UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q



(Mark
One)



[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ended March 31, 2009



[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934



For the transition period from ____________ to ______________



Commission File Number:  001-10608



FLORIDA PUBLIC UTILITIES COMPANY

(Exact name of registrant as specified in its charter)



|                                                               |                                     
|-------------------------------------------------------------- | ------------------------------------
|Florida                                                        | 59-0539080                          
|(State or other jurisdiction of incorporation or
organization) | (I.R.S. Employer Identification No.)



401 South Dixie Highway,

West Palm Beach, Fl.  33401

(Address of principal executive offices)



(561) 832-0872

(Registrants telephone number, including area code)



Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X]     No [
 ]



Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate web site, if any, every Interactive
Data File required to be submitted and posted pursuant to rule 405 of Regulation
S-T during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).

Yes [  ]     No [  ]



Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company.  See the definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):



Large
accelerated filer [  ]

Accelerated
filer [  ]

Non-accelerated
filer [  ]

Smaller
reporting company [X]

(Do
not check if a smaller reporting company)



Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).   Yes [  ]
     No [X]



On May 7, 2009, there were 6,121,114 shares of $1.50 par value
common stock outstanding.



INDEX



Part
I.

Financial
Information



Item
1.

Financial
Statements



Condensed
Consolidated Statements of
Income

Condensed
Consolidated Statements of Comprehensive Income

Condensed
Consolidated Balance Sheets

Condensed
Consolidated Statements of Common Shareholders Equity

Condensed
Consolidated Statements of Cash Flows

Notes
to Condensed Consolidated Financial Statements



Item
2.

Managements
Discussion and Analysis of Financial Condition

and
Results of Operations



Item
3.

Quantitative
and Qualitative Disclosures about Market Risk



Item
4T.

Controls
and Procedures



Part
II.

Other
Information



Item
1A.

Risk
Factors



Item
6.

Exhibits



Signatures











PART
I.

FINANCIAL
INFORMATION



Item
1.

Financial
Statements



|                                                                                                                      |                    |  |          
|--------------------------------------------------------------------------------------------------------------------- | ------------------ |  | ---------
|FLORIDA PUBLIC UTILITIES COMPANY                                                                                     
|CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)                                                              
|(Dollars in thousands, except per share data)                                                                        
|                                                                                                                     
|                                                                                                                      | Three
Months Ended
|                                                                                                                      | March 31,         
|Revenues                                                                                                              | 2009               |  | 2008     
|Natural
gas                                                                                                           | $19,711            |  | $22,137  
|Electric                                                                                                              | 22,033             |  | 17,523   
|Propane
gas                                                                                                           | 4,037              |  | 5,370    
|Total
revenues                                                                                                        | 45,781             |  | 45,030   
|Cost of Fuel and
Other Pass Through Costs                                                                             | 30,662             |  | 30,912   
|Gross
Profit                                                                                                          | 15,119             |  | 14,118   
|                                                                                                                      |                    |  |          
|Operating
Expenses                                                                                                    |                    |  |          
|Operation
and maintenance                                                                                             | 9,871              |  | 6,981    
|Depreciation
and amortization                                                                                         | 2,365              |  | 2,253    
|Taxes
other than income taxes                                                                                         | 878                |  | 873      
|Total
operating expenses                                                                                              | 13,114             |  | 10,107   
|Operating Income                                                                                                      | 2,005              |  | 4,011    
|                                                                                                                      |                    |  |          
|Other Income
and (Deductions)                                                                                         |                    |  |          
|Merchandise
and service revenue                                                                                       | 761                |  | 722      
|Merchandise
and service expenses                                                                                      | (649)              |  | (624)    
|Other
income                                                                                                          | 174                |  | 130      
|Interest
expense                                                                                                      | (1,146)            |  | (1,223)  
|Total
other deductions  net                                                                                          | (860)              |  | (995)    
|Earnings Before
Income Taxes                                                                                          | 1,145              |  | 3,016    
|Income
Taxes                                                                                                          | (401)              |  | (1,066)  
|Net Income                                                                                                            | 744                |  | 1,950    
|Preferred Stock
Dividends                                                                                             | 7                  |  | 7        
|Earnings for
Common Stock                                                                                             | $737               |  | $1,943   
|                                                                                                                      |                    |  |          
|(Basic and
Diluted):                                                                                                  |                    |  |          
|Earnings
Per Common Share                                                                                             | $0.12              |  | $0.32    
|                                                                                                                      |                    |  |          
|Dividends
Declared Per Common Share                                                                                   | $0.1175            |  | $0.1125  
|                                                                                                                      |                    |  |          
|Average
Shares Outstanding                                                                                            | 6,116,505          |  | 6,071,565
|These financial statements should be read with the
accompanying Notes to Condensed Consolidated Financial
Statements.





|                                                                                                                             |                               |  |              |  |  |  |  | 
|---------------------------------------------------------------------------------------------------------------------------- | ----------------------------- |  | ------------ |  |  |  |  | 
|FLORIDA PUBLIC UTILITIES COMPANY
CONDENSED CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME (Unaudited)(Dollars in
thousands)
|                                                                                                                             | Three Months Ended  March 31,
|                                                                                                                             | 2009                          |  | 2008        
|Net
income                                                                                                                   | $744                          |  | $1,950      
|Other
comprehensive gain                                                                                                     |                               |  |             
|Pension
and post retirement costs                                                                                            | 1,825                         |  | 35          
|Income
tax expense on other comprehensive gain                                                                               | (687)                         |  | (13)        
|Comprehensive
Income                                                                                                         | $1,882                        |  | $1,972      
|These
financial statements should be read with the accompanying Notes to
Condensed Consolidated Financial Statements.       
|FLORIDA PUBLIC UTILITIES COMPANY                                                                                            
|CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)                                                                           
|(Dollars in thousands)                                                                                                      
|                                                                                                                             |                               |  |             
|ASSETS                                                                                                                       | March 31,                     |  | December 31,
|                                                                                                                             | 2009                          |  | 2008        
|Utility
Plant                                                                                                                |                               |  |             
|Utility
Plant                                                                                                                | $212,013                      |  | $210,628    
|Less
Accumulated depreciation                                                                                                | 69,639                        |  | 68,303      
|Net
utility plant                                                                                                            | 142,374                       |  | 142,325     
|                                                                                                                             |                               |  |             
|Current
Assets                                                                                                               |                               |  |             
|Cash                                                                                                                         | 2,904                         |  | 2,997       
|Accounts
receivable                                                                                                          | 15,008                        |  | 13,973      
|Income
taxes receivable                                                                                                      | 1,780                         |  | 2,211       
|Allowance
for uncollectible accounts                                                                                         | (577)                         |  | (455)       
|Unbilled
receivables                                                                                                         | 1,788                         |  | 2,041       
|Notes
receivable                                                                                                             | 5,663                         |  | 252         
|Inventories
(at average unit cost)                                                                                           | 3,555                         |  | 3,961       
|Prepaid
expenses                                                                                                             | 765                           |  | 1,037       
|Under-recovery
of fuel costs                                                                                                 | -                             |  | 756         
|Deferred
income taxes-current                                                                                                | 899                           |  | 513         
|Regulatory
assets-environmental  current                                                                                    | 456                           |  | 456         
|Deferred
charges-current                                                                                                     | 220                           |  | 155         
|Special
deposit  fuel contract                                                                                              | -                             |  | 130         
|Total current
assets                                                                                                         | 32,461                        |  | 28,027      
|                                                                                                                             |                               |  |             
|Other
Assets                                                                                                                 |                               |  |             
|Regulatory
assets-environmental                                                                                              | 6,513                         |  | 6,636       
|Regulatory
asset-retirement plan                                                                                             | 2,822                         |  | 9,945       
|Long-term
receivables and other investments                                                                                  | 15                            |  | 5,619       
|Investments
held for environmental costs                                                                                     | 3,516                         |  | 3,507       
|Deferred
charges                                                                                                             | 6,306                         |  | 6,409       
|Goodwill                                                                                                                     | 2,405                         |  | 2,405       
|Intangible
assets (net)                                                                                                      | 3,984                         |  | 4,058       
|Total
other assets                                                                                                           | 25,561                        |  | 38,579      
|Total
Assets                                                                                                                 | $200,396                      |  | $208,931    
|                                                                                                                             |                               |  |             
|These financial statements should be read with the
accompanying Notes to Condensed Consolidated Financial
Statements.       



