How Alaska regulators ignored the gas conservation program

When a major Anchorage utility asked regulators last year for permission to raise rates by 5.5%, renewable energy advocates responded with a counterproposal.

Could large residential energy users be charged even higher prices for each kilowatt of electricity to encourage conservation of Alaska’s dwindling natural gas supply?

Last week, the Alaska State Regulatory Commission issued a ruling on a broader rate increase requested by the Chugach Electric Association.

The utility says it is still studying the complex, 89-page order to understand its effects.

But for supporters who proposed a natural gas conservation program, the lesson was clear: the regulation made only one passing reference to their proposal and, they say, ignored state law that requires the commission to “promote resource conservation” when setting electricity rates ” used to generate energy.

“We don’t see any findings on how this was handled. We also have a natural gas crisis,” said Chris Rose, executive director of the Renewable Energy Alaska Project (REAP), which drafted the environmental proposal. He added: “We are still processing the order. However, our first impression is that they have not addressed a significant problem.”

REAP participated in the commission’s proceedings, known as the stakes case, with free legal assistance from the environmental law firm Earthjustice. Rose and his lawyers were scheduled to meet this week to discuss their options, which include asking the commission to reconsider the order or appealing the decision to a judge.

The commission, through spokesman Steven Jones, declined to comment, citing the possibility of an appeal.

Chugach is reviewing the commission’s order “and will contact our members once we are clear on what it means for them,” said Julie Hasquet, a spokeswoman for the utility.

While neither Chugach nor the Commission has specified how the details of the order would raise or lower the proposed 5.5% rate increase, the document does make some clear conclusions.

The Commission rejected Chugach’s proposal to increase the allowable profit margin calculated using a financial benchmark called the “interest earned ratio” (TIER). The company wanted to raise its TIER – a measure of how much a company’s annual profits exceed its required debt payments – to 1.75 from 1.55, which the commission said would raise rates by a total of $7.7 million.

In rejecting that request, the commission said the existing TIER of 1.55 allows Chugach to “maintain its financial integrity” and allows the lending company to lend money at a “reasonable cost.”

The commission also denied Chugach’s request to charge other utilities for transmitting power on transmission lines it acquired in its 2020 purchase of the Anchorage utility.

The city-owned utility did not charge other customers for transmission. The commission in its order last week said there was no evidence that Chugach purchased city assets for other utilities – concluding that they should not have been collected under the commission rate guidelines, which state that the costs should be borne by those who cause them.

Nathaniel Herz accepts tips at [email protected] or (907) 793-0312. This article was originally published in the Northern Journal, Herz’s newsletter. Subscribe on this to combine.