Monthly Manager’s Report

Posted: August 25, 2021 at 1:30 pm



August 10, 2021

Greetings! I hope you have enjoyed the several weeks of warm weather and amazing fishing that July brought us, however, it seems like this summer has flown by remarkably fast. Looking forward, we are entering a busy fall season that includes Alaska Power Association’s (APA) Annual Meeting in Homer, Northwest Public Power Association’s (NWPPA) Annual Conference, the National Rural Electric Cooperatives (NRECA) Regional Meeting – vote, Janorschke, Of-Course-Ki for the CFC District 9 Board of Directors seat, and our local neighborhood Area Meetings.

The following are brief updates on HEA’s current business activities and strategic goals.

Thanks to the continued efforts of employees, there were no Occupational Safety and Health Administration (OSHA) recordable incidents last month. The short safety report is included in this month’s Board packet and as indicated in the report, the last Lost Time Incident was back in May.

For the month of June, operating revenues of $8.2 million were about $400k ahead of the same month last year. Monthly operating costs during the same time period remained relatively stable just under $8.3 million. Year-to-date operating margins of $3.38 million remain well ahead of budgeted expectations.

As the graph below illustrates, the year-to-date kilowatt hour (kWh) sales are running about 4 percent ahead of last year. As you recall, sales last year were below budgeted expectations due to the pandemic’s impact on commercial sales. The equity ratio remains very healthy at just over 42%.

All departments have reviewed their budgets and submitted mid-year adjustments. At this month’s Board meeting, we will take some time to compare the mid-year budget to actual results. Historically, most of the adjustments are the result of timing issues between budgeted expectations and actual results. Recommended adjustments will be discussed, and staff will seek approval of the 2021 modified budget.


Fuse coordination projects continue to progress nicely with the completion of the Fritz Creek 422 project. The Hatfield 112 project is expected to be completed by mid-August.

HEA staff and contract crews working on our right-of-way (ROW) maintenance plan have been busy working in the Ninilchik and Anchor Point areas. As expected, the bark beetle infestation has created a lot of extra work for our crews and the contractor as we attempt to mitigate the additional hazards these dying trees have created. To date, we have completed about 80% of what was planned for in 2021.

The Nikiski Combined Cycle plant is currently operating under gas supply limitations due to a meter restriction and ongoing dispute with the gas supplier, Harvest. The meter restriction issue is focused on a device, installed in the 1960’s time frame, that HEA took possession of when the Agrium facility shut down. HEA staff is working with venders to secure a new, electronic device.

In addition, the dispute with Harvest is centered around Lost and Unaccounted for Fuel (LAUF). At this time, Harvest has not provided any evidence to support their position on LAUF with HEA nor any of the other large pipeline users. I anticipate this is an issue that will need to be resolved by the RCA.

On July 23, Bradley Lake Unit 1 tripped offline due to hydraulic pump cavitation. The unit was quickly restarted with no issues. In addition, reconstruction of the bridges at the Bradley Lake project are nearly complete with all the wood on-site and final repairs being finished on the railings. Lastly, the site for the new residence is cleared and the architect is finalizing the design. We anticipate the foundation being placed this fall with completion of the residence next year.

HEA’s Director of Member Relations, Keriann Baker and I are preparing for our first two of eight planned area meetings this year. The remaining meetings are planned for October. I will note that although we are planning for these events, proceeding will be dependent upon each community’s status of the COVID-19 virus.

The August area meetings are currently scheduled as follows:

  • Thursday, August 26, 2021 | Seldovia, Sea Otter Community Center, Luncheon 12-1 p.m.
  • Thursday, September 2, 2021 | Nanwalek, Nanwalek School Gym, Luncheon 12-1 p.m.

Lastly, after receiving input from members, HEA reopened the Kenai drive-up window on July 20. Our Kenai members appreciated the convenience of the drive-up window. Although it was a tough decision to close the Kenai lobby, we felt our members were better served through the drive-up. The Homer lobby continues to remain open.

