January 14, 2025
SUMMARY
Happy New Year! As another year has come and gone far too quickly, I hope you all enjoyed a safe & happy holiday season. The holidays often bring a brief slowdown, offering a chance to tackle year-end tasks and prepare for a fresh start in the New Year. While the downtime is always appreciated, it never feels quite long enough to really “catch up.” That said, I have no complaints - I was fortunate to enjoy a vacation with my family confident that our Cooperative is supported by a terrific team capable of handling any unexpected challenges. For that, I am grateful.
Below are brief updates on HEA’s recent business activities and progress toward our strategic goals. As always, a more detailed report will be given on the day of the meeting.
SAFETY
December was another strong month for safety at HEA, with the team achieving 74 days without an Occupational Safety and Health Administration (OSHA) recordable incident. This month's board packet includes a full safety report with additional details.
FINANCIAL OVERVIEW
Financial Update – Revenues for the month of November were $10.1 million, and the cost of service was $9.6 million, which resulted in an operating margin of just under $0.5 million. This monthly gain pushes our year-to-date operating margin to $1.6 million. Lastly, the Retail Energy Usage graph, found adjacent, reflects an average increase despite December being unseasonably warm with average temperatures that we have not seen since 2014.
The Cost of Power Adjustment (COPA) for the first quarter of 2025 decreases 11.0% from $0.08997/kWh to $0.08005/kWh. This reduction is largely attributed to greater Bradley Lake usage due to islanding. Additionally, the Small Facility Power Purchase Rate (SFPPR) declines 4.4% from $0.08935/kWh to $0.085421/kWh. HEA is also preparing to file for a decrease in the Electric Reliability Organization (ERO) Surcharge rate, which will decrease 9.4% from $0.000668/kWh to $0.000606/kWh, primarily due to overcollection versus projected budget at both the ERO and HEA.
Preliminary planning and year-end preparations are underway for the annual independent financial audit by BDO USA, LLP. Thanks to all departments for helping meet end-of-year deadlines by submitting all final 2024 costs to accounting promptly.
RELIABILITY
Generation – After months of negotiation and effort, I am pleased to announce that we have secured a gas sales contract extension with Enstar through March 2031. The contract was signed and submitted to the Regulatory Commission of Alaska (RCA) for approval, along with a Tariff Advice (TA) Letter, on December 31, 2024. This extension provides important stability as we approach the expiration of our previous contract.
Several year-end activities were successfully completed across our Generation facilities. Highlights include the completion of annual environmental testing at the Nikiski Combined Cycle (NCC), including monthly outfall samples showing no detectable copper levels, ensuring continued compliance with our permit. Additionally, NCC’s discharge permit was renewed with higher limits, resolving the Notice of Violation (NOV) with the Department of Environmental Conservation (DEC).
Other accomplishments include the implementation of Subject Matter Expert (SME) evaluations for the Electrical Safety Program, providing Document Management System (DMS) access to all Power, Fuels and Dispatch (PFD) staff, and updating the Generation/Transmission/Substation (GTS) outage scheduling form and procedure. NCC also successfully completed the annual inventory audit process, with a continued focus on improving inventory organization, storage, and control. Additionally, outage coordination and the procurement of critical spare and repair parts remain top priorities as we move forward.
Distribution/Transmission – Heavy, wet snowfall in mid-December had a significant impact on our lines in the Anchor Point, Homer, Kachemak Selo, and South Kachemak Bay areas of the HEA system. Despite the challenging conditions, our linemen safely responded to 75 outages, affecting approximately 5,000 members. Of these outages, approximately 55 were caused by heavy snow loads on the lines or trees outside the right-of-way falling into the lines. We extend our sincere appreciation to the linemen, dispatch personnel, and warehouse staff for their tireless efforts in restoring power to our members.
CUSTOMER SERVICE
Member & Public Relations – Planning for the 2025 Annual Meeting is ramping up. The meeting will be held on Thursday, May 1, 2025, at Kenai Central High School. Candidacy packets will be available at this month’s Board Meeting.
Engineering Services, New Service Applications – The chart on the next page illustrates new service applications and provides a historical comparison.
CYBER SECURITY & INFORMATION TECHNOLOGIES
Switching to encrypted messaging apps is an effective way to safeguard your personal information and conversations. Unlike traditional messaging apps, encrypted platforms use advanced technology to scramble messages, ensuring they can only be read by the intended recipient. This means that even if messages are intercepted, they remain secure and indecipherable.
Apps like Signal, WhatsApp, and Telegram offer end-to-end encryption, providing security from the moment a message is sent until it reaches the recipient’s device. These apps are easy to use and function similarly to standard messaging platforms. Making the switch is a simple step that can significantly reduce the risk of unauthorized access to your information.
BUSINESS & COMMUNITY RELATIONSHIPS
Legislative Update—The Alaska State Legislature will convene its 34th session on January 21, 2025. As previously mentioned in last month’s report, please be sure to watch for emailed updates from Alaska Power Association’s (APA) Deputy Director Michael Rovito, who will keep us appraised of all state and federal legislative activities.
In December, Governor Mike Dunleavy released his Fiscal Year 2026 budget proposals. The budget proposals will be considered by the House and Senate during the next legislative session and are sure to be modified before the end of session. The state operating budget is the only bill required to be passed each year.
- To access the proposed FY26 operating budget, visit > FY26 Operating Budget
- To access the proposed FY26 capital budget, visit > FY26 Capital Budget
- To access the FY26 proposed budgets main page with backup materials, visit > Fiscal Year 2026 Proposed Budget
Lastly, the 2025 APA State Legislative Conference will be held February 5 - 6 in Juneau. More details will be discussed during the board meeting on Tuesday.
BOARD OF DIRECTORS' MEETING APPROVALS | JANUARY 14, 2025
Regular HEA Board Meeting
- Regular Meeting Minutes of December 17, 2024
- Resolution 45.2025.01, Establishing Voting Eligibility Record Date of the 2025 Annual Meeting of the Members