BY MARK J. CRAWFORD
Telegraph Editor
STARKE — Because the cost of producing electricity fluctuates with the price of natural gas, the cost of purchasing electricity fluctuates.
As a member of the Florida Municipal Power Agency’s All-Requirements Project, Starke purchases all its electricity through the agency. That cost is passed onto customers along with the cost of running the city’s utility.
Longtime customers know that their bills can spike when natural gas prices spike. In the 2000s, the city even attempted to exit its contract with FMPA to search for a cheaper provider, only to be quoted a price of $23 million to do so. Since then, fuel purchasing policies at FMPA have changed to help offset price fluctuations.
To mitigate unexpectedly high bills, the city commission also acted. It created a rate stabilization fund and set a static fuel adjustment rate that would not rise and fall from month to month with fuel prices. Customers could finally see some stability in their bills.
Typically, the fuel charge has been around $45 per kilowatt-hour. If the monthly charge was calculated at less than that, the city takes the excess revenue and places it into the rate stabilization fund. If the monthly fuel charge is higher than $45, then money is pulled from the rate stabilization fund to keep customers’ bills consistent.
The commission has also used the rate stabilization fund to lower bills during months of high consumption, like during the holidays or the summer.
Unfortunately, natural gas prices this high bludgeon previous attempts at stabilizing bills.
Last week, the commission took two additional actions to deal with high electric bills — at least for a couple of months.
First, the commission raised the monthly fuel adjustment cost midyear to $55 per 1,000 kilowatt-hours to reflect the increased fuel prices. This is still less than the actual monthly fuel costs, however, which have doubled according to City Clerk Jimmy Crosby. (See related story on the city budget.)
At the same time, the commission voted to absorb up to $400,000 in electric costs for July and August — two of the hottest months of the year — by using unspent revenue.
Comparing this year to last year
The latest cost comparison of municipal utilities from the Florida Municipal Electric Association is from May. Comparing 2021 and 2022, residential bills rose from $100.48 to $153.54 for 1,000 kWh of electricity — a 52.8% increase. The culprit was the fuel cost portion of the bill, which went from $24.53 in 2021 to $77.59 in 2022.
This year, the fuel cost made up more half of a customer’s cost. Starke went from one of the lowest cost municipal utilities in the state to the fourth highest.
Businesses using $1,500 kWh saw bills go up 44%, from $180.80 to $260.39.
According to the city, the fuel adjustment rate exists for cost recovery alone, so municipal utilities do not profit from increased fuel costs in customers’ bills.
“These facts don’t make it any easier to accept the rising costs we are experiencing,” City Manager Drew Mullins said. “It will be important for us to look at all areas in which we might better control overall city costs while maintaining an acceptable level of service and overall maintenance. In addition, during these days of economic challenge, we must look for innovative ways of doing business and a commitment to managed economic growth. We are committed to this goal.”
As a reminder, city utility bills also include the cost of other utilities like water and sewer as well as garbage pickup. Direct comparisons of the total bill to others outside the city limits paying only for electricity is not possible.
In addition, increased usage during high seasonal temperatures is also responsible for high electric costs.
“Unfortunately, I think it’s tough to see prices coming down before the fall. High usage over the summer due to Florida’s heat is of course going to continue to strain supply,” Mullins said. “As a city resident myself, I understand the pressure that this is putting on out residents’ wallets, and we are working as quickly as possible to adjust to the new circumstances.”
