SUMMARY
Hello! Summer has arrived on the Kenai Peninsula, bringing longer days and plenty of activity throughout our communities. I hope you and your families had a safe and enjoyable Fourth of July. This year marked our nation's 250th Independence Day, providing an opportunity to reflect on the freedoms we enjoy, and the sacrifices made by those who came before us.
The following is a brief overview of HEA’s current business activities and strategic initiatives for June. As always, I will provide additional details and answer any questions during the board meeting.
SAFETY
We had a good month for safety. HEA experienced no recordable incidents under the Occupational Safety and Health Administration (OSHA) in June. Two minor equipment/vehicle incidents occurred during the month. Both incidents were investigated, and employees were reminded of safe work practices to help prevent similar occurrences. The full safety report is included in this month's Board packet.
FINANCIAL OVERVIEW
For the month of May, HEA received operating revenue of $10.3 million with a total cost of electric service of $9.9 million, resulting in an operating margin of $0.4 million. Year-to-date, total margins of $3.1 million are approximately $0.6 million above budget, driven by a frosty first quarter and increased industrial load. Through May, operating revenue is also ahead of budget by approximately $5.3 million, while total cost of electric service is above budget by approximately $4.5 million, largely reflecting higher purchased power costs. HEA’s financial position remains sound, with YTD Modified Debt Service Coverage (MDSC) of 1.79, up from 1.43 for the same period last year; margins and equities at 44.8% of assets; and improved liquidity ratios compared to the prior year. Overall, HEA remains in a good position as summer Operations & Maintenance (O&M) activities, like right-of-way clearing, pick up in earnest.
More good news: effective July 1, 2026, the Cost of Power Adjustment (COPA) rate decreased from 10.922 cents per kWh to 10.323 cents per kWh. This represents a 5.5% decrease, resulting in a $3.30-per-month reduction for a residential customer using 550 kWh. As a reminder, the COPA rate calculation contemplates both future cost and sales expectations and the variance between expected and actuals in prior quarters. Regarding the most recent COPA filing, HEA experienced significantly fewer hours of islanding in the second quarter of 2026 than in the first quarter. Being connected to the greater Alaska grid reduces the amount of spinning reserves HEA carries on its own and eliminates the need to run the Nikiski Combined Cycle (NCC) plant at minimum load.
Greater-than-expected sales in the first quarter reduced the per-kWh cost for all fixed-cost components of COPA, primarily Bradley Lake. The reduction in costs borne from reduced islanding conditions and greater-than-expected sales in the first two quarters helped offset the estimated (Weighted Average Cost of Gas) WACOG pricing coming into effect in the third quarter, and these savings are immediately passed on to the membership via the reduced third-quarter COPA rate.
RELIABILITY
NCC experienced a brief outage beginning June 23 due to a steam leak in the Heat Recovery Steam Generator (HRSG). Repairs were completed, the HRSG successfully passed pressure testing, and the plant returned to service on June 26. During the month, the plant's cathodic protection system was also successfully commissioned. The system helps prevent corrosion of underground piping, extending the life of critical infrastructure.
Work continues on the Repower Project. Technical specifications for the replacement turbine have been finalized. Estimates for the Soldotna Combustion Turbine (SCT) compressor project have been reviewed and submitted.
The Battle Creek Diversion was returned to service on June 1 for the summer operating season. Since startup, to maintain reliable operation crews have removed an unusually high number of sticks lodged in the diversion pipe air relief valves.
Wildfire activity near Sterling required the temporary de-energization of the Soldotna-Quartz 115-kV transmission line to allow fire crews to safely contain the Grandview Fire. The affected area was later reduced to the Sterling-Quartz segment, and the transmission line was returned to service approximately 12 hours later. No electrical facilities were damaged.
MEMBER/CUSTOMER SERVICE
ENGINEERING SERVICES, NEW SERVICE APPLICATIONS – The chart below shows new service applications to date and compares them with the previous five years.
MEMBER RELATIONS – Chief Operations Officer Rob Montgomery joined 20 Alaska Power Association (APA) members and two APA staff members 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, Rural Utilities Service, and several other federal officials who work on matters of high importance to our industry. A highlight of the trip was a dinner hosted by the Cooperative Finance Corporation.
CYBER SECURITY & INFORMATION TECHNOLOGIES
With the growing number of data breaches exposing personal information, protecting against identity theft remains an important cybersecurity practice. A credit freeze is one of the most effective ways to help prevent unauthorized accounts from being opened in an individual's name. Credit freezes are available at no cost through the three major credit reporting agencies, do not affect an individual's credit score, and can be temporarily lifted when applying for new credit.
BUSINESS & COMMUNITY RELATIONSHIPS
LEGISLATIVE UPDATE — Alaska Gov. Mike Dunleavy recently signed the FY27 operating (HB263) and capital budgets (SB 214) on June 25, 2026, while vetoing about $90 million in line items, according to reports. One notable appropriation approved is the $14,594,885 for Round 18 Renewable Energy Fund projects (enough to fund the first nine projects on the 29-project list).
Alaska Power Association (APA) – Registration is open for the 75th Annual APA and Alaska Independent Electric (AIE) meetings, hosted by Chugach Electric Association. This annual event is the state’s largest electric utility gathering, bringing together industry professionals for networking, strategic discussions, and insights into key energy issues. Set in Anchorage, 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 14, 2026
Regular HEA Board Meeting
- Regular Meeting Minutes of June 9, 2026
- Board Policy 702, New Employee Relocation Expenses - Periodic review completed, and housekeeping revisions approved.
- Board Policy 709, Jury & Witness Duty - Periodic review completed, and housekeeping revisions approved.
- Resolution 45.2026.17, Authorization for Continuation of Work on the Grant Lake Hydroelectric Project