|                                                                                                                      |           |  |              |  |  |  |  | 
|--------------------------------------------------------------------------------------------------------------------- | --------- |  | ------------ |  |  |  |  | 
|FLORIDA PUBLIC UTILITIES COMPANY                                                                                     
|CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)                                                                    
|(Dollars in thousands)                                                                                               
|                                                                                                                     
|CAPITALIZATION
AND LIABILITIES                                                                                        | March 31, |  | December 31,
|                                                                                                                      | 2009      |  | 2008        
|Capitalization                                                                                                        |           |  |             
|Common
shareholders' equity                                                                                           | $49,836   |  | $48,512     
|Preferred
stock                                                                                                       | 600       |  | 600         
|Long-term
debt                                                                                                        | 47,940    |  | 47,920      
|Total
capitalization                                                                                                  | 98,376    |  | 97,032      
|                                                                                                                      |           |  |             
|Current
Liabilities                                                                                                   |           |  |             
|Line
of credit                                                                                                        | 3,047     |  | 12,747      
|Accounts
payable                                                                                                      | 10,240    |  | 11,481      
|Long-term
debt - current                                                                                              | 1,409     |  | 1,409       
|Insurance
accrued                                                                                                     | 222       |  | 265         
|Interest
accrued                                                                                                      | 1,145     |  | 1,081       
|Other
accruals and payables                                                                                           | 3,177     |  | 3,241       
|Environmental
Liability - current                                                                                     | 1,068     |  | 774         
|Taxes
accrued                                                                                                         | 4,301     |  | 1,902       
|Over-recovery
of fuel costs                                                                                           | 4,361     |  | 1,965       
|Customer
deposits                                                                                                     | 13,320    |  | 11,099      
|Total
current liabilities                                                                                             | 42,290    |  | 45,964      
|                                                                                                                      |           |  |             
|Other
Liabilities                                                                                                     |           |  |             
|Deferred
income taxes                                                                                                 | 17,694    |  | 18,023      
|Environmental
liability                                                                                               | 12,337    |  | 12,655      
|Regulatory
liability- storm reserve                                                                                   | 2,448     |  | 2,418       
|Regulatory
liabilities- other                                                                                         | 11,198    |  | 11,011      
|Regulatory
liability- retirement                                                                                      | 13,690    |  | 19,352      
|Other
liabilities                                                                                                     | 2,363     |  | 2,476       
|Total
other liabilities                                                                                               | 59,730    |  | 65,935      
|Total
Capitalization and Liabilities                                                                                  | $200,396  |  | $208,931    
|                                                                                                                      |           |  |             
|These financial statements should be read with the
accompanying Notes to Condensed Consolidated Financial
Statements.





|                                                                                                                      |              |           |         |          |          |          |               |              
|--------------------------------------------------------------------------------------------------------------------- | ------------ | --------- | ------- | -------- | -------- | -------- | ------------- | -------------
|FLORIDA PUBLIC UTILITIES COMPANY
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
(Unaudited)                  
|(Dollars in thousands, except for shares)                                                                            
|                                                                                                                      |              |           |         |          |          |          | Accumulated   |              
|                                                                                                                      | Common Stock |           |         |          | Treasury | Other    | Common       
|                                                                                                                      | Shares       | Aggregate | Paid-in | Retained | Treasury | Shares   | Comprehensive | Shareholders'
|                                                                                                                      | Issued       | Par Value | Capital | Earnings | Shares   | Cost     | Income(Loss)  | Equity       
|Balances
as of December 31, 2008                                                                                      | 6,199,070    | $9,299    | $6,065  | $36,424  | 97,350   | $(1,725) | $(1,551)      | $48,512      
|Net
income                                                                                                            |              |           |         | 744      |          |          |               | 744          
|Dividends                                                                                                             |              |           |         | (725)    |          |          |               | (725)        
|Other
Comprehensive Income                                                                                            |              |           |         |          |          |          | 1,138         | 1,138        
|Stock
plans                                                                                                           | 13,434       | 20        | 123     |          | (10,527) | 24       |               | 167          
|Balances
as of March 31, 2009                                                                                         | 6,212,504    | $9,319    | $6,188  | $36,443  | 86,823   | $(1,701) | $(413)        | $49,836      
|These
financial statements should be read with the accompanying Notes to
Condensed Consolidated Financial Statements.



|                                                                                                                      |                    |  |         | 
|--------------------------------------------------------------------------------------------------------------------- | ------------------ |  | ------- | 
|FLORIDA PUBLIC UTILITIES COMPANY                                                                                     
|CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)                                                          
|(Dollars in thousands)                                                                                               
|                                                                                                                      |                    |  |        
|                                                                                                                      | Three Months Ended
|                                                                                                                      | March 31,         
|                                                                                                                      | 2009               |  | 2008   
|                                                                                                                      |                    |  |        
|Net cash provided
by operating activities                                                                             | $12,031            |  | $3,785 
|                                                                                                                      |                    |  |        
|Investing
Activities                                                                                                  |                    |  |        
|Construction
expenditures                                                                                             | (1,981)            |  | (2,969)
|Proceeds
received on notes receivable                                                                                 | 252                |  | 283    
|Other                                                                                                                 | (123)              |  | (120)  
|Net
cash used in investing activities                                                                                 | (1,852)            |  | (2,806)
|                                                                                                                      |                    |  |        
|Financing
Activities                                                                                                  |                    |  |        
|Net
decrease in short-term borrowings                                                                                 | (9,700)            |  | (1,442)
|Dividends
paid                                                                                                        | (724)              |  | (688)  
|Other
increases                                                                                                       | 152                |  | 194    
|Net
cash used in financing activities                                                                                 | (10,272)           |  | (1,936)
|                                                                                                                      |                    |  |        
|Net (decrease)
increase in cash                                                                                       | (93)               |  | (957)  
|                                                                                                                      |                    |  |        
|Cash at beginning
of period                                                                                           | 2,997              |  | 3,478  
|                                                                                                                      |                    |  |        
|Cash at end of
period                                                                                                 | $2,904             |  | $2,521 
|These financial statements should be read with the
accompanying Notes to Condensed Consolidated Financial
Statements.









FLORIDA PUBLIC UTILITIES COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

March 31, 2009



1.

Basis
of Presentation

The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with the generally accepted
accounting principles in the United States (GAAP) for interim financial
information and with the instructions for Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by GAAP for complete financial statements. In the opinion of
management, all adjustments necessary for fair presentation have been included.
The operating results for the period are not necessarily indicative of the
results that may be expected for the full year. For further information, refer
to the audited consolidated financial statements and footnotes included in the
Companys Annual Report on Form 10-K for the year ended December 31, 2008.



2.

Use
of Estimates

The preparation of financial statements in conformity with GAAP
requires the Company to make certain estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of any contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Significant estimates
include allowances, accruals for pensions, environmental liabilities, liability
reserves, regulatory deferred tax liabilities, unbilled revenue and
over-earnings liability. Actual results may differ from these estimates.



3.

Regulation

The financial statements are prepared in accordance with the
provisions of Statement of Financial Accounting Standards (SFAS) No. 71 
"Accounting for the Effects of Certain Types of Regulation".  SFAS No. 71
recognizes that accounting for rate-regulated enterprises should reflect the
relationship of costs and revenues introduced by rate regulation. A regulated
utility may defer recognition of a cost (a regulatory asset) or show recognition
of an obligation (a regulatory liability) if it is probable that, through the
ratemaking process, there will be a corresponding increase or decrease in
revenues. The Company has recognized certain regulatory assets and liabilities
in the condensed consolidated balance sheets.



As a result, Florida Public Service Commission (FPSC) regulation
has a significant effect on the Companys results of operations. The FPSC
approves rates that are intended to permit a specified rate of return on
investment. Rate tariffs allow the flexibility of automatically passing through
the cost of natural gas and electricity to customers. Increases in the operating
expenses of the regulated segments may require a request for increases in the
rates charged to customers.



The FPSC approved an annual electric final rate increase of
approximately $3.9 million effective May 22, 2008.  Interim rate relief for
partial recovery of the increased expenditures was approved by the FPSC on
October 23, 2007. Interim rates were effective in November of 2007 up until May
22, 2008, the date our final rates went into effect and produced additional
annual revenues of approximately $800,000.



The Companys natural gas segment received interim rate relief for
partial recovery of increased expenditures. Interim rates which will produce
additional annual revenues of approximately $1 millionwent into effect on March 12, 2009 up until June 4, 2009, when final
rates will be effective.



4.

Pledged
Assets

Substantially all of the Companys utility plant and the shares of
its wholly owned subsidiary, Flo-Gas Corporation, collateralize the Companys
First Mortgage Bonds (long-term debt).  Cash, accounts receivable and
inventory are collateral for the line of credit.



5.

Restriction
on Dividends

The Companys Fifteenth Supplemental Indenture of Mortgage and
Deed of Trust restricts the amount that is available for cash dividends. At
March 31, 2009, approximately $10.2 million of retained earnings were free of
such restriction and available for the payment of dividends. The Companys line
of credit agreement contains covenants that, if violated, could restrict or
prevent the payment of dividends. The Company is not in violation of these
covenants.



6.

