Homer Alaska - Business

Homer Electric Association is proposing to bump up rates at the beginning of next month.

If the Regulatory Commission of Alaska approves the rates increases, members will see a 16.54 percent jump from the current 13.720 cents charged per kilowatt hour to 15.989 cents beginning April 1.

According to HEA, a member using 630 kWH per month would be billed an additional $14.

The rate increase reflects a jump in both HEA's base rate by 6 percent and its wholesale power cost rate adjustment by 11 percent.

HEA spokesman Joe Gallagher said the latter is adjusted frequently and reflects the fluctuating costs of natural gas, the main source of fuel for power production in Southcentral.

Also contributing to the spike, Gallagher said, was that HEA's Nikiski generator was offline from December through mid-February for maintenance.

HEA buys 100 percent of its power from Anchorage-based Chugach Electric Association; however, power produced in Nikiski is sold to CEA for credit.

"When the plant is running we're selling power to Chugach Electric and we get credit, so it offsets the power costs," Gallagher said, "But we didn't have those credits."

The plant is currently back online and producing power, according to Gallagher.

The base rate, however, has not been adjusted since April of 2008, and reflects a more permanent change as a result of rising operating expenses, investment in capital projects and decreases in demand from industrial users.

Gallagher said the closing of the Agrium plant in 2008 and the BP Exploration Alaska gas-to-liquids research facility this past fall have both driven up base rates.

"The loss of the large users does have an impact," Gallagher said. "Costs need to be covered and the more you can spread costs around, the better it is for the rates."

The base rate changes do not reflect the costs of a proposed plan to install a steam turbine that would capture lost heat at the Nikiski plant and potentially install two new natural gas-fired turbines in Soldotna, Gallagher said.

Mark Foster, an independent consultant based in Anchorage with a history of working on energy issues in the Railbelt, said the bright side of the rate increase is that it showed the value of the Nikiski plant to HEA ratepayers.

He warned, however, that HEA will need to look for more industrial clients if it hopes to keep its base rates low in the future.

"What additional large customers can you attract to spread out fixed costs?" Foster said.

He added that a flip side is that if rates continue to climb in the future it will make conservation more popular and likely result in a further decrease to the power the company can sell.

Dante Petri is a reporter for the Peninsula Clarion.