Proposed HEA deregulation generates discussion – and questions

Sometime in October, Homer Electric Association members will receive a ballot in their monthly electric bills with a simple question:

Shall Homer Electric Association Inc. be exempt from regulation by the Regulatory Commission of Alaska?

A “yes” vote means a member supports deregulation or what HEA calls local control. A “no” vote means a member wants to keep the current system of regulation by the RCA.

For that to happen, about 15 percent of HEA’s 23,500 members have to return ballots. A simple majority, or about 1,726 members, has to vote yes for deregulation.

RCA is the state commission that regulates public utilities like HEA. It serves as a consumer oversight agency as well as the group which must approve rate schedules. State law allows some utilities to exempt themselves from RCA regulation.

Members will have several meetings with HEA staff to learn about the issue (see box, page 3). HEA also has set up links on its website at www.homerelectric.com to answer questions.

HEA sent out a notice of the upcoming election with August electric bills, and already the issue has generated discussion — and a lot of questions.

One group, Homer Voice for Business, has been talking among its members about the issue, but hasn’t taken a stand for or against, said Jon Faulkner, president of Land’s End Holdings and Land’s End Resort, one of the business-advocacy group’s founding members.

“We don’t have a strong opinion about will it have vast repercussions one way or the other,” Faulkner said. “Getting the questions asked or answered is very important.”

In informal discussions, though, some members have expressed skepticism, Faulkner said.

“The business community just isn’t convinced the absence of a watch-dog agency is going to result in stabilized and lower prices,” he said.

From the environmental side, some HEA members also have questions. Michael O’Meara, who helped found the HEA Members Forum, an ad-hoc group formed several years to question things like proposals for coal-power generation, said he also has concerns about deregulation. The HEA Members Forum has been inactive, but there have been some informal discussions, he said.

“I’m in the process of talking to other people about it and trying to get input,” O’Meara said.

There have been benefits to RCA oversight, O’Meara said. He said it was assistance from RCA that helped push HEA toward accepting net metering, the idea that small renewable-energy systems could sell power back to HEA.

“The RCA has done a lot of good work as far as I’m concerned,” he said.

Like Faulkner, O’Meara said he’s not yet ready to say if he’s for or against deregulation.

“I need a lot of information before I make that kind of statement,” O’Meara said.

Brad Janorschke, HEA general manager, said he supports local control. The nine-member HEA board of directors voted unanimously in favor of deregulation and also to send the vote to the members.

“I think it’s the right move for our members,” Janorschke said. “They have to think it’s the right move.”

In that respect, Janorschke said he supports criticism of exempting HEA from RCA regulation.

“Our goal really is to get members to exercise their right as a member and make an informed vote,” Janorschke said. “If we get an informed vote, we did our job and let the chips fall where they may.”

O’Meara agreed with that.

“I think it’s really important that people do try to educate themselves on this, and when it comes time to vote, they vote with some kind of understanding,” he said.

As part of that discussion, the Homer News has put together a list of questions that members might have.

 

Question: What is the ballot question to be asked of Homer Electric Association members?

Answer: Shall Homer Electric Association Inc. be exempt from regulation by the Regulatory Commission of Alaska?

( ) Yes ( ) No

A “yes” vote means a member supports deregulation or what HEA calls local control. A “no” vote means a member wants to keep the current system of regulation by the RCA.

 

Q: How can HEA be exempt from regulation?

A: Alaska Statute 42.05.712 allows for a utility or cooperative to be exempt from RCA regulation. That statute describes the procedure for a deregulation vote.

 

Q: To pass, how many members must vote “yes?”

A: According to the process outlined in AS 42.05.712, ballots will be sent out to about 23,500 members. Of that group, for the election to be valid, 15 percent or about 3,525 ballots must be received by the deadlines. To pass, a simple majority of those voting must vote yes.

 

Q: If HEA members decide they don’t like deregulation, can they reverse the exemption?

A: Yes. The HEA board of directors can call for a new election. Alternately, members can call for a new election by petition. The statute also sets out the threshold for signatures — about 5,500 for the size of HEA’s membership.

 

Q: How did the nine-member HEA board vote on deregulation?

A: At its April meeting, the board voted unanimously to support the ballot initiative and it also supported local control or deregulation.

 

Q: What does the RCA currently regulate?

A: The RCA oversight of HEA is for what it calls economic regulation. That means it can investigate or must approve electric utility issues including billing and collection requirements, budget, cost of power adjustment, deferred payment arrangements, deposit requirements, disconnection of services, energy rates, estimated billings, late fees and finance charges, line extensions and service connections, make-up bills, meter reading, meter measurements and adjustments, net metering, nonrecurring rates, power cost equalization, pre-pay and smart meters, quality of service, rates and charges, safety standards, service interruptions and simplified rate filing.

 

Q: What doesn’t RCA regulate?

A: Electrical wiring inside the customer’s building, damage claims, including damages to underground lines, right-of-way issues.

