April 11, 2023
SUMMARY
Good afternoon. Happy Easter! It is a welcome sight to see that the snow is starting to melt. It is an exceptionally busy time that’s compounded by the proposed acquisition of the City of Seward’s Electric Utility System. The staff and I have spent a lot of time over recent weeks talking to Seward residents and businesses to answer many questions about HEA and the electric utility industry. In addition, final planning is being completed for the upcoming annual meeting which is just over 3 weeks away!
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
March was another good month relative to safety. We have worked 72 days without a Lost/Restricted Time incident or an OSHA Recordable incident. The last incident occurred on January 18, 2023. We do need to watch out for ice under the snow even with the warmer springtime weather.
FINANCIAL OVERVIEW
Revenues for the month of February came in just over $9.3M. YTD revenues exceed budgeted expectations by about $634,000 and were driven by slightly colder weather than the average Heating Degree Day forecast. Total cost of service YTD also trails budgeted expectations generating YTD margins of $2M. This trend is expected to continue into March which remained snowy and cold, generating revenues, and delaying the start of the crews’ maintenance activities.
HEA’s second quarter Cost of Power Adjustment (COPA) increased from 8.073 to 8.452 cents per kWh. This 4.7% increase in the COPA rate results in an increase of $2.08 for the average residential member using 550 kWh/month. The primary reason for the increase is lower sales projections for the second quarter coupled with continued fixed payments for Bradley Lake.
The 2023 Annual Revision to the Secondary Service Credit (SSC) and Secondary Service Fee was filed on March 31st. The value of the SSC increased from $5,500 to $5,800 and is almost exclusively driven by the increase in the average cost of transformers. We expect for the commission to approve the SSC on May 15th after a 45-day review period.
HEA is again accepting Mastercard as a payment option. Mastercard was removed as an option in January 2016 to reduce the cross subsidization of credit card fees associated with a few members using Mastercard to pay on high balance accounts. The effort to re-instate this as a payment option was therefore two-fold and began with a Tariff filing effective February 2, 2023 that limited use of all credit cards to payments totaling $20,000 per member, per month as these result in the highest credit card transaction rates.
This month, the Board will be asked to consider the retirement of capital credits to its membership. Last year the Board selected a retirement of $3.58M on a FIFO basis representing a 30-year rotation and cleared all capital credits accrued prior to 1987.
RELIABILITY
Generation
Nikiski Combined Cycle (NCC) APDES permit renewal was a large focus for the month. The new application asks to modify permit limits and provides justification for these changes. Also, a summary of the APDES permit issues were provided to be passed on to the Governor.
Distribution
Switching was conducted in Homer as part of the reconductor job in the lower yard with no issues. The pole replacement job between Sterling and Soldotna has begun. Nikiski substation switch maintenance can begin in conjunction with the plant outage beginning on May 6, 2023.
MEMBER | CUSTOMER SERVICE
Annual Meeting of the Members
As a reminder, our next Annual Meeting of the Members will be held at 6:00 p.m. on Thursday, May 4, 2023, at Soldotna High School. Registration, as well as complimentary snacks and refreshments, will begin at 4:30 p.m. and the membership meeting begins at 6:00 p.m. Additional information is on our website.
Engineering Services – New Service Applications
The chart below plots new service applications, for member jobs only, since 2017. There were 37 new service applications in March which is above the recent historical average of 27.3 for this month. You will see that number of applications to date in 2023 is lagging behind the last two years.
Member Services
Review of Board Policy 216, Designation of Spokesperson and Board Policy 307, Records Retention are up for Board review at this month’s Board meeting. Board Policy 216 was established for guidelines for information contacts with the membership, public and press. Board Policy 307 was established to ensure the retention of all records created by or for the Cooperative, whether paper or electronic, that are necessary or advisable for retention for operations.
Cyber Security & Information Technologies
Last month an employee’s credit card was skimmed while using it to make a purchase on the Peninsula. Within 1 minute of it being skimmed they had 3 attempted credit card transactions from India, Scotland, & Germany. As a reminder, always sign up for transaction notifications via Text or Email. Turn off transactions for cards not used often and if offered, turn off outside U.S. transactions. Never give out your card information to someone calling or texting you. Use a credit card for online transactions and if you use a debit card check your bank statements frequently. Finally, use an RFID (Radio Frequency Identification) wallet to prevent “Bump & Tap” pickpockets now common in the Lower 48.