Allowance
for Uncollectible Accounts

The Company records an allowance for uncollectible accounts based
on historical information and trended current economic conditions.  The
following is a summary of bad debt activity for the first quarter as of March
31:



|                                |      |     
|------------------------------- | ---- | ----
|Allowance for Doubtful Accounts
|(Dollars in thousands)         
|                                | 2009 | 2008
|Bad
Debt Write-offs             | $187 | $114
|Bad
Debt Provision              | $309 | $187



7.

Storm
Reserves

As of March 31, 2009, the Company had a storm reserve of
approximately $1.7 million for the electric segment and approximately $789,000
for the natural gas segment. The Company does not have a storm reserve for the
propane gas segment.



8.

Goodwill
and Other Intangible Assets

The Company does not amortize goodwill or intangibles with
indefinite lives. The Company periodically tests the applicable reporting
segments, natural gas and propane gas, for impairment. In the event goodwill or
intangible assets related to a segment are determined to be impaired, the
Company would write down such assets to fair value.



Goodwill associated with the Companys acquisitions consists of
$550,000 in the natural gas segment and $1.9 million in the propane gas segment.
The summary of intangible assets at March 31, 2009, and December 31, 2008, is as
follows:



|                                             |                          |                |                  
|-------------------------------------------- | ------------------------ | -------------- | -----------------
|Intangible Assets
(Dollars in thousands)    
|                                             |                          | March 31, 2009 | December 31, 2008
|Customer
distribution rights                 | (Indefinite
life)        | $
2,800        | $
2,800          
|Software                                     | (Five to nine year
life) | 3,575          | 3,542            
|Accumulated
amortization                     | (2,391)                  | (2,284)       
|Total
intangible assets, net of amortization | $
3,984                  | $ 4,058       



The amortization expense of intangible assets was approximately
$108,000 and $104,000 for the three months ended March 31, 2009 and 2008,
respectively.



9.

Over-earnings
 Natural Gas Segment

The FPSC approves rates that are intended to permit a specified
rate of return on investment and limits the maximum amount of earnings of
regulated operations. The Company has agreed with the FPSC to limit the earned
return on equity for regulated natural gas and electric operations.



All prior over-earnings have been settled. Management does not
anticipate any electric or natural gas over earnings for 2007, 2008 or 2009.



10.

Environmental
Contingencies

The Company is subject to federal and state legislation with
respect to soil, groundwater and employee health and safety matters and to
environmental regulations issued by the Florida Department of Environmental
Protection (FDEP), the United States Environmental Protection Agency (EPA) and
other federal and state agencies. Except as discussed below, the Company does
not expect to incurmaterial future expenditures for
compliance with existing environmental laws and regulations.



|                       |              |           
|---------------------- | ------------ | ----------
|(Dollars in thousands)
|Site                   | Range From   | Range To  
|West
Palm Beach        | $      4,851 | $   18,332
|Sanford                | 637          | 637       
|Pensacola
and Key West | 120          | 120       
|Total                  | $      5,608 | $   19,089



The Company currently has $13.4 million recorded as our best
estimate of the environmental liability. The FPSC approved up to $14 million for
total recovery from insurance and rates based on the original 2005 projections
as a basis for rate recovery. The Company has recovered a total of $6.4 million
from insurance and rate recovery, net of costs incurred to date.  The
remaining balance of $7 million is recorded as a regulatory asset.  On
October 18, 2004 the FPSC approved recovery of $9.1 million for environmental
liabilities.  The amortization of this recovery and reduction to the
regulatory asset began on January 1, 2005. The majority of environmental cash
expenditures is expected to be incurred before 2012, but may continue for
another 9 years.



West
Palm Beach Site

The Company is currently evaluating remedial options to respond to
environmental impacts to soil and groundwater at and in the immediate vicinity
of a parcel of property owned by us in West Palm Beach, Florida upon which we
previously operated a gasification plant. Pursuant to a Consent Order between
the Company and the Florida Department of Environmental Protection effective
April 8, 1991, the Company completed the delineation of soil and groundwater
impacts at the site. On June 30, 2008, the Company transmitted a revised
feasibility study, evaluating appropriate remedies for the site, to the Florida
Department of Environmental Protection.



The feasibility study evaluated a wide range of remedial
alternatives based on criteria provided by applicable laws and regulations. The
total costs for the remedies evaluated in the feasibility study ranged from a
low of $2.8 million to a high of $54.6 million. Based on the likely
acceptability of proven remedial technologies described in the feasibility study
and implemented at similar sites, management believes that
consulting/remediation costs to address the impacts now characterized at the
West Palm Beach site will range from $4.4 million to $17.9 million. This range
of costs covers such remedies as in situ solidification for deeper soil impacts,
excavation of surficial soil impacts, installation of a barrier wall with a
permeable biotreatment zone, monitored natural attenuation of dissolved impacts
in groundwater, or some combination of these remedies. The feasibility study
proposed a remedy of surficial soil excavation, installation of a hanging
barrier wall with permeable biotreatment zone, and monitored natural
attenuation, the cost of which is projected to range from $4.4 million to $9.4
million.



Negotiations between the Company and the Florida Department of
Environmental Protection on a final remedy for the site continue. Prior to the
conclusion of those negotiations, we are unable to determine, to a reasonable
degree of certainty, the complete extent or cost of remedial action that may be
required. As of March 31, 2009, and subject to the limitations described above,
management believes the Company's remediation expenses, including attorneys'
fees and costs, will range from approximately $4.9 million to $18.3 million for
this site.



Sanford
Site

The Company owns a parcel of property located in Sanford, Florida,
upon which a gasification plant was operated prior to our acquisition of the
property. On March 25, 1998, the Company executed an Administrative Order on
Consent with the four former owners and operators (collectively, the "Group")
and the United States Environmental Protection Agency that obligated the Group
to implement a Remedial Investigation/Feasibility Study and to pay the United
States Environmental Protection Agency's past and future oversight costs. The
Group also entered into a Participation Agreement and an Escrow Agreement on or
about April 13, 1998. Work under the Remedial Investigation/Feasibility Study
Administrative Order on Consent and Participation Agreement and an Escrow
Agreement is now complete and the Company has no further obligations under
either document.



In 2008, a revised Consent Decree was signed by all Group Members
and the United States Environmental Protection Agency, providing for the
implementation by the Group of the remedies the United States Environmental
Protection Agency approved earlier for the site, which are set forth in the
Records of Decision for Operable Units 1-3, and for the payment of the United
States Environmental Protection Agency's past and future oversight costs. The
Consent Decree was entered by the federal Court in Orlando and became effective
on January 15, 2009; the parties to the Consent Decree are now obligated to
implement the remedy approved by United States Environmental Protection Agency
for the site.



In January 2007, the Company and other members of the Group signed
a Third Participation Agreement, which provides for funding the remediation work
specified in the Records of Decision for Operable Units 1-3 and supersedes and
replaces the Second Participation Agreement.  The Company's share of
remediation costs under the Third Participation Agreement is set at 5% of a
maximum of $13 million, or $650,000. To date, the Company has contributed
$100,000 of its total share of remediation costs under the Third Participation
Agreement. It is currently anticipated that the total cost of the final remedy
will exceed $13 million. The Company has advised the other members of the
Sanford Group that we are unwilling at this time to agree to pay any sum in
excess of the $650,000 committed by us in the Third Participation Agreement.



Several members of the Sanford Group recently concluded
negotiations with two adjacent property owners to resolve damages that the
property owners allege that they have/will incur as a result of the
implementation of the EPA approved remedy. In settlement of these claims,
members of the Sanford Group (excluding the Company) have agreed to pay
specified sums of money to the parties. In one case, the settlement agreement
requires the select members of the Sanford Group to purchase the third party's
property for approximately $2 million; the third party then has an option to buy
back the property after completion of the remedy for approximately the same
amount. In the other case, the select members agreed to a lump sum payment of
$450,000. The Company has refused to participate in the funding of the third
party settlement agreements based on the contention that it did not contribute
to the release of hazardous substances at the site giving rise to the third
party claims.



As of March 31, 2009, the Companys share of remediation expenses,
including the Companys attorneys' fees and costs, are projected to be
approximately $637,000 for this site. However, at this time, we are unable to
determine, to a reasonable degree of certainty, whether the other members of the
Sanford Group will accept the Companys asserted defense to liability for costs
exceeding $13 million to implement the final remedy for the site or will pursue
a claim against the Company for a sum in excess of the $650,000 that FPUC has
committed to fund the remedy.



Pensacola
Site

The Company is the prior owner/operator of the former Pensacola
gasification plant, located at the intersection of Cervantes Street and the
Louisville and Nashville (CSX) Railroad line, Pensacola, Florida. Following
notification on October 5, 1990, that the Florida Department of Environmental
Protection had determined that the Company was one of several responsible
parties for any environmental impacts associated with the former gasification
plant site, the Company entered into cost sharing agreements with three other
responsible parties providing for the funding of certain contamination
assessment activities at the site.



