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Rate changes sought

Chugach is seeking to adjust both base rates and the fuel & purchased power charge in light of changing market conditions. Chugach requested the adjustments in a pair of February filings with the Regulatory Commission of Alaska. If approved for implementation simultaneously in April as Chugach asked, the decrease in the fuel & purchased charge will cancel out much of the increase in base rates.

The departure of Matanuska Electric Association after decades as a wholesale customer is the driving force behind much of the needed changes. Like Homer Electric Association a year earlier, MEA chose to build its own power plant and become self-generating when its long-term contract expired, rather than continue to buy power from Chugach. Although Chugach has been planning for the loss of the two wholesale customers for years by (among other things) adjusting depreciation schedules, cutting expenses and downsizing its work force, rate increases are still necessary to make up for the lost contribution to fixed costs.

MEA and Chugach did agree to a 3-month interim power sales agreement that provided power for MEA through March while it finished work on its new plant. Consequently, Chugach asked the RCA for permission to make the changes effective with April bills. If approved as requested, the new rates for demand and energy charges would be "interim and refundable" pending resolution of the proceeding.

As proposed, demand and energy charges would increase for both Chugach retail members and the City of Seward (which remains a wholesale customer).

MEA’s departure from the Chugach system also contributed to the request to lower the fuel & purchased power charge. Without MEA, the efficient new Southcentral Power Project will supply most of the gas-fired generation needed to serve its customers. Through the time of the interim power sales agreement, older units at the Beluga Power Plant had contributed to the generation mix, as had power Chugach purchased from some of MEA’s new units. The remaining Chugach customers will also gain a larger share of Chugach’s hydroelectric resources, which will no longer be shared with MEA.

If approved by the RCA, Chugach retail members would see their bills rise about 2 to 5 percent from the net effect of the proposed increases to demand and energy charges and the requested reduction to the fuel & purchased power charge.