Submitted By: Marie Brooks
presenter
Presentation By: Douglas Peebles
end
Department: Electric Utility
STAFF RECOMMENDATION (Motion Ready):
title
Adopt Resolution 2024-11 amending the Electric Power Cost Adjustment Rate for monthly electric energy billing, effective March 1, 2024
end
OCALA’S RELEVANT STRATEGIC GOALS:
Fiscally Sustainable
PROOF OF PUBLICATION:
N/A
body
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 consideration, along with monthly management analysis, it has been recommended to reduce the PCA. The City has successfully recovered the Fiscal Year 2022 under-collection by December 2023. Although there is still a need to recover funds and replenish the Rate Stabilization Reserves, current analysis and projections indicate that this goal can be achieved by the fiscal year ending September 30, 2024. The Rate Stabilization Reserve's current balance is below the target range. It stands at $12,945,306, which is 12 percent of the estimated fuel costs of approximately $107 million. The policy specifies that the reserve should be maintained within a target range of 15 to 25 percent of projected fuel costs.
FINDINGS AND CONCLUSIONS:
The Utility Advisory Board approved the rate study and staff recommendation on January 24, 2024, to decrease the Power Cost Adjustment effective March 1, 2024, to 0.02815/kWh.
FISCAL IMPACT:
This decrease in the PCA rate will keep customer collections in line with projected fuel costs.
PROCUREMENT REVIEW:
N/A
LEGAL REVIEW:
N/A
ALTERNATIVE:
• Approve with amendments
• Deny
• Table
RESOLUTION 2024-11
A RESOLUTION SETTING THE ELECTRIC BULK POWER COST ADJUSTMENT RATE FOR MONTHLY ELECTRIC ENERGY BILLING EFFECTIVE MARCH 1, 2024
WHEREAS, City of Ocala, Florida, provides that a power cost adjustment (PCA) shall be added to the monthly rate per kilowatt hour (kWh) of each filed rate schedule; and
WHEREAS, City of Ocala, Florida, sets forth the method of calculating the power cost adjustment, stated in cost per kilowatt hour; and
WHEREAS, based on the factors that impact the City’s purchased power costs and projected expenses for the upcoming fiscal year, an adjustment in the PCA rate is recommended.
NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF OCALA, FLORIDA, in regular session duly assembled as follows: The power cost adjustment is decreased to $0.02815 per kWh for bills released on or after March 1, 2024 unless modified by action of Council according to Section 70-641, Code of Ordinance, City of Ocala, Florida, as reflected in the revised Schedule A.
This resolution adopted this ______ day of ______________________, 2024.
ATTEST: CITY OF OCALA
By: By:
Angel B. Jacobs Barry Mansfield
City Clerk President, Ocala City Council
Approved as to form and legality:
By: _________________________________
William E. Sexton
City Attorney