February 14, 2023
SUMMARY
Good afternoon. Yeah, we made it to February! For those of you that are winter enthusiasts, I am sure you were thrilled when Punxsutawney Phil saw his shadow last week predicting a late spring and an additional 6 weeks of winter. However, for the rest of us, it is easy to remain upbeat as we have now completed January…what I would consider one of the more challenging winter months.
The following are brief updates on HEA’s current business activities and strategic goals that have taken place over the last month. As always, a more detailed report will be given on the day of the meeting.
SAFETY
Unfortunately, we did have an Occupational Safety and Health Administration (OSHA) recordable incident in January. The full safety report is included in this month’s Board packet. In addition, our year-end 2022 biannual scorecard, along with all strategic plan scorecards are included in this month’s Board packet.
FINANCIAL OVERVIEW
The HEA Finance Department has been remarkably busy with year-end closing activities. The unaudited financials are complete for both AEEC & HEA. Audit preparations are in full swing and on-site fieldwork begins on February 13, 2023. A draft audit report will be presented at the March Board meeting.
Revenues for the month of December were $10.2 million and cost of service was $10.4million, resulting in an operating margin loss of $146,000. Although, December’s retail energy usage was relatively high (see graph below), the high cost of restoration efforts due to storms resulted in the monthly loss.
HEA’s unaudited 2022 year-to-date total margins are $2.2 million, resulting in a Modified Debt Service Coverage (MDSC) of 1.34. As of December 31, 2021, HEA has an equity ratio of 45.7%.
Lastly, staff has been working hard to prepare the draft 2023 budget for Board review and consideration during Tuesday’s meeting.
RELIABILITY
Generation
HEA’s generation facilities operated well for the majority of January. Despite having a few very cold days, January ended up being the third warmest we have seen in 20 years. This warmer than normal weather results in less Bradley Lake use as loads dropped accordingly while the Nikiski Combined Cycle (NCC) generation was held to target levels which minimized monthly impact on fuel use. Generally, any increase in member load that we saw in the past couple of months disappeared with this warm weather. In addition, economy energy sales to Golden Valley Electric Association (GVEA) continued during the month of January. Unfortunately, current fuel forecasts indicate that the current firm fuel contract will only be sufficient to meet HEA needs and not off-system sales. Sales opportunities will be evaluated as the year progresses.
NCC staff continues to monitor and maintain the outfall composite sampler and processes, as the outfall copper tests continue to be unpredictable. Preliminary work will be starting to investigate the feasibility of discharging into an alternate location rather than the Cook Inlet outfall and we are hopeful this will be a viable option to raising our allowable discharge copper limits to ensure permit compliance.
Bradley Lake did experience a forced outage when one of the units tripped due to an oil pump issue and a thermal overload. After the thermal overloads were reset, the unit was returned to service.
Distribution / Transmission
The 2023 distribution clearing schedule is finalized and includes the areas around Bernice Lake in Nikiski; the Sterling Highway in Soldotna; Fritz Creek, and the Homer Spit in Homer; and south Kachemak Bay. With regards to clearing, the Community Wildfire Defense Grant is still pending approval. HEA filed jointly with the Kenai Peninsula Borough in late 2022. Lastly, the Transmission Pole Inspection Project has been completed. There are seven poles that require replacement this spring.
MEMBER | CUSTOMER SERVICE
Member Relations
The Member Services department continues to collaborate with local schools on this year’s scholarship program. Your recent decision to expand HEA’s scholarship policy to fund trade or apprenticeship scholarships in addition to continuing to award traditional academic scholarships is exciting! The updated scholarship program provides a meaningful opportunity to support students pursuing both traditional academic study and trade-based programs that better reflect the needs of our diverse student population and community. In addition, we have also made it easier for students to apply for our scholarship online by using a QR code to submit an online application. The deadline to submit scholarship applications has been extended to April 3, 2023. Lastly, the Safety Poster Contest will continue for third and fourth graders within our service area.
