Customers of Municipal Light and Power could face a 22 percent increase in their electric bills under a plan released by the city-owned utility Friday.
Costs on average for residential customers would rise about $15 a month, from $69 to $84, ML&P told Anchorage Assembly members in a work session at City Hall.
The utility needs the money primarily to pay for its $130 million investment in the construction of a new power plant that went online in January, General Manager James Posey said, as part of a strategy to phase out old and inefficient infrastructure. The plant was a joint project of ML&P and Chugach Electric Association.
"There's only so much bailing wire and tape you can use," Posey said in an interview after the meeting. "It's near impossible to keep the old (equipment) running."
ML&P's request first has to be approved by the Assembly before being submitted to the Regulatory Commission of Alaska for a final decision.
If the Assembly signs off this month, the utility's 30,000 customers -- who are located west of Boniface Parkway and north of Tudor Road -- would likely face a 17 percent rate hike in the fall, with the full 22 percent increase going into effect in late 2015.
The remainder of the city is served by Chugach Electric Association, while Eagle River and the northern suburbs are served by Matanuska Electric Association. Both are consumer-owned coops. A Chugach spokesman said the utility had already requested a rate increase of about 7 percent to pay for its share of the new power plant. The generators are near the intersection of Minnesota Drive and International Airport Road.
Assemblywoman Jennifer Johnston, who chairs the committee that oversees ML&P, said it was likely that the utility's request would be granted.
"I don't think we're going to be able to not give them a rate increase," she said.
ML&P currently charges its customers rates that are substantially lower than most area utilities, and even with the increase, its prices would still be in line with or below the others, according to data it presented at the meeting.
Posey told Assembly members Friday that residential and commercial customers could reduce the pain of the rate increase by using less power -- which he likened to ML&P's investment in more efficient generators.
"We have not done enough in this community ... in working with folks to help them do energy conservation," he said. "Like we're conserving by building new equipment, all of our customers can do likewise."
While a 22 percent increase might seem high, Posey defended it by saying that ML&P's rates had been stable for a long period before it made a request for a 6.5 percent hike last December.
Aside from fluctuations to account for the cost of fuel, the utility's prices didn't rise significantly between 2003 and 2011, said ML&P Public Relations Manager Ronnie Dent.
That stability was appreciated by local businesses, said Alaska Club President Robert Brewster, whose facility on Tudor Road averages close to $20,000 a month in utility bills.
"We were living large on the East Side," he said.
But the proposed increase will hurt, Brewster said. And it will be difficult for his business and others to offset through conservation, given the costs of equipment like new motors and cooling systems.
"Unfortunately, most businesses are just going to take the hit," he said in an interview. "They aren't in a position to significantly reduce their cost of operation, especially in an existing building."
One Assembly member, Patrick Flynn, argued that one of the best ways for Anchorage to save on power costs would be a merger of the city's three utilities, plus two others in the state to which ML&P compared its rates.
Flynn estimated that the five served a population that in most areas would be contained in one power district.
"I love our utility, but it's outrageous," Flynn said.
Posey responded that such a step would be politically unfeasible.
"You have to declare war against the Valley to make something like that happen. I was a military guy," he said. "I don't want to go to war again."
Reach Nathaniel Herz at nherz@adn.com or 257-4311.
By NATHANIEL HERZ