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JEA Board Approves Fuel Rate Increase; Sets Water Rate Public Hearing Date

Fuel Rate
In response to dramatically escalating fuel costs and a growing deficit in the fuel fund of more than $61 million, the JEA Board of Directors voted to raise the variable fuel rate by $15.00 per 1000 kilowatt hours (kWh) for the period July 1 through September 30, 2008. On October 1, 2008, the fuel rate will be reduced by $4.14 resulting in a net increase of $10.86 per 1000 kWh.

JEA initially enacted a variable fuel rate in April 2005. Fuel is a direct pass-through to customers and accounted for 43 percent of JEA’s operating budget in fiscal year 2007.  When the price of buying fuel goes up dramatically as it has, JEA must adjust rates to pass that cost through to our customers.

In the past year, the price of coal, which is used to produce about 60 percent of JEA's power, has doubled. The costs of petroleum coke and natural gas, which combined make 34 percent of the energy, have risen more than 45 percent, JEA officials say.

The cost of all fuels used for electric generation has been increasing over the past five years.

Water Rate Hearing
On the water side, the JEA Board will review several factors as they consider increasing water rates at a July public hearing that was called for today. Those factors included:

• The costs associated with improvements to sewer treatments plants as JEA works to meet the total maximum daily load requirement (TMDL) of the Environmental Protection Agency. The TMDL is the amount of nitrogen that is passed through the wastewater treatment facilities in treated effluent as it goes to the river.
  
  
• The cost of increasing JEA’s capacity to provide reclaimed water. On average, JEA’s single family residential customers use a little over 100 gallons of water per person, per day. About half of that water is used for irrigation. Every gallon of reclaimed water that is used for irrigation is a gallon of fresh water that is saved for other uses, including use inside the home.
  
  
• Meeting JEA’s financial needs for the water side of the business. JEA must have the financial resources available to pay for capital needs, such as the purchase of pipes, and to pay for our debt service.

Fuel Background
JEA works constantly to minimize the effect rising costs have on customers’ bills.  This is accomplished by building and maintaining a diversified fuel mix and technology among our fleet of generating plants.

• Generation Fleet Diversification
  
  JEA has diligently pursued a diversified portfolio of electric generation technology. There are three kinds of generation that JEA relies upon to provide the service our customers require.
  
  
• Base Load
  Base load is the minimum constant amount of electrical power that JEA needs to deliver at all times and during all seasons. Forty-five percent of JEA’s electric generation is base load.
  
  Base load generating stations are large, expensive to build and, except for planned outages, run at all times. JEA’s base load generation relies upon solid fuel sources including coal and pet coke, which have been relatively inexpensive fuel sources.
  
  JEA’s Northside Generating Station (NSGS) Units 1 and 2, and St. Johns River Power Park Units 1 and 2 and power from our interest in Plant Scherer Unit 4 supply the base load electricity for our service area.
  
  
• Intermediate Load
  JEA’s NSGS Unit 3 and Brandy Branch Generating Station Units 2-4 provide 30 percent of JEA’s electric generation which is considered intermediate load.
  
  
• Peak Load
  Peak load is the largest amount of electricity being used at any one point in time during the day or the greatest demand that occurred during any specific period of time. Twenty-five percent of JEA’s electric generation is peak load.
  
  Peaker load generating stations are smaller stations that are inexpensive to build, relatively quick to bring on-line but tend to use more expensive sources of fuel.
  
  JEA’s Kennedy Station Combustion Turbine (CT) Units 3 and 7, Brandy Brach CT 1 and NGS CT 3 – 6 provide the peak load generation for our service area.
  
  

• Fuel Mix
  
  In addition to having a diversified fleet of generation facilities, JEA strives to keep our fleet as diversified as possible in the types of fuel we are able to use.
  
  No utility can control the market value of fuel. However, in an attempt to temper the effect of rapid price increases on our customers, JEA is using a portfolio of strategies to contain costs. One of these strategies is to ensure our electric generation relies upon a variety of fuel sources, or a diverse fuel mix, to protect customers from the price volatility of any one fuel source.
  
  
• Solid Fuels – Coal and Pet Coke
  Coal and pet coke have been abundant sources of fuel available at a stable cost in the United States for decades. Our Northside Generating Station and St. Johns River Power Park, as well as Unit 4 at Plant Scherer, use coal, pet coke, or some combination of the two.
  
  However, even coal has doubled in price just this past year. Fifty percent of our nation’s electricity is produced from coal.  Forty-five percent of JEA’s electricity is produced from coal and pet coke.
  
  
• Gas
  Since 1999, the cost of natural gas has also skyrocketed, by more than 400 percent. Consider that most of Florida’s utilities use natural gas for a significant part of their generation, and you can see how rising fuel costs are impacting your electricity bill as well. Florida uses natural gas for nearly 40 percent of its electric generation.
  
  Approximately 1500 megawatts of JEA power comes from natural gas. These same plants may also use oil or diesel fuel for generation.

Other
JEA also has other fuel that may be included in our fuel mix including biogas and diesel.

Want to know more?
The Rising Cost of Fuel by Barry Moline, President of the Florida Municipal Electric Association