Following field investigations performed on behalf of the
responsible parties, on July 16, 1997, the Florida Department of Environmental
Protection approved a final remedy for the site that provides for annual
sampling of selected monitoring wells. Such annual sampling has been undertaken
at the site since 1998. The Company's share of these costs is less than $2,000
annually.



In March 1999, the United States Environmental Protection Agency
requested site access in order to undertake an Expanded Site Inspection. The
Expanded Site Inspection was completed by the United States Environmental
Protection Agency's contractor in 1999 and an Expanded Site Inspection Report
was transmitted to the Company in January 2000. The Expanded Site Inspection
Report recommends additional work at the site. The responsible parties met with
the Florida Department of Environmental Protection on February 7, 2000 to
discuss the United States Environmental Protection Agency's plans for the site.
In February 2000, the United States Environmental Protection Agency indicated
preliminarily that it will defer management of the site to the Florida
Department of Environmental Protection; as of July 31, 2008, the Company has not
received any written confirmation from the United States Environmental
Protection Agency or the Florida Department of Environmental Protection
regarding this matter. Prior to receipt of the United States Environmental
Protection Agency's written determination regarding site management, we are
unable to determine whether additional field work or site remediation will be
required by the United States Environmental Protection Agency and, if so, the
scope or costs of such work.



As of March 31, 2009, the Companys share of remediation expenses
for the site, including attorneys fees and costs, are projected to be
approximately $27,000.



Key West Site

Between 1927 and 1938, the Company owned and operated a
gasification plant on Catherine Street, in Key West, Florida. The plant
discontinued operations in the late 1940s; the property on which the plant was
located is currently used for a propane gas distribution business. In March
1993, a Preliminary Contamination Assessment Report was prepared by a consultant
jointly retained by the Company and the current site owner and was delivered to
the Florida Department of Environmental Protection. The Preliminary
Contamination Assessment Report reported that very limited soil and groundwater
impacts were present at the site. By letter dated December 20, 1993, the Florida
Department of Environmental Protection notified the Company that the site did
not warrant further "CERCLA consideration and a Site Evaluation Accomplished
disposition is recommended." the Florida Department of Environmental Protection
then referred the matter to its Marathon office for consideration of whether
additional work would be required by the Florida Department of Environmental
Protection's district office under Florida law. As of March 31, 2009, the
Company has received no further communication from the Florida Department of
Environmental Protection with respect to the site. At this time, we are unable
to determine whether additional field work will be required by the Florida
Department of Environmental Protection and, if so, the scope or costs of such
work. In 1999, the Company received an estimate from its consultant that
additional costs to assess and remediate the reported impacts would be
approximately $166,000. As of March 31, 2009 and assuming the current owner
shared in such costs according to the allocation agreed upon by the parties for
the Preliminary Contamination Assessment Report, the Company's share of
remediation expenses, including attorneys' fees and costs, is projected to be
$93,000 for this site.



11.

Employee
Benefit Plans

The Company sponsors a qualified defined benefit pension plan for
non-union employees hired before January 1, 2005 and for union employees who
work under one of the six Company union contracts and were hired before their
respective contract dates in 2005 for our Northwest division contract in 2006.
Employees hired after the above time frames along with those that elected to
transfer out of the defined benefit pension plan are not eligible for the
defined benefit pension plan and are in a 401k match plan.The Company also sponsors a post-retirement medical
plan.



In March 2009, the Company's Board of Directors authorized
amendments to the pension plan in an effort to reduce anticipated future pension
expenses. As a result of these amendments, the Company will freeze the pension
plan for all participants effective December 31, 2009. All future benefit
accruals under the plan shall cease, including freezing salary rates at 2009
average compensation levels as of December 31, 2009. In addition to the freeze,
the reduced early retirement eligibility will be lowered from 30 years to 20
years and two additional service years can be earned by active participants at
the December 31, 2009 average compensation levelsfor
the purposes of benefit accrual, vesting and retirement eligibility. The two
additional service years will increase annual pension cost by $800,000 in each
of the next two years. Beyond December 31, 2011, active participants will
continue to accrue service years for the purposes of vesting and retirement
eligibility. The amendments to the plan have been accounted for in accordance
with SFAS No. 88, Employers' Accounting for Settlements and Curtailments of
Defined Benefit Pension Plans and for Termination Benefits, resulting in the
recognition of approximately $2.7 million in non-cash pretax curtailment loss of
which $2.3 million is reflected in expenses and $400,000 is reflected on the
balance sheet in the Company's consolidated statements.



The following table provides the components of the net periodic
benefit cost for our pension plan and postretirement benefit plan for the three
months ended March 31, 2009 and 2008.





|                                 |                    |  |      | 
|-------------------------------- | ------------------ |  | ---- | 
|FLORIDA PUBLIC UTILITIES COMPANY
|Net Periodic Benefit Costs      
|(Dollars in
thousands)          
|                                 |                    |  |     
|                                 | Three Months Ended
|                                 | March 31,         
|                                 | 2009               |  | 2008
|                                 |                    |  |     
|Pension Plan:                    |                    |  |     
|Service
Cost                     | $257               |  | $273
|Interest
Cost                    | 694                |  | 642 

|                                         |        |  |       | 
|---------------------------------------- | ------ |  | ----- | 
|Expected Return on
Plan Assets           | (634)  |  | (648)
|Amortization of
Net Gain                 | 54     |  | -    
|Amortization of
Prior Service Cost       | 179    |  | 184  
|Total FAS 87 Net
Periodic Pension Cost   | 550    |  | 451  
|Curtailment
Loss                         | 2,722  |  | -    
|Net
Periodic Pension Cost                | $3,272 |  | $451 
|                                         |        |  |      
|Postretirement
Benefit Plan:             |        |  |      
|Service
Cost                             | $13    |  | $14  
|Interest
Cost                            | 26     |  | 25   
|Amortization of
Transition Obligation    | 11     |  | 11   
|Amortization of
Net Gain                 | (13)   |  | (13) 
|Net
Periodic Postretirement Benefit Cost | $37    |  | $37  
|                                        



For additional information related to our employee benefit plans,
please see Notes to Consolidated Financial Statements in the Companys Form 10-K
for the year ended December 31, 2008.



FASB issued Statement No. 158, Employers Accounting for Defined
Benefit Pension and Other Postretirement Plans that requires the Company to
show the funded status of its pension and retiree health care plan as a prepaid
asset or accrued liability, and to show the net deferred and unrecognized gains
and losses related to the retirement plans, net of tax, as part of accumulated
other comprehensive income (loss) (AOCI) in shareholders equity.This resulted in a gain in AOCI, net of deferred tax,
ofapproximately $1,138,000 and $22,000 as of March
31, 2009 and March 31, 2008, respectively.



12.

Impact
of Recent Accounting Standards



Financial
Accounting Standard No. 161

In March 2008, the FASB issued Statement No. 161, Disclosures
about Derivative Instruments and Hedging Activities  an amendment of FASB
Statement No. 133 This standard requires enhanced disclosures about an entitys
derivative and hedging activities and thereby improves the transparency of
financial reporting. This Statement is effective for financial statements issued
for fiscal years and interim periods beginning after November 15, 2008.
  The Company adopted SFAS No. 161 effective January 1, 2009. The
adoption of SFAS No. 161 did not have an impact on the Companys
disclosures.



FASB
Staff Position, FAS No. 142-3

In April 2008, the FASB issued FASB Staff Position, or FSP, FAS
142-3, Determination of the Useful Life of Intangible Assets, effective for
financial statements issued for fiscal year beginning after December 15, 2008,
and interim periods within those fiscal years. This FSP amends the factors that
should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset under SFAS No. 142
Goodwill and Other Intangible Assets, thereby resulting in improved
consistency between the useful life applied under SFAS No. 142, and the period
of expected cash flows used to measure the fair value of the asset under SFAS
No. 141R, Business Combinations. We adopted FSP FAS 142-3 effective January 1,
2009. The adoption of FSP, FAS No. 142-3 did not have a material effect on our
results of operations or financial position.



Financial
Accounting Standard No. 162

In May 2008, the FASB issued Statement No. 162, The Hierarchy of
Generally Accepted Accounting Principles.  This standard offers guidance
on the principles used to prepare financial statements in accordance with GAAP.
 FASB Statements of Financial Accounting Concepts now supersede industry
practice. The adoption of this standard did not have an effect on our financial
position or results of operation.



FSP
132(R)-1, Employers Disclosure about Postretirement Benefit Plan
Assets.

In December 2008, the FASB issued FSP FAS 132(R)-1, Employers
Disclosures about Postretirement Benefit Plan Assets (FSP FAS 132 (R)-1). FSP
FAS 132 (R)-1 amends FASB Statement No. 132 (revised 2003), Employers
Disclosures about Pensions and Other Postretirement Benefits, to provide
guidance on an employers disclosures about plan assets of a defined benefit
pension or other postretirement plan. FSP FAS 132 (R)-1 is effective for fiscal
years ending after December 15, 2009. The Company is currently evaluating
the effect FSP FAS 132(R)-1 will have on its disclosures.



