Driven by an imperfect storm of hot weather, rising natural gas prices and transportation bottlenecks, Lakeland city commissioners today adopted a record fuel adjustment rate for Lakeland Electric customers of $75 per 1,000 kWh. The new rate, which was passed unanimously, takes effect Sept. 1.
Since 1973, commissioners have reviewed the fuel rate quarterly and adjusted it to reflect current prices. The cost is passed on to customers and Lakeland Electric “makes no profit from the fuel charge,” spokeswoman Cathryn Lacy said. Because of the volatility of natural gas markets, the commission and its Utility Committee is now assessing the charge monthly rather than quarterly, she said.
Until now, the utility’s highest fuel rate was $72.50 per 1,000 kWh in the spring of 2008. The upcoming $75 rate is nearly double the $40 that was charged from March 2021 to June 2022.
The current fuel rate through the end of August is $60 per 1,000 kWh. The fuel rate is combined with Lakeland Electric’s base rate on customer bills.
For a customer using 1,000 kWh a month — which the utility says is typical for many residential customers — the base rate of $64.87 a month, combined with the new fuel charge, will add up to an electric bill of $139.87 in September compared with $124.87 now and $104.87 in recent months.
Before approving the new rate, several commissioners cited a chart showing that Lakeland Electric would deplete its fuel reserve fund by September without a fuel adjustment. The utility targets a fuel reserve fund that represents 15% of its total fuel budget.
Currently that means a target fuel reserve fund of $29 million, Commissioner Stephanie Madden noted. She cited the reserve as a bulwark against natural disasters, and Lakeland Electric Fuel Manager Tory Bombard said the reserve is needed to maintain the utility’s AAA bond rating.
Bombard cited several reasons for rising prices for natural gas, the main fuel used by Lakeland Electric:
- Unnaturally high temperatures this summer leading to greater fuel consumption.
- Natural gas transportation issues exacerbated by outages in two of the three pipelines into Florida and the potential of a rail strike in September.
- A premium paid by all Florida electric utilities for natural gas because of the supply issues.
Several commissioners emphasized that rates at Lakeland’s municipally owned utility are still lower than many in the state.
A chart provided to the commission by Lakeland Electric compares the current local rate of $124.87 per 1,000 kWh with other utilities as being:
- A little higher than Orlando Utility Commission’s
- About the same as Tallahassee’s municipal utility and Florida Power & Light
- Lower than Jacksonville’s and Gainesville’s municipal utilities and the investor-owned TECO, Gulf Power and Duke Energy.
Once the September increase takes effect, only Gainesville, Gulf and Duke will be higher.
Commissioners also said the city utility’s practice of hedging fuel contracts has reduced local costs below actual prices.