AEL&P pleads its case to RCA

Posted: Wednesday, July 07, 2010

Alaska Electric Light & Power officials told the Regulatory Commission of Alaska that its current profit margin was so low as to be "confiscatory," and urged commissioners to grant their request to increase bills 18.5 percent on an interim basis, and later to 22.1 percent on a permanent basis.

A failure to grant an adequate return on investment would be an unconstitutional "taking" of AEL&P's private property for public use, the company said in a written brief filed before the hearing in Anchorage.

AEL&P's Connie Hulbert, vice-president and treasurer, said the RCA should not have denied the Juneau utility's requested interim increase last month, and that the commission may have misunderstood the utility's rate request and how its return on equity was calculated.

While it appeared AEL&P made more than $4 million last year, its returns look lower measured in other ways, Hulbert said.

Hulbert said the RCA routinely grants emergency Cost of Power Adjustments, such as for diesel during the Snettisham avalanche, and said AEL&P's rate adjustment should be no different.

Customers don't differentiate between an increase of 19 percent for a base rate and a COPA, she said.

Bill Burk of the Juneau People's Power Project, listening in to the hearing at a City Hall teleconference, called Hulbert's testimony "a lot of double talk."

He said he doubted the presentation would fully persuade the RCA.

"I don't think AEL&P proved their case for the high interim rate," Burk said.

"I think they're going to give one, but it will be far below what they were asking," he said.

The RCA made an unusual denial of AEL&P's interim rate increase in June after widespread public opposition, but gave AEL&P the opportunity to make its case at Tuesday's public hearing.

Much of AEL&P's presentation was focused on addressing commission questions about the Lake Dorothy Hydroelectric Project, which went online last summer adding 20 percent to AEL&P's power production capability.

AEL&P executives strongly defended Lake Dorothy, and said the project south of Taku Inlet would provide big savings to Juneau for decades, even if it costs more initially.

"Over the long run, hydro produces lower rates," said Scott Willis, AEL&P's power engineer.

"Lake Dorothy will provide benefits for many, many years into the future," he said.

One of the benefits of hydro power is that precipitation provides the energy source, and the cost does not increase.

Lake Dorothy provides surplus power now, but is an alternate power source for the city. Had it been available during the Snettisham avalanches, it would have saved ratepayers $5 million worth of diesel, he said.

The Snettisham avalanches occurred during two successive winters of deep snow, knocking out power lines for weeks and causing electric rates to increase as much as five fold while lines were repaired and the city was powered by diesel.

Willis also defended sales of power to Hecla's Greens Creek Mine, for now the largest consumer of Lake Dorothy power.

Having the Greens Creek Mine available to purchase the surplus Lake Dorothy Power will help pay for the cost of developing it, he said, a cost that would have otherwise been the responsibility of local ratepayers.

In fact, Willis said, without Greens Creek they wouldn't have been able to afford to build Lake Dorothy. Instead, as demand grew, they'd have to burn diesel in low-water years, and then in average years.

"If we had not built Lake Dorothy, and tried to meet future load growth, we'd have to add diesel generation to our system," Willis said.

Lake Dorothy is a prime hydroelectric site, developed with a lake tap instead of a dam to minimize environmental impacts. And it is just three miles from existing transmission lines.

Southeast Alaska has a great deal of hydroelectric potential, but many likely sites are too far from population centers or transmission lines to be economical.

"The fact that we had this project in our backyard is really amazing," Willis said.

AEL&P President Tim McLeod acknowledged that the project expected to cost about $50 million wound up costing $70 million, but said it was still cheaper than Snettisham on a per-kilowatt basis, and cheaper than most other projects as well.

"It came in very reasonable, especially in comparison with the Snettisham Project," he said.

Had AEL&P known it was going to cost $70 million, it would still have built it, he said. "It's a huge benefit to our customers," McLeod said.

AEL&P's last rate increase was five years ago, Hulbert said.

"In that time we've experienced increased costs and also brought on a new hydro project," she said.

The RCA has promised a decision on interim rates by July 16. Permanent rates will be decided next summer.

AEL&P has threatened legal action if the rates are not satisfactory.

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



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