Each new year French Broad EMC faces the task of developing a budget.  Like most businesses, we include additional amounts in the expense accounts to cover projected increases in materials, labor, interest, depreciation, and taxes.  However, unlike many companies, your electric cooperative’s budget has a single line item expense that consists of over half of our total expenditures. French Broad Electric’s wholesale power costs account for about 55% of our total expenses. 

We meet annually with our wholesale power supplier, Progress Energy, to discuss the projected fuel costs for the coming year.  It was no surprise to learn that 2009 will bring steep increases in generation fuel costs.  In recent years, our wholesale generation fuel costs have spiraled upwards.  In fact, our wholesale fuel cost has increased over 800% since 2004 and has doubled since 2006!  With such substantial increases, neither Progress Energy nor your electric cooperative is in a position to absorb these costs.  Therefore, they must pass them on to all of their consumers. 

It is interesting to note that approximately half of the electricity we purchase is generated by coal; 45% is from nuclear, 4% from natural gas, and the remaining one percent is from various sources such as hydro, solar, and diesel.  However, the fuel cost ratios are entirely different.  About 71% of the fuel costs go to purchasing coal, 19% of the total goes to natural gas, and only 9% go to nuclear.  The remaining 2% goes to diesel fuel.  As coal and natural gas costs continue to increase, so will our power bills. 

These increases are seen throughout our entire region.  TVA, the Associations of Electric Cooperatives in North and South Carolina, Progress Energy, and Duke Energy are only a few of the many utilities which have already passed on double digit rate increases to their customers to cover their fuel generation costs.  French Broad EMC is looking at every option for holding down the price of electricity to our members, but with over a two million dollar increase forecasted for 2009 much of this will have to be passed on to our customers as well. 

Many of our members have asked when will the situation of rising fuel costs stabilize and what can be done to keep this trend from continuing.   Unfortunately, we are at a point in this country where we are paying for decisions we made years ago.  The electric utility industry was forced away from building nuclear generation facilities in the late 1970’s, leaving them with no choice but to invest in electric generation from fossil fuels like coal and natural gas, which are increasingly expensive.

If the country had continued to construct nuclear generation plants during the past 30 years, non-emitting nuclear generation would be a greater part of our country’s base load capacity. This would have provided greater electric price stability.  Building these plants today will be at a much higher construction price and we will all have to bear these costs.  However, these facilities will play an important role in the long-term effort to stabilize electric rates.  Obstacles to nuclear power must be overcome if Americans are to continue to receive electric service at an affordable price.

Thank You,

Jeff Loven
Email: jeff.loven@frenchbroademc.com


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