FSP
FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial
Instruments.

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, Interim
Disclosures about Fair Values of Financial Instruments. It requires the fair
value for all financial instruments within the scope of SFAS No. 107,
Disclosures about Fair Value of Financial Instruments (SFAS No. 107), to be
disclosed in the interim periods as well as in annual financial statements. This
standard is effective for the quarter ending after June 15, 2009. We are
currently assessing the potential impact that adoption of this standard may have
on our financial statements disclosures.



SFAS
115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary
Impairments

In April 2009, the FASB, issued FSP No. FAS 115-2 and FAS 124-2,
Recognition and Presentation of Other-Than-Temporary Impairments, to amend the
other-than-temporary impairment guidance in debt securities to be based on
intent to sell instead of ability to hold the security and to improve the
presentation and disclosure of other-than-temporary impairments on debt and
equity securities in the financial statements.  This pronouncement is
effective for periods ending after June 15, 2009.  We are currently
assessing the potential impact that adoption of this standard may have on our
financial statements.



FSP
No. 157-4, Determining Fair Value When the Volume and Level of Activity for the
Asset or Liability Have Significantly Decreased and Identifying Transactions
That Are Not Orderly

In April 2009, the FASB issued FSP No. 157-4, Determining Fair
Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly, or
FSP 157-4. FSP 157-4 provides additional authoritative guidance to assist both
issuers and users of financial statements in determining whether a market is
active or inactive, and whether a transaction is distressed. The FSP will be
effective for us for the quarter ending June 30, 2009. We are currently
assessing the potential impact that adoption of this standard may have on our
financial statements.



FSP
SFAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a
Business Combination That Arise from Contingencies

In April 2009, FASB issued FSP SFAS 141(R)-1, Accounting for
Assets Acquired and Liabilities Assumed in a Business Combination That Arise
from Contingencies, to amend the provisions related to the initial recognition
and measurement, subsequent measurement and disclosure of assets and liabilities
arising from contingencies in a business combination under SFAS 141(R). Under
the new guidance, assets acquired and liabilities assumed in a business
combination that arise from contingencies should be recognized at fair value on
the acquisition date if fair value can be determined during the measurement
period. If fair value cannot be determined, companies should typically account
for the acquired contingencies using existing guidance.



13.

Fair Value of Financial Instruments

In September 2006, the FASB issued SFAS No. 157, Fair
Value Measurements (SFAS 157), which defines fair value, establishes a
framework for measuring fair value in GAAP, and expands disclosures about fair
value measurements. SFAS 157 does not require any new fair value
measurements, but provides guidance on how to measure fair value by providing a
fair value hierarchy used to classify the source of the information. In February
2008, the FASB deferred the effective date of SFAS 157 by one year for
certain non-financial assets and non-financial liabilities, except those that
are recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually). On January 1, 2008, we adopted the
provisions of SFAS 157, except as it applies to those non-financial assets
and non-financial liabilities for which the effective date has been delayed by
one year. On January 1, 2009, we adopted the provisions of SFAS 157 for
non-financial assets and non-financial liabilities. The adoption of
SFAS 157 did not have a material effect on our financial position or
results of operations.



The carrying amounts reported in the balance sheet for investments
held in escrow for environmental costs, notes payable, taxes accrued and other
accrued liabilities approximate fair value.  The fair value of long-term
debt excluding the unamortized debt discount is estimated by discounting the
future cash flows of each issuance at rates currently offered to the Company for
similar debt instruments of comparable maturities. The indentures governing our
two first mortgage bond series outstanding contain "make-whole" provisions
(pre-payment penalties that charge for lost interest).



The
values at March 31, 2009 and December 31, 2008 are shown below.



|                       |                  |                        |                  |                       
|---------------------- | ---------------- | ---------------------- | ---------------- | ----------------------
|(Dollars
in thousands) | March 31, 2009   | December 31, 2008     
|                       | Carrying
Amounts | Approximate Fair Value | Carrying
Amounts | Approximate Fair Value
|Long-term
debt         | $50,966          | $56,700                | $50,966          | $ 56,600              





On January 1, 2008, we adopted the provisions of
SFAS No. 159 The Fair Value Option for Financial Assets and Financial
Liabilities  including an amendment of FASB Statement No. 115
(SFAS 159). SFAS 159 provides companies with an option to report
selected financial assets and financial liabilities at fair value. Unrealized
gains and losses on items for which the fair value option has been elected are
reported in earnings at each subsequent reporting date. The fair value option:
(i) may be applied instrument by instrument, with a few exceptions, such as
investments accounted for by the equity method; (ii) is irrevocable (unless
a new election date occurs); and (iii) is applied only to entire
instruments and not to portions of instruments. We did not elect to record any
additional assets or liabilities at fair value.



14.

Segment
Information

The Company is organized into two regulated business segments:
natural gas and electric, and one non-regulated business segment, propane gas.
There are no material inter-segment sales or transfers.



Identifiable assets are those assets used in the Companys
operations in each business segment.  Common assets are principally cash
and overnight investments, deferred tax assets and common plant.



Business segment information at March 31, 2009, and December 31,
2008 is summarized as follows:



|                       |   |         |   |         | 
|---------------------- | - | ------- | - | ------- | 
|(Dollars
in thousands) |   | 2009    |   | 2008    | 
|Identifiable
assets    |   |         |   |         | 
|Natural
gas            | $ | 101,627 | $ | 101,920 | 
|Electric               |   | 57,284  |   | 58,220  | 
|Propane
gas            |   | 17,897  |   | 18,534  | 
|Common                 |   | 23,588  |   | 30,257  | 
|Consolidated           | $ | 200,396 | $ | 208,931 | 





Business segment information for the quarter ending March 31,
2009, and March 31, 2008 is summarized as follows:



|                                       |   |        |   |        |  |  |  |  | 
|-------------------------------------- | - | ------ | - | ------ |  |  |  |  | 
|(Dollars
in thousands)                 |   | 2009   |   | 2008  
|Revenues                               |   |        |   |       
|Natural
gas                            | $ | 19,711 | $ | 22,137
|Electric                               |   | 22,033 |   | 17,523
|Propane
gas                            |   | 4,037  |   | 5,370 
|Consolidated                           | $ | 45,781 | $ | 45,030
|Operating
income, excluding income tax |   |        |   |       
|Natural
gas                            | $ | 1,699  | $ | 2,392 
|Electric                               |   | 14     |   | 735   
|Propane
gas                            |   | 292    |   | 884   
|Consolidated                           | $ | 2,005  | $ | 4,011 
|Depreciation
and amortization          |   |        |   |       

|                          |   |       |   |       |  |  |  |  | 
|------------------------- | - | ----- | - | ----- |  |  |  |  | 
|Natural
gas               | $ | 1,253 | $ | 1,188
|Electric                  |   | 816   |   | 787  
|Propane
gas               |   | 210   |   | 201  
|Common                    |   | 86    |   | 77   
|Consolidated              | $ | 2,365 | $ | 2,253
|Income
tax expense        |   |       |   |      
|Natural
gas               | $ | 294   | $ | 579  
|Electric                  |   | (75)  |   | 142  
|Propane
gas               |   | 88    |   | 276  
|Common                    |   | 94    |   | 69   
|Consolidated              | $ | 401   | $ | 1,066
|Construction
expenditures |   |       |   |      
|Natural
gas               | $ | 1,143 | $ | 1,255
|Electric                  |   | 652   |   | 1,492
|Propane
gas               |   | 131   |   | 186  
|Common                    |   | 55    |   | 36   
|Consolidated              | $ | 1,981 | $ | 2,969





15.
   Subsequent Events

On April 17, 2009, we executed a definitive merger agreement with
Chesapeake Utilities Corporation (Chesapeake) pursuant to which Florida Public
Utilities Company (FPU) will merge with a wholly owned subsidiary of Chesapeake.
 The merger agreement, publicly announced on April 20, 2009, was approved
by the boards of directors of both FPU and Chesapeake and is subject to the
approval of the shareholders of both companies.  Pursuant to the terms of
the merger agreement, FPU shareholders will receive 0.405 shares of Chesapeake
common stock for each share of FPU common stock held by them.  The merger
is intended to qualify as a tax-free reorganization and is subject to various
regulatory approvals.  The merger is expected to close during the fourth
quarter of 2009 assuming all required approvals and other conditions to closing
are satisfied.



