Alaska’s largest electric utility wants to increase the base rate paid by its customers, saying inflation has pushed costs higher while demand for its power is falling.
Chugach Electric Association is proposing what would amount to an average increase of 5.9% for its 90,000 member customers, with most of the increase starting in September, the utility said in a prepared statement on Saturday.
The proposed base-rate increase would be the first such adjustment since 2017 for the former municipal utility customers and the first since 2020 for its Chugach customers, the utility said.
The utility said it faces higher costs due to the inflation that has soared nationwide, as well as declining sales due to energy efficiency measures by members, such as more rooftop solar installations, and changes in use during the pandemic, according to a written statement by the utility.
The utility is proposing to raise rates in two steps, first with a 3.6% jump starting Sept. 1, with the remaining increase set for September 2024. The rate case could take 15 months, and the utility will refund customers with interest if the increase approved by the agency is lower than the utility plans, Chugach officials said.
Individual customer impacts will vary, the utility said in its statement. A 5.9% increase on a monthly bill of $150 would add $8.85.
If approved by the Regulatory Commission of Alaska, the proposal would bring into alignment rates paid by those members who were once with Anchorage Municipal Light and Power and rates paid by Chugach’s legacy members, the utility says.
Chugach Electric purchased the municipal utility in 2020, creating one service area across Anchorage and beyond. As part of that transaction, the regulatory agency required that a base-rate adjustment be filed this year, the utility said in its statement.
The utility filed the rate case on Friday, proposing an increase. The agency will provide a 30-day public comment period.
“We are looking forward to moving toward uniform rates for each customer class,” said Arthur Miller, Chugach Electric chief executive, in a prepared statement.
He said the acquisition has been a success that’s led to savings of more than $72 million.
“Those savings are passed along to our members in the form of rates lower than what they would otherwise be without the acquisition,” Miller said.
The proposed increase is coming amid concerns about a looming shortage of Cook Inlet natural gas, the primary source of power in Alaska’s most populated area, the Railbelt, from Homer to Fairbanks.
The rate increase is already drawing some attention. At least one group says it plans to intervene in the case in order to promote a rate structure that conserves Cook Inlet gas, which it says is a much cheaper resource than the imports of liquefied natural gas that the utilities see as a leading solution to the shortfall. Other groups said they have concerns about the proposed increase and they’ll be working to let people know about the issues as the rate case moves along.
Veri di Suvero, executive director of Alaska Public Interest Research Group, said the consumer advocacy group is pleased that Chugach Electric customers will have a chance to weigh in on the plan during the public comment period.
But di Suvero said the group is concerned about what it sees as “pretty severe increase in rates.” Many ratepayers came away with the perception that the 2020 acquisition would not lead to rate increases, di Suvero said.
“That’s not to say the rate increase is not justified, but taking a close look at it will be very important to make sure there’s public trust that the utility is operating in the public good,” di Suvero said.
Aurora Roth, a co-founder of the Chugach Ratepayers Alliance, said the group will inform ratepayers about the proposal, with short informational videos on its Instagram page.
The change is significant and the public should weigh in during the regulatory proceedings, she said.
“Everyone’s rates will increase, whether you’re a household ratepayer or a large ratepayer like Providence (hospital) system,” she said.
Leaders with Renewable Energy Alaska Project said their group intends to intervene in the case to propose a rate structure that will conserve Cook Inlet natural gas, the main source of power for Chugach Electric.
The group’s ideas include setting rates that rise as members consume more energy. The goal is to provide an incentive for households and businesses to keep energy use low to preserve Cook Inlet gas, a critical resource that also provides heat across Southcentral Alaska. They said that gas imports will be much more expensive and volatile than current Cook Inlet gas prices.
“There should be a strong focus by the utility and the commission to design rates and improve rates to change customer behavior to transition from natural gas to renewables, which in most of the world are much less expensive to generate,” said Chris Rose, the renewable energy group’s executive director.
The rates should also be designed to incentivize less energy use through conservation and efficiency, he said.
The amount of available Cook Inlet gas is expected to begin falling short of demand in the Railbelt region starting in 2027, according to a working group of six Railbelt utilities and two state agencies. The group includes Chugach Electric and ENSTAR natural gas company, and was formed last year after producer Hilcorp warned utilities that it does not currently have enough natural gas reserves in Cook Inlet to provide for new gas contracts. Chugach Electric’s gas supply contract ends in 2028. The contract for ENSTAR, providing gas for heating and cooking for more than half the state’s population, ends in 2033.
The Utility Working Group late last month released a first-phase assessment looking at solutions to the anticipated Cook Inlet gas shortage.
Importing liquefied natural gas is a leading near-term solution, the group said in a prepared statement last week.
The group said more Cook Inlet gas production is viewed only as a “very short-term fix” because of challenging market conditions, potentially providing only a few years of additional supply, the group said.
With the gas shortage on the horizon, the utilities have been racing to find ways to reduce natural gas use, including with renewable and energy efficiency projects. Chugach Electric is studying large-scale wind and solar projects that could reduce demand, and the utility recently purchased a Tesla battery pack to make gas-fired generation more efficient.
But the working group says “renewables cannot meaningfully displace natural gas demand for electric generation in Alaska for many years to come,” according to a document from the group addressing frequently asked questions.
The situation is “very unsettling,” but the current rate case is an opportunity to change that with a rate system that helps conserve Cook Inlet gas, Rose said.
Chugach has created a page on its website to track the case.
The proposed increase was first reported by Alaska Public Media.