December 14, 2021
SUMMARY
Good afternoon and Happy Holidays! As we enter the holiday season and another New Year, it is always a good time to look at where we have come this past year. Although this year has been challenging for us, we turned challenges (i.e., pandemic) into successes – thanks to you and the employees. Together we have reached new heights and I’m immensely proud of the work that we are doing at HEA, both through our service and by making a difference that touches many lives. I could not be more excited about what’s in store for next year, and for the opportunity to work with all of you to make it happen. In addition, a big thank you to the many employees and directors who volunteer their time and efforts within our communities throughout the year –those efforts do not go unnoticed. Again, thank you to the board and employees for your accomplishments this year and for making 2021 a great year.
The following are brief updates on HEA’s current business activities and strategic goals that have taken place over the last month.
SAFETY
Another great month to report there were no non-COVID related Occupational Safety and Health Administration (OSHA) recordable incidents in the month of November. We did however have one COVID related recordable that unfortunate, I am pleased to report they are back to work. A complete safety summary is included in this month’s Board packet.
FINANCIAL OVERVIEW
Strong financial performance continues as we head into the winter months. Energy (kWh) sales for the month of October increased significantly over the previous month. Revenues for the month of October were $9.51 million and cost of service was $8.61 million, resulting in an operating margin of almost $909,000. The strong margins for the month pushed our year-to-date operating margin to about $4.2 million, which is ahead of budgeted expectations.
The 2022 operating and capital budgets for HEA and AEEC will be presented for final review and approval during the December Board meeting. Many thanks to our employees for preparing realistic budgets and to the Board for a thorough review.
The HEA Retail Energy Usage graph below provides a comparison of the previous five years.
RELIABILITY
Distribution
Over the past few weeks, the Kenai Peninsula has experienced winter weather that included heavy snowfall and high winds. HEA’s line crews and dispatchers have been working long hours, weekends, and holidays, responding to outages…kudos to their hard work and dedication in these challenging conditions. As a reminder, for public safety reasons, the Seldovia based generators are NOT connected to the grid until HEA dispatchers are confident of the source location causing the outage. As always, for real time outage information, please visit HEA’s Outage Map on our website.
Generation
The month of November went very smoothly at the Nikiski Combined Cycle (NCC) plant. The plant operated the entire month with the alternate fuel source via the 414-proxy meter. We are actively working with an engineering firm and have reviewed their final construction drawing for the gas supply rebuild. We anticipate a project completion date of May 2022.
In regard to the winter weather, I mentioned above, we experienced the coldest average November temperatures since 2011. Due to this extended cold snap, we saw a maximum hourly load of 74.7 MW, the highest since 2017.
Energy sales to Golden Valley Electric Association continued through the month. As I have mentioned on occasion, these sales allow NCC to operate at its optimum efficiency for most of the month.
Lastly, during operational switching of the 115 kV system the Bradley Lake Hydroelectric Plant experienced an outage due to failure of the Uninterruptible Power Supply (UPS). The failed UPS system also damaged a server, damaged the backup system, and caused the phone system to fail, creating extensive networking repairs. The UPS is slated for replacement in March 2022.
MEMBER/CUSTOMER SERVICES
In true Christmas spirit, every December for the past three years, the Member Relations team has launched their HUG (Home Utility Gift) program. Members can nominate a family in need to receive one of six $100 HUG energy credits by submitting an online nomination form via the HEA website or in-person at one of the HEA offices. Two winners, one member from the north end and one member from the south end, are announced each week through December 16.
The Homer lobby recently re-opened to the public on Wednesday, December 1. The lobby hours are 9 a.m. – 4 p.m. Monday through Friday. We ask everyone to please continue to social distance in the lobby and to be mindful of HEA’s COVID-19 protocols. The Kenai lobby will remain closed to the public; however, the drive-up window remains 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.
LEARNING & GROWTH | INNOVATION
Battery Energy Storage System (BESS) Project
With continued collaboration between staff from Operations, Engineering, Cyber Security, and Power, Fuels, and Dispatch, all three Megapack groups are connected and in “heat mode” maintaining around a 90% charge. We continue to work on outstanding communication and control issues before final performance testing.
Lastly, several key staff members on the BESS Project participated in an interview by Northwest Public Power Association (NWPPA) for an article in a future publication regarding the BESS. We look forward to sharing the article with you.
Strategic Services
Work proceeds on surveying our service area for wind and solar sites where the resources and logistics can potentially provide a competitive cost of energy. Proposals for several of the most promising sites will be submitted in the next round of Alaska Energy Authority (AEA) Renewable Energy Fund (REF) grants in the hopes of securing funds to install meteorological towers. AEA recently opened the application period for grants under Round 14 of the Renewable Energy Fund. The Renewable Energy Fund provides feasibility grants for selected renewable energy projects around the state. AEA evaluates grant applications in consultation with the Renewable Energy Fund Advisory Committee before submitting project grant recommendations to the governor and legislature for inclusion in the state’s budget. Grant applications are due by 4:00 p.m. on Tuesday, January 18, 2022.
Multiple departments continue to meet and collaborate with Renewable IPP regarding the details of their proposed 20-MW solar facility on the western Kenai Peninsula, as well as continued discussions with several other wind IPPs about their offerings.
A draft Compliance Monitoring Plan has been submitted to Alaska Department of Environmental Conservation (ADEC) related to our Notice of Violation (NOV) around copper discharges. The submission of the required Corrective Action Plan awaits implementation and testing of a copper-binding agent to our water treatment scheme.
