Submitted By: Marie Brooks
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Presentation By: Doug Peebles
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Department: Electric Utility
FORMAL TITLE:
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Reallocation of over-collected Power Cost Adjustment funds to mitigate the impact of un-anticipated increase in the bulk power cost expenditures incurred during Fiscal Year 2025, in the amount of $3,701,630
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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 serves as the mechanism through which fluctuations, both positive and negative, in power costs are passed through to customers. Power costs and sales are reviewed monthly to project potential over- or under-collections for the year. Although the PCA may be adjusted as frequently as monthly, recent practice has been to make limited adjustments to promote rate stability for customers.
At the close of Fiscal Year 2024-25, the PCA program reflected an over-collection relative to actual power costs incurred. The over-collection amount, totaling $3,701,630, was primarily due to a prior-year adjustment, favorable market conditions earlier in the fiscal year, and a largely conservative rate-setting practice. Concurrently, the Utility experienced an increase in bulk power costs totaling $6,968,957, driven by heightened market demand during the year, and resulting in expenditures that exceeded the adopted budget. Early projections indicated that $112 million would be sufficient to cover the Fiscal Year 2024-25 expenditures; however, the actual bulk power cost totaled approximately $119 million by the end of the year.
FINDINGS AND CONCLUSIONS:
The Rate Stabilization Policy establishes a reserve funding range of 15 to 25 percent of projected fuel costs. As of September 30, 2025, the reserve is funded at approximately 23 percent of the power cost and is in compliance with policy requirements.
To ensure the Electric Utilities Fund maintains its required cash-on-hand and remains adequately prepared for unforeseen operational or market-related contingencies, staff recommend that the Fiscal Year 2024-25 PCA over-collection be transferred to the Utility Reserve Fund. This strategic allocation will help absorb unanticipated increases in bulk power costs while preserving the department’s reserve requirements and strengthening long-term utility fund stability and resilience.
FISCAL IMPACT:
The reallocation of $3,701,630 of over-collected PCA funds will support the Electric Utility Fund in offsetting the total of $6,968,957 in unanticipated bulk power cost increases incurred during Fiscal Year 2024-25.
PROCUREMENT REVIEW:
N/A
LEGAL REVIEW:
N/A
ALTERNATIVE:
• Approve with Changes
• Table
• Deny