October 12, 2021
SUMMARY
Good afternoon! I hope this report finds you and your family staying healthy. The seasons seemed to have transitioned rather quickly to the cooler weather, almost bypassing fall and moving into early winter with the snow we experienced in late September. I recently attended the Northwest Public Power Association’s (NWPPA) Annual Meeting in Kennewick, Washington; a CFC Board Meeting in Virginia and finally the National Rural Electric Cooperative Association (NRECA) / Cooperative Finance Corporation (CFC) Region 7 & 9 Meeting in Las Vegas. The NRECA/CFC Region 7 & 9 meeting was definitely exciting and HEA was well represented with two Directors in attendance. It was an honor to have the CFC district 9 voters elect me to represent them on the CFC Board for my final three-year term. As you are aware, HEA is a 100% CFC borrower. In addition, AEEC uses CFC and their subsidiary National Cooperative Services Corporation (NCSC), to support our transmission and generation construction work plan.
The following are brief updates on HEA’s current business activities and strategic goals. Details on many of these initiatives will be discussed during our Renewable Energy Committee meeting beginning at 10:00 a.m.
SAFETY
September was a great month with no Occupational Safety and Health Administration (OSHA) lost time or recordable incidents, however, we did experience a recordable incident in August.
As previously mentioned, the snow in late September was a great reminder that it is important we slow down on the roads (and sidewalks) as this is the season, we begin to see slips, trips and falls. Additionally, it was great timing that employees participated in the Winter Driving training last month. A complete safety summary is included in this month’s Board packet.
FINANCIAL OVERVIEW
August remains steady with operating revenue of $8.2 million and cost of electric service of $8.0 million, which consisted of about $2.4 million in fuel expenses; $2.6 million as generation and transmission expenses; and $3.0 million as distribution related expenses. Our operating margin for the month of August was just under $259,000 and our year-to-date operating margin is just over $3.8 million. From a financial perspective, HEA is in a strong financial position as we head into the winter months.
I am pleased to report the 4th quarter Cost of Power Adjustment (COPA) did not increase. Although the COPA declined slightly, I expect most residential members will not see a decrease in their monthly bill if their usage follows the historical seasonal trend of increased energy consumption this time of year due to colder weather, holiday lighting, etc.
Relative to energy sales, the year-to-date kilowatt hour (kWh) sales continue to run about 2.7 percent ahead of last year. In addition, the equity ratio continues to hold strong above last year’s numbers and ahead of budgeted expectations.
RELIABILITY
Distribution
A sincere thank you to Kenai linemen, Sam Clyde, and Jake Holthaus for organizing the 9/11 tribute in Kenai. To commemorate the day, an 18’ X 38’ American flag was hung from a bucket truck in front of the Kenai Home Depot. It was an incredible tribute.
Generation
As mentioned in August, gas supply constraints due to the 414 Meter restriction and ongoing dispute with the pipeline operator, Harvest, continued. However, temporary connections were made to allow an alternate gas feed, with accommodations from Harvest. Unfortunately, during the swap of the gas supply and the restart of the plant, the cranking diesel engine failed and forced the Nikiski Combined Cycle (NCC) plant into an emergency outage that kept the plant offline for approximately 10 days. The plant was back online in early October. HEA staff worked tirelessly on the design of the new 414 meter run and the new equipment is ordered. The Soldotna Combustion Turbine (CT) plant was brought online, as well as the Bernice Lake CT units that were operated periodically during the NCC outage. Both back-up facilities operated with no issues.
Bradley Lake Unit 2 tripped offline due to a module failure. The module was replaced, and the unit was restarted in just over an hour with no issues.
Lastly, as a side note, average September temperatures were some of the coldest we have experienced since 2004, though similar in 2015. Higher loads tended to reflect these cooler temperatures.
MEMBER/CUSTOMER SERVICES
Member Relations had a very busy September with multiple events. Sadly, one of my favorite events of the year, the Area Meetings, has been cancelled due to the current state of the ongoing pandemic. HEA continues to be mindful and respectful of our staff and members’ safety and health. The Public Relations report in the Board packet has all the exciting details about September’s events.
HEA received good news for members who received Housing Assistance Payments (HAP) between October 1, 2020, and September 30, 2021. Most members will receive supplemental payments in the amount of $790 per household. On September 30, 2021, HEA confirmed that 521 members will be receiving the supplemental payment for a total of $411,590. HEA received the pledge notices and is assigning to the appropriate member account.
