March 19, 2024
SUMMARY
With February’s busyness behind us, let’s welcome March and hopefully, with a little luck of the Irish, we will see an early spring. Rob Montgomery and I recently participated in the National Rural Electric Cooperative Association’s (NRECA) PowerXChange, an annual gathering of co-op leaders. The meeting focused primarily on reliability and resiliency. Following the conference, my wife Sarah and I extended our travels to spend time with nearby family. I’m pleased to report that our trip was enjoyable, with favorable weather conditions. However, amidst the hustle and bustle of navigating through traffic and enduring long lines, our visit served as a reminder of the unique privileges we enjoy in Alaska. Additionally, I attended a Northwest Public Power Association (NWPPA) Board Meeting in Portland during the month.
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
Regrettably, there was one (1) Occupational Safety and Health Administration (OSHA) recordable incident in February. However, I am pleased to report that the employee involved has since returned to work in full capacity.
Throughout February, our indoor employees engaged in safety meetings focusing on office safety, while our outdoor employees in Kenai and Homer were given the opportunity to complete online Electrical Workers Training (EWT). Additionally, employees at Bradley Lake, Nikiski, Bernice Lake, and Soldotna generation sites were offered an Electrical Safety program. I commend the Safety group for their diligent efforts in providing comprehensive training initiatives. For further details, please refer to the full safety report included in this month’s Board packet.
FINANCIAL OVERVIEW
The year 2024 is off to a strong start for us, especially considering that our rate increase took effect on January 1, 2024. The rate increase, along with the cold weather, provided the cooperative favorable financial performance in January, with a monthly operating margin of $898,859, surpassing our budgetary expectation of $705,088.
Additionally, our annual independent financial audit, which was conducted in February, is nearing completion. Joy Merriner from BDO USA, LLP will present the findings of the Independent Auditor’s report on the consolidated financial statements at the upcoming Board of Directors’ meeting.
RELIABILITY
Generation – February’s weather was unpredictable, starting off very cold before warming up to the 40s and then returning to normal temperatures. Even though temperatures fluctuated, system loads and member energy demand did not necessarily reflect this normal. Loads were up significantly with the initial cold temperatures. Member demand slowly dropped as it warmed but remained higher than anticipated. On average, monthly loads were up over 2 MW despite being a relatively “normal” Heating Degree Days (HDD) month. This cold weather required close scrutiny of the gas production and transportation systems during the first few days of the month. Although we planned for potential emergencies due to the cold weather, no Railbelt generation was forced to use diesel generation as gas producers were able to meet system demands. CINGSA is still undergoing work to return to its full capabilities.
Distribution / Transmission – In February, system outages due to hazard trees on private properties outside HEA’s rights-of-way accounted for approximately half of the total outages. As we have discussed in the past, these hazard trees pose a risk of falling onto powerlines or HEA facilities and have become prevalent due to the extensive beetle kill affecting the Kenai Peninsula. Our operations personnel are actively collaborating with tree-clearing contractors to identify and remove these hazard trees with the permission of property owners. We want to inform you about this issue so that you can address any concerns or questions from neighbors, friends, or family members experiencing frequent outages.
CUSTOMER SERVICE
Engineering Services, New Service Applications – The adjacent chart illustrates new service applications since 2017. Through February, there were 37 applications for new service…about average.
Member Services – Our annual report and review of Board Policy 603, Identity Theft Red Flag Prevention is up for Board review at this month’s Board meeting. The policy was established for us to take reasonable steps to identify, detect, and prevent the theft of our members’ personal information; commonly known as Identity Theft.
CYBER SECURITY & INFORMATION TECHNOLOGIES
We are all highly suspect of phishing links in our emails but not so much with “smishing” text messages. Last month, HEA encountered a security incident involving “smishing” text messages within our Microsoft Teams environment, originating from a cell phone attempting to obtain banking information. It is crucial to remain vigilant against such threats, as unsolicited text messages, even if they seem legitimate, should never be trusted. Avoid relying on the phone number provided in these messages; instead, always contact your bank directly if you receive any suspicious account-related text messages. For a detailed example of how this scam operates, please refer to this informative video: https://www.youtube.com/watch?v=t9gChi_cvjQ
BUSINESS & COMMUNITY RELATIONSHIPS
Alaska Energy Authority – The Alaska Energy Authority (AEA) recently released its 2023 Alaska Renewable Energy Fund (REF) Impact and Evaluation Report. The report details information about the REF’s efficacy in diversifying Alaska’s energy generation portfolio through the harnessing of Alaska’s vast renewable energy resources.
