The 22,892 member-owners of Homer Electric Association will have a chance to vote for three representatives on the electrical co-operative’s nine-person board of directors in HEA’s upcoming election, and to converse with HEA staff at the group’s annual member’s meeting Wednesday.
HEA and its managing staff are overseen by a nine-person board — three directors for the three districts of the Kenai Peninsula, divided based on population. Each year, one seat opens from each district. This year’s candidates include two incumbents — Dan Chay of Kenai and Ed Oberts of Soldotna — running uncontested. The one race that is contested is between incumbent Bill Fry of Homer and Stephen Pollack of Seldovia.
“Board members are responsible for policies,” Chay said. “They hire the general manager… we have fiduciary responsibility to make sure the co-op serves its membership.”
Chay, a commercial fisherman and pilot, will be serving his second term on the HEA board. He was also a member of the Kenai Peninsula Borough Assembly from 2004 to 2007. He said resource availability and problem-solving were his reasons for seeking board membership.
“I’ve been interested in energy issues since the 1990s,” Chay said. “I was tracking natural gas production and development in Cook Inlet. Five or six years ago, there was quite some concern on the part of some people, including utilities, about the long-term availability of natural gas as a resource for generating electricity here in the Cook Inlet basin. That was the main incentive that I had to get involved.”
Oberts, who sells real estate, has previously served two non-consecutive terms on the HEA board. He’s previously worked as an engineer for Marathon Oil and as staff for Kenai Peninsula Borough mayor Dale Bagely and Sen. Paul Fischer, R-Soldotna.
“I’ve wanted to be involved in HEA,” Oberts said. “I’ve got an energy and engineering background, and I sell real estate, and just been active in the community forever, and it’s one of the things I’ve always wanted to do.”
Fry owns the Bear Creek Winery in Homer and has sat on the Alaska Electric and Energy Cooperative Board of Directors and the Kachemak City Council. He’s previously worked as a well-driller and on the North Slope.
“The reason I got on (the Board of Directors) was because I was mad at HEA,” Fry said. “I didn’t understand why our rates were the highest in the nation, and I didn’t understand how we got there, and I was mad. You can’t be mad at somebody if you have an opportunity to be part of the solution.”
According to the U.S. Energy Information Administration, Alaska has the country’s second highest energy costs, with an average retail price of $0.17 per kilowatt-hour, behind Hawaii’s $0.33 per kilowatt-hour.
Fry’s opponent Pollack could not be reached for an interview. A former operator at HEA’s Bradley Lake hydroelectric power plant, he currently lives in Seldovia and has not served on the HEA board before.
Issues that board candidates identified as significant include fuel costs, renewable power, and a proposal for HEA to leave the oversight of the Regulatory Commission of Alaska, the state agency that controls how utilities gain revenue and bill their members.
Gas Supply
One decision the board approved during the previous term was a natural gas contract with Furie Operating Alaska, which will supply HEA’s gas-fired plants with fuel until 2018, with an optional contract extension until 2020. Before making the contract in 2015, HEA bought gas for 12 percent more from Hilcorp. The Furie contract was riskier, however, because at the time Furie had not yet produced any gas.
“As board members we aren’t directly involved in the negotiation, but we have an oversight responsibility, so the negotiation is reported back to us,” Chay said, of the supply contract. “Then in the end we ratify it, or ask for it to be modified or not.”
Chay said that gas supply contracts for utilities are becoming more short-term and more expensive due to changes in the Cook Inlet’s producer population.
“Historically, going back to at least the 70’s, utilities had even 30-year contracts as far as I understand,” Chay said. “… It was a pretty straightforward deal we didn’t have to worry about. With the sale of different fields by Chevron and Union Oil, and the influx of new independents with not quite the capital, and actually quite a bit of turnover, and Hilcorp’s purchase of a lot of the proven reserves — all of that involved quite a bit of change.”
Oberts, who like Chay supported the Furie deal, said he’d had fewer concerns about it.
“The gas supply to me was never as big an issue as a lot of people said it was, because I never bought into the idea that we were running out of gas,” Oberts said. “I always knew we had lots of gas, it was only just taking the time and money and energy to drill for it. Now that we’ve seen exploration and drilling in the area, there’s plenty of gas.”
Renewable energy
HEA draws roughly 90 percent of its power from gas-fired plants in Nikiski and Soldotna, and 10 percent from its share of the state-owned Bradley Lake Hydroelectric facility. Chay and Fry said it’s important for HEA to expand its non-gas-fired generating power. Fry described the HEA board as “like-minded” on the necessity of creating more renewable power sources.