On May 5, 2009 the FPSC approved a final natural gas rate increase
of approximately $8.5 million in revenues annually with new
rates beginning on June 4, 2009. Interested parties may protest the
action of the Commission within 21 days after the entry of the Commission order
and if the ruling is protested, a full hearing will be required within
eight months. Revenues may be collected pending possible refund upon final
determination at the full hearing.  These revenues should provide an
increase to the Companys overall profitability for the natural gas segment and
recovery of increased expenditures including depreciation and other expenses
beginning in 2009.



Item
2.     Managements Discussion and Analysis of Financial
Condition and

Results
of Operations



Overview

We have three primary business segments: natural gas, electric and
propane gas. The Florida Public Service Commission (FPSC) regulates the natural
gas and electric segments. The effects of seasonal weather conditions, timing of
rate increases, economic conditions, fluctuations in demand due to the cost of
fuel passed on to customers, and the migration of winter residents and tourists
to Florida during the winter season have a significant impact on income.



Revenues and gross profit increased in the first quarter of 2009
compared to the same period in the prior year due in a large part to the base
rate increases in our electric operations.



Earnings for the first quarter of 2009 were significantly impacted
by the pension plan freeze.  The pension curtailment expensed in the first
quarter of 2009 as a result of the freeze was approximately $2.3 million. The
impact to net income for the effects of these curtailment expenses is
approximately $1.4 million after income taxes or $.24 per share for the quarter
ending March 31, 2009.



Earnings continue to be impacted by the overall economic slow-down
and management expects current conditions to continue through 2009 with an
ongoing impact to our customer growth rates, unit sales and sales expense.
Management continues to look for ways to help offset the negative impacts of the
current economic condition.



Early in the second quarter, we entered into a merger agreement
with Chesapeake Utilities Corporation.  See Note 15, Subsequent Events,
above and Outlook, below for more information about this proposed merger.



Results
of Operations



Revenues
and Gross Profit Summary

Cost recovery revenues are included in revenues. The FPSC allows
cost recovery revenues to directly recover costs of fuel, conservation and
revenue-based taxes in our natural gas and electric segments. Revenues collected
for these costs and expenses have no effect on results of operations and
fluctuations could distort the relationship of revenues between periods. Gross
profit is defined as gross operating revenues less fuel, conservation and
revenue-based taxes that are passed directly through to customers. Because gross
profit eliminates these cost recovery revenues, we believe it provides a more
meaningful basis for evaluating utility revenues. We believe data regarding
units sold and number of customers provides additional information helpful in
comparing periods.  The following summary compares gross profit between
periods and units sold in one thousand Dekatherm (MDth) (gas) and Megawatt Hour
(MWH) (electric).





|                                          |                    |  |        
|----------------------------------------- | ------------------ |  | -------
|Revenues and Gross
Profit                
|(Dollars in thousands)                   
|                                          | Three Months Ended
|                                          | March 31,         
|                                          | 2009               |  | 2008   
|Natural
Gas                               |                    |  |        
|Revenues                                  | $19,711            |  | $22,137
|Cost
of fuel and other pass through costs | 11,063             |  | 14,082 

|                                          |         |  |        
|----------------------------------------- | ------- |  | -------
|Gross
Profit                              | $ 8,648 |  | $ 8,055
|Units sold:
 (MDth)                       | 1,964   |  | 1,861  
|Customers (average
for the period)        | 52,095  |  | 52,166 
|Electric                                  |         |  |        
|Revenues                                  | $22,033 |  | $17,523
|Cost
of fuel and other pass through costs | 17,715  |  | 13,859 
|Gross
Profit                              | $ 4,318 |  | $ 3,664
|Units sold:
(MWH)                         | 165,245 |  | 173,276
|Customers(average
for the period)         | 31,109  |  | 31,221 
|Propane
Gas                               |         |  |        
|Revenues                                  | $4,037  |  | $5,370 
|Cost of
fuel                              | 1,884   |  | 2,971  
|Gross
Profit                              | $2,153  |  | $2,399 
|Units sold:
 (MDth)                       | 166     |  | 170    
|Customers (average
for the period)        | 12,374  |  | 12,666 
|Consolidated                              |         |  |        
|Revenues                                  | $45,781 |  | $45,030
|Cost of
fuel                              | 30,662  |  | 30,912 
|Gross
Profit                              | $15,119 |  | $14,118
|Customers(average
for the period)         | 95,578  |  | 96,053 
|                                          |         |  |        





Three
Months Ended March 31, 2009 Compared with Three Months Ended March 31,
2008.



Revenues
and Gross Profit

Natural
Gas

Natural gas service revenues decreased $2.4 million in the first
quarter of 2009 from the same period in 2008 due to lower fuel and other costs
passed through to customers of $3 million. Colder temperatures in the first
quarter of 2009 compared to the same period last year was the primary reason for
a 5.5% increase in units sold and a 7% increase in gross profit.  Interim
rates awarded in our natural gas rate proceeding beginning March 2009 also
positively impacted our gross profit.



Electric

Electric service revenues increased $4.5 million in the first
quarter of 2009 over the same period in 2008. Higher cost of fuel and other
costs that were passed through to customers accounted for $3.9 million of this
increase.



Gross profit increased by $654,000 or 18% this quarter compared to
the first quarter of 2008 primarily due to the final base rate increase approved
April 2008, compared to interim rates which were in effect in the first quarter
of 2008. Units sold, excluding industrial customers, decreased by 4.8%.
Management believes this decrease is a result of possible conservation measures
taken by our customers due to fuel and base rate increases.  Gross profit
was not materially impacted by reduced consumption as this was forecasted in our
electric rate increase approved April 2008. Rates were set to compensate for the
anticipated reduction in units sold due to significant increases in fuel costs.



Propane
Gas

Propane revenues decreased $1.3 million in the first quarter of
2009 compared to the same period in 2008.  The cost of fuel contributed to
$1.1 million of the revenue decrease, with gross profit decreasing by $246,000.



In spite of colder temperatures units sold declined by 2.4%.
 Management believes this is a result of the downturn in the housing market
and the economy as a whole which had a negative impact on customer usage.



Operating
Expenses

Operating expenses increased $3.0 millionin the first quarter of 2009 as compared to the same period in 2008. The
recent pension plan freeze significantly impacted our operating expenses in the
first quarter of 2009; related curtailment costs associated with our pension
plan freeze increased operating expenses by approximately $2.2 million.  In
addition to the pension curtailment costs, administrative and general expenses
increased $178,000 primarily due to increased pension expenses unrelated to the
plan freezeand auditing fees related to our initial
required audit of internal control over financial reporting under Sarbanes Oxley
section 404.  As we continue to experience the impact of the declining
economy, bad debt expenses increased $220,000 due in a large part to a recent
bankruptcy of a commercial customer in our electric segment.  Maintenance
expenses increased $129,000 as a result of several severe storms and storm
hardening initiatives recently mandated by the FPSC.



Other
Income and Deductions

Merchandise and service revenue increased by $39,000 and expense
increased by $25,000 in the first quarter of 2009 compared to the same period
last year resulting in  increased profitability of $14,000. Although we
continue to experience effects of the slowing economy, sales increased through a
successful coupon program.



Other income increased $44,000 primarily for interest income on a
deposit refund from one of our fuel providers.



Total interest expense decreased by $77,000 in the first quarter
of 2009 compared to the same period last year. This was due primarily to a lower
average balance on our line of credit as a result of increased cash flow from
operations and lower capital expenditures. In addition, the interest rate on our
line of credit, tied to the London Interbank Rate (LIBOR), was lower this
quarter, compared to the first quarter of 2008.  Our line of credit was
also amended in March 2008, lowering the interest rate margin paid on borrowings
by 0.10% or 10 basis points.



Liquidity
and Capital Resources



Cash
Flows

Operating
Activities

Net cash flow provided by operating activities for the three
months ended March 31, 2009 increased by approximately $8.2 million over the
same period in 2008. Over-recovered fuel costs accounted for approximately $3.8
million of the increase in the current years net cash flow. Colder temperatures
along with our electric and natural gas base rate increases also contributed
approximately $2.8 million of the increase.



Investing
Activities

Construction expenditures in the three months ended March 31, 2009
decreased by $1.0 million compared with the same period last year. The decrease
was primarily due to discretionary capital expenditures controls instituted by
the company during the current slow-down in the economy.



Financing
Activities

Short-term borrowing on our line of credit decreased by $8.3
million in the first quarter of 2009 compared to the same period in 2008
primarily as a result of the reduced need for short-term borrowing primarily
because of the increase in funds provided from our operations and lower capital
expenditures.



Capital
Resources

We have a revolving line of credit with Bank of America which
expires July 1, 2010. Prior to March 2008, the available line of credit was $15
million with the ability to increase the limit to a maximum of $20 million upon
30 days notice. In March 2008, we amended our line of credit to allow us, upon
30 days notice, to increase our maximum credit line from $20 million to $26
million and to reduce the interest rate paid on borrowings by 0.10% or 10 basis
points. In April 2008, we increased the currently available line of credit from
$12 million to $15 million. The balance outstanding was $3 million at March 31,
2009. We reserve $1 million of the line of credit to cover potential expenses
for any major storm repairs in our electric segment and an additional $250,000
for a letter of credit insuring propane gas facilities.



