a month.
Dickenson is also working with the JEA Board to develop a pricing philosophy that would guide the Board in rate setting and help JEA and its customers "avoid such dramatic short-term rate changes in the future."
JEA uses two primary rates to recover its costs - the fuel adjustment rate, which is intended to be a direct pass-through to customers, and the base rate (electric and water), that covers all other operating costs. To ensure JEA is sufficiently recovering the costs to meet revenue requirements going forward, Dickenson announced that the utility has begun a thorough cost-of-service analysis of both the electric and water/sewer base rates.
"We believe that, after a decade and a half, JEA will have to make some adjustments to the base rates in the near future," Dickenson said.
As fuel prices have steadily risen over the last five years, JEA covered the shortfall in its fuel budget by using other line items and financial reserves to avoid raising rates for customers.
Not raising rates for the last four years has put JEA in the position where rate increases are necessary to allow JEA to retain its current strong bond ratings. At year end, Standard & Poor's maintained their AA- rating of JEA, but also placed JEA on a negative outlook.
"We need to increase revenues to pay for higher fuel costs and avoid a reduction in our bond ratings," he said. "A reduction in JEA's bond ratings means that the utility will have a higher credit risk and, subsequently, have to pay more in financing charges for our outstanding variable rate debt and future fixed rate debt."
JEA is the eighth largest community-owned electric utility in America, providing electric, water and sewer services to more than 750,000 accounts in Northeast Florida.
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