Power companies lock horns

MAT-SU -- More than a year after its general rate case was filed, Chugach Electric Association is now in hearings before the Regulatory Commission of Alaska seeking a rate increase that averages 5.7 percent. Matanuska Electric Association and Homer Electric Association, both utilities that purchase wholesale power from CEA, have joined the case, seeking to block the increase and, in MEA's case, requesting a decrease instead.

CEA spokesperson Patti Bogan said Friday the utility originally requested an average increase of 6.5 percent. Preliminary discussions with the utility regulating group whittled that increase down some -- HEA was originally proposed to receive a 7-percent hike, but now a 6.6 percent hike is proposed instead. Similarly, Chugach originally requested a 6-percent increase for MEA, but that increase is now 5.6 percent.

If approved, Bogan said the rate increase would be the first in many years. She said the last general rate case filed by the company took place in 1987, and said Chugach's last significant rate increase took place at that time as well. Last fall, when the case went before the Regulatroy Commission, Chugach was granted a 3.97-percent interim rate increase.

But that's not to say Chugach customers haven't had higher bills since 1987. While base rates have remained stable since that time, Bogan said, other cost factors, such as fuel costs and state taxes, have increased.

Bogan said recent capital improvement projects, such as an overhaul of two of its energy-generating units at their Beluga power plant, have been costly for the company.

"When Chugach took into consideration everything that we had been doing recently," Bogan said, "our rates were inadequate. So we filed rate revisions to allow us to earn revenues to meet our obligations … We're looking to the future of all of our members when we repair our units, because we want to make them last. We're not incurring costs like it would be to build a whole new generator."

Most of Chugach's power-generating equipement, Bogan said, is no longer new. An Eklutna plant dates back to 1955, but most of the units used today were installed between the late 1960s and early 1980s. The two Beluga units -- Chugach's biggest and most-used power generators -- were revamped between 2000 and 2001, Bogan said. They were first installed in 1975 and 1978.

"We have a lot of equipment out there, and most of it was installed a long time ago," Bogan said. "Repairing a generator is a much more effective use of our resources than purchasing a new one."

But MEA and HEA are both arguing that, instead of using captial improvments as an excuse to raise rates, Chugach should be factoring those costs into their regular budget cycle.

"… CEA's recent rate filing shows no justification for the additional margins requested other than to correct CEAs own undisciplined and imprudent management decisions (particularly those involving capital projects)," said MEA's chief financial officer, Don Zoerb, in testimony for the hearing prefiled July 16. "A review of the relevant facts will establish the necessity for downward adjustment to CEA's requested margins and many other requested expenses."

Zoerb, formerly Chugach's director of accounting and finance, in his testimony, requests the commission to order a full management audit by an outside auditor. He said such an audit would allow the commission to implement safeguards against "imprudent projects, undiscilplined project managment and reckless financial management."

A large part of MEA's objections to Chugach's filing links back to the 1989 Tripartite power supply agreement between MEA and Chugach.

According to Zoerb's testimony, MEA is Chugach's largest customer, paying more than $33 million a year for power from CEA.

MEA's spokesman Mike Pauley said Friday that Chugach has a monopoly over the power generated in Southcentral Alaska -- a monopoly MEA is hoping will be mitigated by the RCA.

"Chugach is in an intriguing position where a high amount of their generation is purchased by Matanuska," Pauley said. "In Railbelt Alaska … Chugach accounts for 94.1 percent of all wholesale power transactions that occur between utilities."

Pauley said 46 percent of the power Chugach generates goes to MEA, with 36 percent going to Homer. But that could change. In 2014, Chugach and MEA will finalize what their relationship will be. That is the year the Tripartite agreement reaches an end, Pauley said, and MEA has already begun talks about what will be done if the contract is not reapproved.

"We have begun preparations for hiring a consultant to advise us what our options are in the future," Pauley said.