The line of credit contains affirmative and negative covenants
that, if violated, would give the bank the right to accelerate the due date of
the loan to be immediately payable. The line of credit covenants with Bank of
America include certain financial ratios, all of which are currently met.



The line of credit, long-term debt and preferred stock as of March
31, 2009 comprised 52% of total debt and equity capitalization.



Historically we have periodically paid off short-term borrowings
under lines of credit using the net proceeds from the sale of long-term debt or
equity securities.  We continue to review our financing options. Any choice
of financing will be predicated on the current needs and dependent on prevailing
market conditions, the impact to our financial covenants and the effect on
income. The timing of additional funding will be dependent on projected
environmental expenditures, building of the South Florida operations facility,
pension contributions, and other capital expenditures.





Our 1942 Indenture of Mortgage and Deed of Trust, which is a
mortgage on all real and personal property, permits the issuance of additional
bonds based upon a calculation of unencumbered net real and personal property.
 At March 31, 2009, such calculation would permit the issuance of
approximately $49.6 million of additional bonds.



On October 14, 2008 we received approval from the FPSC to issue
and sell or exchange an additional amount of $45 million in any
combination of long-term debt, short-term notes and equity securities and/or to
assume liabilities or obligations as guarantor, endorser or surety during
calendar year 2009.



We have $3.5 million in invested funds for payment of future
environmental costs. We expect to use some or all of these funds in 2010 and
2011.



We expect to receive tax refunds of approximately $1.8 million in
early 2009.  The primary reason for this refund is our planned pension
contribution of $4.6 million for plan year 2008 expected to be made in 2009.
 This pension contribution is a deduction for tax purposes in 2008 calendar
year but was not known at the time of estimated tax payments made in calendar
year 2008.



As of March 31, 2009 there was approximately $5.7 million in
receivables from the 2003 sale of our water assets. Final payment of principal
and interest totaling $5.7 million is expected in February 2010.



Capital
Requirements

Portions of our business are seasonal and dependent upon weather
conditions in Florida. This factor affects the sale of electricity and gas and
impacts the cash provided by operations. Construction costs also impact cash
requirements throughout the year.  Cash needs for operations and
construction are met partially through short-term borrowings from our line of
credit.



Capital expenditures are expected to be lower for the remainder of
2009 compared to 2008 by approximately $900,000 due primarily to the Companys
current controls on discretionary capital expenditures during the current
economic slow-down.



We currently do not have any outstanding commitments for capital
expenditures.



Cash requirements will increase significantly in the future due to
environmental cleanup costs, sinking fund payments on long-term debt and pension
contributions. Environmental cleanup is forecast to require payments of $774,000
in 2009, with remaining forecasted payments, which could total approximately
$9.1 million net of investment proceeds, beginning in 2010. Annual long-term
debt sinking fund payments of approximately $1.4 million will continue in 2009
for ten years.



Based on current projections, we will make required contributions
to our defined benefit pension plan of approximately $560,000 and $1.2 million
in 2009 for the 2008 and 2009 plan years respectively. In addition, we expect to
make a voluntary contribution of $4 million for the 2008 plan year. We will
continue in future years to make contributions as required by the Pension
Protection Act funding rules.



We believe that cash from operations, coupled with short-term
borrowings on our line of credit, will be sufficient to satisfy our operating
expenses, normal construction expenditure and dividend payments through 2009.
 However, if we experience significant environmental expenditures in the
next two or three years it is possible we may need to raise additional funds.
There can be no assurance, however, that equity or debt transaction
financing will be available on favorable terms or at all when we make the
decision to proceed with a financing transaction.



Outlook



Pension Plan

In March 2009, the Company's Board of Directors authorized
amendments to the pension plan in an effort to reduce anticipated future pension
expenses. As a result of these amendments, the Company will freeze the pension
plan for all participants effective December 31, 2009. All future benefit
accruals under the plan shall cease, including freezing salary rates at levels
existing in 2009 average compensation as of December 31, 2009. In addition to
the freeze, the reduced early retirement eligibility will be lowered from 30
years to 20 years and two additional service years can be earned by active
participants at the December 31, 2009 average compensation levels for the
purposes of benefit accrual, vesting and retirement eligibility. Beyond December
31, 2011, active participants will continue to accrue service years for the
purposes of vesting and retirement eligibility. The two additional service years
will increase annual pension cost by $800,000 in each of the next two years.



The amendments to the plan have been accounted for in accordance
with SFAS No. 88, Employers' Accounting for Settlements and Curtailments of
Defined Benefit Pension Plans and for Termination Benefits. The pension
liability has been reduced by $5.7 million and we recognized approximately $2.7
million non-cash pretax curtailment loss of which $2.3 million is reflected in
expenses and $400,000 is reflected on the balance sheet in the Company's
consolidated statements.



The freeze will reduce pension expenses beginning in the second
quarter of 2009.With the freeze, pension expense and
pension contribution are expected to be approximately $500,000 and $13 million,
respectively spread over the period 2009 through 2013.



Natural Gas Base Rate Proceeding

We filed a request with the FPSC in the fourth quarter of 2008 for
a base rate increase of approximately $9.9 million annually in our natural gas
segment. This request included recovery of increased expenses and some capital
expenditures since our last rate proceeding in 2004.



On May 5, 2009 the FPSC approved a final natural gas rate increase
of approximately $8.5 million in revenues annually with new
rates beginning June 4, 2009. Interested parties may protest the
action of the Commission within 21 days after the entry of the Commission order
and if the ruling is protested, a full hearing will be required within
eight months. Revenues may be collected pending possible refund upon final
determination at the full hearing.  These revenues should provide an
increase to the Companys overall profitability for the natural gas segment and
recovery of increased expenditures including depreciation and other expenses
beginning in 2009.



Interim rate relief was approved by the FPSC on February 10, 2009
for partial recovery of the increased expenditures.  Interim rates which
should produce additional annual revenues of approximately $1.0 million became
effective on March 12, 2009 and will remain effective until final rates are in
place on June 4, 2009.



Electric Franchise Marianna

The City of Marianna employed a Consultant to review the existing
franchise agreement with the Company that is up for renewal in 2010 and to
review the feasibility of purchasing the portion of our electric system that is
within the city limits. On May 7, 2009 the City of Marianna Commissioners voted
to enter into a new ten year franchise agreement with FPUC with stipulations
that new Interruptible and Time of Use rates become available for certain
customers prior to February 2011 or the franchise could be voided six months
after that date.  The second reading and final passage of the franchise
ordinance is scheduled for June 2009 and the new agreement will be effective
February 1, 2010. Should final approval of the ordinance not be obtained as
anticipated, the City could elect to purchase the Marianna portion of the
distribution system.  This would require the city to pay
severance/reintegration costs, fair market value for the system and the initial
investment in the infrastructure to operate this limited facility.  If the
franchise is not renewed and the City purchases this portion of our electric
system, the Company would have a gain in the year of the acquisition; but,
ongoing financial results would be negatively impacted from the loss of this
operating area within our electric operations.



Storm Preparedness Expenses

Regulators continue to focus on hurricane preparedness and storm
recovery issues for utility companies. Mandated storm preparedness initiatives
impacted our 2008 earnings and continue to impact our operating expenses and
capital expenditures in 2009. The current forecast is not expected to exceed
additional annual expenditures of approximately $260,000. During the 2008 rate
proceeding, these storm preparedness costs were approved and have been included
in the base rates.  It is possible that additional regulation and rules
will be mandated regarding storm related expenditures over the next several
years.



Land Purchase

We purchased land for $3.5 million in July 2007 for a new South
Florida operations facility.  We started preparing plans
for site development of this property but have temporarily placed this
project on hold. We may begin construction in the next one to three
years or sell the property if we determine we can return to the existing
operations location.



Natural Gas Depreciation Study

We filed a depreciation study with the FPSC in the fourth quarter
of 2008 for our natural gas segment. In April 2009, the FPSC approved new
deprecation rates to be effective July 1, 2009. As a result of new depreciation
rates, depreciation expense is expected to increase approximately $200,000
annually beginning July 1, 2009, and we received full recovery for this
increased expense in our base rate increase.



Large Customer in NE Electric Division

A large industrial customer in our northeast electric division
filed for bankruptcy on January 26, 2009.



Although the average monthly gross profit from this customer was
approximately $29,000 in 2008, the average total monthly bill including fuel
costs for this customer was approximately $250,000. This customer has currently
paid all outstanding amounts that were due as of December 31, 2008. The Company
has reserved approximately $200,000 for this potential bad debt in the first
quarter of 2009 awaiting the outcome of this bankruptcy proceeding. If the
courts determine that we have to refund any prior payments, the Company may be
required to write-off a portion of this customers receivables including fuel
cost to our reserve.



