Lakeland Electric Earns $13.1 Million

LAKELAND | Finally rid of its albatross - a money-losing contract to sell electricity to a power consortium - Lakeland Electric has posted its best year-end profit since 2001.

The unaudited $13.1 million figure for this fiscal year, which ended Sept. 30, was posted by Lakeland Electric after the utility paid a $23.6 million dividend to City Hall.

But, depending on whom you ask, predictions vary about whether the good times will continue to roll for the utility. Lakeland Electric's profit projection for 2010 is only $2.7 million.

This is the first fiscal year the utility has been free from a contract with the Florida Municipal Power Agency. That agreement locked the city into selling electricity to the FMPA at a set price, one that turned out to be too low when the cost of generating electricity went up. The contract ended Dec. 15, 2007.

Overall, the contract cost Lakeland Electric $93 million from 2000 through 2007.

Fiscal year 2008 was the first time in five years that the utility posted a profit. It tallied $6.3 million in the black that year, despite the FMPA contract's causing a loss of $5.3 million in the first 2 1/2 months.

The utility lost $38.4 million in the years 2004 through 2007.

But there was at least one bright spot involving the contract, utility General Manager Jim Stanfield said.

"The contract forced us to take a look at becoming more cost-effective," Stanfield said. "But now we need to continue to do so."

Utility workers are more efficient and productive, so they're a significant reason for the profits, he said.

After its stellar year in 2009, Lakeland Electric is projecting an after-dividend profit of just $2.7 million for this fiscal year, which started Oct. 1. This year's dividend is projected to be $24.5 million.

The culprit in the decreasing profit, utility officials say, is that sales likely will be off because of the poor economy.

This past year, residential electricity sales, which are tied to weather conditions, were up slightly. But all other categories were down, including usage by commercial and industrial customers. Those sales are not driven by the weather.

The 2010 fiscal year will bring much more of the same trend of lower sales, said Don Eckert, the city's assistant finance director. He said the $2.7 million profit projection is almost entirely tied to lower sales projections, which are expected to be off by 100,000 megawatts.

City Commissioner Howard Wiggs said he is disappointed in that profit target. Wiggs said he expects a higher profit and doesn't want the utility to aim low with an expectation of doing better than that.

"I'm not comfortable with that," he said. "The citizens, who own the utility, need a better rate of return. The adage of promise low and deliver high doesn't cut it, because people won't believe the next projections."

One thing that stood out in the 2009 fiscal year was that Lakeland Electric's former problem generator, the natural gas-burning Unit 5, proved to be a reliable workhorse. Because the price of gas was low, Unit 5 was used more than the utility's coal-burning generator, Unit 3.

Lakeland Electric's cash position, money in savings not planned for a specific use, improved by $4.5 million to $32.7 million. The goal, which would please Lakeland Electric's bond raters, is to reach about $45 million in two or three years.