LAKELAND — With natural gas prices remaining low and coal prices falling to remain competitive, Lakeland Electric is reducing fuel charges by almost 8 percent at the start of the year and expects the savings to continue through 2016.
The $3.50 reduction per 1,000 kilowatt-hours of energy used — $43.85 to $40.35 — will reduce the fuel price for the third quarter in a row even as the utility builds a $20 million reserve fund.
In July and October, the City Commission approved fuel rate reductions of $1 per 1,000 kilowatt-hours. It expects to top out its reserve fund by the end of the second quarter, March 31.
With state and federal taxes and fees included, but not local taxes and fees, starting Jan. 1 residential customers will pay $103.37 for 1,000 kilowatt-hours of energy, down from $106.87.
“This is going to be a good year for fuel, both coal and gas,” Fuel Manager Tory Bombard said. If assumptions about weather and the market hold, the utility could lower fuel rates by $4 per 1,000 kilowatt-hours of energy by Oct. 1.
Lakeland Electric analysts attribute the savings on natural gas to lower costs to transport the fuel across pipelines, the El Nino weather phenomenon producing a warm winter and low production costs.
Though coal remains more expensive per 1,000 kilowatt-hours generated by Lakeland Electric — $28.48 from the McIntosh Unit 3 coal-burner compared to $20.19 from the McIntosh Unit 5 gas-fueled generator — prices have dipped and closed the larger gap seen through the year.
The last time coal was the cheaper option was seven months starting December 2013 when natural gas prices spiked.
About 35 percent of the utilities power is generated from coal, General Manager Joel Ivy said.
The fuel price reduction is in line with Tampa Electric and Progress Energy, which announced earlier they would reduce their fuel charges for 2016. Lakeland Electric adjusts fuel prices quarterly and last month had forecast prices would fall, though not by how much.
The price of buying fuel is passed through to the consumer and both publicly owned and investor-owned utilities cannot profit from resale. Energy charges, also known as the base rate, and taxes and fees make up the rest of a standard residential electric bill.
Ivy said he remains concerned about volatility in the natural gas market, though he has been surprised by the sustained historic low prices of the fuel.
Commissioner Justin Troller said he was shocked to see the fuel price as low as recommended by the utility’s professional staff despite expecting to have added $4.4 million to the growing reserve fund by the end of December.
Bombard assured him he was not the only one astonished.
“I rechecked it, it bothered me, too,” she said. “It’s the cost of fuel. It’s the main driver. Nothing else has changed.”
This article was written by Christopher Guinn from The Ledger, Lakeland, Fla. and was legally licensed through the NewsCred publisher network.