Electric utility braces for own financial crisis

Posted: Monday, April 21, 2008

The avalanche that knocked down Alaska Electric Light & Power Co.'s transmission lines between town and the Snettisham hydroelectric plant is expected to cause a five-fold increase or more in electric rates and big loses for businesses around town. But what about the bottom line of the privately owned electric company responsible for maintaining those lines?

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Chris Miller / The Associated Press
Chris Miller / The Associated Press

"We're in pain also," said AEL&P's director of consumer affairs, Gayle Wood, adding that the company is facing one of its most challenging periods in its 115-year history.

The company is paying $1 million every three days to buy the diesel fuel necessary to produce most of the city's electricity, Woods said. Though that cost will likely be passed on to consumers, Wood said AEL&P has plenty of other problems it has to pay for out of its pocket.

Wood pointed out that early estimates for repairing the transmissions towers destroyed and damaged in the avalanche are $5 million to $10 million. Large amounts of paid overtime and new maintenance costs associated with running the company's diesel generators more frequently will also hurt AEL&P's bottom line, Wood said.

"We're going to have a kind of dismal financial year," Wood said, adding that she did not know if the company would make a profit this year.

Wood declined to offer specifics about AEL&P's profits last year, as did AEL&P's general manager, Tim McLeod.

McLeod said it was "inappropriate" to talk about the company's profits because they weren't relevant to the situation at hand. He said AEL&P was a "healthy company" whose finances were tightly regulated, and the company would not be profiting from the avalanche.

McLeod added the cost of the fuel being used to make electricity should be paid for those using the electricity and he didn't want the public to think that paying for that cost should solely be AEL&P's responsibility.

"It would simply break the company and what good would that do for anyone?" McLeod asked.

Though McLeod declined to disclose AEL&P's past profits, he said he was willing to give the city sales tax information it needed, should it decide to alter the city's tax on electricity.

AEL&P's largest individual shareholder, Juneau resident Bill Corbus, deferred questions about the company to its staff. "All I can say is I'm carefully monitoring it," Corbus said.

A partial picture of AEL&P's past finances is available through the company's disclosures to regulatory agencies. AEL&P has to file periodic financial information with the Regulatory Commission of Alaska as well as the Federal Energy Regulatory Commission.

In 2005, when AEL&P was seeking a rate increase, it had to submit detailed financial information about the previous year's revenues and expenses. The information shows that in 2004, AEL&P pulled in $25.8 million in revenues and had to pay $21.6 million in costs, leaving nearly $4.2 million in profit.

That's enough money, according to Woods' calculations, to pay for less than two weeks worth of fuel. AEL&P estimates it could take three months to fix the transmission lines.

University of Southeast Alaska professor of economics, Brittney Cioni, said it was fair to ask why the company hadn't put some of its previous profits into a rainy day fund as a form of self-insurance, given that there was a known risk that its towers could be damaged in an avalanche.

"If they had known that there was this risk, why wasn't something done proactively?" Cioni asked.

McLeod said it was impossible for the company to find an insurance company willing to cover its transmission lines. And any self-insurance costs would have been passed on to the customers, McLeod said, and he didn't think the idea would have been approved by the RCA.

He added that AEL&P's past decisions had been motivated, in part, by one factor: "Everything we do, every decision we make, we consider the best interest of our customers," McLeod said.

• Contact reporter Alan Suderman at 523-2268 or e-mail alan.suderman@juneauempire.com.

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