AEL&P: Proposed rate hike an interim step

Posted: Tuesday, June 15, 2010

Alaska Electric Light & Power is asking for approval for a rate increase that will boost average power bills 22 percent, but says it deserves more - perhaps much more.

AEL&P officials said that while they intend to ask for the additional increase later, they won't be doing so as part of the current rate hike.

The Regulatory Commission of Alaska is holding a hearing on the increase tonight at 6 p.m. at Centennial Hall.

The news of the additional rate increase sought by AEL&P was buried in voluminous filings the company made with the RCA supporting the current increase request. The company could have asked for a 30 percent increase, if it wanted the full amount.

The utility is calling the second permanent rate increase it is seeking a "revenue requirement," and anything less than that a "deficiency."

In a filing with the RCA seeking the 22 percent increase, AEL&P executives said they'd forgo $3.2 million they're entitled to so as to benefit Juneau ratepayers.

"Recovering the entire deficiency would cause undue hardship to AEL&P's customers," said Connie Hulbert, corporate Secretary and Treasurer, in an affidavit filed with the RCA supporting the rate increase.

"Requesting only part of the calculated increase at this time will help ease into the required rate increase over time," she said in the filing.

Later, AEL&P intends to ask the commission for another increase to bring the amount they're receiving from customers in line with a study conducted.

In support of the rate increase, the company developed a "revenue requirements study," calculating what AEL&P needs based on how much it thinks it deserves.

In accompanying supporting data, AEL&P reported that in the base year of 2009 it brought in revenues of $27.3 million from firm power customers, while its revenue requirements study showed it should have received $43.1 million.

The revenue deficiency, it said, was $15.8 million, though $3.4 million of that was made up by selling non-firm excess power to Greens Creek Mine.

After the rate increase, AEL&P said it hopes to bring in an additional $5.9 million from the higher rates. Also, Greens Creek will likely be able to purchase an additional $3.1 million in surplus power thanks to the Lake Dorothy Hydroelectric Project being online.

The remaining amount is the $3.2 million AEL&P said it would forgo so as to not overburden ratepayers all at once.

AEL&P President Tim McLeod said he did not know when the additional rate increase might be sought.

"We haven't determined that yet, and it is going to depend on a lot of things," he said.

If the utility gets additional unanticipated revenue, the next rate increase could be delayed. That could come if more electricity than anticipated is sold, such as if an increase in the price of heating fuel leads more people to switch to electric heat.

McLeod said in an affidavit supporting the rate increase it is necessary for AEL&P to remain financially strong, and accomplish its corporate goals of providing safe and reliable power that is among the cheapest in Alaska.

"In the absence of the rate increase we have requested, the utility will be unable to meet one key part of these goals: maintaining financial integrity," he said.

A financially strong company will be able to borrow money readily and cheaply in order to do required system upgrades and develop new power sources, McLeod said.

"Prompt approval of AELP's requested rate increase will help improve AELP's financial indicators and allow AELP to access low-cost capital when necessary, which, in the long run, will help stabilize AELP's electric rates," McLeod said in an affidavit supporting the increase.

The rate increase will also allow AEL&P to build a cash reserve. McLeod said the company was criticized for not having a bigger cash reserve when responding to avalanches the last few years that cut power to Juneau.

• Contact reporter Pat Forgey at 523-2250 or patrick.forgey@juneauempire.com.



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