Provided by Xcel Energy
AMARILLO, Texas – Today Xcel Energy filed a proposal with the Public Utility Commission of Texas to increase its fuel cost factors to reflect higher prices for fuel – especially natural gas – which, if approved, will result in higher fuel charges on Texas retail customer bills beginning June 1.
Lower natural gas prices over the past four years have made electricity generated with gas less expensive, but as the price of natural gas firms up, the increase is necessary to cover the higher bills the company is paying for fuel.
Fuel costs are passed through dollar for dollar with no profit to the company. Falling natural gas costs led to a near-10 percent drop in overall residential bills in early 2012. Natural gas prices at the time were just under $3 per MMbtu (million British thermal units). Since that time, natural gas prices have moved into the $4 per MMbtu range.
Fuel costs make up about a third of a typical residential customer's monthly bill. For a customer using 1,000 kilowatt-hours a month, a new fuel cost factor that accounts for higher fuel costs will mean an average increase of $5.87 a month, or 6.2 percent.
"Our fuel costs are significantly below where they were in 2008 and 2009 when natural gas prices spiked to historic levels," said Riley Hill, president and CEO of Southwestern Public Service Company, an Xcel Energy company. Hill added that Xcel Energy has developed a fuel mix that allows some flexibility in the face of fuel-cost volatility. The company generates about half the power used in the region with coal, about 40 percent with natural gas, and close to 10 percent with wind energy, he said.
Prices for coal have risen as transportation costs have increased, but coal generation still remains the most economical source of power in the region, followed by natural gas generation, Hill said.
"Wind energy is a great hedge against rising fuel prices, and we currently have almost 1,500 megawatts of wind energy on our system and potentially more on the way," Hill said. "As natural gas prices rise, we save on fuel costs by displacing gas-fired generation with wind generation."
The company also is holding down fuel costs by generating or purchasing power from newer, more efficient natural gas-fueled power plants that generate more electricity with less fuel, Hill added.