Tuesday, May 18, 2010

HEAMF Action Alert

KBBI/KDLL this Wednesday, May 19 at 9:00 AM

The focus will be all things HEA with guests HEA General Manager Brad Janorschke and Public Relations Coordinator Joe Gallagher.

Call 235-7721 on the southern peninsula, 1-800-979-7405 from elsewhere.


While there are many issues affecting rates, quality of service, and other HEA member interests, four are particularly obvious right now:


Want ideas for questions?
Look below (in italics) under each of the four topics, along with a little background information on each.



Why were HEA members excluded from the planning of the Independent Light project?

Shouldn’t the HEA membership be given a chance to approve, modify, or reject this historic change?

Shouldn’t HEA members have more opportunities for planning and approving or rejecting other proposed projects such as small hydroelectric and wind?

Was the Alaska Electric and Energy Cooperative (AEEC) formed with approval of the HEA membership or simply by the HEA Board and staff?

The Seven Guiding Cooperative Principles All rural electric cooperatives, including HEA, are supposed to adhere to these principles. Two are of particular interest here:

“Cooperatives are democratic organizations controlled by their members, who actively participate in setting policies and making decisions. The elected representatives are accountable to the membership.”

“While focusing on member needs, cooperatives work for the sustainable development of their communities through policies accepted by their members.”

With Independent Light HEA has embarked upon the largest, most costly change in its history -- transformation from a simple distribution cooperative to a generation and transmission utility. HEA members remain out of the loop.

The development of and decision to move forward with Independent Light was made exclusively by the HEA management and Board of Directors. The General Manager was authorized to do so on June 24, 2008. A July 9, 2008 press release sketched a general plan. Members were provided little other information until a January 12, 2010 press release describing the complete plan. You were not invited to review and comment on the plan at any point. There was never a vote by the membership to accept Independent Light. This was true for its predecessor, the Healy coal plant plan, and is true for present small hydro and wind proposals.

All generation and transmission projects now take place under the Alaska Electric and Energy Cooperative (AEEC). It is unclear whether or not the general HEA membership voted to approve its formation in 2001.

Is it true that HEA members are not also AEEC members? Who is an AEEC member?

Who runs AEEC?

Who is AEEC responsible to?

Does the HEA Tariff also apply to AEEC or does it have it’s own?

There are many unknowns regarding AEEC. One thing IS clear -- HEA members have no standing. According to HEA staff and Directors, AEEC was formed in 2001 to allow funds to be borrowed at a lower rate of interest. It is a separate generation and transmission cooperative and HEA is the only member. AEEC bylaws do not indicate a limit on how much money it can borrow or spend. In recent months it has authorized borrowing $205 million. AEEC passes all expenses on to it’s one member/customer, HEA. HEA then charges us through our electric rates. Even though the two cooperatives are legally separate entities, HEA Directors also serve as AEEC Directors and HEA staff is tasked with AEEC work. All Alaska utilities operate under a set of rules outlined in a “Tariff “ filed with the Regulatory Commission of Alaska (RCA). It is unclear whether or not AEEC is also covered by the HEA Tariff.

Is it true that the combined HEA/AEEC debt is or soon will be at $339 million.

Is it true that AEEC is not bound by the $450 million HEA debt cap and has no such limit of its own?

Will $180 million cover all elements of the Independent Light project or will additional debt be required? If more, how much?

How will payment toward interest and debt retirement affect electric rates?

According to HEA General Manager Brad Janorschke, the 2009 year end financial audit showed the debt to be $121 million HEA and $38 million for AEEC. In a May 3, 2010 e-mail he stated that when combined with all recently authorized new loans it would bring the total debt burden to $339 million. Bear in mind that only the $121 million in HEA debt counts against the $450 million debt cap. In HEA/AEEC meetings last year, HEA Director of Finance stated that present loans carried a fluctuating interest rate which was at about 4.75 percent at the time.

HEA management asserts that “studies indicate that the cost for HEA to own and operate the new assets will be about the same (perhaps slightly lower) as paying another utility for wholesale power.” Where can HEA members review these studies?

Even though the decision was made without their input, most HEA members seem to support upgrading the Nikiski plant. However, many question the wisdom of buying new gas turbines for Soldotna as the best way to meet peaking, reserve, and contingency demand. Would you be willing to bring the wider HEA membership into the decision process now?

If we invest hundreds of millions in Nikiski AND new gas turbines to meet ALL base load, peak, and emergency demands what incentive how will we afford to buy significant amounts of renewable energy as new projects projects come on line?

The Legislature appropriated $7 million to fund a 5 MW reciprocating generator or a battery bank to allow HEA to integrate the 14.4 MW of power from the Kenai Winds project into the existing grid. Why won’t that solve the problem of “following” this intermittent source of energy?

HEA management outlines two phases for Independent Light. We are already committed to the first -- adding a steam turbine to the Nikiski gas plant and associated upgrades to the Nikiski substation. This is intended to meet the needs of so-called “base load and intermediate generation.” The second phase involves acquisition of energy for so-called peaking, reserve, and contingency demand. Three options are suggested by HEA management -- build new gas generators in Soldatna, purchase energy from other producers, buy existing generation facilities from Chugach Electric Association.

HEA management claims that “The ‘Independent Light’ plan, because of its flexibility and sole control by HEA, actually provides a better opportunity to accommodate future renewable energy sources.” This claim refers to increased ability to compensate for variable output from wind turbines. Unfortunately, HEA keeps reducing the amount of wind energy they are willing to utilize from potential sources like the Fire Island and Kenai Winds project.

HEA’s response evades another basic issue. After you’ve spent hundreds of millions on enough gas turbines to meet all base load and contingency needs, what incentive will there be to move to renewables -- and with so much debt, where would the money come from?

At the May 11 HEA Board meeting General Manager Brad Janorschke indicated that he felt it was only feasible to use around 4 MW from any wind farm. He didn’t explain why $7 million would no longer pay for enough standby battery or generation equipment to balance more wind energy as originally planned.

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