Progress Files for Rate Reduction

Progress Energy Inc. (PGN - Analyst Report) has filed a request to the North Carolina Utilities Commission for a rate reduction for its North Carolina customers. If approved by the commission, an average residential consumer using 1,000 kilowatt hour in a month will save around $50 per year.
 
Progress Energy filed for a rate reduction for the second straight year. In the last financial year the North Carolina commission approved a rate reduction of $14 million, which reduced the average residential bill by 45 cents per 1,000 kilowatt hour consumption.
 
Progress Energy’s rate request has three major components. Firstly, a $5.60 decline in the monthly amount charged for fuels used to generate electricity, on a 1,000 kilowatt hour residential bill. Secondly, an increase in monthly charges by $1.53 for energy efficiency and demand-side management programs. And finally, a 5 cent per month decline in the charges for renewable energy.
 
The net impact of the above will be a yearly reduction of $49.44 or $4.12 per month reduction on a 1,000 kilowatt hour residential bill. If approved by the commission, the rate plan will be applicable from December 1, 2010, and will reduce the residential customers’ bill by 4.6% and 4.4% for the industrial customers.
 
Progress Energy’s filing to reduce electricity rates is an effort to pass on the benefits of lower production costs to its customers. The cost of fuel shot up drastically in the middle of the last decade. However, it came down significantly in the last two years, which allowed Progress Energy to negotiate lower-priced fuel contracts for its power plants and reduce its production costs. Production costs also declined as the demand from average customers stabilized due to the slow economic growth.
 
We appreciate the move of the company to reduce electricity rates for its consumers. We presently maintain a Neutral outlook on Progress energy as the company tries to improve production, expand its operation, curtail costs, reduce debts and improve its balance sheet.
 
Based in Raleigh, North Carolina, Progress Energy generates power through a diverse mix of power plant resources, which includes nuclear, coal, natural gas, oil and hydroelectric energy. The main competitors of the company are Duke Energy Corp. (DUK - Analyst Report), NextEra Energy Inc. (FPL) and Southern Energy (SO - Analyst Report).

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