Palin's rate cut plan likely worth less in Juneau

Posted: Thursday, May 22, 2008

Gov. Sarah Palin's promise of a 60 percent cut in electric bills will likely amount to far less than was originally promised for many Alaskans. For residents of rural Alaska, Fairbanks and especially Juneau, the promised savings may be barely half of what was promised.

Many of the details in Palin's plan for utilities are still being worked out, including both the 60 percent cut and a conservation incentive that would pay utilities for conservation that would be implemented, said Karsten Rodvik, spokesman for the Alaska Energy Authority, which is helping develop the plan. Authority Executive Director Steven Haagensen also is Palin's energy adviser.

Rep. Beth Kerttula, D-Juneau, said that while the governor's proposal might have some problems, it was only a proposal. It will be considered by the Alaska Legislature this summer and can be amended or even rejected by the Legislature, she said.

At a press conference in Anchorage last week, Palin promised that her program would cut electric bills by 60 percent.

Written information provided by her office and interviews with state officials indicate that instead of providing 60 percent cuts to future bills, it would provide cash to utilities equivalent to 60 percent of their power sales in 2007.

That means the discount won't be based on 2008 bills, but what 2007 bills would have been, Rodvik said.

In 2007, Juneau residents spent $30 million on power. Preliminary Alaska Electric Light & Power Co. estimates were that the switch to diesel would cost an additional $25 million this year. Under Palin's plan, that would work out to a 33 percent electric bill savings for Juneau residents, if other factors remain the same.

AEL&P spokesman Scott Willis said even a lesser amount would be good news for Juneau residents.

"Every little bit helps," he said.

Other communities where rates have increased or usage has grown in the last year would get reduced benefits as well, including Fairbanks and most rural communities on diesel generation.

During Palin's announcement of her energy cost relief plan, questions were raised but not answered about whether private, investor-owned utilities such as AEL&P would be included in the rate relief plan.

Rodvik said it would apply to all utilities.

"A utility is a utility," he said.

Willis said he was happy to hear that, given the confusion over what was said during the plan's announcement.

"This is the first that I've heard that IOUs would be included," he said. "We were worried."

The only electric consumers not affected are those who do not purchase electricity from a utility, Rodvik said. An example of that would be the Red Dog Mine near Kotzebue, which generates its own power.

It is not clear how the rate cut program would affect Greens Creek Mine or Princess Cruises, which in 2007 bought surplus power from AEL&P.

Both were "interruptible" customers, meaning they paid a lower rate but were cut off when water at Snettisham ran low last fall.

One part of the Palin plan might work in Juneau's favor, however.

She proposed a program to encourage conservation by providing a 1 percent "kicker" which would be granted to utilities for each 1 percent of conservation reduction shown from 2007 to 2008.

In recent years, Juneau has had a steady increase in electricity consumption, but with the extensive conservation efforts beginning with the April 16 avalanches, Juneau might be poised to show a remarkable decline in consumption, Willis said.

"We're going to be winners on that," he said, because of the extraordinary conservation efforts for a two- to three-month period.

Rodvik said conservation of any type, even because Juneau couldn't get its abundant hydroelectric power to town, would count.

"Conservation is conservation," he said.

Such a method of measuring conservation would also seem to favor declining, mostly rural communities over growing ones, mostly in Southcentral, Rodvik acknowledged.

• Contact reporter Pat Forgey at 523-2250 or e-mail

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