AEL&P rate hike to skip cruise ships, mine

Utility executives say Juneau benefits from surplus power sales

Posted: Wednesday, May 05, 2010

Alaska Electric Light & Power is proposing an average 20 percent rate increase for residents and businesses in Juneau, but two of the city's biggest individual users aren't being asked to pay more.

The local utility filed a rate increase with the Regulatory Commission of Alaska Monday seeking a 22.1 percent permanent rate increase and 18.5 percent in the interim. The hike will cost Juneau residents about $6 million per year, according to AEL&P.

That includes increases for residential, small and large commercial, manufacturing and street lighting.

What it doesn't include, said AEL&P president Tim McLeod, is power sold to Princess Cruise Lines when its ships dock in Juneau, and power shipped to the Greens Creek Mine on Admiralty Island.

Sales to those companies, even at a lower price than Juneau residents pay, will still go to benefit its Juneau customers, McLeod said.

"Their revenue is going directly to reduce the rate to our other customers," he said.

Juneau residents will pay an average of 11.8 cents per kilowatt-hour when new rates take effect in two weeks. The permanent rate increase will be slightly higher. Princess and Greens Creek pay 10 cents per killowatt hour, McLeod said.

The reaction to the rate increase announced by AEL&P Monday has been swift, said Grace Salazar, public affairs officer for the Regulatory Commission of Alaska.

Even before RCA staff established a comment process for the rate increase request, Juneau residents were going to the commission's complaint form, intended for complaints about service problems, to voice their views.

McLeod said they'd not heard much reaction yet, but said he was not surprised that RCA was.

"I'm sure they'll get some calls," he said.

McLeod said he anticipated "the usual bloggers" would object to the rate increase.

Salazar said rate increases would have to be justified to the commission.

"The bottom line is, the utility has to prove in their filing and perhaps subsequent hearings that they rates are just and reasonable," she said.

Allowable costs include operating expenses, buying fuel, paying taxes, payroll, plus a reasonable profit, she said. Maintenance and upgrade of facilities are allowable costs as well.

McLeod said ongoing expenses are increasing, as well as the costs of developing the new Lake Dorothy Hydroelectric Project.

The new hydro plant, which went online last summer and can supply 20 percent of the city's power needs, was made possible by the ability to sell surplus "interruptible" power to Princess and Greens Creek, McLeod said.

Those two customers can generate their own power if they need to, but prefer to buy hydroelectric if it is available and competitively priced, he said.

"I believe we are probably positioned better than anyone in the state to provide low rates in the long run," McLeod said. "If not for the sales to those two interruptibles, we wouldn't be in that position."

The big problem for an isolated utility such as Juneau, which is not connected to a power grid, is that when demand grows to match and then exceed generation capability, it has no where to turn for more power.

Then, when it develops a new generation, it can't use all the power so much of the capacity sits idle.

That's what happened when the Snettisham Power Project came online decades ago, and AEL&P was unable to make payments on it, McLeod said.

That doesn't allow the utility to optimize its operations, he said.

"The time when power costs the lowest per kilowatt-hour is when you are fully loaded," McLeod said, referring to using all of the power being produced.

"With those interruptible customers, we can optimize the output from the (Lake Dorothy) project for many, many years," he said.

Lake Dorothy will also increase AEL&P's reliability, and help ensure that it won't have to use diesel generators to supplement hydro.

Even with the rate increase, McLeod said Juneau's power rates would be among the lowest in the state. Two other hydro-powered communities, Ketchikan and Sitka, are both lower but are facing the need for big, new expansions and lack Juneau's ability to sell the surplus power.

• Contact reporter Pat Forgey at patrick.forgey@juneauempire.com.



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