Q&A of the Day – Is Lake Worth Utilities Now Lower Cost Than FPL?
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Today’s Entry: Today’s Q&A came about due to comments made by Lake Worth Beach Commissioner Sara Malega to Joel Malkin. Sara said Lake Worth Utility power bills are now $17 less than FPL’s based on 1,000-kilowatt hours. I was asked if this was true.
Bottom Line: With inflation still running well above historic norms as consumer prices have risen by an average of 3.1% over the past year, there aren’t many examples of everyday life becoming cheaper. In Florida however, utility bills are actually starting to come down and it’s not just due to cooler weather to start the year. Natural gas accounts for much of the power that’s generated throughout the state. Entering 2024 the spot rate for natural gas was over 35% lower than it was entering 2023 and over 70% lower than peak prices during the height of the inflation crisis in 2022. This has enabled Florida’s utility companies to lower rates for customers. Before breaking down the utility cost comparisons for FPL and Lake Worth Utilities, to see if what Sara’s saying is on the mark, let’s take a look at the latest cost guidance from each power provider.
FPL currently has two sets of costs, those charged to former customers of Gulf Power, which FPL recently acquired and existing FPL customers. Electricity rates for Gulf Power customers were considerably higher than those charged by FPL for existing customers. The merger has increased the average rate shown for FPL’s footprint to start 2024 in a potentially misleading way. For this exercise it’s appropriate to only use cost comparisons for existing FPL customers as opposed to those they just recently acquired - which also wasn’t in South Florida. As was mentioned by Malega, the standard way of measuring the cost of electricity is based on the total cost of the use of 1,000 kilowatt hours (though use rates in South Florida are typically much higher with the average residential customer using over 1,500 kWH monthly). So, let’s get to the breakdown:
- FPL’s existing customer cost per 1,000 kilowatt hours was $136 entering the year. As of April, that cost will decrease to approximately $129.
- Lake Worth Utilities' existing customer cost per 1,000 kilowatt hours declined from $138 to start 2023, to $114 to end the year, with an additional drop to approximately $107 expected as of March 1st.
So yes, the current and near-term projected cost of Lake Worth Utilities rates are lower than FPL’s, while FPL’s rates had been cheaper previously. Out of the 33 municipally owned power providers in the state, Lake Worth Utilities now has the eighth lowest rates while FPL’s rates are the lowest of the commercial power providers.
At the onset I mentioned the impact of natural gas prices on the ability for utility companies to lower bills. Natural gas accounts for most of the power generation, regardless of operating entity, within the state.
- Lake Worth Utilities Power Generation is 52% Natural gas
- FPL’s power generation is 76% Natural gas
Interestingly, while Lake Worth Beach has aggressively cut power rates over the past year as the cost of generating electricity has significantly lessened, the cost cutting hasn’t been as aggressive with FPL despite even greater use of natural gas.
Historically, one of the challenges for Lake Worth Beach and other smaller utility operations has been volatile energy prices impacting their customers' rates. After enormous increases were imposed in Lake Worth Beach in 2022 during the inflation crisis, the City raised and transferred $1 million to a Rate Stabilization Fund which should help mitigate similar situations, should they arise in the future. Additionally, the city was recently awarded a $23.4 million grant by the U.S. Department of Energy to update and upgrade the utility’s operations which should improve reliability and create additional cost efficiencies over the next five years as projects are completed. There’s reason to believe that the power provider which was once offline due to an alleged squirrel incident and more recently due to iguanas and raccoons has begun to turn the corner – including with lower rates.