FAIRBANKS -- The company that supplies heat to much of downtown Fairbanks with steam piped underground from a power plant wants to raise its rates up to 95 percent.
Steam heat has long been the biggest bargain in Fairbanks, with regulated costs about one-third of those for heating oil and natural gas.
There are 73 steam heat customers in Fairbanks, including many of the larger buildings downtown, some of which have been hooked up since the 1950s.
Aurora Energy, which says that the rates have not changed in 28 years, wants to increase the maximum price for steam customers from $10.50 per thousand pounds to $20.45.
The proposal, which would allow the utility to adjust its rates no higher than the cap, is open for public comment to the Regulatory Commission of Alaska. The company wants the new cap to start Jan. 23.
Aurora Energy, an affiliate of Usibelli Coal Mine, the company that supplies coal to the Aurora power plant, says it deserves an increase in steam revenue totaling $1 million, based on a study showing its costs and allowable rate of return.
The company says the cost of coal charged by Usibelli to its affiliate is at or below the cost of producing coal and is "far less" than what it would cost to import coal from Outside. The utility has sought rate increases for steam heat before. Last time, the RCA rejected the plan, calling for a detailed cost study.
The utility has three hot water heat systems that charge much higher rates because they are not regulated.
The company says a return on equity of 11.75 percent is justified with a 50-50 ratio between debt and equity. A risk premium, such as those approved by the RCA for the utilities in Juneau and McGrath, is appropriate, the company says.
"Unlike those two utilities, Aurora does not face such risks as avalanches or mud slides. Instead, it faces serious risks associated with the uncertainty of new and potentially crippling environmental regulation as well as potential competition from alternative fuels, such as natural gas," said consultant Janis Dillard, deputy director of the Delaware Public Service Commission.
Contact Dermot Cole at dermot(at)alaskadispatch.com. Follow him on Twitter @dermotmcole