SUMMARY
Happy New Year. I hope everyone enjoyed the holiday season, even though 2026 began with a strong cold snap and historic winter temperatures across the Kenai Peninsula. As we look ahead to the new year, I am grateful to HEA employees and the Board for their continued dedication, and to our members for their support throughout 2025.
The following provides a snapshot of HEA’s current business activities and progress on key strategic initiatives over the past month.
SAFETY
December was another strong month for HEA’s safety record. The cooperative completed the month with 270 consecutive days without a lost-time incident. This achievement reflects HEA employees’ continued commitment to maintaining a safe and reliable work environment across all operations as we closed out 2025.
FINANCIAL OVERVIEW
FINANCIAL UPDATE – November revenues totaled just over $10.4 million, with a cost of service of $10.2 million, resulting in an operating margin of $0.23 million. This monthly gain brings HEA’s year-to-date operating margin to just under $1.5 million.
Effective January 1, 2026, HEA implemented a 4% base-rate increase to the energy and demand components for approximately 31,397 residential, 3,972 general service, 438 large general service, three industrial, and three electric-vehicle fast-charging (EVFC) members. For an average residential member using 550 kilowatt-hours (kWh), the change represents an increase of $3.77, or 2.16%, in the total monthly bill.
The adjustment reflects test-year conditions in which revenue growth has not kept pace with rising costs, including industry-specific and broader inflationary pressures, particularly related to labor. This rate change is necessary to meet HEA’s revenue requirements and maintain sufficient margins so that HEA’s financial ratios continue to satisfy lender requirements.
At the same time, the revised Cost of Power Adjustment (COPA) for the first quarter of 2026 decreased 14.8%, from $0.10937 per kWh to $0.09317 per kWh. For the average residential member using 550 kWh, this decrease is expected to reduce the monthly bill by $8.91. The lower COPA reflects a higher anticipated share of HEA’s energy supplied from Bradley Lake hydropower relative to natural gas-fueled generation. Taken together, the base rate adjustment and COPA decrease are expected to result in a net monthly bill reduction of approximately $5.14 for the average residential member during the first quarter of 2026.
Also, effective January 1, 2026, HEA updated its Electric Reliability Organization (ERO) surcharge to reflect the approved Railbelt Reliability Council (RRC) fiscal year 2026 rate, increasing the surcharge from $0.000606 per kilowatt-hour to $0.000720 per kilowatt-hour. State statutes, AS 42.05.770(3) and 3 AAC 46.420, provide that ERO activities are funded through a Regulatory Commission of Alaska-approved surcharge assessed to interconnected Load Serving Entities (LSEs), with rates reviewed annually to ensure appropriate cost recovery. The surcharge is expected to collect about $331,000 annually from HEA members.
Preparations are underway for the annual independent financial audit by HEA’s new auditing firm, Aldrich Advisors. Thank you to all departments for their support in meeting year-end deadlines by submitting the final 2025 costs to the accounting department in a timely manner.
RELIABILITY
GENERATION – Work on the Nikiski Combined Cycle (NCC) Repower Project continues, with vendors selected for the Heat Recovery Steam Generator (HRSG) Bypass Dampers and the Generator Step-up Transformer. Both contracts are currently in final negotiations.
Operationally, NCC experienced a forced outage early in December due to a failed combustion compartment cooling fan and associated breaker. During the outage, HEA’s load was temporarily supplied by the Battery Energy Storage System (BESS) and Bradley Lake. The issue was promptly resolved, and the unit was returned to service, restoring normal generation operations.
December brought unusual weather conditions, with warmer temperatures early in the month followed by a prolonged period of extreme cold. These temperature swings kept overall power demand elevated. As a result, total generation for the year ended close to 2024 levels, about 30,000 megawatt-hours above long-term historical averages.
DISTRIBUTION AND TRANSMISSION – High-wind events continued to affect HEA’s system in December. Trees outside the right-of-way (ROW) caused all three major outage events during the month. HEA maintains a robust, proactive, and targeted ROW maintenance program. In coordination with its ROW contractor, HEA continues to focus on known problem areas.