Bad Debt Expense

Management expects bad debt expense and related write-offs of
receivables to continue increasing further in 2009 as a result of the current
economic climate and the impact to our customers. We are not able to predict the
impact to our financial results, but we do anticipate an increase to bad debt
expense over 2008 levels.



Energy Efficiency Legislation

Regulators are focusing on several legislative issues involving
the Energy Policy Act of 2005 and the Energy Independence and Security Act of
2007 and related issues.  One major provision is the implementation of a
renewable portfolio standard.   Since the Company is a non-generating
utility with existing ten year all-requirements wholesale energy contracts,
there is significant concern over the additional purchased power cost that may
be required to comply with the standard.  Although this cost may be passed
on to the customers through a rate increase, continued decrease in customer
usage will have an impact on operations.  Smart Grid Technology is
another item being considered that would require significant capital investment
to develop, install and manage.  The Company understands the overall
benefits from the legislation but the burden imposed on a small utility like
ours is of particular concern.  The Company is continuing to communicate
with the FPSC to find solutions that will work for the Company, while
maintaining manageable electric rates for customers.



Covenants

We have historically met all our line of credit and fuel supplier
covenants. As of December 2008 we were in violation of a covenant regarding our
total liabilities to tangible net worth ratio included in one of our supply
agreements with a fuel provider. The violation was caused primarily by a
significant increase in our pension liability.  Failure to meet this
covenant would have required us to provide a one year irrevocable letter of
credit for $3.3 million; however, we received a 30 day time extension to March
27, 2009 to meet this covenant ratio. On March 20, 2009, we calculated the
covenant ratio, as of February 28, 2009 as required, and the supplier was
advised that we were once again in compliance with this covenant. At this time
management does not anticipate any further covenant violations.





Our line of credit contains a similar covenant ratio. Management
is continuing to take steps to comply with all covenants on an ongoing basis,
but there can be no assurance that further deterioration of the market or the
economy will not occur and give rise to a violation.



The Company is in compliance with all covenants on our line of
credit and other fuel supply agreements at March 31, 2009.



Merger

We entered into a definitive merger agreement with Chesapeake
Utilities Corporation (Chesapeake) on April 17, 2009.  The merger was
approved by both companies' boards of directors and is subject to the approval
of both companies shareholders.  Under the merger agreement, holders of
Florida Public Utilities common stock will receive 0.405 shares of Chesapeake
common stock in exchange for each outstanding share of Florida Public Utilities.
 The merger is intended to qualify as a tax-free reorganization and is
subject to various regulatory approvals and closing conditions as set forth in
the merger agreement.  The merger is expected to close during the fourth
quarter of 2009 assuming all approvals are obtained and closing conditions are
satisfied.



Forward-Looking
Statements (Cautionary Statement)

This report contains forward-looking statements including those
relating to the following:

·

Our consideration of equity or debt financing in the next few
years.

·

Cash requirements will increase significantly in the future due to
environmental clean-up costs, sinking fund payments on long-term debt and
pension contributions.

·

Cash from operations, coupled with short-term borrowings on our
line of credit, will be sufficient to satisfy our operating expenses, normal
construction expenditure and dividend payments through 2009.

·

Realization of actual additional revenues from the electric rate
proceeding finalized in May 2008 will occur as expected.

·

Realization of actual additional revenues from the natural gas
rate proceeding finalized in May 2009 will occur as expected.

·

Impact of the overall economic conditions on our earnings,
customer growth rates, unit sales and sales expense.

·

Capital expenditures will be less than originally expected for
2009.

·

Timing and progress of construction on the South Florida
operations facility.

·

Increase in pension contributions to our defined benefit pension
plan in 2009 and beyond.

·

Amortization of pension service costs and pension expense as
expected in future years.

·

Increase in bad debt expense on our customer accounts
receivable.

·

Impact of Energy Efficiency Legislation on our Company and our
operating results.

·

Renewal of the Marianna Franchise.

·

Additional annual expenditures relating to storm preparedness.



These statements involve certain risks and uncertainties. Actual
results may differ materially from what is expressed in such forward-looking
statements. Important factors that could cause actual results to differ
materially from those expressed by the forward-looking statements include, but
are not limited to, those set forth in Risk Factors in our Form 10-K for the
year ended December 31, 2008.



Item
3.

Quantitative
and Qualitative Disclosures about Market Risk



All financial instruments held by us were entered into for
purposes other than for trading.  We have market risk exposure only from
the potential loss in fair value resulting from changes in interest rates. We
have no material exposure relating to commodity prices because under our
regulatory jurisdictions, we are fully compensated for the actual costs of
commodities (natural gas and electricity) used in our operations. Any commodity
price increases for propane gas are normally passed through monthly to propane
gas customers as the fuel charge portion of their rate.



None of our gas or electric contracts are accounted for using the
fair value method of accounting. While some of our contracts meet the definition
of a derivative, we have designated these contracts as "normal purchases" under
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". As
of March 31, 2009, we had not entered into any hedging activities, and we do not
anticipate entering into hedging activities in 2009. Beginning in 2009, we
started pre-buying propane when certain price levels are reached.



We have no exposure to equity risk, as we do not hold any material
equity instruments. Our exposure to interest rate risk is limited to investments
held for environmental costs, the long-term notes receivable from the sale of
our water division and short-term borrowings on the line of credit. The
investments held for environmental costs are short-term fixed income debt
securities whose carrying amounts are not materially different than fair value.
The short-term borrowings were approximately $3 million at the end of March
2009. We do not believe we have material market risk exposure related to these
instruments. The indentures governing our two first mortgage bond series
outstanding contain "make-whole" provisions (pre-payment penalties that charge
for lost interest), which render refinancing impracticable until sometime after
2012.



Item
4T.

Controls
and Procedures



Disclosure
Controls and Procedures

In accordance with Exchange Act Rules 13a-15 and 15d-15, we
carried out an evaluation, under the supervision and with the participation of
management, including our CEO and CFO, of the effectiveness of our disclosure
controls and procedures as of March 31, 2009. Based on evaluation, our CEO
and CFO have concluded that, as of March 31, 2009, our disclosure controls
and procedures were effective.



Changes
in Internal Control over Financial Reporting

There have not been any changes in the Companys internal control
over financial reporting during the fiscal quarter ended March 31, 2009
that have materially affected, or are reasonably likely to materially affect,
the Companys internal control over financial reporting.



PART
II.

OTHER
INFORMATION



Item
1A.

Risk
Factors



The risk factors should be read in conjunction with those included
in our most recent Form 10-K for the year ending December 31, 2008.



Item
6.

Exhibits



2.1

Agreement and Plan of Merger between Florida Public Utilities
Company and Chesapeake Utilities Corporation, a Delaware corporation, and its
wholly owned subsidiary, CPK Pelican, Inc., a Florida corporation. (incorporated
by reference to Exhibit 2.1 to our Form 8-K filed on April 17, 2009).



3.1

Restated Articles of Incorporation (incorporated herein by
reference as Exhibit 3.2 on Form 8-K filed November 10, 2008).



3.2

Restated By-Laws (incorporated herein by reference as 3.1 on Form
8-K filed November 10, 2008).



4.1

Indenture of Mortgage and Deed of Trust of FPU dated as of
September 1, 1942 (incorporated by reference herein to Exhibit 7-A to
Registration No. 2-6087).



4.2

Fourteenth Supplemental Indenture dated September 1, 2001
(incorporated by reference to exhibit 4.2 on our annual report on Form 10-K for
the year ended December 31, 2001).



4.3

Fifteenth Supplemental Indenture dated November 1, 2001
(incorporated by reference to exhibit 4.3 on our annual report on Form 10-K for
the year ended December 31, 2001).



31.1

Certification of Chief Executive Officer (CEO) per Section 302 of
the Sarbanes-Oxley Act of 2002.



31.2

Certification of Chief Financial Officer (CFO) per Section 302 of
the Sarbanes-Oxley Act of 2002.



32

Certification of Principal Executive Officer and Principal
Financial Officer per Section 906 of the Sarbanes-Oxley Act of 2002.







SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.



FLORIDA PUBLIC UTILITIES COMPANY

(Registrant)





Date: May 15, 2009

By: /s/ George M. Bachman

George
M. Bachman

Chief
Financial Officer

(Principal
Accounting Officer)









FLORIDA PUBLIC UTILITIES COMPANY

EXHIBIT INDEX

Item
Number





31.1

Certification of Chief Executive Officer (CEO) per Section 302 of
the Sarbanes-Oxley Act of 2002.



31.2

Certification of Chief Financial Officer (CFO) per Section 302 of
the Sarbanes-Oxley Act of 2002.



32

Certification of Principal Executive Officer and Principal
Financial Officer per Section 906 of the Sarbanes-Oxley Act of 2002.