City-owned utility rates slated to rise in Anchorage, with hefty spike coming for ML&P

Thousands of Anchorage households and businesses may see electrical bills jump more than 25 percent next year as the city-owned electric utility, Municipal Light and Power, prepares to start paying off a major power plant in East Anchorage, city officials said Tuesday.

Meanwhile, rising costs associated with aging facilities are fueling a smaller proposed rate increase for Anchorage Water and Wastewater utility customers, officials said. Under the proposal, an average household would pay $4 more per month for sewage treatment.  

Details on the rate proposals for Municipal Light and Power and Anchorage Water and Wastewater Utility emerged Tuesday at an Anchorage Assembly rules committee meeting. The AWWU proposal is being formally introduced to the Assembly next week, while the ML&P proposal is expected to be introduced in early December.    

The electric utility hasn't put forward a major rate increase in some time, city manager Mike Abbott told Assembly members. But next year, the utility is proposing to increase rates between 25 percent and 30 percent.

Abbott said the utility has to start paying back the $275 million replacement of the city's 1970s-era George M. Sullivan Power Plant 2 in East Anchorage. Construction on the new plant started in 2014 under the administration of Mayor Dan Sullivan.

While the new plant is expected to lead to significant long-term natural gas savings, the short-term cost of construction will fall to customers, Abbott said.

Assemblyman Forrest Dunbar, who called into the meeting, asked about the effect of the Berkowitz administration's decision to spend $100 million last year on a Cook Inlet gas field. Abbott didn't have exact numbers yet but said the purchase of the field helped make the proposed rate increase lower than it otherwise would be.

If the rate increase is ultimately approved, general manager Mark Johnston told Assembly members, ML&P rates would be slightly higher than Chugach Electric rates.  

ML&P currently serves about 30,000 customers in the Anchorage area.

Separately, Anchorage Water and Wastewater is proposing to charge customers up to 9.5 percent more for sewage treatment next year. A public hearing on the proposal is set for the Assembly meeting on Nov. 1.

Right now, a typical customer is billed a little more than $90 a month for water and sewer, Abbott said.

With the proposed sewer rate increase, an average customer will pay closer to $94 a month, or an average increase of 4.5 percent, Abbott said.

Water rates won't change under the proposal.

Abbott and AWWU general manager Brett Jokela said the utility is trying to keep up with the cost of aging buildings and equipment. Abbott said the rate increase does not factor in "significant upgrades" that will be associated with sewage treatment in the future.

AWWU customers were reimbursed for the last rate increase, which happened in January 2014. Anchorage has lower rates than larger cities like Portland and Seattle but higher rates than some of the plants and utilities in Southeast Alaska, Jokela said.

AWWU serves about 56,000 customers in Anchorage.

Both proposals, if approved by the Assembly, would then head to the Regulatory Commission of Alaska.