State OKs 6 percent electric hike
The Regulatory Commission of Alaska on Monday granted local utility Alaska Power Company’s request for a short-term 6 percent power rate increase pending an investigation into whether the company’s request for a permanent, 18 percent increase is warranted.
The 6 percent increase came into effect Tuesday and raises residential and small commercial rates from 13.06 cents per kilowatt-hour to 13.84 cents per kilowatt-hour in Haines. It also raises the monthly base fee, which all customers pay on top of their usage fee, from $12.46 to $13.21.
According to utility officials, the 6 percent increase would add $8.55 to the monthly energy bill of a four-person family in Haines consuming roughly 1,000 kilowatt hours.
In addition to granting the interim rate increase, the RCA suspended a decision on the permanent 18.12 percent increase the company is seeking. An investigation conducted by a commission panel will further examine APC’s application and reasoning for the request.
The investigation involves a hearing process, an invitation for the Alaska attorney general to join, public involvement and expert testimony to determine what a fair rate increase might be.
Alaska Power Company is the energy subsidiary of Alaska Power and Telephone, which also provides Internet and phone service to Haines residents.
APT President Bob Grimm reiterated in an interview Tuesday the reason for the rate increase request: “The loads (or demand) are declining rather than growing, so we sell less of our product, yet it takes the same amount of investment and manpower to provide that product, so the rate on the product has to go up.”
Factors leading demand to decrease or remain flat include a lack of economic development, lack of jobs and promotion of more energy-efficient products like LED lights, he said.
During the public comment period on APC’s proposal, 34 people or organizations – mostly from Haines – voiced opposition to the increase.
In addition to individual residents, the Municipality of Skagway, Thorne Bay City Council, Sheldon Museum Board of Directors and Hammer Museum Board of Directors submitted comments urging the RCA to deny APC’s request.
“Skagway’s economy has grown and our population continues to grow, therefore power use in the community should also be increasing. If power sales are growing in Skagway, why should Skagway citizens pay for the costs associated with decreasing use in other areas?” asked Skagway Mayor Mark Schaufer.
In her submitted comments, Haines Borough mayor Stephanie Scott claimed Haines will continue to grow and provide the necessary demand base, making a rate increase unnecessary. Scott pointed to construction of the Soboleff-McRae Veterans Village, the possibility of a wood pellet production facility and other potential developments as evidence for a sufficient demand.
“The rate increase may very well stymie development planned but not yet financed, and it will, of course, promote even more vigorous curtailment of use through energy efficiency technologies,” Scott said.
Scott clarified she isn’t opposing APC’s request outright, but would like a closer look at the individual communities involved in the rate increase request, which, in addition to Haines and Skagway, includes Prince of Wales Island, Tok, Tetlin and several Interior villages.
“In particular, we request an analysis of the power usage and costs for the Upper Lynn Canal service area,” she said.
Haines residents Scott Carey and Heidi Robichaud submitted a joint comment opposing the request and questioning why citizens or municipalities who invest in energy-saving technologies should be punished with increased rates.
“(Grimm) also cites conservation measures such as LED bulbs as contributing to decreased revenues. Rate payers who choose to do so are attempting, at great expense to do their part in not adding to their carbon footprint and lowering their monthly/long-term costs at the same time. Again, these rate payers should not be forced to pay more for using less,” Carey and Robichaud wrote.
Grimm responded that the request is not an attempt to take advantage of customers or penalize those who are more conservation-minded.
“We aren’t trying to punish anybody. We just have to maintain a certain revenue level to be able to provide service. We don’t think we are punishing anybody; we’re just stating the facts,” Grimm said.
APC says it is unable to cut expenses to save money, leaving rate increases as its only option to remain solvent.
Haines resident Cynthia Jones doesn’t buy that argument. “The Alaska Power Company must review its own business plan and reduce its own expenses to compensate for less demand as opposed to coming to the consumer to pay extra,” Jones said.
Grimm responded that the company has been cutting costs for the past three years and there’s nothing left to get rid of.
The 6 percent interim rate is refundable, which means if the commission determines, for example, that APC can only implement a 4 percent increase, it would have to refund the revenue collected from the 2 percent difference.
APC also has to decide by Jan. 27 whether it will place revenue collected from the interim increase into a third-party, interest-bearing holding account or pay 10.5 percent interest on the revenue.
Grimm said the company has always chosen the 10.5 percent interest option. “It’s still under consideration. No decision has been made. But I can tell you in the past we have always gone with the option that had us paying the 10.5 percent increase. We haven’t utilized the escrow option to the best of my knowledge,” he said.
The refundable nature of the revenue garnered from the interim rate is one of the primary reasons the RCA approved the short-term increase. “If we later approve some or all of the proposed rate increase, the utility would not be able to retroactively collect any increased rates, and may suffer irreparable harm. Conversely, if we approve interim rates on a refundable basis, the customers will be protected because the utilities will refund any excess amounts to their customers,” the commission wrote in its order.
Mayor Scott said she is investigating whether the borough should file a petition to intervene, which allows the municipality to participate in the investigation process. Scott said she is consulting with the manager and borough attorney.
“It’s not cheap. There is going to be an expense in dealing with this,” Scott said.
The deadline to file a petition to intervene is Feb. 12.
The RCA has set a deadline of July 13 for an update on the investigation, though the commission has until Feb. 20, 2015, to issue a final order.
Rod Crum, the RCA’s chief of consumer protection and information section, said he couldn’t speculate on how long it could take to make a decision.
“It’s been suspended for six months which means they are going to continue to look into it, and then after that day they could decide to make a decision or extend it even further,” Crum said.