HEA continues to follow the process for capturing money allocated to electric utilities in HB69. This bill allocated $7.0 million, exclusive to electric utilities. The program is administered by the Department of Commerce which has asked Alaska Energy Authority (AEA) to create a process to distribute the money. We don’t know the distribution details, but we expect payment sometime in November.
ENGINEERING SERVICES | New Service Applications
As illustrated in the chart at the end of this report, the 77 applications received in August is the highest monthly total received over the last four years. In addition, there were 53 applications received in September. The 435 applications received this year is the highest number of applications received over the same period in recent history.
LEARNING & GROWTH | INNOVATION
Battery Energy Storage System (BESS) Project
Construction at the site is complete with the exception of a few minor items. The Testing and Commissioning (T&C) Plan is on-going and is scheduled to be completed later this month. I am excited for commercial operation which is expected in late October. HEA staff is working with a local business to coordinate a ribbon cutting ceremony this fall for both the BESS and a Tesla supercharger, located at Whistle Hill in Soldotna.
Strategic Services
As mentioned earlier, details on initiatives included in HEA’s Strategic Plan will be presented by the management team in executive session during the Renewable Energy Committee meeting.
CYBER SECURITY | COMMUNICATIONS | INFORMATION TECHNOLOGIES
Cyber Security, Communications, and Information Technologies (CCIT) continues to program energy accounting and network interfaces, test data controls and research potential security risks with the BESS. We are collaborating very closely with Tesla on a mitigation plan which should be complete by the end of October.
Also, a new mobile app for both the iPhone and Android systems was recently rolled out as part of the upgrade to our “member friendly” portals. Additionally, we expect the website bill pay system upgrade to be complete by the end of November. These upgrades are required for the future expansion of an energy calculator and usage estimator for HEA’s website.
BUSINESS & COMMUNITY RELATIONSHIPS
Alaska Power Association (APA) Annual Meeting
The APA 70th Annual Meeting in Homer in August was an excellent experience. It was great to have support and attendance by our Directors, thank you. The meeting kicked off with a boat cruise to the village of Seldovia and ended with an interactive presentation on electric utility safety practices. The general sessions featured a variety of topics including carbon reduction and renewable energy, hydropower challenges and opportunities, cyber security, and grassroots political advocacy. After more than a year of virtual meetings, the members who attended were ready to reunite, reenergize and accomplish the annual business matters of the association and insurance exchange. Thank you to all HEA staff who helped make this a fabulous event.
Legislative Updates
Alaska Governor Mike Dunleavy announced a fourth special session that began on October 4. The Governor modified the call to include an act for making appropriations for a supplemental 2021 Permanent Fund Dividend for eligible Alaskans, proposed constitutional amendment (SJR 6, HJR 7) to constitutionalize the PFD and the controversial Power Cost Equalization (PCE) program, and an act relating to measures to increase state revenues.
At the Federal level, in late September a letter was mailed to the Alaska Senators and Congressman requesting support of direct payment of Investment Tax Credit (ITC) to not-for-profit electric utilities through Reconciliation via the expansion of Hydropower Opportunities. A new direct pay system for not-for-profit organizations like HEA would significantly improve the economics for new, cooperative-owned renewable energy resources.
Regulatory Commission of Alaska (RCA)
Staff continues to wait for the RCA to provide direction on a rate methodology applicable to electric vehicle charging stations. With Alaska Energy Authority (AEA) implementing their electric vehicle charging station grant program earlier this year, it would be beneficial to receive some clarity from the RCA on this issue. At this time, it is unknown when the RCA will provide some guidance.
As you have heard me mention on numerous occasions, HEA staff continues to invest significant 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 draft regulations on June 29 and at the present time, the Department of Law is still reviewing the regulations prior to implementation.
Board of Directors’ Meeting Approvals | October 12, 2021
Regular HEA Board Meeting
- Revised Regular Meeting Minutes of June 8, 2021
- Regular Meeting Minutes of August 10, 2021
- Board Policy 202, Functions of the Board of Directors – Periodic review completed with no new revisions.
- Board Policy 204, Oath of Office – Periodic review completed with no new revisions.
- Board Policy 205, Board Officers – Periodic review completed with housekeeping revisions approved.
- Board Policy 206, Board Meetings & Minutes – Periodic review completed with no new revisions.
- Board Policy 220, Director Authority; Statement and Acts of Same; Objective – Periodic review completed with no new revisions.