Ocala Electric Utilities may have to increase rates again

Keith Green, a lineman with Ocala Electric Utility, works on lines from a bucket truck in heavy rain at the Eugene Dearmin substation off Southeast 36th Avenue in Ocala, Fla. on Wednesday, Sept. 1, 2021. [Bruce Ackerman/Ocala Gazette] 2021.

Electric utilities around Florida are poised to ring in the new year with rate hikes, and indications are that the Ocala Electric Utility may have to join those utilities in increasing their customers’ monthly bills.

While no new rate increase has been announced, rates rose steadily this year and, despite that,  Ocala is facing a roughly $25 million deficit in the amount of revenue versus costs of generating electricity this fiscal year.

“The city’s final fuel cost for FY22 totaled $147,625,935 of which the city recovered $123,411,633, leaving the total under-collected balance of $24,214,302,” said Ashley Dobbs, the City of Ocala’s communications manager. She said city officials are evaluating if additional fuel cost recovery payments will be needed.

OEU is not alone among Florida utilities in dealing with economic pressures. Duke Energy, Florida Public Utilities Co., and Tampa Electric Co. are all set to increase customers’ rates beginning in January 2023.

Rates already have been rising for OEU customers. The electrical Power Cost Adjustment (PCA) rate has tripled since the start of 2022. In January, OEU consumers were paying $0.01400 as the PCA rate. In February, the rate doubled to $0.02800 and remained there until the end of May. In June it rose again, to $0.05600, and this is what customers of OEU have been paying since then.

These cost increases were put in place to combat volatile fuel prices. The city also has been tapping into its Rate Stabilization Reserve (RSR), which is designed to help when unanticipated fuel costs arise and need to be compensated without drastically affecting the consumers’ bills.

OEU gets billed by Florida Municipal Power Agency for its utility costs. Consumer payments generate revenue that is given partially to the city account and partially to fund the RSR.

The RSR has approximately $12.9 million as of the end of November. However, this is not enough as the October PCA projection report shows the $25 million shortfall. This deficit has been on the rise since July, with more money coming out of the RSR than going in.

Ocala City Council member James Hilty said that per council orders, the amount of money in the RSR should be between 15% to 25% of the annualized collection in a given year.

Deficits can only be combatted through PCA rate changes, Dobbs said, so if the deficit is to be relieved, it will be through a rate increase.

Hilty said OEU uses natural gas, wind, and solar power in operating its electric plants. Hilty said natural gas prices have been spiking significantly above what the city projected last year.

“Economic factors during FY22 caused numerous increases driving energy prices up and consequently the city’s PCA rate,” Dobbs said.

There are multiple factors that impact PCA rates. Some are environmental determinants and base rates. This year, a major reason is an increase in the cost of natural gas used to power electrical plants.