Despite Equipment Failure, Lakeland Electric Succeeds in Keeping Fuel Rates Flat

The low retail prices enjoyed by Lakeland Electric’s 120,000 customers in the Sunshine State throughout 2016 will last into 2017, because the City Commission has decided to keep fuel rates flat through next March, according to a December 5 report in The Ledger.

Notwithstanding the failure of a large transformer – which, in turn knocked the utility’s 365-megawatt (MW), two-stage natural-gas-burning McIntosh Unit 5 generator offline in October —the fuel rate will remain at $34.25 per 1,000 kilowatt-hours  (kWh) of energy.

The temporary loss of the transformer on its Unit 5 generator did increase the cost of energy supplied by Lakeland, but it was absorbed by the full service municipal utility with $3 million from surplus in the utility’s fuel reserve fund.

Although Lakeland Electric plans to buy a new transformer, which already is in the process of being constructed, the utility purchased a used one from nearby Tampa Electric as a temporary fix. It was delivered on December 3, the local news outlet said, and the utility expects to have it connected and the unit returned to service by the end of this month.

“Every time I say we need to raise the rate, it doesn’t seem to work out that way,” Fuel Manager Tory Bombard told the Utility Committee, referring to earlier projections that showed the utility would see its first increase since 2015.

Adding the $34.25 fuel rate to the utility’s base fees means Lakeland Electric customers in the city will pay $97.27 in total for 1,000 kilowatt-hours before taxes. Customers outside the city limits pay an additional 10 percent surcharge.

As in the current quarter, which ends December 31, the Q1 2017 fuel rate is projected to represent a loss to the utility, because Lakeland Electric will attempt at that time to refund to customers a $4 million surplus in its reserve fund. The utility aims to charge customers what it pays to fuel its generators, a constantly moving target.

“We’ve been outperforming just about every quarter,” General Manager Joel Ivy told the newspaper. “I don’t think we need to increase [the fuel rate] now because we have money in the bank.”

What’s more, although the utility expects the fuel rate to increase starting in the second quarter of 2017, the average rate per kilowatt-hour sold is expected to be lower than the average rate through 2016. In January 2016, the fuel rate was $40.35 per 1,000 kilowatt-hours, The Ledger reported.

Of course, this all depends on the weather. These expectations could be crushed, if the weather this winter is warmer than expected. Fuel prices are contingent on demand and demand is highly dependent on weather.

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