Friday, August 6, 2010

HEA Members Forum Update

HEA Plans Rate Structure Change
Every HEA member has a big stake in this ratemaking process. The outcome will affect the finances of Kenai Peninsula families and businesses for the foreseeable future. Electric rates will increase. They jump two percent this October. They're expected to reach 20-25 cents per kWh by 2014. A new rate structure probably can’t prevent that but HEA members should be wondering just what it might do.

Can it be fair to all classes of ratepayers (residential, commercial, industrial) in all areas?
What will it mean for low wage workers and people on fixed incomes?
Will it promote energy efficiency and conservation?
Can it do anything to stabilize electric rates?
Will it be easy for HEA members to understand?

Attend the Ratemaking Workshop on Wednesday, August 18
Come to the HEA Homer Board Room at 9:00 AM -- video conferencing available at Kenai HEA offices for central peninsula members. This will be the last opportunity for you to learn more about three potential residential rate options under consideration:

1. Raise the present $11.00 per month residential customer charge to around $90.00 (the estimated monthly cost to HEA to provide service) and lower the per kWh energy charge.

2. Raise the $11.00 customer charge to $15.00 and increase the per kWh energy charge.

3. Raise the $11.00 customer charge to $15.00 and require a minimum monthly energy payment based upon 300 kWh of electricity ($36.26). All residential customers would then pay at least $52 per month.

Those options are at the core of this process but only reflect part of the background discussion. For example, there is the issue of basic kWh rate design -- should it be uniform or variable based upon differing levels of consumption, peak vs. off-peak use, summer vs. winter? There are other issues too but no space for discussion here.

Now is the Time to Get Involved
A draft rate plan is expected by the end of this month. The plan will be presented to members at September HEA regional meetings. By then the opportunity for input will be limited -- final rate design will be adopted in October. If you want to help determine how the final plan looks, go to the HEA website ( and read Rate Design: Making It Fair and Promoting Conservation. Try to attend the August 17 HEA Board meeting. Participate in the August 18 ratemaking workshop. Ask questions, explain your priorities, and make suggestions.

Electric utility rates include two basic charges, one for recovering “fixed costs” and the other for recovering “variable costs.” For this discussion let’s ignore the taxes and surcharges typically tacked on to your electric bill.

Fixed Costs
These include expenses the utility incurs by just having a customer tied into the system -- wire, poles, buildings and everything needed to provide basic service. These costs have nothing to do with how much or how little energy a customer uses and do not fluctuate.

Variable Costs
These include expenses the utility incurs for equipment, over and above the basics, required by high demand customers and for acquiring the energy it distributes to us. These costs vary depending upon how “big” a service capacity is installed for the customer and how much energy is consumed each month.

Utilities generally consider it good policy to recover fixed costs through fixed charges (the “customer charge”) and variable costs through variable charges (the “energy charge” or “per kWh” charges).

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