The Romantic Guy
In February, all of us romantic guys turn our thoughts to the loves of our lives and how to show them we care on Valentine’s Day. When my wife and I went on our first date as students at Troy State, we went to a movie at the theater downtown on a Wednesday night because tickets were half off.
The movie we went to see was a surefire romantic classic — “First Blood.” How could I think otherwise? Sylvester Stallone already had 1 romantic classic under his belt with “Rocky.” I still get teary-eyed when I hear Rocky calling for Adrian to come into the ring at the end of the fight. Surely, “First Blood” would follow suit.
Over the past few months, I’ve been discussing some of our generation resources that have come online in the past year, including nuclear, solar, and natural gas, as well as the push for electric vehicles. These topics aren’t romantic like “First Blood,” but they’re important to understanding the electric industry.
This month, I’d like to cover the components that are included in your electric bill and the ways they will be changing.
For the 39 years I’ve been in the electric industry, it has always been capital-intensive when it comes to building electric plants. But in the past few years, those costs have risen even more. Back in 2008, PowerSouth committed to buying 125 megawatts of electric power from the 2 new reactors, Units 3 and 4, at the Vogtle Nuclear Plant in Georgia. In 2013, the expected building cost of those reactors was $14 billion. By 2023, that cost had risen to $34 billion, with work still to be completed on Unit 4.
You might wonder why PowerSouth’s board would stay in this program with costs increasing so much. The reason is that, with baseload power plants across the country closing, carbon-free resources like nuclear will be a super asset in the future. It also offers reliable baseload power, which is key for our members.
Similarly, PowerSouth made the decision several years ago to close the Lowman coal-fired plant and replace it with the Lowman Energy Center, which came online last year.
The new facility cost $540 million but it also increased our demand capacity by 40% — something that could not have been achieved by trying to make the coal-fired plant regulation-compliant. So, while it was a big investment, it made financial sense.
Then there’s the cost of building distribution lines across South Alabama Electric’s territory. We’ve discussed the increased price for those materials, but interest rates and the cost of labor and transportation continue to increase, adding to the overall cost of distributing power to serve our members.
So how does all this relate to your electric bill?
Each of these is an example of what we call a fixed cost, one that has to be paid regardless of how much electricity we sell. You can think of it like buying a new car. The cost of the vehicle is still the same whether you drive it 1 mile or 100,000 miles.
This year, you will start seeing fixed costs appear on your bill as a facility charge. Also, you will start to see your kW demand and demand charge on your monthly bill. Demand is the maximum amount of kW power you need over a monthly period. The other component of your monthly bill will kWh’s you used over the month.
It might sound like I’m priming you for a rate increase, but I’m not. We want to break up these charges on your bill so you have a better understanding of where the rate you’re paying comes from. You won’t see this new structure on your bill this month, but it is coming soon.
I hope these quick explanations of the costs facing the electric industry are helpful. We haven’t seen this type of long-term cost pressure in over 40 years, but I know we can get through this crisis together.
Looking back on that first date, “First Blood” may not have been the romantic story I was hoping for. But it still holds a special place for my wife and me. In fact, we recently watched the final chapter of that series, “Last Blood,” not in a theater but streaming at home. Technology may have changed but our love has not. I hope all of you have a romantic month this February.