Chugach Outlet
July/August 2001, Number 193

	General Manager's Message by Gene Bjornstad Rate case update

I told you we'd keep you informed about our general rate case. Here's the latest.

Most Chugach customers are likely to see some increases as a result of the first major rate case the utility has filed in more than a decade.

At the April annual meeting, and again in the May/June Outlet, we shared the news that Chugach was planning to file a general rate case {1145871 BR} with the Regulatory Commission of Alaska that would likely result in higher rates. Chugach and other utilities had been ordered by the Commission to prepare and file rate cases to give the regulatory body an opportunity to review charges throughout the Railbelt.

Chugach filed its general rate case with the RCA on July 10.

A general rate case provides a mechanism for a full and thorough discussion of expenses, rates and the appropriate cost-sharing between different classes of customers. Chugach's last general rate case was filed in 1987. Until the mid-90s, Chugach used another mechanism to make relatively small, periodic changes to the base rates charged for demand and energy. While Chugach has not raised base rates for several years, it has continued to make regular adjustments in the fuel surcharge in response primarily to the actual costs of fuel and purchased power.

The process of filings, hearings and eventual final orders in a general rate case can stretch out over several months. It is fairly common for a Commission to approve some relatively uncontroversial rate changes early on, with the provision that the utility may have to return all or a portion at a later date. These changes are termed "interim and refundable."

Chugach has asked for interim rates and expects to have approval to implement them in September.

In its filing, Chugach asked for interim and refundable increases of 4 percent overall. Permanent increases are expected to be 6.5 percent. These increases are based on total system revenue, and do not necessarily translate into like increases for each and every customer.

Chugach has not proposed interim rate increases for all customer classes. For example, Chugach did not file for interim increases for small general service customers (usually smaller commercial accounts), street and yard lighting accounts or the City of Seward (a wholesale customer with an interruptible contract).

The remaining classes will see a 4.5 percent increase if the interim rate proposal is approved. This would mean interim increases for residential and large general service, those operating under an economic viability rates schedule, and wholesale customers Matanuska and Homer electric associations.

The proposed permanent rates Chugach filed for are higher than the proposed interim rates. If approved as filed, residential charges would go up 8.1 percent, small general service rates would fall 7.8 percent, and large general service and economic viability rates would rise 8.7 percent. There would also be increases for wholesale customers of 3.2 percent for Seward, 7 percent for HEA and 6 percent for MEA.

The three main factors driving the higher rates are increased depreciation from new capital plant, higher labor costs and the need to collect additional margins.

We'll continue to keep you informed about the rate case.