Submitted By: Marie Brooks
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Presentation By: Douglas Peebles
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Department: Electric Utility
STAFF RECOMMENDATION (Motion Ready):
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Adopt Resolution 2024-11 amending the Electric Power Cost Adjustment Rate for monthly electric energy billing, effective March 1, 2024
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OCALA'S RELEVANT STRATEGIC GOALS:
Fiscally Sustainable
PROOF OF PUBLICATION:
N/A
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BACKGROUND:
The Power Cost Adjustment (PCA) rate is the mechanism by which the positive and negative fluctuations in the cost of power are passed through to the customer. Staff continues to work closely with the Florida Municipal Power Agency (FMPA) to ensure power costs and sales are reviewed monthly to project over or under-collections for the year. While the PCA can be adjusted as often as monthly, recent practice has been to make minimal adjustments to maintain stable customer rates.
Generally, major factors contributing to fuel costs are natural gas prices and weather. As a result of various economic conditions, the last rate adjustment increased the PCA rate to .056/kWh effective June 1, 2022. Despite the increase, the fiscal year that ended September 2022, experienced an under-collection of approximately $24 million. The Rate Stabilization Reserve funded fuel purchases of $16 million ($8M in Fiscal Year 2022 and $8M in Fiscal Year 2023). To avoid additional increases during that time, the current rate remained in effect to stabilize expenses and provide minimum impact to the customer.
The City of Ocala Electric Utility hired Leidos, Inc. on August 29, 2023 to perform a thorough rate study. The study took into account various factors that affect the City's purchased power costs, such as natural gas prices, reduction in natural gas hedges, and FMPA hedging policy. Based on the study's findings, it is recommended to lower the PCA rate from .056/kWh to .02815/kWh.
Based on current projections provided by FMPA, fuel costs are expected to remain stable. Taking this into conside...
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