ENGINEERING SERVICES | New Service Applications
The chart below plots the new service applications, for HEA contractor jobs only, and provides a comparison to the previous four years. Although we received less new service applications than in June, the traditional pattern of a reduction in applications in mid-summer remains consistent. 2021 continues to lead the previous four years with a total of 305 new applications to-date through the end of July



Battery Energy Storage System (BESS) Project
Activity at the site has been very busy as we work to install, commission, and integrate the new Megapacks into our operation. The Megapack batteries were delivered and placed the week of July 19. In addition, the area was recently black topped to improve water (rain and snow) management around the batteries. We continue to anticipate commercial operation this fall.

Strategic Services
Extensive activity is occurring on our strategic initiatives. Some of these initiatives have involved other organizations and as a result, an update will be provided in executive session. Relative to standing up an ERO, efforts to complete an application to the RCA continues (Bylaws, tariff, policies) with a target date of October 12th.  HEA staff and counsel continue to participate and advocate HEA’s interests during multiple weekly meetings.

HEA recently completed required updates designed to block ransomware attacks and as a result, averted an attack by Chinese and Russian hackers that has been targeting other utilities in the Lower 48. Please remember to update your iPad, phone, or PC to latest vendor software. Updates are important!


Legislative Updates
Alaska Governor Mike Dunleavy announced a special session that will begin on August 16. The Governor modified the call to include the proposed constitutional amendment (SJR 6HJR 7) to constitutionalize the PFD and the controversial Power Cost Equalization (PCE) program.

At the Federal level, a lot of attention has been focused around the one billion dollar plus infrastructure package being discussed in the Senate. In addition, Alaska Congressman Don Young and Rep. Annie Kuster, D-NH introduced H.R. 4375, the bipartisan Twenty-First Century Dams Act. This bill makes a $25.8 billion investment in enhancing the safety, grid resilience benefits, and power generating capacity of America’s existing dams while also providing historic funding to remove dams that are no longer necessary.

Lastly, additional legislation filed in the U.S. House of Representatives seeks to address the bark beetle epidemic facing numerous states which also poses a greater risk for wildfires. The legislation, the Active Forest Management, Wildlife Protection, and Community Protection Act, by Rep. Lauren Boebert, R-CO, authorizes the removal of hazard trees within 500 feet of electric powerlines, among other items.

Regulatory Commission of Alaska (RCA)
The Depreciation Study and associated rates submitted to the RCA for approval earlier this year were recently approved. However, in the final order the RCA is requiring HEA to submit future depreciation rates in conjunction with a rate case or a simplified rate filing (SRF).

As mentioned earlier, HEA staff has had a significant investment in resources participating in the workshops/hearings regarding the Electric Reliability Organization (ERO). As you may recall, the ERO discussion stems from the passage of SB 123 and is focused on electric reliability standards, cybersecurity standards, interconnection standards, and Railbelt integrated resource planning. The RCA issued their orders on June 29 and at the present time, the Department of Law is reviewing the orders prior to implementation. In response to the orders, Matanuska Electric Association (MEA) sent a letter to the Department of Law raising several issues with the orders. At the present time, staff is awaiting a response to the RCA’s orders.

Board of Directors’ Meeting Approvals | August 10, 2021

Regular HEA Board Meeting

  • Regular Meeting Minutes of August 10, 2021
  • Resolution 45.2021.22, Capital Credit Payment to an Estate
  • Resolution 45.2021.23, Ratification of the 2021 Modified Operating Budget
  • Board Policy 107, Organizational Planning – Periodic review completed with no new revisions.
  • Board Policy 302, Insurance – Periodic review completed with no new revisions.
  • Board Policy 308, Risk Management – Periodic review completed with no new revisions.
  • Quarterly Board & General Manager Expenses

Regular AEEC Board Meeting

  • Regular Meeting Minutes of June 8, 2021
  • Resolution 01.2021.04, Ratification of the 2021 Modified Operating Budget