 

Q: If regulation goes away for HEA, what role does the RCA still have in oversight of HEA?

A: HEA and other utilities will still be required to have a Certificate of Public Convenience and Necessity or CPCN — the document giving HEA the right to generate and sell electricity to consumers in its service area on the Kenai Peninsula.

 

Q: What about regulating HEA’s arrangements with other utilities?

A: The RCA still has oversight over other utilities, such as pipeline companies, that HEA might interact with, Janorschke said.

 

Q: If deregulation happens, how does that affect off-the-grid energy systems like solar panels, wind energy systems, small-scale hydropower and personal generators?

A: Those systems are not affected provided the consumer does not connect to the HEA power grid.

 

Q: What if an entrepreneur wants to sell energy to HEA or connect to the grid?

A: The current rules would apply. Janorschke said there have to be rules regarding how energy producers connect to the HEA system.

“The biggest driver in interconnection standards is when members come onto the system the other members don’t have to subsidize them and they don’t impact other members on the grid,” Janorschke said.

 

Q: How will deregulation affect my electrical bill?

A: The Regulatory Cost Charge will go away. That costs HEA about $340,000 a year. Members are billed $0.000675 per kilowatt hour or $6.75 per 10,000 kilowatt hours. A typical HEA customer uses 550 kwh a month or 6,600 kwh a year — about $4.55 a customer annually for the Regulatory Cost Charge.

However, other costs are subject to a variety of factors such as natural gas prices.

“Under local control, HEA’s board would have increased freedom to make strategic and timely decisions that could have a positive impact on our members,” HEA says in its fact sheet. “HEA’s board will continue to oversee the rate making process and will have the final say on rates instead of the RCA.”

 

Q: How will deregulation affect oversight of things like power cost adjustments, rate changes and other items under RCA oversight?

A: The HEA board will still have oversight over those matters. One-third of the board is up for election annually by members, and board members answer to members.

 

Q: Beyond the RCA, what other government agencies regulate HEA?

A: HEA still is regulated by the Alaska Department of Environmental Conservation, Occupational Safety and Health Administration and other agencies. DEC enforces environmental regulations and OSHA worker safety rules.

 

Q: How will deregulation affect HEA contracts with the International Brotherhood of Electrical Workers or other unions representing HEA employees?

A: Not at all.

 

Q: What are the benefits of deregulation?

A: According to an HEA fact sheet, deregulation will bring “reduced operational and administrative costs (and) increased predictability for base utility rates.” HEA also notes that about 80 percent of 845 rural electric cooperatives nationwide already are deregulated.

HEA also sees benefits in what it calls “local control.” Janorschke noted that the five-member RCA board is made up of appointees from Anchorage and may be biased against rural cooperatives.

 

Q: Does deregulation lead to more flexibility in managing HEA?

A: Janorschke said it will. For example, some programs HEA would like to consider include community solar and night-time recharging rates the electric vehicle market. Deregulation would make it easier to implement these programs, he said.

 

Q: Why did HEA decide now to ask for regulation exemption?

A: Janorschke said the idea has been under discussion for several years, but HEA wanted to wait until it had made a lot of infrastructure improvements. HEA also has seen its sales drop over the past few years with warmer winters and reduced consumer need from energy conservation. Over the past few years, HEA has already eliminated about 25 positions either through attrition or lay-offs.

“Considering the financial situation we’re in, we might have to do more with less,” Janorschke said.

 

Q: If a member has a complaint, under deregulation, who takes the complaints?

A: Members can complain to HEA staff or to the HEA board. In its fact sheet, HEA said over the past five years, the RCA receives from one to two complaints annually from members. “HEA’s board and management will continue to work with members to resolve issues that arise,” its fact sheet said.

RCA will still take consumer complaints, said Rodney Crum, an RCA public information officer.

“We can try to help them if they have an issue and maybe be a liaison with HEA,” he said. “If there’s an issue, we’ll take their call and voice that up to the HEA leadership. … We’re still a state agency. They’re an Alaska citizen.”

 

Q: What other legal avenues are available?

A: As with RCA regulation, decisions can be appealed to state Superior Court.

Michael Armstrong can be reached at michael.armstrong@homernews.com.

 

 

Homer Electric Association deregulation timeline and meetings

 

Aug. 5-29: notice of deregulation election mailed to HEA members in monthly bills

 

Noon-1 p.m. Sept. 12: Public meeting and luncheon, Seldovia Sea Otter Center, Seldovia

 

5:30-6:30 p.m. Sept. 26: Public meeting and buffet style dinner, Chapman School, Anchor Point

 

5:30-6:30 p.m. Sept. 28: Public meeting with cookies and coffer, Alaska Islands and Ocean Visitor Center

 

Oct. 5-28: Ballots mailed to HEA members in monthly bills. Ballots must be returned or postmarked within 30 days after they are mailed.

 

November: Ballots collected by Regulatory Commission of Alaska

 

December: RCA announces results

 

For more information: Call 907-283-5831 or visit homerelectric.com

 

 

 

 

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