HEA directors look at regulated future

Editor’s note: This story has been updated to add the amount HEA spent on the deregulation campaign. 

After Homer Electric Association failed to deregulate, with election results released Tuesday showing 70 percent in favor of remaining supervised by the Regulatory Commission of Alaska, HEA directors said the cooperative will continue with its status quo.

HEA’s nine member-elected directors unanimously voted to hold the deregulation election in their April 12 meeting, according to meeting minutes. The outcome showed that 4,854 members — 70 percent of the voters — opted for the cooperative to remain regulated and 2,042 voted to deregulate. At least one HEA director found the numbers unexpected.

“I’m surprised that many of the members didn’t want us to save them money that way,” said HEA Director Bill Fry. “It was one tool that we could have used to reduce rates. Ninety-nine percent of the people I talk to, that’s all they care about is rates. … The only reason I could see to vote against that was if you don’t trust your board.”

On the bright side, Fry added that he was impressed with the voting turnout. Of HEA’s 22,892 members, 7,271 returned ballots.

“I think it’s awesome that we got so many votes,” Fry said. “Thirty percent of the members voting — that’s good. That’s way more than we have for the annual meeting or for the directors’ election. Seems like 700 or 800 votes gets you elected (as a director).”

Dick Waisanen, president of the board, said HEA had made the deregulation bid mainly for financial reasons. He cited one regulatory dispute, which has since grown into an ongoing Alaska Supreme Court case, over the cost for HEA of transmitting power on behalf of other utilities from the Bradley Lake Hydroelectric power plant on the south side of Kachemak Bay. In previous documents related to the case, HEA officials wrote that the cooperative is losing about $1 million a year by doing so, a number the other Railbelt utilities using Bradley Lake power dispute.

“That was one of the reasons we tried to get HEA deregulated, because it would then be easier for us to justify this cost to the other utilities, and they’d have to take us to court in order to deny it, and we could get a decision a little faster than we’ve been getting with our present deal,” Waisanen said. “This has been going on since late 2013 and we have no resolution for it.”

HEA hired marketing consultant group Strategies 360 to help plan the deregulation campaign — a decision made by HEA administrators rather than the Board of Directors, according to an email from HEA Communications Director Melissa Carlin.

“It is the responsibility of the staff, not the Board of Directors, to develop and implement operational and strategic initiatives,” Carlin wrote.

Strategies 360 worked for HEA from late spring until Oct. 31, and presented a marketing plan to the HEA Directors at their July 12 meeting. Waisanen said Strategies 360 had been hired for $30,000.

At the HEA Board of Directors meeting on Dec. 13, Nikiski resident Peter McKay — a public critic of the deregulation campaign — requested that the directors compile and release a report on the expense of the deregulation campaign, including the consultants, extra staff time, and the cost of statutorily-required public informational meetings.

HEA Director of Member Relations Bruce Shelley wrote in an email that HEA spent approximately $98,000 in promotion, ballots and postage during the deregulation campaign. HEA Board of Directors Vice President Dan Chay said the expenditures were made with the goal of reaching yearly savings of about $340,000, referring to the cost that HEA representatives have cited as the cooperative’s annual regulatory expense.

HEA’s wholly-owned subsidiary Alaska Electric Energy Cooperative — which for financing purposes has legal ownership of the cooperative’s generation and transmission infrastructure — is also in the midst of a deregulation election. HEA is the sole member of the AEEC cooperative, but whether or not that would allow AEEC to deregulate based on a single vote cast by the Board of Directors remains an open legal question. Acting on a complaint from McKay and Bob Shavelson, executive director of the conservation non-profit Cook Inletkeeper, the RCA is investigating whether law and precedent require the AEEC to send deregulation ballots to the HEA board or to the HEA members who consume the power it generates.

The AEEC deregulation is on hold, pending the RCA’s investigation of this question.

Fry called the investigation “frivolous.” He said that because HEA and AEEC deregulations would have the same practical effects, members would be likely to vote identically in both.

HEA representatives have said the director delegated to vote in the AEEC deregulation election on the board’s behalf — director Kelly Bookey — intends to follow the membership vote in the HEA deregulation. After Tuesday’s results this means both cooperatives would remain regulated.

RCA spokesperson Grace Salazar said the investigation is presently set to continue. Its most recent action was a Dec. 14 request by HEA-representing attorney Greg Stein to pause until the conclusion of the HEA deregulation, which Stein wrote “could render the issues in this proceeding moot.”

“It could get quite complicated if HEA was regulated and AEEC wasn’t,” Waisenen said. “I’ve asked our attorney about that before, and with the fact that RCA could pretty much regulate AEEC through regulating HEA, they’d still be regulated.”

Regarding the practical near-term effects of the election results, HEA director Ed Oberts said he expected few.

“Bottom line, I don’t think it will change anything other than slow us up making changes in the future,” Oberts said.

 

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

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