Inside the ‘titanic’ legal case that will help determine Alaska’s energy future: an analysis

Regulatory Commission of Alaska commissioners John Espindola, left, and Bob Pickett, right, perceive to grounds astatine a caller proceeding connected Chugach Electric Association’s petition to raise its energy prices by 5.5%. Nolan Oliver, a authorities administrative rule judge coordinating nan hearing, is astatine center. (Photo by Nathaniel Herz/Northern Journal)

Should Anchorage residents who devour much electricity, and usage up much of nan region’s dwindling supplies of earthy gas, person to salary a higher value to bespeak nan steeper costs of nan imported substance that will switch it?

How overmuch will developers of upwind and star projects person to salary to move nan energy they make crossed powerfulness lines they don’t own?

And really tin businesses and residents beryllium encouraged to trim their power usage and thereby hold nan request for costly state imports?

All those are questions that now must beryllium answered by nan gubernatorially appointed members of the Regulatory Commission of Alaska, pursuing nan caller conclusion of a month-long nationalist hearing. 

Their ruling will thief determine nan early of Anchorage’s power supply; nan value of energy for nan city’s residents, businesses and different users; and nan costs that developers of upwind and star farms could look to link their projects to nan grid.

The wide-ranging proceeding addressed a request by Anchorage-based Chugach Electric Association, nan state’s largest inferior and 1 of its largest buyers of earthy gas, to raise its rates for each types of customers by an mean of 5.5%. 

The proceeding, known arsenic a complaint case, involves a sprawling array of subjects connected to Chugach’s operations and its 90,000 members — including efforts to delay the impending depletion of nan region’s earthy state deposits.

That’s wherever a petition from Renewable Energy Alaska Project, aliases REAP, an defense group that intervened successful Chugach’s case, comes in.

Citing a authorities law that calls for nan “conservation of resources” successful energy generation, nan Anchorage-based defense group is making an unprecedented request: that nan commissioners unit Chugach to create a caller costs strategy for its residential customers to reward reduced consumption.

Chugach wants to complaint those customers 15 cents per kilowatt-hour of electricity, sloppy of their full use. REAP, pinch thief from nan biology rule patient Earthjustice, is asking for 2 tiers of charges. 

The first tier would complaint residential customers 13 cents per kilowatt-hour to usage up to 450 kilowatt-hours a period — astir nan aforesaid magnitude that nan median Chugach personnel family now uses.

The 2nd tier would boost rates to 17 cents per kilowatt-hour for each 1 supra 450 — an summation of astir 30%.

That increase, REAP says, would align nan 2nd tier pinch nan higher prices Chugach customers will look erstwhile nan institution fuels its powerfulness plants pinch imported liquefied earthy gas, alternatively of section supplies. REAP says nan bump successful costs would nonstop “an due value awesome to consumers.”

“The state proviso crunch will get sooner if nan committee does not beforehand conservation of state done Chugach’s rates,” Hannah Payne Foster, an Earthjustice lawyer moving pinch REAP, said successful her closing arguments astatine nan proceeding past month. “Our connection is to nonstop existent costs signals to consumers that bespeak nan existent costs of their depletion decisions.”

Chugach’s attorney, Dean Thompson, didn’t straight reside REAP’s connection successful his closing arguments, and a spokeswoman for nan utility, Julie Hasquet, declined to comment.

Chugach Electric Association Chief Executive Officer Arthur Miller, astatine halfway successful glasses, sits successful nan assemblage astatine nan nationalist hearing. (Photo by Nathaniel Herz/Northern Journal)

But successful its final written brief, revenge past week, Chugach said that REAP’s master witness, nether transverse examination, couldn’t foretell conscionable really overmuch state would beryllium saved by nan organization’s “drastic and caller recommendations.” The proposal, Chugach added, would “arbitrarily” boost prices supra costs and nonstop “signals to consumers that whitethorn not beryllium successful nan consumer’s champion interest.”

A $10,000-an-hour hearing

REAP’s connection is acold from nan only 1 that asks nan commissioners to set nan complaint summation requested by Chugach: A dozen different parties, from businesses to utilities to authorities agencies, besides intervened successful nan case.

Each is asking nan committee to set nan projected rates that Chugach wants its members to pay. 

The monthly checks that those members person to constitute to nan inferior are not solely tied to nan number of kilowatt-hours of energy each of them uses. Instead, they hinge connected analyzable formulas that disagreement up nan utility’s different costs categories — for illustration fuel, powerfulness works building and customer work — and delegate shares to different classes of members, for illustration residential customers aliases ample users for illustration hospitals and universities.

Though they person drawn small nationalist attention, nan method arguments complete those components, and really they’re divided and assigned successful nan future, person filled hundreds of pages of written grounds to nan commission.

That’s successful portion because of nan immense stakes of nan complaint case, pinch commissioners asked to determine really to apportion payments of nan astir $260 cardinal successful yearly gross that Chugach needs to operate. 

Some of Anchorage’s biggest powerfulness consumers — including the federal government, the University of Alaska Anchorage and JL Properties, a awesome commercialized existent property developer — are participating successful nan case. At nan commission’s month-long hearing, truthful galore attorneys and experts were coming that 1 of them referred to nan proceedings arsenic “titanic” and estimated they were costing nan parties, collectively, immoderate $10,000 an hour.

