HEA rates stable -- for now: Future is unclear, but diversification, conservation part of solution

Posted: Wednesday, June 24, 2009

First, the good news: As of July 1, Homer Electric members will see a decrease in the base rate charged for energy. This rate is the major component of the blended rate members pay for electricity and includes the cost of operation and maintenance along with the fixed cost of purchased power for the cooperative. In a filing with the Regulatory Commission of Alaska, HEA has requested a decrease in the base rate, from 13.545 cents a kilowatt hour to 13.296 cents a kilowatt hour. This decrease, although minimal, is the first decrease in the base rate since 2003.

Unfortunately, the base rate decrease is being off-set by an upward adjustment in the wholesale power cost adjustment or WPCRA. The WPCRA is the second component of the blended rate and reflects primarily changes in the cost of natural gas Chugach Electric consumes producing power for HEA. The WPCRA for the third quarter is increasing from 3.970 cents per kilowatt hours to 4.439 cents per kilowatt hour.

Taken together, the two rate changes mean HEA members will see the blended rate change slightly, from 17.515 cents to 17.735 cents per kilowatt hour. The average member's monthly bill will increase by $1.39 under the new rates.

HEA rates today are similar to what they were back in October of last year and significantly less than those seen in January 2009 when WPCRA adjustments pushed the rate over 21 cents a kilowatt hour. Unfortunately, fuel prices are beginning to edge upward again this summer and if the trend continues, electric rates are likely to increase later in the year.

This is a very difficult situation for Homer Electric and other Railbelt utilities because predicting and controlling the price of natural gas is out of our control. But while we can't do much to influence natural gas commodity prices in the near term, there are two areas we can make a difference.

First, we are continuing to look at alternative power sources to reduce our dependence on natural gas. We are actively pursuing potential small hydro projects on the Kenai Peninsula. This summer, field work is being conducted at Grant Lake and Falls Creek near Moose Pass to determine the feasibility of a small hydro project that could produce five megawatts of power. The work is being supplemented by state grant money set aside to study potential renewable energy projects. More information about these projects can be found on the project Web site at www.kenaihydro.com.

Another avenue HEA recently was pursuing called for a pilot project to test a tidal power system in Kachemak Bay. Unfortunately, economic hurdles forced the company to indefinitely postpone the project. We will continue to keep abreast of tidal information and potential partnering possibilities in this area.

In addition to small hydro and tidal, there is a strong possibility of seeing wind power produced on the peninsula in the near future. Kenai Winds, a private renewable energy company, has pending plans to install a wind farm in the Nikiski area in 2010. This power would be available to Homer Electric and be a valuable addition to our energy portfolio. We also are continuing to monitor met towers that are measuring wind potential at two different sites around the peninsula.

The other step that we can all take is energy conservation. As the demand and cost for electricity increases, it is more important than ever to become energy efficient. Homer Electric will continue to offer its members advice and tips on how to use less energy. Our newsletter will always have a column, Wise Watts, devoted to sharing conservation news and information. We also plan to use the local media more aggressively to get out the word about energy conservation and what it can mean in savings to individuals and overall benefits to the community.

In addition, make sure to keep an eye on our Web site, which is undergoing some major changes and will soon have a new look that will include energy conservation information.

We may not be able to control the price of fuel being used to generate electricity, but we can control the amount of energy we use and keep our electric bills as low as possible.

Homer Electric's board, management, and staff are committed to energy conservation and developing alternative sources of power. I encourage each of our members to join us in this effort.



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