“One of the ways I think we can reduce rates is by promoting renewables,” he said. “They’re really expensive up front, but once you get them paid down a little ways, there’s no fuel component. And that’s probably 25 to 30 percent of the electric bill, is the gas.”
In addition to Bradley Lake, HEA is also considering a new, smaller-scale hydroelectric project at Moose Pass’s Grant Lake. Homer Electric Association submitted a license application for the Grant Lake project to the Federal Energy Regulatory Commission on April 18. If completed, the project is expected to produce 5 megawatts of power.
“If we didn’t have Bradley Lake right now, our power would be much more expensive,” Fry said. “… I want to see Grant Lake through. I like that project… It’s not huge. I realize it’s only 5 megawatts, but that’s 5 megawatts less of natural gas we’ll be burning.”
Deregulation
As a public utility, HEA’s rates and transmission tariffs are overseen by the Regulatory Commission of Alaska (RCA), a state agency that controls electrical pricing. Because utilities often have monopolies over power delivery in a certain area, changes in a public utility’s rates must be approved by the RCA’s judiciary process, designed to keep rates close to the amount needed to recover a utility’s expenses.
According to Alaska statutes, electrical utilities and cooperatives can exempt themselves from RCA oversight by a majority vote that 15 percent of the group’s members participate in. HEA Director of Member Relations Joe Gallagher wrote in an email that the HEA Board of Directors voted to put the question before members in an election to be held in the fall.
Oberts said it has “become quite burdensome, quite expensive, quite time-consuming, to argue in front of the Regulatory Commission for everything we want.”
“Fortunately, when we have to raise rates, they (RCA) ask a lot of questions,” Oberts said. “Which is not necessarily bad, but we’ve got to make our budget, and with the warmer weather we’ve had over the past few years has made it really hard.”
Previously, HEA general manager Brad Janorshke said that warming winters had dropped the average annual household energy consumption from approximately 620 kilowatt-hours to 550 kilowatt-hours, with a corresponding drop in revenue for HEA. Oberts said that without the lengthy RCA rate-reveiw process, HEA would be able to quickly adjust rates in response to weather — raising them in warmer winters and dropping them in colder ones.
“We’ll have complete control over our rates, and what we do and how we do it,” Oberts said. “It’s not that the regulatory commission controlled that much, but it slowed things down and attorney’s fees and outside consultant fees went way up, because you have to represent yourself in front of a quasi-judicial body that expects all these formal reports and everything. There’s no way we’ll get entirely out from under that, because we’ll have to do our own rate studies — you just don’t do that without thinking about it. But on the other hand, if we had a really cold winter, and a lot of revenue coming in, it sure would be nice to adjust the rates downward without having to wait for the Regulatory Commission to review them six months later.”
In January, the RCA allowed HEA to temporarily charge its members 3.25 percent more to cover the costs of transmitting power from the Bradley Lake hydro plant on behalf of other utilities. HEA owns the transmission lines that carry power from Bradley Lake’s location on the south side of Kachemak Bay, but the five other utilities with Bradley Lake shares must also use the lines. At the RCA hearings in January, HEA officials testified that they needed to make up $4 million to cover revenue lost transmitting power for other utilities.
Fry, who also said he favored HEA removing itself from RCA oversight, estimated the case cost HEA close to $2 million in fees for lawyers, consultants, and other requirements of the process. He also said the RCA has a regional bias.
“We don’t really get a fair shake with them (the RCA),” Fry said. “They’re really slanted toward Anchorage, or at least it seems that way to us. We don’t seem to be getting a fair verdict from them lately.”
Fry wasn’t sure whether the money saved from the regulatory process would have an effect on member rates.
“We can’t say for sure it’s going to reduce rates, but it will definitely make us more efficient,” Fry said. “We spend a lot of money defending rate cases, new rate structures.”
Annual meeting
Ballots for the board election have already been mailed out to HEA members and must be returned by May 3. This year’s annual member meeting will take place on Wednesday, May 4 at Kenai Central High School. In addition to the results of the board election, it will also include food and a chance to speak with HEA staff, as well as prize drawings for reduced or free electricity.
Doors will open at 4:30 p.m, and the formal meeting will start at 6 p.m, featuring awards and an update talk by HEA general manager Brad Janorshke, followed by a question and answer section. Gallagher said that HEA’s proposal to deregulate will be one subject of Janorschke’s talk.
Reach Ben Boettger at ben.boettger@peninsulaclarion.com.
