Georgia Power customers will begin reaping the benefits of lower fuel prices with an average $8 drop in their monthly bills starting in July.
The reduction in fuel rates is the first major one in more than a decade, but it's sandwiched in between a three-tiered increase for basic electricity rates that added $14 to a typical monthly bill starting last year.
Friday, the utility said it was cutting the amount of fuel charges -- the amount it pays for natural gas, coal, nuclear and renewable fuels to make electricity -- on customer bills by $567 million a year for two years. The result is a 6-percent drop in a typical monthly bill of 1,000 kilowatt hours.
The rate reduction, in part, is a result of Georgia Power becoming less reliant on coal and getting more of its electricity from natural gas, whose prices have plummeted because of increased supplies.
“Our customers are receiving the full benefit of this diverse fuel mix,” Georgia Power President and Chief Executive Officer Paul Bowers said.
The fuel-rate cut offsets about half of what has been a one-two-three punch of rising bills to pay for basic electricity use, building two reactors at Plant Vogtle and, for a time, rising fuel costs. The most recent rate increase, approved in 2010, added the $14.
That increase includes two additional bumps: one starting Sunday, an average $2.46, and another in January 2013, to be determined later this year. For consumer advocates, the fuel rate cut pales in comparison.
“It’s a good thing that fuel costs have gone down. But given recent rate increases, including the most recent increase … that will show up on people’s bills beginning in April, this is a drop in the bucket,” said Angela Speir Phelps, executive director of the consumer group Georgia Watch.
Georgia Power filed the information with the state’s Public Service Commission, who will have to approve the proposed fuel rate decrease. The PSC will hold hearings in early June and decide by the end of the month.
Besides getting more of its fuel from natural gas, Georgia Power was able to further cut its fuel rate because the utility has paid off a fuel balance the PSC had required it to carry. That balance, which at one point had reached $1 billion, was a backlog of fuel costs Georgia Power had not billed customers for to prevent monthly customer bills from rising too sharply.
The utility said it expected to pay off that balance by Saturday.
Georgia Power is allowed to recoup the cost of fuel from its customers, but the utility cannot profit from those costs. Any increase or, in this case, a decrease, must be passed directly to customers, according to state law. When Georgia Power was carrying a fuel balance, customers were paying those costs plus interest.
“Paying down the fuel balance not only saves interest costs for customers, it also helps maintain the utility’s credit rating,” said PSC member Stan Wise.
The fuel-rate reduction is the most drastic in 14 years. Prior to that, rising fuel costs were the main driver behind increases in Georgia Power bills with the exception of 2011. The utility cut fuel rates by 64 cents, or $7.68 for that year.
Fuel rates have dropped as Georgia Power is shifting to get more of its electricity from natural gas so it can comply with environmental rules. Georgia Power once got as much as 70 percent of its electricity from coal, formerly a more favorable fuel because of its lower, stable prices.
Environmental regulations requiring power companies to curb the amount of mercury and other pollutants have pushed coal out of favor, however. Utilities, including Georgia Power, are preparing to close or retrofit coal-fired units to comply with those rules. That, coupled with increased supplies of natural gas have driven down its price, making it the current fuel of choice.
In 2008, prices averaged $6 a unit, but more than doubled to $14 during the hot summer. The price plummeted to average $4 in 2011. Thursday, the price was at a 10-year low of $2.17 a unit.
"With the summertime coming up, even though they are lowering their rate, you have to realize, the bill is actually going to be higher," said Atlanta resident Jack Jackson.
Jackson, who lives in a condominium, says his monthly bills right now range between $121 and $130 a month.
"If they can go lower, that would be nice. They are trying to make the consumer think they are getting a bargain."
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