Keriann Baker, Director of Member Relations, and I, along with President Furlong and Director McKittrick travelled to Juneau recently for the Alaska Power Association’s annual Legislative Conference. The trip went very well and while in Juneau, we had the opportunity to visit with each of the legislators’ representing members in our service territory. As expected, the legislators appreciated keeping them up to speed on issues that impact our cooperative, including energy diversification projects, the proposed purchase of the Seward Electric System, proposed projects in South Kachemak Bay, and the Cook Inlet fuel supply issue.
Engineering Services
The chart below plots new service applications, for member jobs only, over the last five years. The 15 new service applications in January are slightly below the average number (19.3) for the previous five years.
CYBER SECURITY & INFORMATION TECHNOLOGIES
Experian, one of the three big credit reporting agencies had their systems compromised this month. Although the “bad guys” were not able to change credit reports, they were able to get personal information that would allow them to apply for credit using identity theft. The best way to protect yourself from identity theft is to freeze your credit. You may freeze your credit with Experian for free by using this link: https://www.experian.com/freeze/center.html.
BUSINESS & COMMUNITY RELATIONSHIPS
Strategic Services
Extensive activity continues on strategic initiatives. We received three applications for heat pumps that are installed and inspected or ready for inspection by HEA. In addition to the three new applications that were submitted in December of 2022, we continue to make progress on the Renewable Energy Fund (REF) Round 14 grants that were awarded to HEA early last year. Although statutorily scheduled to sunset later this year, recent comments from legislators indicate strong support for extending the program another 10 years.
Alaska State Legislature
The Alaska legislature gaveled in for the first session of the 33rd legislature in Juneau on Tuesday, January 17, 2023. Senators and representatives took their oath of office during ceremonial floor sessions.
The Senate has organized into a 17-member bipartisan majority and formally voted for Sen. Gary Stevens, R-Kodiak, to serve as senate president. The chamber also approved adoption of committee chairmanships and memberships. For a list Senate committee chairs and the Senate Majority’s priorities, click: NEWS: Senate Majority Announces Committee Chairs and Priorities for the 33rd Alaska State Legislature (alaskasenate.org).
In addition, on January 18, 2023, the Alaska House of Representatives voted 26-14 to elect Rep. Cathy Tilton, R-Wasilla, as Speaker of the House. Tilton was the minority leader during the previous legislature.
Alaska Power Association (APA)
APA Legislative Conference – Alaska’s electric utilities showed up in force to Juneau for the annual APA State Legislative Conference during the first week of February, as previously mentioned in this report. Back in person for the first time since 2020, the conference is strategically scheduled at the beginning of the legislative session so APA and electric utility members can put issues front and center as lawmakers consider priorities. Through conference panels and meetings with individual legislators, energy issues are top-of-mind and there is a recognition that electric energy is the cornerstone of Alaska’s economy.
Two legislative committees heard from Railbelt utility managers, with the hearings focused on the Railbelt electric energy system and the energy transition. The topic was heard in the Senate Resources Committee and the House Energy Committee.
In an E-flash update from APA, Senate Bill 33, the Renewable Energy Grant Fund extension is the only bill that is being tracked by APA as of now. APA heard support for the bill from legislators and expect the legislation to have its first hearing in the next couple of weeks.
Regulatory Commission of Alaska (RCA)
Railbelt Reliability Council (RRC) – The RRC docket(s) on Tariff, Surcharge and Rules are currently scheduled to run through November 2023. The RRC, and all interveners, would like to see the dockets consolidated into one for logical and cost-saving reasons and are awaiting the RCA’s response. Given that the RRC will have an open docket(s), their historic legal spend that has been approximately $40k/month will increase. As a result, the monthly surcharge proposed in a stipulated agreement is now about $25k/month to HEA as an “inception surcharge” since “interim and refundable” rates are not applicable.
Board of Directors’ Meeting Approvals | February 14, 2023
Regular HEA Board Meeting
- Regular Meeting Minutes of January 17, 2023
- Board Policy 301, Corporate Banking – Periodic review completed with housekeeping revisions approved.
- Board Policy 708, Holidays – Periodic review completed with housekeeping revisions approved.
- Resolution 45.2022.26, Appointment of General Counsel
Regular AEEC Board Meeting
- Regular Meeting Minutes of December 13, 2022