July 8, 2025
SUMMARY
Hello! Just like that, June has come and gone – and it was a full month. Travel and meetings kept us busy, including the Alaska Sustainable Energy Conference and Railbelt Transmission Organization (RTO) meetings in Anchorage, the Alaska Power Association (APA) Federal Legislative Conference in Washington, D.C., and the Cooperative Finance Corporation (CFC) Forum in New York.
With summer in full swing and the Kenai Peninsula alive with activity, it’s a great time to make the most of the season. I also want to wish you a safe and enjoyable Fourth of July, celebrating with family, friends, and a little sunshine. The holiday is a meaningful reminder of the freedoms we enjoy—and the sacrifices that made them possible.
Below are updates on HEA’s current projects and strategic initiatives.
SAFETY
We had a good month for safety. HEA experienced no recordable incidents under the Occupational Safety and Health Administration (OSHA) in June. The full safety report is included in this month’s Board packet.
FINANCIAL OVERVIEW – 
For the month of May, our operating revenue stands at $9.44 million, with a total cost of electric service of $10.05 million, resulting in an operating margin loss of $0.61 million. This reflects the seasonal pattern of decreased energy sales in the warmer months compared to increased spending on summer maintenance activities. Our healthy year-to-date operating margins of $1.03 million remain ahead of budget expectations by $0.266 million.
The Cost of Power Adjustment (COPA) rate increased to 10.7 cents per kilowatt-hour, effective July 1. This quarter, the cost of gas went up significantly due to changes in market pricing and contract rates. Additional upward pressure on this rate included the annual update to Bradley Lake utility contributions and changes related to a large industrial member’s new contract rate structure. These costs are passed through directly to members—HEA does not mark-up fuel or purchase power costs—and we understand how even small increases can affect household budgets. We remain committed to keeping rates as stable as possible and will continue to work on managing costs while providing reliable service.
RELIABILITY
Generation – As of June 18, ENSTAR firmed up 5,000 Mcf per day under HEA’s previously interruptible gas contract. At the same time, ENSTAR’s proposed pricing changes remain under review by the Regulatory Commission of Alaska (RCA), creating some uncertainty around billing. HEA continues to track these developments and adjust planning as needed.
June brought cooler-than-average temperatures, resulting in a decline in demand across most of our service territory. However, overall system demand increased significantly due to issues at the Marathon Refinery. Following the loss of its cogeneration units in April and June, the refinery has been dependent on HEA’s generation, adding 8 to 9 megawatts of additional load. One unit is expected to return in July, and the other may be back online by September.
The Nikiski Combined Cycle (NCC) plant operated reliably throughout June. Base generation increased from 55 MW to 58 MW to help conserve hydro resources at Bradley Lake, particularly in response to the increased refinery load.
Looking ahead, several important maintenance and capital projects are planned at NCC. A plant outage is scheduled for mid-August to repair an oil leak on the T3 transformer. Major work planned for 2027 includes a combustion turbine hot gas path inspection and generator rewind.
At Bradley Lake, the new water year began on June 1. HEA carried forward approximately 2,100 MWh of energy—about 3.4% of our total allocation. This low carryover reflects efficient water use. In comparison, other Railbelt utilities carried forward significantly more energy and could face losses if water spills are required later in the season.
Work also continues on Bradley Lake Unit #2. A new main generator breaker was installed, but mechanical differences between the new equipment and the original 40-year-old breaker prevented successful synchronization. A contractor is developing a solution, and an additional outage will be required to complete the installation.
As mentioned in last month’s report, the new 1 MW generator for Seldovia has been delivered to the Homer Spit and is awaiting final transport and installation. The project team developed a revised foundation design, resulting in more than $400,000 in savings on project costs. The installation is expected to proceed once the modified design is fully approved.
On June 17, HEA hosted a tour of the Soldotna Generation Plant and Battery Energy Storage System (BESS) for staff from the Alaska Energy Authority and Federal Energy Regulatory Commission (FERC) Commissioner Judy Chang. A second tour was held on June 30 for members of Senator Murkowski’s staff.
