Chugach Electric Seeks Rate Hike, Offset by Cheaper Fuel
After nearly two years of managing a significant decline in electricity sales and the associated drop in revenues during the COVID-19 pandemic, Chugach Electric Association has filed a request for a rate increase with the Regulatory Commission of Alaska (RCA). The utility expects the increase to base rates of 4.1 percent will be diminished, however, by a drop in fuel prices, for a net positive to members. If approved by the RCA, member bills will decline on average in the first quarter of 2022 by between 0.1 percent and 5 percent, depending on customer class.
“Like every business in Alaska, we have worked hard to keep the company healthy, delivering reliable power to our members while dealing with the impacts of COVID-19,” says Chugach CEO Lee Thibert. “It’s fortunate that as we ask for this increase in base rates, members will also have the benefit of lower fuel costs, which will mean bills will not increase early next year.”
The request for the base rate increase is the result of an ongoing discussion with the RCA to find a way for the utility to wait for electricity use and revenues to recover as Anchorage’s economy starts to turn around after weathering months of a downturn brought about by the pandemic. Chugach’s revenues have declined significantly, with reductions of $9.4 million realized from the beginning of the pandemic through October 31, 2021.
“As everyone knows, this has been a difficult time for Alaskans, with businesses closing then struggling to reopen with minimal staff. We are proud at Chugach that we have been able to continue to deliver safe, reliable electricity during this time, and we have made sure any pandemic relief money received has benefitted members first,” Thibert adds. To date $3.3 million has been applied to eligible member accounts from federal CARES Act money, Alaska Housing Finance Corporation assistance, and the state’s heating assistance program.
Thibert also notes that one of the benefits of Chugach acquiring Municipal Light & Power (ML&P) last year was the increased ownership in the Beluga River Unit (BRU) gas field. Chugach now owns two-thirds of the lower cost field, and the increased production out of that field means a savings of millions of dollars for members.
In July, Chugach filed a petition with the RCA requesting the utility be allowed to defer certain expenses associated with the acquisition of ML&P for three years. The RCA rejected Chugach’s request for acquisition expense deferral for 2022 and 2023, only allowing it for 2021. The deferral request was triggered by the significant decrease in electricity sales, as the pandemic resulted in the closure of numerous Anchorage businesses and the associated economic downturn. Chugach says its goal was to not raise rates during the pandemic.
The lower-than-expected fuel costs benefitting members are a result of increased production from the BRU gas field. Gas from the BRU makes up about half of Chugach’s gas supply each year, saving members millions of dollars.
Thibert emphasizes that recent declines in electricity sales are independent from Chugach’s acquisition of ML&P, which has resulted in significant cost reductions and savings during the first year following the acquisition. Chugach has incurred both increases in costs due to inflation and lower revenues due to reductions in sales since base rates were last adjusted. Chugach’s most recent base rate increase was 1.1 percent in May of 2020, and former ML&P customers haven’t had a base rate increase since 2017. Additionally, rates went down for all customer classes in January of this year.
Chugach has requested the RCA make a decision on the rate filing by January 24, 2022, in order for the rate increase to take effect February 1.