Tampa Electric to Lower 2011 Rates – Analyst Blog

Tampa Electric Company, a subsidiary of TECO Energy Inc. (TE), has requested permission from Florida Public Service Commission (FPSC) to trim the fuel portion of all customers’ bills beginning January 2011.

 

If approved, Tampa Electric estimates that the new rates will lower the monthly bill for a residential customer using 1,000 kilowatt-hour (kWh) of electricity to $107.51 effective January 2011. This represents a saving of roughly $5.22 for residential customers. The company also expects a reduction of about 5% on total bill value for its commercial and industrial customers.

 

The request for this decrease in the fuel charge stems from the reduced costs for fuel and purchased power during the first six months of 2010, projections for the remainder of 2010 and expected fuel prices in 2011. Tampa Electric expects to reduce its fuel costs by roughly $67 million than originally projected.

 

The company’s cost of fuel, mainly coal and natural gas, accounts for nearly 40% of customers’ electric bills. Though the company has no direct control on fuel prices, as an effort to reduce customer bills, Tampa Electric maximizes the use of existing generating assets to mitigate costs and pass the associated savings back to customers.

 

In December 2009, the FPSC established Tampa Electric’s energy-efficiency and conservation goals to reduce customer energy use by 360 million kWh over the next 10 years, an increase of more than 225% over the company’s current goal. To achieve these aggressive goals, the company has requested FPSC approval for seven new energy conservation programs and several enhancements to its 29 existing programs for all customer sectors, residential, commercial and industrial.

 

In the second quarter of 2010, TECO Energy’s earnings of 37 cents per share edged past the Zacks Consensus Estimate of 34 cents as well as the year-ago comparable earnings of 29 cents. The cost of fuel, purchased power and cost of natural gas sold during the quarter was $293.9 million versus $332.5 million in the year-ago quarter, reflecting a decline of 11.6%.

 

TECO Energy’s earnings per share for 2010 lies in the $1.25 to $1.35 per share range. The Zacks Consensus Estimate for 2010 and 2011 are $1.33 and $1.43, respectively. The Zacks Consensus Estimate for 2010 lies within the guidance range provided by the company.

 

We have a short-term Zacks #3 Rank (Hold) and a long-term Neutral recommendation on the stock.