AEA commissioned BW Research Partnership, an independent third-party research consultancy, to assess the economic, community, and environmental impacts of the state’s competitive renewable energy grant program, the REF. The report finds that the REF has played a significant role in supporting the development of Alaska’s renewable energy sector. To date, the fund has financed more than 100 renewable projects, primarily wind and hydroelectric, with 60 more currently under development. The program has secured more than $317 million in state funds, and successfully leveraged over $300 million in federal and local funds, with rural-community projects comprising over 80 percent of all REF awards.
Such investment has led to significant reductions in carbon-based power generation and its associated carbon emissions, such as greenhouse gas emissions and PM2.5 pollutants in Alaska. Per the report, the REF has offset approximately 85 million gallons of diesel fuel (e.g., five percent of all petroleum consumed in Alaska in 2021), 2.2 million cubic feet of natural gas, and 1,063,500 net metric tons of carbon dioxide. The report also finds that the REF program has made a significant contribution to Alaska’s overall economy with 2,931 new jobs created, $237 million in labor income, and $399 million in value added. Every dollar deployed through the REF program to date has resulted in $2.07 in benefits returned to residents and the economy.
With ongoing investment in the program, the REF continues to support Alaska’s transition to a clean energy economy and enables AEA to diversify Alaska’s energy portfolio increasing resiliency, reliability, and redundancy through the sustainable deployment of viable renewable energy sources. (Source: Alaska Energy Authority)
Alaska State Legislature – The halls of the capitol were buzzing with activity as various groups continued to meet with legislators and work on their priorities. Energy issues are chief among the conversations in the capitol, with a range of bills and ideas that could become bills circulating through the building. There are about 10 weeks left in session, which is an eon in legislative time.
Numerous bills impacting the electric utility space in Alaska had hearings in Juneau. The Senate Resources Committee held its first hearing for Senate Bill 217, which would require the Regulatory Commission of Alaska (RCA) to change the current mechanism of transmission cost recovery in the Railbelt to eliminate wheeling rates for transmitting power. The bill also extends the tax structure that electric cooperatives live under to independent power producers. The hearing in Senate Resources focused on operational topics, as well as the goals of the bill and how it could impact the future of the Railbelt electric system. To watch the hearing, visit: SB 217 Hearing (Begins at 3:43:28). For the administration’s presentation on SB 217, visit: Integrated Transmission Systems – Senate Bill 217.
Before hearing SB 217, the Senate Resources Committee heard and moved Senate Bill 243. This bill sets up a new board of directors for the Alaska Energy Authority (AEA). The bill is a response to the executive order from Gov. Mike Dunleavy that also creates a new AEA board. Many lawmakers have said that while they agree AEA needs its own board, they do not think an executive order is the right or legal way to go about it.
Lastly, the House Judiciary Committee heard House Bill 227, by Rep. George Rauscher, R-Sutton, which would make clear in statute that electric utilities are not liable when vegetation from outside the rights-of-way falls and contacts electric infrastructure. The Judiciary Committee asked numerous questions about the bill and brought up a range of issues.
Alaska Power Association (APA) – Finally, congratulations to Crystal Enkvist, Executive Director at APA, who was recently seated on the NRECA Board of Directors.
BOARD OF DIRECTORS’ MEETING APPROVALS | March 19, 2024
Regular HEA Board Meeting
- Regular Meeting Minutes of February 13, 2024
- Resolution 45.2024.01, Appointment of the Annual Meeting Election Committee
- Resolution 45.2024.02, Acceptance of the 2023 Audit Report
- Board Policy 105, Cooperative Mailings & Related Assistance – Annual review completed, and housekeeping revisions approved.
- Board Policy 603, Identity Theft Red Flag Prevention – Annual review completed, and housekeeping revisions approved.