Setting the rules
RCA issues order mandating conditions for new Chugach Electric tariff
Alan Bailey for Petroleum News
On Sept. 25 the Regulatory Commission of Alaska issued an order spelling out the conditions that Anchorage-based Chugach Electric Association must meet when issuing a new tariff with revised rates for the utility- s customers. In July of last year the utility requested RCA approval of a new tariff that would have resulted in a 5.9% rate rise. In response the commission opened two dockets, which were subsequently combined, to investigate the tariff situation, while gathering input from various parties with interests in what was happening.
The resulting order, closing the dockets, requires Chugach Electric to file by Nov. 14 tariff sheets and other documentation that comply with the conditions set out in the order.
Chugach Electric has told Petroleum News that the utility is analyzing the order and will communicate with its members when it is clear on what it means for them.
Financial gains One important issue in determining the electricity rates is what is referred to as the target - times interest earned ratio,- or TIER, a factor that sets a target limit on the financial gains that a utility can make to cover interest on its debt. According to information discussed during the RCA hearing, Chugach Electric is currently in a relatively weak liquidity situation. Presumably, the potential to make higher gains could help alleviate that problem - the utility had requested permission to raise its target TIER from 1.55 to 1.75. However, based on evidence presented, the commission determined that the target TIER should remain at 1.55, a level at which, the commission said, Chugach Electric would be able to maintain its financial integrity.
Also the commission accepted a request by Chugach Electric that the same target TIER must apply to both the utility- s transmission system and its other operations - previously the utility had been operating with split targets. However, the utility will be able to use a separate target TIER of 2.2 for the gains from its two-thirds ownership of the Beluga River gas field. The utility obtains much of its fuel gas from the field.
ML&P acquisition Some complications in Chugach Electric- s tariff rules relate to the utility- s acquisition of Municipal Light & Power from the Municipality of Anchorage in 2020. Since the ML&P acquisition, Chugach Electric has been operating its original service area and what had been ML&P's service area under different electricity rates. The RCA now requires Chugach Electric- s new tariff to have the same rates for all of its customers, regardless of where the customers are located. The implementation of a single rate structure for all customers had been a stipulation under the RCA approval of the ML&P acquisition.
Another complication relating to the ML&P acquisition relates to payments in lieu of taxes, or PILT, a schedule of payments that Chugach Electric must make to the Municipality of Anchorage in lieu of the municipal taxes that ML&P had been required to pay. As a member owned cooperative, Chugach Electric does not have to pay municipal property taxes. The RCA now requires Chugach Electric to change the manner in which it calculates the PILT payments.
The order also requires Chugach Electric to continue the protocol, whereby there is no charge to other utilities for the use of transmission lines previously owned and operated by ML&P. On the other hand the commission declined a request from some utilities to exclude from transmission rates the operating costs of - radial- transmission lines to the Beluga and Cooper Lake power stations - these lines are not part of the backbone transmission system that carries power along the Railbelt.
The tight power pool One of the conditions set by the RCA for its approval of the ML&P purchase was that Chugach Electric and Matanuska Electric Association should form a tight power pool, to minimize electricity costs through the sharing of power from their lowest cost power generation systems. Although the two utilities have made progress in implementing the tight power pool, the arrangements have yet to be completed. As part of its order, the RCA requires Chugach Electric to file an update on the tight power pool project by Jan. 1, 2025.
The RCA also recognizes the potential for Chugach Electric to include within its tariff what is referred to as a shore power service, an arrangement whereby cruise ships and other visiting vessels would be able to obtain power from the local grid while they are docked.
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