Submitted By: Marie Brooks
presenter
Presentation By: Doug Peebles
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Department: Electric Utility
STAFF RECOMMENDATION (Motion Ready):
title
Adopt Budget Resolution 2025-118 to amend the Fiscal Year 2023-24 budget, transferring funds from the Electric Power Cost over-recovery to support unfunded capital improvement projects in the amount of $1,028,541
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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 fluctuations in power costs are passed through to the customer. Key factors affecting fuel costs include natural gas prices and weather. Power costs and sales are reviewed each month to forecast over or under collections for the year.
Elevated energy prices led to under collections of $24.5 million and $4.5 million, respectively, in Fiscal Years 2022 and 2023. These shortfalls were managed through minimal rate increases and the use of reserves from the Rate Stabilization Funds to mitigate customer rate impacts. Since then, consistent rate collections have allowed the City to recover these under collections and restore reserve levels.
Following a thorough analysis and forecast by staff, a PCA rate decrease from $0.056 to $0.028 was approved by the Council effective March 1, 2024. Staff analysis identified the opportunity to decrease PCA rates while maintaining moderate collections to support bulk power purchases and reserve funding.
The end of Fiscal Year 2023-24 resulted in an over-collection of $15,215,541, creating an opportunity to both replenish the Rate Stabilization Reserves to policy-compliant levels, and provide funding for unbudgeted capital improvement projects (CIP), which were delayed due to unavailable funding.
The Electric Rate Stabilization Reserve fund was created to keep customer rates stable amid volatile fuel price changes and economic fluctuations. A fiscally sound reserve fund is essential to stabilize or smooth customer rate spikes. The policy sets a target funding level of 25 percent of projected annual fuel costs, with a minimum threshold of 15 percent.
FINDINGS AND CONCLUSIONS:
The Rate Stabilization Reserves (RSR) will be restored to the targeted compliance level of 25 percent with a total allocation of $14,187,000. The policy allows for the use of these funds for other lawful purposes. Product costs and unexpected growth have created the need for additional funding. The Electric Capital Improvement Plan includes several high-priority unfunded projects that were previously delayed due to funding constraints. These CIP projects align with strategic objectives and focus on infrastructure improvements to enhance system reliability and resilience. Staff recommends allocating the remaining $1,028,541 towards capital improvement construction projects.
FISCAL IMPACT:
The RSR account # 457-223-000-000-23-22367 will be funded to compliance status using $14,187,000, and the remaining $1,028,541 will be allocated to unfunded CIP construction projects.
PROCUREMENT REVIEW:
N/A
LEGAL REVIEW:
This Agreement has been reviewed and approved for form and legality by City Attorney, William E. Sexton.
ALTERNATIVE:
• Adopt with Changes
• Table
• Deny
BUDGET RESOLUTION 2025-118
A RESOLUTION AMENDING THE FISCAL YEAR 2023-24 BUDGET TO TRANSFER FUNDS FROM THE ELECTRIC POWER COST OVER-RECOVERY TO SUPPORT UNFUNDED CAPITAL IMPROVEMENT PROJECTS IN THE AMOUNT OF $1,028,541
WHEREAS, the end of Fiscal Year 2023-24 experienced an over-collection of $15,215,541 from the power costs collections and created an opportunity to replenish the rate stabilization reserves back to compliance status with the reserve policy and provide funding for unbudgeted Capital Improvement Plan (CIP) projects, which were delayed due to unavailable funding; and
WHEREAS, the rate stabilization reserves will be funded back to 25 percent compliance with a total of $14,187,000; and
WHEREAS, the remaining $1,028,541 will be used to initiate unfunded CIP construction projects.
NOW THEREFORE, BE IT RESOLVED THAT THE CITY COUNCIL OF THE CITY OF OCALA, FLORIDA, duly assembled in regular session, that the Fiscal Year 2023-24 budget be amended as outlined below to support the transfer of funds from the power cost adjustment to Electric CIP:
SOURCE:
457-369-000-000-16-39211 Electric Fund Misc. Rev $1,028,541
332-381-000-000-19-38457 Trf In-Electric Fund $1,028,541
USE:
457-099-999-531-81-91332 Trf - Elec Construction Fund $1,028,541
332-032-206-531-69-65010 Construction In Progress $1,028,541
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
Reviewed for accounting accuracy & completeness:
By: _________________________________
Peter A. Lee
City Manager