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Lakeland Electric residential customers could see a small increase in their monthly bill after Oct. 1 if the City Commission approves it later this month.
“We know people are paying more in their everyday expenses and the cost of business has gone up,” said Lakeland Electric spokeswoman Cathryn Lacy. “But we’re working diligently to keep those costs in hand.”
The city’s Utility Committee met Friday morning to discuss the three rates that can be adjusted up or down: environmental, fuel and the base rate. The committee voted unanimously to lower the environmental and fuel rates, while they approved a base-rate increase. They also approved an increase in the customer fee, which is part of the base rate.
What it means for your bill: Factoring in the ups and downs of the different rates applied to a bill, a residential utility customer using 1,200 kilowatt hours per month — the average among Lakeland Electric’s 115,000 residential customers — will see their bill increase by about 22 cents a month, if the City Commission approves the changes. That change would take effect Oct. 1 and last at least three months since the commission reviews the fuel charge quarterly.
The average electric potion of a homeowner’s bill would go from $133.63 to $133.85.
Components of the electric bill
Environmental rate: Lakeland Electric currently charges customers $1.5907 per megawatt hour for environmental remediation. The Utility Committee approved a drop to $1.176 per megawatt hour. The drop is mostly due to the final closure of the coal combustion residual project, a large landfill-type structure to the east of the power plant where byproducts from Lakeland Electric’s coal-burning era are buried. This rate is considered once a year.
Fuel rate: The fuel charge — a major part of the electric bill — is being reduced by $1.50 per 1,000 kilowatt hour, from $45 to $43.50. Officials said the reason for the drop is the forecasted mild autumn and winter, resulting in a lower demand for liquid natural gas. This rate can be adjusted quarterly throughout the year. It is a volatile rate and is impacted by things that affect fuel costs like the war in Ukraine, high summer temperatures and winter freezes.
Base rate: The current base rate is currently $64.22 for a customer using 1,200 kilowatt hours per month. It was supposed to increase by 2.25%, but instead the Utility Committee voted to up the increase to 3.15% for the next two years. That means the average customer would pay a $66.24 base rate. This rate is considered as needed.
Customer charge: The current customer charge is is a flate rate of $13.50 for residential customers and is expected to increase to $14. It is one component of the base rate and is typically considered annually.
The base rate covers the costs of doing business — labor, equipment, operations and profit — and is typically adjusted every four years, although ti can change as needed. The base rate does not include the cost of buying fuel, which is usually adjusted quarterly.
Changing previous decisions
Already scheduled increase: The utility projects its budget in five-year increments. The committee voted in 2023 to allow three phased-in increases of 2.25% to the base rate — the first in April 2023, another in October 2023, and a third 2.25% increase on Oct. 1 of this year.
But in Oct. 2023, the Utility Committee recommended increasing the base rate by 3.5% instead of 2.25% and the City Commission concurred. That was done to allow Lakeland Electric to stay above 180 days’ cash on hand — a benchmark that the financial rating agency Moody’s would like to see in order to maintain Lakeland Electric’s AA bond credit rating.
Now staff is recommending a 3.15% increase instead of the already approved 2.25% to ensure cash-on-hand stays above 180 days in 2027.
The credit rating is “really important” because it “drives our ability to continue to build and expand to support our customers and how much we have to pay on our debt,” Lacey said.
Commissioner Guy LaLonde asked what would happen if the city leaves the increase at 2.25% and was told Lakeland Electric’s cash on hand would begin dropping and then a much higher increase would be required in 2027.
Steady increases over the last three fiscal years: While the increase might not seem like much, it is the fourth proposed increase in the base rate in three fiscal years, beginning in April 2023. In all, the base rate will have increased by 12.05% if this latest measure is approved.
Statewide comparison: Despite the increases, Lakeland Electric customers pay some of the lowest rates in the state. The base rate is currently about $80 per kilowatt hour per month for that average household customer. It is the second lowest self-generating power company in the state, just ahead of Bartow Electric at $70. The highest in the state is Kissimmee Utility Authority at $186, followed by Gainesville Regional Utilities at $128.
Increased costs: Willem Strauss, Lakeland Electric assistant general manager of fiscal operations, said the base rate increase is due to the substantial increased costs of nearly everything the utility needs to operate compared to 2020 costs:
- A substation transformer: $850,000 in 2020 — $1.75 million in 2024.
- 1,050-foot roll of primary copper wire: $14,106 in 2020 — $17,704 in 2024.
- 55-foot steel distribution pole: $3,367 in 2020 — $7,017 in 2024.
- One ton of sulfuric acid: $148 in 2020 — $308 in 2024.
- One cubic foot of hydrogen: .07 cents in 2020 — .21 cents in 2024.
What’s next: The City Commission will vote on the measures at its Sept. 16 meeting.
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