Power rates go up

Breaking their run of 15 consecutive rate decreases, Matanuska Electric Association's board of directors agreed to increase rates by 1.75 percent during the third quarter last week.

The new rate filing will go into effect July 1 and, for the average bill of 800 kilowatt hours, it'll mean an increase of $1.21 per month.

According to information presented to the board by MEA's Director of Administration Dan Zoerb, the increase is needed because the co-op's 12-month financial results rang in slightly lower than expected. MEA spokesman Tuckerman Babcock explained that the problem stemmed, in part, from a gap in timing.

"As some prices go up, we get billed for power before we get paid for power," Babcock explained. "The problem is, the amount of revenue we're getting for what we budgeted is less than what we're paying."

MEA operates with an approved maximum 2.0 TIER, or Times Interest Earned Ratio level. Previous rate decreases have allowed MEA to stay just under its approved level, but Zoerb, in his report, indicated MEA's revenues had fallen too far under that level, to a TIER of 1.59. As rates are adjusted to compensate for higher costs, the revenues should come back into balance with the co-op's expenses.

"After reviewing our first-quarter financial results and factoring out timing related issues that will self-correct during the remainder of the year, it is apparent that we have a deficiency in our gross margin," Zoerb wrote, explaining that gross margins are the difference between sales revenue and purchased power cost.

With higher fuel costs, Babcock said it's possible MEA ratepayers will see additional rate increases on the portion of their bill paid to Chugach Electric for power generation costs. Flexible costs such as fuel are included in a portion of the bill that is not as strictly governed by the Regulatory Commission of Alaska, allowing companies to compensate for sudden fluctuations in cost.

About 61 percent of a customer's bill, Babcock said, goes to Chugach Electric, while the remaining 39 percent stays at MEA.

"Any time there's a sharp increase in fuel costs, our bill will go up," Babcock said.

Contact Rindi White at rindi.white@frontiersman.com.