Distribution/Transmission – Right-of-way (ROW) clearing plays a critical role in improving reliability and reducing outage risks. It allows crews safe, timely access during storms and helps limit the impact of trees falling into power lines. The ongoing spruce bark beetle outbreak has weakened large areas of trees throughout the northern part of our service territory, increasing the number of hazard trees—many of which are located just outside the ROW and can fall unexpectedly onto utility lines.
Clearing is currently underway near the Soldotna Airport and along Kalifornsky Beach Road to the Central Emergency Services fire station, with about 45% of the work complete. Additional clearing in South Kachemak Bay—funded by the Community Wildfire Defense Grant—is also progressing well, with 90% of road-accessible areas cleared. This work focuses on wildfire risk reduction and improving access to critical infrastructure, including the Homer Spit.
Thanks to dry weather in early June, the Pole Inspection Transmission Project was completed ahead of schedule. Over five days, 172 poles were inspected from Fritz Creek to the Bradley Junction. All poles were found to be in good condition, requiring no repairs.
CUSTOMER SERVICE | 
Engineering Services, New Service Applications – The chart adjacent shows new service applications to date and provides a comparison to the previous five years.
Member Services – Chief Strategy Officer Keriann Baker recently joined 12 Alaska Power Association (APA) members and two APA staff for two-and-a-half busy days in Washington, D.C. The group advocated for key issues impacting Alaska’s electric utilities and received updates on several federal energy programs. While in D.C., attendees met with members of the Alaska Congressional Delegation and their energy staff, as well as senior officials from the Federal Energy Regulatory Commission, the Department of Energy, and the Department of Agriculture. They also met with policy representatives from national trade associations. A highlight of the trip was a dinner hosted by the Cooperative Finance Corporation at The Capital Grille.
CYBER SECURITY & INFORMATION TECHNOLOGIES
With supply chain attacks on the rise, it’s more important than ever to vet third-party vendors carefully. Ensure your vendors follow strong cybersecurity practices and conduct regular security audits. Taking these steps can help reduce the risk of potential threats entering through outside partners.
BUSINESS & COMMUNITY RELATIONSHIPS
Legislative Update — Federal Legislation: H.R. 1, “One Big Beautiful Bill” – On July 3, 2025, the U.S. House passed the Senate’s updated version of H.R. 1—commonly referred to as the “One Big Beautiful Bill” – by a 218-214 vote primarily along party lines. This budget reconciliation bill includes significant proposed changes to clean energy tax credits created under the Inflation Reduction Act (IRA).
The updated version includes the Senate’s updates that were passed on July 1, 2025, and maintains provisions that scale back eligibility timelines for the 45Y production tax credit and 48E investment tax credit. Under the current text:
- Wind and solar projects must be placed in service by the end of 2027 to qualify for the tax credits, tightening earlier proposals that offered more flexible construction timelines.
- Nuclear, geothermal, and hydropower projects retain eligibility if construction begins by 2033.
- The bill removes the “placed in service by” requirement for these technologies, focusing instead on construction start dates.
The latest version of the bill can be found here: Latest Version of “One Big Beautiful Bill”.
Railbelt Transmission Organization (RTO) – RTO development efforts intensified in June in preparation for the upcoming July 1 filing deadline. Focus areas include edits to the Open Access Transmission Tariff (OATT), treatment of grandfathered agreements, and the allocation of the Annual Transmission Revenue Requirement (ATRR). These discussions remain a high priority as we continue to work with other Railbelt utilities to finalize the RTO framework.
Alaska Power Association – Registration is now open for the 74th Annual APA and Alaska Independent Electric (AIE) meetings, hosted by Cordova Electric Cooperative. This annual event is the state’s largest electric utility gathering and brings together industry professionals for networking, strategic discussion, and insight into key energy issues. Set in the scenic coastal town of Cordova, this year’s conference offers a terrific opportunity to connect with peers and shape the future of Alaska’s utility landscape. If you’d like to attend, please contact your Board President.
BOARD OF DIRECTORS’ MEETING APPROVALS | JULY 8, 2025
Regular HEA Board Meeting
- Regular Meeting Minutes of June 10, 2025
- Board Policy 103, Nepotism – Periodic review completed, and rescission approved.
- Board Policy 706, Employee Training – Periodic review completed, and housekeeping revisions approved.