BUSINESS & COMMUNITY RELATIONSHIPS
Alaska State Legislature
The House Finance Committee is voting to move the Fiscal Year 2024 state operating budget (House Bill 39) from committee. The annual state operating budget is the only bill the legislature is required to pass each session. The bill is usually one of the last passed before session adjourns, and it sets the funding for state agencies and programs for the next fiscal year. The House Finance Committee considered approximately 80 amendments to the budget, most of which were not adopted. One item that directly affects several of APA’s members is the Power Cost Equalization FY24 program funding. As of today, the PCE program is fully funded at just over $48 million (this funding level is higher than past years due to the PCE monthly residential usage subsidy cap of 500 kWh per month being raised to 750 kWh per month last session).
Debate over the FY24 operating budget was scheduled to begin Monday, April 3, 2023, on the House floor. Usually, numerous amendments are offered to the bill during House debate, and the process has often run over multiple days, though sometimes the House chooses to debate and vote on the operating budget in one long day. The Alaska Power Association (APA) is continuing to monitor the course of the operating budget for items that impact our members.
The Senate Finance Committee moved House Bill 62 from committee with one major change. Instead of extending the Renewable Energy Grant Fund (REF) for 10 years, the amended bill now extends the program permanently. The change simply removes the REF program’s sunset date clause from statute. The bill moved from the committee quickly and without objection. HB 62 goes next to the Senate floor for a vote. Since the bill is now different than the version that passed the House, it will have to go back to the chamber for a concurrence vote.
A hearing scheduled for Friday, March 31st for Senate Bill 98, which would shift management of the Power Cost Equalization Endowment Fund from the Department of Revenue to the Alaska Permanent Fund Corporation. SB 98 was pulled from Senate Finance Committee’s agenda and APA was informed the bill is being changed through a committee substitute (CS).
Gov. Mike Dunleavy introduced legislation creating the Alaska Energy Independence Fund. Senate Bill 125 and House Bill 154 allows the Alaska Housing Finance Corporation (AHFC) to create a non-profit subsidiary that will provide financing for sustainable energy development projects in Alaska. SB 125 has been referred to the Senate Finance Committee, and HB 154 has been referred to the House Energy Committee and the House Finance committee.
The legislation also allows AHFC to create a non-profit subsidiary to provide direct or indirect funding and technical assistance for sustainable energy development in the state. The governor’s office says direct financing would include loans or capital provided to individuals or companies for specific sustainable energy development projects. The AHFC non-profit subsidiary would also indirectly invest by providing financial and technical assistance to new or existing public, quasi-public, or non-profit entities that finance sustainable energy development in the state.
Alaska Energy Authority
The Alaska Energy Authority’s Alaska Electric Vehicle Working Group offered a technical session on the Charging and Fueling Infrastructure (CFI) Discretionary Grant Program on Monday, April 3. The Federal Highway Administration has opened the first round of the CFI Program for applications. Up to $700 million is available nationally through this funding opportunity. Funding will be administered to build alternative fueling infrastructure, including electric vehicle charging stations in urban and rural communities. This program is distinct and separate from Alaska’s previously announced National Electric Vehicle Infrastructure Program Request for Applications. This technical session provided an opportunity to learn and ask questions about the CFI program, meet other entities who are interested in applying, and explore partnership opportunities. For more information on Alaska’s EV Infrastructure Implementation Plan, Alternative Fuel Corridors, or EVs in Alaska, email the working group at electricvehicles@akenergyauthority.org. (Source: Alaska Energy Authority)
BOARD OF DIRECTORS’ MEETING APPROVALS | April 11, 2023
Regular HEA Board Meeting
- Regular Meeting Minutes of March 21, 2023
- Resolution 45.2023.07, Retirement of Capital Credits and Capital Credits Retirement Method
- Resolution 45.2023.08, Annual Scholarship Awards
- Board Policy 216, Designated Spokespersons – Annual review completed, and housekeeping revisions approved.
- Board Policy 307, Records Retention – Annual review completed, and housekeeping revisions approved.