Lastly, it was a busy month giving multiple presentations on our various strategic initiatives at Accelerate Alaska, REAP, Cook Inlet Keeper, and KBBI.
CYBER SECURITY | COMMUNICATIONS | INFORMATION TECHNOLOGIES
Cyber Security, Communications, and Information Technologies (CCIT) is typically slow in November with the holidays, employees using annual leave, etc. However, this month the department saw malware issues on two machines at Bradley Lake and experienced a Hacker Foothold event.
The Hacker Foothold event on Sunday November 14th with our email systems was caused by a Microsoft vulnerability. The hacker was able to install a RAT (Remote Access Technology) on our Exchange server. Our firewall and intrusion detection system were able to block access to our email data. CCIT immediately remediated the server in a matter of hours. We were later informed that this attack was being performed by Iranian hackers and became public on November 17th as Alaska being a prime target.
BUSINESS & COMMUNITY RELATIONSHIPS
Alaska Power Association (APA)
The 2022 Alaska legislative session is set to begin January 18, 2022. Please be sure to watch for emailed updates from Alaska Power Association’s (APA) Deputy Director Michael Rovito, who will be keeping us appraised of all state and federal legislative activities. Please let Jenniffer Rosin know if you would like to join APA’s legislative email updates.
In addition, the APA Legislative Conference is scheduled for January 26-27, 2022, in Juneau, Alaska. HEA plans to host our annual Legislative Dinner and will provide more details as this popular event comes together. We look forward to another good turnout at the dinner and conference. Please let Jenniffer Rosin know if you plan to attend the APA Legislative Conference. We plan to make personal visits with Alaska Senate President Micciche, Representative Carpenter, Representative Gillham, and Representative Vance.
Legislative Updates
On the Federal level, the $1.2 trillion bi-partisan Infrastructure Investment and Jobs Act was signed into law by President Joe Biden on November 15. The infrastructure bill includes investments to modernize and upgrade the grid, including billions of dollars to develop new electric transmission lines and enhance the existing transmission system. It establishes a $2.5 billion loan program to boost the construction of new electric power transmission lines or help repair existing lines and adds $3 billion in funding to an existing program at the Department of Energy (DOE) that seeks to modernize the electric transmission and distribution systems. Other programs of note related to the electric industry included in the bill are electric vehicle infrastructure, cyber security, hydropower, wildfire mitigation and clean energy development.
Additionally, the larger $1.85 trillion “human infrastructure” reconciliation bill, known as the Build Back Better Act, was recently passed in the U.S. House of Representatives. One aspect of the legislation that may be of interest to electric cooperatives is a direct pay provision to develop new energy resources and technologies. Currently, non-profit electric cooperatives have been unable to take advantage of federal tax credits for renewable energy since they do not pay federal taxes. According to an analysis from NRECA, the House-passed version of the Build Back Better Act also provides direct pay incentives for developing electric vehicle infrastructure and a $10 billion voluntary program that would provide grants and loans to co-ops that deploy renewable energy systems, energy efficiency or carbon capture, or retire their fossil fuel power plants.
Regulatory Commission of Alaska (RCA)
As we discussed last month, the RCA recently released the order that will allow the cooperative to develop an EV inception rate that combines the demand component of commercial rates (kW) to be folded into the energy rate (i.e., kW rate) for the sale of electricity from a Direct Current Fast Charging (DCFC) or Level 3 charger. The rate will make it easier to price and therefore easier for investor/members to resell power to EV owners. The order also helps clarify the regulatory language surrounding sale and resale of electricity as well as whether a Direct Current (DC) station could be considered a public utility. HEA intends to file an inception rate and tariff clarifying language before the end of this year. We can continue our discussion on this topic during the December Board meeting under Old Business.
Announcements | Upcoming Events
Renewable Energy Committee Meeting – January 18, 2022 | Kenai Boardroom/Microsoft Teams | Meeting 10:30 a.m.
HEA Board of Directors’ Meeting – January 11, 2022 | Kenai Boardroom/Microsoft Teams | Lunch 11:30 a.m., Meeting 12:00 – 4:00 p.m.
Alaska Power Association 2022 State Legislative Conference | January 26 -27, 2022 | Juneau, Alaska
Board of Directors’ Meeting Approvals | December 14, 2021
Regular HEA Board Meeting
• Regular Meeting Minutes of November 9, 2021
• Resolution 45.2021.24, Electric Vehicle Inception Charging Rates
• Resolution 45.2021.25, Approval of the 2022 Operating Budget
• Resolution 45.2021.26, Approval of the 2022 General Plant Budget
• Resolution 45.2021.27, Approval of the 2022 Construction Work Plan Budget
• Resolution 45.2021.28, Appointment of the 2022 Annual Meeting Election Committee
• Resolution 45.2021.29, Resolution Terminating Member
• Board Policy 310, Cooperative Rate Design – Periodic review and housekeeping revisions approved.
• Board Policy 401, Material and Equipment Sales – Periodic review and housekeeping revisions approved.
• Board Policy 403, Material and Equipment Sales – Periodic review and housekeeping revisions approved.
Regular AEEC Board Meeting
• Regular Meeting Minutes of November 9, 2021
• Resolution 01.2020.05, Approval of the 2022 Operating Budget
• Resolution 01.2020.06, Approval of the 2022 Construction Work Plan Budget
• Resolution 01.2020.07, Approval of the 2022 Generation Project Budget