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Both sides weigh in on RCA utility rate decision

Posted: September 6, 2011 - 11:02pm  |  Updated: September 7, 2011 - 6:11am

The Regulatory Commission of Alaska granted Alaska Electric Light & Power’s 24 percent permanent increase to the rate it charges consumers for energy components Friday night.

“We were pleased that the RCA saw fit to award us the full 24 percent we requested,” said AEL&P Vice President and Generation Engineer Scott Willis.

“The rates are based on actual costs and getting this increase will allow us to have the revenue so we can continue to provide power to the community of Juneau,” he said, explaining this increase will allow them to perform maintenance, replace aging equipment and buy new equipment as necessary, as well as pay for the Lake Dorothy project.

Bill Burk of Juneau People’s Power Project, which argued against the increase in the hearings, said the decision was a disappointment. He said JPPP knew an increase was likely but thought it might only be as high as 14 percent.

Willis said the increase amount was driven by both the costs of the Lake Dorothy hydroelectric project and regular inflation over the last during the five years since the last rate increase.

“We were hoping it would be less and we feel that AEL&P are doing great injustice to the firm ratepayers of Juneau,” said Burk.

“That’s a large increase that’s going to add up in the winter and people on limited incomes are going to have trouble paying that 24 percent,” he said.

Willis agreed people in those situations can have trouble paying bills and recommends changing electrical use habits or other changes inside the homes to help with the costs.

He also said this increase shouldn’t affect most customers too much. He said that average residential customer uses 750 kilowatt-hours per month. He said this translates to $13 more per month under the interim increase that’s been in place since last summer and the permanent increase would add an additional $2 or $3 to that.

Burk said an original reason AEL&P requested 24 percent was that it guarantees a 13 percent return on equity to the shareholders. He said this comes from the original tariff proposal the utility filed with RCA.

Willis said this isn’t true. He said the maximum allowable return on equity is now 12 7/8 percent, which is lower than the previously allowed amount of 13.5 percent. He said this also doesn’t guarantee this amount, or any amount, to shareholders. He said AEL&P typically gives around 15 percent of that return to shareholders while the rest goes back into the company.

“Any utility needs to cover their costs and make another extra profit to invest back into the system,” he said,

Willis said another misconception is this increase will greatly increase the city’s power charges. He said the city paid around $1.6 million annually before the interim increase, and this will raise it around $400,000. He said, however, that because Lake Dorothy has been developed, the utility will pay around the same amount as the increase back to the city through property taxes.

• Contact reporter Jonathan Grass at 523-2276 or at jonathan.grass@juneauempire.com.

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