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KEYS ENERGY SERVICES’ POWER COST ADJUSTMENT CHARGE TO INCREASE DUE TO SUSPENDED NATURAL GAS PRODUCTION

09/01/2005 ~ High natural gas prices, as a result of the shutting down of natural gas production facilities in the Gulf of Mexico – due to Hurricane Katrina, have forced an increase in Keys Energy Services’ (KEYS) Power Cost Adjustment (PCA) charge. The PCA increase will be reflected in the September billing cycle.

For the average residential customer consuming 1000 kilowatt hour’s (kWh) it will mean a 3.5 percent increase on their total bill - from $114.70 to $118.70 per 1,000 kWh.

“Since 2001, natural gas prices have nearly tripled,” said Carl R. Jansen, KEYS General Manager and CEO. “Prices have not been stabilizing, and the devastating effects of Hurricane Katrina to natural gas production facilities in the Gulf (of Mexico) could not have happened at a worse time.”

Jansen cautioned that another increase is expected in October.

The cost for KEYS to purchase energy from the Florida Municipal Power Agency (FMPA) is passed through to the customer in the PCA charge. Increases from FMPA result in increases to customers.

As a member of FMPA, a nonprofit organization that supplies the wholesale power needs of 15 municipal electric utilities in Florida, KEYS is subject to the recent increases of FMPA’s wholesale energy rate.

While FMPA has an active program for managing natural gas prices, continued high prices for natural gas and oil have pushed FMPA’s expected costs above its current budget forecast. Industry experts predict that oil and natural gas prices will remain high for the foreseeable future – Hurricane Katrina has not helped.

Without FMPA’s fuel price risk management program – known as hedging – a higher percentage increase would have been necessary. Hedging essentially
allows FMPA to purchase fuel on the Futures Commodity Market and lock in a price of fuel prior to the time it is actually needed.

The last two increases were in August 2005, when KEYS PCA increased from 2.72 cents per kWh to 2.88 cents per kWh and in February 2005, when KEYS PCA was increased from 2.44 cents per kWh to 2.72 cents per kWh. With the current increase to 3.28 cents per kWh, KEYS customers who paid $114.70 per 1,000 kWh will now be paying $118.70, an increase of 3.5 percent per 1,000 kWh.

KEYS is actively pursuing opportunities with FMPA to reduce - or at least hold the line on energy costs including retiring older, less efficient units, constructing new generation utilizing coal and continuing the hedging program to control natural gas prices.

Customers can help control their bills too. In order to offset the increased PCA, KEYS urges all of its customers to conserve energy and reduce consumption. A good way to start is by calling KEYS for a FREE Home Energy Survey. Additionally, customers may consider enrolling in KEYS Budget Billing program which levelizes electric bills and helps avoid seasonal high and/or low electric bills. For information on these or other KEYS programs, visit www.KeysEnergy.com or call (305) 295-1080.

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