Customers likely to see higher bills as Lakeland Electric seeks to raise fuel rate
LAKELAND — Lakeland Electric customers are likely to see their monthly bills increase this summer.
Lakeland Electric is seeking to raise its fuel rate from $40 to $60 per 1,000 kilowatt hours starting July 1. The measure was approved by the city's Utility Committee Friday morning and will be voted on by the commission at Monday's 9 a.m. meeting.
If approved, the average Lakeland homeowner could see their monthly electric bill increase by around $20 a month. Customers on LE's demand price plan would pay a fuel rate up to about $74 an hour during peak times.
It would be the utility's highest fuel rate since January 2009, according to LE's Fuel Manager Tory Bombard.
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Bombard said the fuel rate hike is necessary due to the explosive increase in the price of natural gas, despite the municipal utility's practice of fuel hedging.
"We have to raise our rates," she said. "Fuel costs have gone up 300% in just three months."
Hedging is Lakeland Electric's attempt to anticipate trends in the natural gas market by locking in prices early. Bombard said she did not foresee the conditions of the current fuel market.
Several factors are contributing to the rising costs of natural gas, according to Bombard,. She said unusually hot weather leading to drought in parts of the country and Russia's invasion of the Ukraine leading to a premium demand on domestic gas.
The municipal utility's current fuel rate leaves it about $5 million short of its actual monthly costs. This has eaten into Lakeland Electric's fuel reserves, according to Bombard - a fund where 15% of the city's annual fuel costs are set aside to help offset sudden price changes.
"By September, the end of of our fiscal year, we will have no fuel reserve left," Bombard said.
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Increasing the rate to $60 per 1,000 kilowatt hours should allow Lakeland Electric to cover its projected costs plus an additional $1.2 million, according to her calculations. This would begin replenishing the city's fuel reserve to the tune of $20 million, but it may not be enough Utility Committee member Jack English said.
"We're already dead in the water, you can go through that in a month," he said.
In fiscal year 2021, Lakeland Electric spent a net total of about $125 million on fuel to operate its power plants, according to Bombard. She is estimating the utility will spend $233 million this year as its buying nearly $27 million a month in fuel.
If city commissioners wanted the utility to continue having fuel reserves at 15% of annual cost, that would mean an increase from $20 million to $30 million.
Commissioner Bill Read voted against setting the utility's fuel rate at $60, saying he'd like to see at $65 per 1,000 kilowatt hours.
"We are trying to be sensitive to our customers," said Mike Beckham, Lakeland Electric's interim general manager. "We don't want to send shock waves to our customers unnecessarily."
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The price change would go into effect during the summer months, Beckham said, a period of peak demand when customers are cranking up their air conditioners to cope with the heat.
Commissioner Stephanie Madden said she is concerned how the rate change will impact the city's commercial and industrial businesses.
If the price of natural gas continues to rise, the utility recognized there may be a need to increase the rate again. Typically, Lakeland Electric adjusts its fuel rate as needed every three months.
The utility is currently in the middle of conducting a cost of service analysis, Beckham said, which it expects will result in a suggestion to raise its service fees. The study results are expected to be presented to the city commission in the fall, likely October, with pricing changes taking effect in March 2023.
Sara-Megan Walsh can be reached at swalsh@theledger.com or 863-802-7545. Follow on Twitter @SaraWalshFl.
This article originally appeared on The Ledger: Lakeland Electric seeks to raise fuel rate ahead of summer peak season
