Financial challenges await HEA board candidates

Operating expenses have risen from hike in natural gas prices, legal fees, unfinished buildings

Posted: Monday, April 10, 2006

Three open seats — one in each of Homer Electric Association’s three districts — will be filled by candidates running for seats on the cooperative’s board of directors unopposed.

Ballots for the annual elections were mailed to members March 31.

For District 1, which covers Kenai and Nikiski, the candidate for the three-year seat is incumbent Bruce Passe of Kenai; for District 2, covering Soldotna, Sterling and Kasilof, the candidate is Dave Carey of Soldotna; and for District 3, covering Homer and Seldovia, the candidate is Don Seelinger of Seldovia.

Seelinger is the only person on the ballot who is not an incumbent. He will replace Kasilof representative John Strandefer, who opted out of serving an additional three-year term.

The main duties of the board members are to oversee the fiduciary duties of HEA, which is a cooperative, not a profit-driven company, according to spokesman Joe Gallagher.

“That’s definitely one of the things that makes the cooperative different — we’re not set up to make money,” Gallagher said.

Members who received their ballots, accompanied with the HEA budget statement for 2005, may have noticed a few questionable numbers, however. The operating expenses jumped about $6.3 million in 2005. The majority of the jump in operating expenses, which members saw as part of a rate increase of 2.5 cents per kilowatt hour in February, came as a result of an increase in the cost of natural gas. About $567,000 of additional increases, though, are labeled “administrative.”

Gallagher said most of that money was eaten up by legal fees. Chugach Electric, a company that gets power from natural gas-fired generators, is the company from which HEA buys 90 percent of its power. Chugach filed an increase in the wholesale cost of power with the Regulatory Commission of Alaska last year, which increased HEA’s cost. Legal fees associated with fighting the change at the commission led to the large jump in HEA’s 2005 administrative operating costs.

“We basically responded to that filing,” Gallagher said.

Another large operating cost jump came in the “miscellaneous” category, from $97,143 in 2004 to $218,020 in 2005. That jump came from uncompleted homes and businesses HEA sank funds into by installing energy equipment. The jump is large, Gallagher explained, because it includes a project deemed uncompleted this year. HEA doesn’t compute sunk costs every year. With some projects, he said, it takes several years before HEA is sure the project will not be completed.

“Usually, it’s not that big of an amount,” he said.

This year’s election will be the second at which members will vote only for the representative in their district, a shift adopted through a bylaw change voted into effect by members after the 2004 elections.

“Voters now vote only for representatives in their districts, which was overwhelmingly approved by our membership,” Gallagher said.

Returned ballots need to reach HEA by May 3 at 5 p.m., but members who choose not to vote by mail can vote at the annual meeting, to be held May 4 at Homer High School.

All members are welcome at the meeting, which begins at 4:30 p.m. with a dinner and a series of open informational booths.

One of them, Gallagher said, explains the cooperative’s five-year mission to replace its mechanical meters with automated meters. The meters, 7,500 of which have been installed in Kenai, North Kenai and Kasilof, are connected through HEA’s power lines directly to the association’s computers.

“With the automated meters, we can read the meters with the click of a button,” Gallagher said.

He touted them as a way to improve service, as HEA doesn’t always have the staff to read every meter every month and charges are based on averages. The constant connection to the home office also should help HEA be more responsive during power outages, he said.

After the dinner, names of members who voted by mail or at the meeting will be drawn for a series of energy credit prizes, one of which is a year’s worth of electricity, not to exceed 10,000 kilowatt hours. This is the second year that door prizes are energy credit giveaways.

“We used to give away all sorts of door prizes, but we thought people would be more interested in energy credits, and the feedback we got was real positive, Gallagher said.

There also will be a business meeting and the announcement of election winners, although, he said, “There won’t be a lot of people waiting around for results on that.”

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