Several cardinal areas of conflict person emerged since Chugach initially revenge its complaint petition successful June 2023.

One is nan profit separator that nan commissioners let for Chugach, calculated utilizing a financial benchmark called “times liking earned ratio,” aliases TIER. Chugach wants to raise its TIER — a ratio expressing really overmuch nan utility’s yearly net transcend its required indebtedness payments — to 1.75 from 1.55.

Critics, for illustration JL Properties, say the TIER summation would adhd $9 cardinal to Chugach’s profit separator and isn’t needed because nan utility’s financial wellness is already sound. Chugach argues that nan higher TIER would let it to get money astatine little rates, amended respond to unexpected costs and emergencies and maximize its options arsenic it brings renewable powerfulness projects online and contends pinch nan earthy state shortage.

Another awesome disagreement is complete Chugach’s projected 19% summation successful nan complaint it charges different utilities to vessel energy crossed its transmission lines.

Chugach says that hike aligns pinch ostentation complete nan years since nan complaint past went up, and would thief screen nan costs of infrastructure Chugach acquired erstwhile it bought Anchorage’s city-owned utility in 2020.

Power lines connecting Chugach’s Beluga powerfulness works to nan remainder of nan electrical grid transverse nan Susitna River. (Photo by Nathaniel Herz/Northern Journal)

That infrastructure sits betwixt a awesome powerfulness works connected nan Kenai Peninsula that sometimes ships powerfulness done Anchorage toward Fairbanks. 

But nan city-owned inferior did not antecedently require costs from nan different utilities whose energy traveled crossed its lines.That’s 1 of nan objections that those different utilities, including Kenai Peninsula-based Homer Electric Association and Fairbanks-based Golden Valley Electric Association, are making to Chugach’s projected boost successful transmission charges. 

The different utilities besides reason that higher transmission rates will discourage building of large-scale renewable powerfulness projects, which would look steeper costs to vessel their energy done Chugach’s territory.

REAP targets “gas proviso crunch”

The connection from REAP, meanwhile, is astir focused connected Chugach’s residential customers, arsenic is a proposal from nan Alaska branch of the AARP, a group that advocates for nan interests of Americans complete 50 years old.

Broadly, nan 2 organizations want Chugach’s rates to beryllium much reflective of nan wide magnitude of energy utilized by customers and little influenced by different elements of nan cost-setting look — a building that would springiness those customers much expertise to power nan size of their bills.

If adopted by nan commission, they say, their proposals would promote consumers to usage little earthy gas. They opportunity their proposals would besides springiness Chugach elasticity to tinker pinch per-kilowatt-hour rates to thief lucifer request pinch nan adaptable powerfulness supplies generated by upwind and star projects.

One of AARP’s arguments targets Chugach’s petition to boost its monthly flat-rate, customer work interest for its pre-existing households — those that were members earlier nan 2020 acquisition.

Those pre-existing households had been charged a level fee, sloppy of nan magnitude of powerfulness they used, of $8 a month, successful summation to their per-kilowatt-hour bills. Chugach now wants to raise those level fees to $13.68, to lucifer nan higher work fees charged to erstwhile members of nan city-owned inferior who are now Chugach customers .

The AARP’s master witness, successful his written testimony, said that connection could boost wide monthly bills arsenic overmuch arsenic 16% for nan Chugach households that devour nan slightest magnitude of power. The witness, Ron Nelson, proposes that nan level fees alternatively beryllium group astatine $10 for some sets of customers.

Both nan AARP and REAP besides target important charges successful Chugach’s existent pricing formula, and its projected caller one, that are tied to customers’ highest azygous hr of energy usage complete nan people of a year.

Those charges are intended to relationship for nan truth that utilities must build and support powerfulness plants to meet nan highest request of their full strategy — moreover if acold little powerfulness is being utilized during nan remainder of nan year. As a result, rates are often designed to delegate nan costs of maintaining plants to meet highest request to customers that lend to that request nan most.

Chugach’s earthy gas-fired Southcentral Power Project works successful Anchorage. (Photo by Nathaniel Herz/Northern Journal)

REAP argues that Chugach has agelong had much than capable generating capacity to meet highest request — and that its newest powerfulness plants were built not to meet its system’s maximum load, but to boost ratio and trim substance consumption.

As a result, REAP argues, nan request charges should beryllium reduced, since nan newest powerfulness plants weren’t built to meet nan system’s highest load. Instead, nan group says, Chugach’s rates should beryllium much tightly linked to nan wide magnitude of energy each customer consumes. That would springiness customers moreover much inducement to trim their powerfulness usage — and, consequently, Chugach’s usage of earthy gas.

“We are successful a strategy pinch important excess capacity built chiefly not to service highest demand, but to nutrient power much efficiently,” Foster, REAP’s attorney, said successful her closing arguments. “And this strategy runs chiefly connected earthy gas, for which we are facing a awesome proviso crunch wrong this decade.”

The nationalist proceeding connected Chugach’s requested complaint summation ended July 18. 

The commissioners are expected to rumor their last ruling wrong nan adjacent 2 months. Any of nan parties progressive tin entreaty nan determination to nan courts.

Nathaniel Herz welcomes tips at natherz@gmail.com or (907) 793-0312. This article was originally published in Northern Journal, a newsletter from Herz. Subscribe astatine this link.