HEA answers questions on withdraw from RCA regulation

Editor’s note: This story has been changed to correct the dates of election events.

Homer Electric Association’s 22,892 members will decide whether their cooperative’s pricing practices will continue to be overseen by the Regulatory Commission of Alaska (RCA), the state agency that regulates public utilities.

HEA mailed out the first ballots of its deregulation election on October 5, and has since hosted public meetings on the question, most recently at the Kenai Visitor Center on Sept. 29. Ballots are mailed alongside members’ bills, and are due 30 days after being recieved. The last ballots will be mailed October 28.

If HEA withdraws from RCA oversight, its elected nine-member board will be able to make metering, billing, and budgetary decisions without the approval of the five regulatory commissioners, appointed by the governor to oversee utility practices statewide. The RCA will finish collecting ballots in HEA’s deregulation election on November 27 and the results will be announced in December 2016. Fifteen percent of HEA’s membership must participate for the election to be official.

In the meantime, HEA has distributed pro-deregulation material in its monthly newsletter, the Kilowatt Courier, and HEA officials including general manager Brad Janorschke have made public appearances promoting it. Janorschke has said regulatory expenses cost HEA about $340,000 a year, which is distributed among members as a charge equal to about $4.55 annually for the average HEA customer.

Others have opposed HEA’s withdraw from the RCA, such as RCA chairman Robert Pickettt, who spoke alongside Janorschke at the Sept. 29 meeting. One of the many questions in the ongoing debate is terminology: Pickettt used the term “deregulation,” while Janorschke and other HEA officials call the vote a decision on “local control,” stating that HEA’s charges will still be regulated, though by its board rather than the RCA.

Alaska statute allows RCA-regulated utilities and cooperatives to withdraw from its oversight with a majority vote of their members or subscribers. According to the September 2016 issue of the Kilowatt Courier, 56 percent of Alaska’s 129 electrical utilities are unregulated by the RCA. According to the Regulatory Commission’s website, there have been 75 deregulation elections held by electrical, communications, and sanitation companies and cooperatives since 1975, 47 of them successful. Utilities that earn less than $500,000 per year are automatically exempt from RCA regulation.

Janorschke cited the Kodiak Electric Association (KEA) as an example in which deregulation helped a utility achieve a goal, namely renewable energy construction. KEA’s members voted to deregulate in 2004, after two unsuccessful attempts in 1991 and 1994. Following deregulation, KEA has created a 100 percent renewable power grid, and Janorschke said Kodiak’s manager had recently told him deregulation was — in Janorschke’s words — the “most important strategic milestone” in achieving that goal in a timely manner.

HEA is also pursuing renewable power projects, including a prospective small-scale hydroelectric facility at Moose Pass’s Grant Lake and a landfill gas installation planned with the Kenai Peninsula Borough.

Unlike Kodiak, the Kenai Peninsula is not an island, and HEA’s infrastructure is not an isolated grid. Rather, it belongs to the 500-mile long region known as the Railbelt, which stretches from Homer to Fairbanks and is served by five electric utilities with interconnected transmission lines.

Pickett said that HEA’s deregulation would make it both the largest cooperative to deregulate in Alaska, as well as the only deregulated utility in the Railbelt.

Janorschke said two other Railbelt utilities, which he declined to name, were also considering deregulating if the results of HEA’s election are favorable.

Kate Blair, Government and Public Affairs Manager of Tesoro Corporation — whose Nikiski petroleum refinery is one of HEA’s industrial power consumers and has in the past made arguments in HEA rate cases before the RCA — said she was concerned with the fact that HEA’s withdrawal from RCA regulation would leave the Alaska Superior Court as the only recourse in disputes between the HEA board and members.

“Tesoro has used the RCA as a mediator before in rate cases, and it’s very nice to have that checks and balances system between the rate HEA has set and the rate Tesoro thinks is fair,” Blair said. “Our fear as a commercial customer is that without that oversight process, then we could appeal to the (HEA) board, but ultimately those decisions would have to go through potentially a very costly and lengthy superior court case. So Tesoro’s position on this is that we will be voting no.”

Attorney Rick Baldwin, who said he had served as a counsel for the HEA Board for about 35 years, said he could think of two times when customers had brought complaints against HEA before the RCA. Janorschke, who has been with HEA since 2004, said that in his career he’d seen only one dispute where a non-industrial customer went to court. The issue was right-of-way clearing, he said, rather than pricing.

Later in a question and answer session, Nikiski resident Ben Carpenter asked about the cost of superior court litigation versus RCA dispute.

“Do we expect that solving our problems through the superior court only — with no RCA involvement — is going to be more or less expensive than it is to use the RCA to solve our problems?” Carpenter asked.

Baldwin answered speculatively.

“I would say that the difference would be negligible between the two, whether it’s resolved before the RCA or litigated before the superior court,” he said.

Janorschke will be making another public presentation regarding the deregulation proposal at noon on Oct. 19 at the Kenai Visitor’s Center.

 

Reach Ben Boettger at ben.boettger@peninsulaclarion.com.

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