UPDATE: Fla. OKs $13 Million Interim Rate Hike For Progress Energy

Florida regulators Tuesday approved Progress Energy's request for a $13.1 million interim electric rate increase.

The decision will increase the average 1,000-kilowatt-hour residential bill by 41 cents beginning in July.

Progress Energy Florida, a utility owned by Progress Energy Inc. (PGN), Raleigh, N.C., said it needed the short-term rate increase to cover the cost of doing business until the Florida Public Service Commission decides whether the utility can raise rates by $500 million in 2010. The increase would allow Progress to recover costs associated with upgrades to the electric grid and to the utility's power plants.

Because rate proceedings can take several months, utilities sometimes ask regulators to approve temporary rate increases. In a February letter to the Public Service Commission, Jeffrey Lyash, Progress Energy Florida's president and chief executive, said the utility "may not be able to continue to provide reliable, efficient electric service to its customers" without the proposed interim rate increase.

Progress has invested $4.5 billion in Florida's energy infrastructure since 1993, but the utility's base rate - the part of the electric rate covering the general costs of doing business, excluding fuel expenses - has only risen 1%, the company said.

Much of the Public Service Commission's debate on the proposed interim rate increase Tuesday centered on whether state regulations permit a temporary rate increase for the utility.

The Public Service Commission also voted Tuesday to allow Progress to recover the cost of upgrading its Bartow power plant in western central Florida to burn natural gas instead of oil. The project will increase the average 1,000 kwh residential bill by $4.11 beginning in July.

Progress Energy shares closed at $34.92 Tuesday, up 51 cents, or 1.5%.

-By Christine Buurma, Dow Jones Newswires; 201-938-2061; [e-mail]