Georgia Power’s costs rise with heat

When summer temperatures turned from mild to broiling recently, at least one industry wasn’t complaining.

Hotter weather makes air conditioners hum and electric bills soar for businesses and homeowners, meaning higher revenues for utilities like Southern Co. and its Georgia Power unit.

But even company officials say there are limits to how hot they want it. If temperatures get too high, more costly power sources have to be tapped, and that can cut into profits, the company said.

Asked if people assume more heat equals more profit, Georgia Power vice president of resource planning and nuclear development Oscar Harper said, “Absolutely.

“A lot of people make that assumption. What they see is the revenue piece of their bill going up. But what they don’t see is what we have to do to cover the cost and deliver the product under those circumstances.”

The utility uses its lowest-cost power sources such as coal and nuclear first, and higher-cost sources such as natural gas only when demand requires it.

If the temperatures get too hot, the incremental cost to use those secondary power sources can offset revenue gains and hurt profits, the company said.

Industry analysts confirmed that scenario, but also downplayed the overall impact of weather on profitability. A bigger factor, they say, is the economy and population growth in a particular utility’s market.

Georgia Power and other utilities have been hurt lately by the recession which has led to lower consumption by industrial customers.

Still, hot weather has been regularly cited as beneficial by the utility in its earnings reports. And, “Directionally, you would hope that it’s going to be good,” Harper said of higher temperatures, “because you’re using more.”

Georgia Power’s all-time power peak usage day came in August, 2007, the hottest month overall in the last decade, when temperatures averaged 94.2 degrees. The average temperature over the last 10 years is 85.4 in June, 87.9 in July, 88.4 in August and 82.2 in September.

What the utility wants, Harper said, is “normal” weather — what Georgia should expect based on past temperatures. The utility plans and builds according to future power needs, which it estimates based on that history.

Anything less than normal temperatures can cut into revenue and profit. Too much more can require expensive power purchases, including buying from other power generators on the spot market.