HEA rates headed down for now

Posted: Monday, September 20, 2010

The Homer Electric Association is proposing two rate adjustments that would overall lower average residential users' utility bills in the near term, but would include a more permanent increase.

The adjustments, which have been submitted to the Regulatory Commission of Alaska for approval, are for both the energy base rate as well as the wholesale power cost rate adjustment, both of which would go into effect at the beginning of October.

The former, which accounts for operating and maintenance expenses as well as a fixed amount of purchased power costs would increase 1.89 percent from 14.351 cents to 14.622 cents per kilowatt hour for the first 800 kWh used by a residential member. All other rate classes will see the 1.89 percent base rate increase as well.

The WPCRA meanwhile, which reflects quarterly changes in the price of natural gas -- the fuel used to generate over 90 percent of the electricity purchased by HEA -- would decrease 60 percent from 1.792 cents to .715 cents per kWh.

If both rate requests are approved, the overall blended rate will be lowered five percent from 16.143 cents to 15.337 cents per kWh.

This will mean a reduction of $5.08 in the monthly bill paid by the average residential member using 630 kWh, according to a company statement.

Joe Gallagher, HEA spokesperson, said that while the WPCRA goes up and down on a quarterly basis and is out of HEA's control -- HEA buys 100 percent of it's power from Anchorage-based Chugach Electric Association -- the base rate adjustment would be more permanent.

"The base rate is basically a reflection of the costs of doing business and is often just a reflection of inflation," Gallagher said on Sunday. "They're not major adjustments but they're just some tweaks that are necessary to balance the books."

Gallagher said it is also a reflection of improving ageing infrastructure.

If approved, this will be HEA's second adjustment to the base rate this year and comes after a 6-percent jump that was approved in April, ending a two-year period of stability.

HEA said last spring that the second quarter adjustment reflected rising operating expenses, investment in capital projects and decreases in demand from industrial users.

Gallagher said on Sunday that neither of the current proposed rate adjustments is related to HEA's recently proposed rate restructuring plan.

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