Coal to sustain We Energies bills

by jboullion | Nov 21, 2008 | Uncategorized

From an article by Tom Content in the Milwaukee Journal Sentinel:

The falling price of natural gas could result in a small refund to We Energies electricity customers early next year, but the Milwaukee utility is forecasting a big jump in the price of another fuel it uses in its power plants – coal.

The utility is forecasting a jump of $100 million, or 25% in the amount of money it plans to spend on coal next year, utility spokesman Brian Manthey said.

The key drivers of the higher cost: rises in market prices for coal and transportation expense by rail from Wyoming and Colorado. Also factoring in, to a lesser degree, Manthey said, is the need to buy more coal next year as the first of two new coal plants under construction in Oak Creek prepares to start generating power.

Two months ago, the utility signaled to investors that it might have to raise prices for customers next year because of rising coal costs. But the slowdown in the economy and the resulting drop in natural gas prices has made that less likely, Manthey said.

The typical We Energies customer using 750 kilowatt-hours a month currently pays $89.23 per month for electricity.

The company raised prices three times this year for a total of 9%. One increase was to cover the costs of the utility’s power plant construction program and other projects. The other two came in response to soaring fuel prices. The state’s other utilities have also raised fuel prices at least once this year.

Based on November bills, We Energies customers’ monthly bills are lower than those of three of the five investor-owned utilities in the state. Customers of two Madison utilities and one in Green Bay pay more, while customers of Xcel Energy Corp.’s Eau Claire utility pay less.

As recently as two months ago We Energies said soaring fuel costs would reduce its 2008 profit by as much as $20 million to $40 million from the company’s business plan, but the drop in natural gas prices since the summer now means customers could see a refund early next year.

“Whether or not there will be a refund and how much money would be refunded will be known after the books are closed in December,” Manthey said.

But the drop in natural gas prices could help customers on their heating, or natural gas, side of their monthly utility bill if gas prices remain low, Manthey said.

Another increase on electricity bills will hit We Energies customers in January. The increase, authorized earlier this year by the state Public Service Commission, will amount to a jump of nearly 4%, or nearly $4 a month for the average residential customer, pushing the monthly bill to $93.07.