Of the 551 tree-related service orders completed in 2025, 470 involved beetle-killed trees. Members may contact HEA to request an evaluation of potential danger trees, and HEA will remove those that pose a risk to system reliability when permitted. It is important to note, however, that HEA does not have the authority to remove trees located outside of established rights-of-way without the property owner’s consent.
MEMBER/CUSTOMER SERVICE
ENGINEERING SERVICES, NEW SERVICE APPLICATIONS – The chart below shows the new service applications and provides a historical comparison.
MEMBER & PUBLIC RELATIONS – Planning is underway for HEA’s 2026 Annual Meeting, which will be held Thursday, May 7, 2026, at Soldotna High School. Candidate packets will be available at this month’s board meeting.
As noted in last month’s report, HEA’s Member Relations team began outreach in late November to help ensure member contact information is accurate ahead of the election season. The effort was intended to improve the accuracy of member records and support member engagement prior to the distribution of election materials. According to the Member Relations team, the outreach has been highly successful.
Beginning January 21, a link to request a paper ballot will be available on HEA’s website. Members who have previously elected to receive a paper ballot will continue to receive one automatically. Key upcoming dates related to the 2026 Annual Meeting include:
- Candidate packet submission deadline: March 6, 2026
- Voting eligibility cutoff date: March 9, 2026
- Unique voting credentials emailed: April 3, 2026
- Paper ballots mailed: April 3, 2026
- Deadline for ballots to be received: May 6, 2026
Additional details and updates are available on the Annual Meeting Timeline in this month’s board packet as well as on the HEA website.
CYBER SECURITY & INFORMATION TECHNOLOGIES
Ransomware activity is increasing nationwide. Members are encouraged to protect important photos and documents by maintaining offline backups, such as copies stored on an external drive that is not continuously connected to a computer. Having an offline backup can help ensure data can be recovered if files are encrypted during an attack.
BUSINESS & COMMUNITY RELATIONSHIPS
Legislative UPDATE – In December, Governor Mike Dunleavy released his proposed fiscal year 2027 state budget. The proposal will be reviewed by the Alaska House and Senate during the upcoming legislative session and is expected to change before final adoption. The operating budget is the only bill the Legislature is required to pass each year.
- To access the proposed FY26 operating budget, visit > FY27 Operating Budget
- To access the proposed FY26 capital budget, visit > FY27 Capital Budget
- To access the FY26 proposed budgets main page with backup materials, visit >
Fiscal Year 2026 Proposed Budget
The Alaska House Republican caucus announced its leadership and committee assignments for the session in a January 9 press release. Representative DeLena Johnson, R-Palmer, was confirmed as minority leader, and Representative Justin Ruffridge, R-Soldotna, was confirmed as minority whip. Both legislators will serve on the House Energy Committee, which recently lost two members following appointments to the Senate.
HEA also received an update from Representative Ky Holland’s office regarding proposed changes to House Bill 153. The legislation would reframe the state’s Renewable Portfolio Standard as a Diversified Portfolio Standard, with the goal of recognizing a broader mix of energy resources while maintaining affordability and reliability for ratepayers. While final bill language is still pending, the proposal would simplify the standard to a single target of 40% by 2036, remove financial penalties for noncompliance, and emphasize legislative intent to avoid undue economic impacts on consumers. Additional provisions would expand eligible energy sources and adjust compliance incentives. HEA will continue to monitor the legislation and evaluate potential impacts on members as the bill moves through the legislative process.
RAILBELT RELIABILITY COUNCIL (RRC) – The Railbelt Reliability Council hosted a one-hour informational webinar on January 8, 2026, providing an overview of the ERO’s work on developing a regional Integrated Resource Plan. The presentation included a progress update, opportunities for public input, and a question-and-answer session. A recording of the webinar is expected to be posted on the council’s website.
BOARD OF DIRECTORS’ MEETING APPROVALS | JANUARY 20, 2026
Regular HEA Board Meeting
- Regular Meeting Minutes of December 9, 2025