Issues discussed in Homer Electric Association’s annual members meeting, held May 4 at Kenai Central High School, include what the electric cooperative is doing to reduce the electric bills of its members, a proposal to withdraw from regulation by the Regulatory Commission of Alaska — a state utilities oversight agency — and a possible settlement of HEA’s dispute with six other utilities over the cost of transmitting electricity over HEA’s powerlines.
Power costs and gas supply
Ninety percent of HEA’s power is generated by natural gas, according to a presentation given Wednesday by HEA general manager Brad Janorschke. Natural gas prices drive about “25 to 30 percent of the bill you pay HEA every month,” Janorschke said.
HEA’s most recent long-term gas supply deal, with gas producer Furie Operating Alaska, went into effect at the beginning of April and will last until 2018, with an optional extension until 2020.
“The good news, it’s lower-cost than what we were paying with our previous contract,” Janorschke said, referring to HEA’s previous supply contract with Hilcorp.
Nonetheless, Janorschke said the new deal, and the increased competition between gas producers in Cook Inlet was not driving down the price of natural gas so much as it was slowing the rise in cost. Since 2013, the cost of gas has been an increasingly large part of the average residential electrical bill.
Janorschke said that although previous concerns about the availability of gas have become less serious, gas supply contracts generally have become more expensive. He said that recent discussions about fuel supply have focused on “the cost of fuel, how we’ll use it, and any opportunities to reduce this piece of your bill.”
“We’ve been making improvements to our generation so we use the fuel we do burn more efficiently, and we’ve been buying power whenever we can buy it for cheaper than we produce it, and we’ve been selling power when we can do so, because selling power actually reduces these costs,” he said.
Money spent on power from other utilities was the largest increase reported in HEA’s expenses between 2014 and 2015 — jumping from $2.6 million to $4.2 million. In response to an audience question, HEA finance director Emily Hutchison said the increase was partially a side effect of maintenance at the Bradley Lake hydroelectric plant. Energy from HEA’s 12 percent share of Bradley Lake’s output is included in the budget as purchased power. When Bradley Lake was recently drawn down to allow access to a silted-up tunnel opening, its output increased from the increased flow — with a resulting increase in the budget item.
Deregulation
In April, the HEA Board of Directors voted to investigate the possibility of exempting the cooperative from the authority of the Regulatory Commission of Alaska, a state oversight group that Janorschke described as “politically appointed, Anchorage-based regulators that really have the final say over the decisions of the board on issues that affect our members.”
Alaska statute allows public utilities to withdraw from the RCA by a majority vote of their membership. HEA’s deregulation election is planned to start this August or September, when HEA will formally notify the regulatory commission and its members. Ballots will be mailed in October, and collected by the RCA in November. Results will be announced in December.
Resolution of wheeling cost dispute
One of HEA’s current engagements with the RCA is a case in which it seeks compensation for what it claims are costs it incurs transmitting electricity for other utilities from Bradley Lake. HEA’s proposal to the RCA to bill the six other utilities for those costs has led to appeals cases in the Alaska superior and supreme courts.
At last week’s annual meeting, Janorschke announced that HEA had been negotiating with the other utilities and had reached a tentative settlement.
“What HEA has done is sat down with the other utilities and mediated a proposed solution,” Janorschke said. “It’s one that my board doesn’t like, I don’t like, but neither do any of the other parties. Because we’re not collecting everything we want to collect, and they’re paying way more than they thought they should pay.”
Janorschke declined to provide more information on the settlement because it is not yet final.
“We’ll know more by the end of this month as we work through this process and get the attorneys involved and work out the contract language,” Janorschke said. “Pending board approval of all the parties — the six parties on the Railbelt — we will have a path forward to be collecting revenue to transmit Bradley Lake power that belongs to utilities from Seward to Fairbanks off of our system for a fee.”
Election
The meeting concluded with the results of the yearly HEA board of directors election, during which three seats of the nine-member group were open. This year the three incumbent HEA directors who were up for re-election — Dan Chay of Kenai, Ed Oberts of Soldotna, and Bill Fry of Homer — were all re-elected. Only Fry had run against an opponent, Stephen Pollack of Homer.
Ben Boettger is a reporter for the Peninsula Clarion. He can be reached at ben.boettger@peninsulaclarion.com.
