Thursday, January 13, 2011

HEA Members Forum Update

January HEA/AEEC Meetings
These meetings will take place in Kenai at the Central Peninsula Offices, 280 Airport Way. Video conferencing is available in the Homer Offices at 3977 Lake Street.

Tuesday, January 18, 2011 (tentative)
10:00 AM -- Operations and Special Projects

1:00 PM -- Finance Committee
3:00 PM -- AEEC Board Meeting
5:30 PM -- HEA Board Meeting

Check for meeting calendar updates and draft agendas on the HEA website at http://www.homerelectric.com/BoardofDirectorsElections/BoardMeetingInformation/Agendas/tabid/220/Default.aspx.

No More Secrets for Now
Last November HEA/AEEC filed a petition with the Regulatory Commission of Alaska to classify it’s 2010 Equity Management Plan as confidential. This would keep a lot of information about how the coop conducts business out of the hands of HEA members -- or anyone else for that matter. Several HEA members followed up with a request for a stay pending resolution of a previously filed informal complaint. On December 17, 2010 the RCA denied the HEA/AEEC petition for confidentiality (U-10-85, Order No. 2). The coop may reapply if willing to supply meaningful justification for such blanket confidentiality.

HEA/AEEC Rate Plan on Hold
The proposed new rate design was filed with the RCA on November 9, 2010. Under the plan, the present $11.00 monthly residential customer charge would increase to $15.00 and a minimum monthly 150 kWh energy charge would be added. After receiving 22 public comments, all but one opposing the plan, the RCA suspended the HEA/AEEC request for approval (Order U-10-97, Order No. 1). The December 17, 2010 stay requires HEA/AEEC to submit a brief addressing how the proposed “minimum energy charge” complies with relevant Alaska Administrative Code. It also schedules further investigation, invites petitions to intervene from interested parties and participation by the Attorney General, and appoints an administrative law judge to conduct the docket. The deadline for petitions to intervene is 4 p.m., January 18, 2011. A prehearing scheduling conference for the matter will be held in the Commission’s East Hearing Room at 9 a.m. on February 4, 2011. Go to the RCA website at http://rca.alaska.gov/RCAWeb/Entity/EntityDetails.aspx?id=883fd287-5437-45c3-ac93-6611db2d87b0 for documents relating to HEA/AEEC.

WPCRA vs. COPA -- Say What?
Given the RCA stay of HEA/AEEC’s proposed rate plan this might be moot but here goes anyway. One of the complaints against the rate plan was a move to replace the Wholesale Power Cost Rate Adjustment (WPCRA) with a Cost of Power Adjustment (COPA). Remember, the WPCRA is that fluctuating cost HEA has to pay for energy, mostly reflecting the price of natural gas. It’s passed through to you. According to a December 6, 2010 letter from RCA staff, unlike the WPCRA, the COPA would allow HEA/AEEC to change rates associated with fuel and purchased power absent the normal RCA rate proceeding. It looks like going to the COPA would result in an instant rate increase as well. When the new rate plan was presented to HEA members the WPCRA was less than one cent (.00715) per kWh. The figure given for the COPA under the new plan was 2.862 cents per kWh -- much higher. What extra things does it include? While this information has been requested many times, there has as yet been no side-by-side comparison of these two computations. HEA’s Joe Gallagher is trying to get this for us but has so far been unable to deliver.

Independent Light $$
Phase One of the Independent Light project, upgrade of the Nikiski plant, is proceeding as planned according to the December 14, 2010 update from the HEA/AEEC engineering staff. At that time design work was 90 percent complete and construction bids were expected to go out last month. A contract should be awarded in February 2011, work should be completed by 2012, and the new steam turbine should be in commercial operation by the 4th quarter of that year. This upgrade is expected to improve efficiency of the plant by 40 percent without burning any extra fuel, allowing it to generate most of the baseload requirements for the HEA/AEEC service area.

Phase Two of the project, addition of new gas generation facilities at Soldotna to supply “peaking” and reserve energy, is moving forward as well. Additional property has been purchased at the old “Soldotna 1” site, Stanley Consultants was awarded a contract for up to $3,300,000 for facility design, and purchase of one gas turbine generator for approximately $22,700,000 was authorized. HEA/AEEC Directors declined to authorize purchase of two units as originally envisioned by management. Discussion of the enabling resolution (10-34) indicated that some Directors have misgivings about investing so much money in new natural gas hardware and would like to investigate other renewable energy sources. This decision will be revisited in the near future.

Cook Inlet Natural Gas Storage Alaska (CINGSA)
With diminishing Cook Inlet natural gas supplies, keeping the heat and lights on during winter cold snaps is becoming iffy. This is a growing concern for HEA/AEEC, especially with at least one new gas turbine slated for Soldotna. As a partial solution, CINGSA proposes an underground storage facility in Kenai to hold natural gas during times of low demand and then withdraw the gas during peak demand (winter). At the December 14, 2010 HEA/AEEC meetings AEEC Resolution 10-31 was approved authorizing HEA General Manager Janorschke to sign a contract committing HEA/AEEC as a customer of the CINGSA project. Other CINGSA customers include Enstar, Municipal Light and Power of Anchorage, and Chugach Electric Association. If the project is successfully developed HEA/AEEC commits to a 20-year contract. The coop would pay monthly fees for its share of storage capacity and the amounts of gas it injects or withdraws. It will also need to supply (purchase) gas and pay for the energy used to inject or withdraw it. There will be added charges if amounts of gas stored, injected, and withdrawn exceed that allowed by the contract. While speculative, estimates of cost to HEA/AEEC range between $900,000 and $1,988,000 per year.


AEEC Board Meeting Minutes and Voting Record
A small concession was won at the December 14, 2010 HEA/AEEC meetings. In response to a HEAMF request, Directors approved a motion to start posting Alaska Electric and Energy Cooperative Board meeting minutes on the HEA website as is already done for HEA Board meetings. This is important because the minutes contain a record of how Directors vote on various resolutions. It’s one way for HEA members to evaluate Director performance and make good decisions at annual Board elections. But more needs to be done.

Since inception in 2002 the AEEC has been more or less invisible to HEA members. There is little information provided on the HEA website -- only meeting notices and agendas. Considering that the present conversion from a distribution utility to a generation &transmission utility is likely the largest, most costly event in our coop’s history and is being accomplished primarily through the AEEC, this seems like a significant omission. For some time we have requested that HEA fully disclose and explain to members the HEA/AEEC relationship. This should include posting of AEEC organizational documents such as bylaws, Board policies, Board member information, and other pertinent materials on the HEA website -- or on a new AEEC site. HEA members are not also AEEC members. AEEC has no debt limit. Consequently, it should be made clear how HEA members can have a voice in AEEC affairs, what measures are in place to prevent unlimited borrowing through the AEEC, and what checks and balances preclude bad decisions by those who conduct AEEC business.

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