HEA prices dropped at beginning of 2016

Homer Electric Association decreased its rates starting Jan. 1, while an unresolved proposal that may raise them remains suspended until July.

The cost of power adjustment price that HEA members pay for a kilowatt-hour of electricity was about 7 cents. On Jan. 1 it dropped to about 6 cents. For a member using 550 kilowatt hours a month (the average, according to an HEA press release), the decrease will save around $6.88 each month.

The cost of power adjustment is the rate the Regulatory Commission of Alaska — the state’s supervising body for public utilities — allows HEA to charge members in order to earn back the cost of generating and transmitting electricity. The cost of power is adjusted four times a year based on the operation of HEA’s gas-fired generating plants in Nikiski and Soldotna, and near Bernice Lake.

“If we’re operating efficiently and getting the most efficient use of the three generation plants, we’ll see a drop in the (cost of power),” said HEA’s Director of Member Relations Joe Gallagher. “There’s also a factor of how much fuel we use. If we use a little less than we used in the previous quarter, that’s reflected, too.”

Gallagher said the decrease is unrelated to HEA’s upcoming change in gas suppliers. The current gas supply contract it has with Hilcorp Alaska LLC will expire in March 2016, to be replaced in April with a new supply from Furie Operating Alaska’s Kitchen Lights unit, which HEA will buy at $6.50 per thousand cubic feet. As of Sept. 2015, HEA paid $7.42 per thousand cubic feet for Hilcorp gas. However, the future supplier change does not affect present costs, Gallagher said.

“The (cost of power adjustment) is a bit of a catch-up from the previous quarter, and a projection of what we anticipate is going to happen in the next quarter,” Gallagher said. “Basically, we just had a good last quarter, and that’s pretty much the reason we saw that decrease.”

Gallagher said the Nikiski plant made a large contribution to the utility’s efficiency.

“Our Nikiski plant is our most efficient plant,” Gallagher said. “When we’re running that, we basically get the best bang for the buck. Sometimes there’s maintenance. There might be an unscheduled outage that could come into play, and that would have an impact. … We were able to run the plant pretty regularly, and that was a part of the efficient use of our operations.”

HEA owns a 12-percent share in a fourth generating plant, the Bradley Lake Hydroelectric facility. Power generated by the other utilities sharing the Bradley Lake plant is transmitted to their customers in the north over HEA-owned power lines. 

HEA officials believe the company is under-compensated for this transmission, losing about $1 million in unrecovered costs, according to an Oct. 30 request HEA submitted to the Regulatory Commission.

That request was for the Regulatory Commission to allow HEA to recover these costs in one of two ways: by charging the utilities that use its transmission lines for Bradley Lake power, or by raising HEA rates to recover the expense from its retail customers, resulting in a 3.25 percent cost increase that would have gone into effect on Jan. 1. 

The filing advocated for the first alternative, stating that the second would “amount to an unreasonable subsidy” of other utilities by HEA users.

Gallagher said that although HEA is continuing to lose money in the Bradley Lake arrangement, HEA users will not see the effect in upcoming cost of power adjustments because the Regulatory Commission suspended judgment on HEA’s proposal until July 2016. 

The Regulatory Commission will have a ruling on the matter before Jan. 27, 2017.

Ben Boettger is a reporter for the Peninsula Clarion.

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