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Florida Keys News - Islamorada/KL Free Press
Wednesday, April 17, 2013
FKEC rates beat most co-ops, but not FPL

TAVERNIER -- The Florida Keys Electric Cooperative, which will hold its annual meeting Saturday, April 20, provided service at a lower rate than most of Florida's 14 other electric co-ops over the past year and regularly beat the price of Keys Energy Services in the Lower Keys.

But the average Middle and Upper Keys electricity consumer -- defined statewide as a household that uses 1,000 kilowatt hours per month of power -- paid 26 percent more than their counterparts who are serviced by Florida Power Light, the company from which FKEC buys more than 99 percent of its power.

From last April through this March, an FKEC household that used 1,000 kilowatt hours per month of power paid an average bill of $116.76. Power rates vary monthly primarily depending upon the wholesale price that FKEC gets from FPL. FKEC services more 26,000 customers from Marathon to Ocean Reef.

The costs stack up favorably with other, mainly rural, Florida electric utilities that are run by member-owned cooperatives. Only Clay Electric, which services the Keystone Heights area southwest of Jacksonville, and the Lee County Cooperative in the Fort Meyers area, were less expensive over the past year.

The other Keys electric utility, Keys Energy Services, which provides power to areas south of the Seven Mile Bridge, had an average 1,000 kilowatt hour rate of $136.13 over the past 12 months.

"We are in excellent shape, financially, operationally and all the way around," FKEC CEO Scott Newberry said last week.

Aside from beating most like-competitors in cost, Newberry noted that FKEC's system is highly reliable. In 2012, the average customer of the utility was without power for only 43 minutes, he said.

In 2011, the last year for which the FKEC has reliability figures for co-ops around the state, the average Middle and Upper Keys customer went 62 minutes without power, CFO Cris Beaty said, compared to the statewide co-op customer average of 178 minutes.

Those statistics notwithstanding, on a cost basis FKEC loses out to its wholesale power provider, FPL, which is the state's largest and cheapest electric utility. FPL's 4.6 million customers span a patchwork of communities from Miami to just north of Jacksonville on Florida's east coast and almost as far north as Tampa on the west coast.

While FKEC rates are appro-ximately 25 percent higher than FPL, both on the residential and commercial side, the differential varies by user.

For example, an FKEC customer who used 500 kilowatt hours in March paid 41 percent more than an FPL customer who did the same, according to analysis by Glenn Heran, a Vero Beach-based accountant who runs a political action committee that advocated cheaper power in the Indian River County city.

More prolific FKEC customers fair better, with the cost difference disappearing entirely at the 2,750 kilowatt hour per month level.

The sliding differential exists partially because FPL uses a graduated rate structure, designed as a conservation incentive, in which the cost increases past the 1,000 kilowatt hour per month threshold.

The differential is also due in part to a move by FKEC in 2011 to increase the base rate while reducing the hourly rate -- a step that increased the power costs for those who use the least electricity. FKEC says it made that change to match up the base rate revenues with the fixed costs of the system, for which they say everyone should pay equally.

Despite the sliding scale, Heran says the cost difference between FKEC and FPL can be measured simply. FKEC collected $70 million in electric bills from its customers in 2012. At the FPL rate, the revenue would have been $56 million. "Thus $14 million is wasted each and every year to FKEC, which is a middleman buying its power from FPL," Heran said.

It was concerns about rates that led Heran to begin a push for Vero Beach to sell its city-owned utility to FPL in 2008. Last month, Vero voters approved the sale by a 65 to 35 percent margin. The switch is expected to save ratepayers there at least $268 each year.

Newberry said he doesn't like to comment directly on FPL, since he's not an expert on the company. But he said the FKEC rates come with a service level that Middle and Upper Keys residents wouldn't get from a less local utility.

"I will tell you, if you call here you'll talk to somebody," he said. "People will be out [to your home] quick. Whether you think that's worth 25 percent, I don't know. I think it is."

Budget overview

The 2013 FKEC budget is $79 million. The lion's share of that, $47 million, will be spent on purchasing power. Another nearly $10 million is to be spent on power transmission and distribution, including maintenance.

The utility plans to spend approximately $5.1 million this year on capital projects, the largest being a shared effort with Keys Energy to increase the capacity of the transmission line. FKEC's share of that project is $2.7 million.

Debt service this year, including interest and principal, is $4.6 million. The largest recent project for which co-op is making payments was its 65,000-square-foot office building, warehouse and fleet maintenance building at mile marker 91.6, bayside. Completed in 2009, the facility cost $13.6 million.

FKEC budgeted for 120 employees this year who are scheduled to make total salaries of $10.1 million, Beaty said, an average of approximately $84,000 per person. Benefit packages would total another $5.8 million, or 56 percent of salaries. The base salaries of 20 FKEC employees exceed $100,000.

The co-op's popular annual meeting and picnic, which typically draws more than 1,000 people, is expected to cost approximately $80,000 this year, plus another $50,000 in non-overtime staff hours that the utility budgets as a meeting expense.

Five thousand dollars worth of raffle prizes, including a grand prize of a 40-inch television, will be given out at the meeting. Another $15,000 in LED light bulbs will be distributed as a registration gifts to all FKEC members who show up.

Registration for the April 20 event begins at 11 a.m. at Coral Shores High School, followed by the picnic and the 1 p.m. meeting.

"Our bylaws require us to have a meeting and we want to get as many people as we can there, and this is what it takes to do it," Newberry said of the meeting expense.

rsilk@keysnews.com

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