Leading rural power company declares emergency

ALEX DeMARBAN

June 05, 2008 at 8:39AM AKST

The largest utility in rural Alaska can’t afford to buy next year’s fuel and is asking the state for millions of dollars in help.

Board members with Alaska Village Electric Cooperative, which provides power in 53 Interior and Western Alaska villages, declared a “financial emergency” on May 23 because of runaway diesel fuel prices.

“We have an immediate problem on our hands,” said Meera Kohler, the cooperative’s chief executive.

AVEC spent $14 million on fuel last year.

Barges are just beginning to deliver diesel fuel to villages, and the cooperative isn’t fully certain how much it must spend.

But, based partly on crude oil prices around the $130 a barrel mark, this year’s fuel bill will cost an estimated $26 million, Kohler said.

The cooperative has some money on hand but needs help to prevent a crippling rate increase for customers who can barely pay current bills, Kohler said.

In its emergency statement, AVEC’s seven-member board offers an energy relief plan that would help utilities statewide. Under the plan, which has been sent to legislators and the governor, the state would cover about $19 million of the cooperative’s costs, Kohler said.

That’s less money than the utility would get under a $1.2 billion, one-year plan recently introduced by Gov. Sarah Palin, Kohler said.

If approved by the Legislature, Palin’s plan will give every Permanent Fund Dividend recipient a $100-per-month debit card to buy gas, heating fuel or electricity. It will provide grants to electric utilities to cut ratepayer costs by 60 percent.

The cooperative’s plan would have the state cap fuel prices for utilities statewide, including for transportation and heating fuels, with the state making up the difference.

Like the governor’s plan, lower rates for the utilities would mean lower rates for the customer. One result of the cooperative’s plan, for example, is that prices at the pump would fall.

Overall, AVEC’s plan would cost the state less than the governor’s plan, Kohler said. It would also give more relief in areas where energy is costlier, such as in many villages.

Kohler called the debit cards an “administrative nightmare.” Stores in many villages don’t accept credit cards, she said.  

The cooperative’s plan might also be easier for the Legislature to accept, she said. Some lawmakers have panned Palin’s idea as an entitlement program in the making and excessively bureaucratic.

Without any state assistance, about 7,500 AVEC customers can expect to pay about 30 percent more for their electricity next year, Kohler estimated.

AVEC’s average customer already pays three to five times what Anchorage residents pay for electricity.

“It makes my hair stand on end to think of passing those costs onto our customers,” she said.

The cooperative wants to avoid borrowing money, because interest payments would force rates that much higher, she said.

Legislators will take up the subject of energy cost relief in a special session this summer. Palin wants to introduce her plan on June 20, said her press secretary, Sharon Leighow.

Karsten Rodvik, Alaska Energy Authority spokesman, said the Palin administration is reviewing AVEC’s plan.

“It would be premature to comment on it at this time,” he said.

Officials at Aniak Light and Power, the electric company in the Western Alaska village of Aniak, haven’t seen AVEC’s plan, said Celeste Adkins, bookkeeper and secretary.

They hope the governor’s proposal passes. If not, about 215 customers in that village will likely pay twice as much for electricity next year. They now pay about three to six times what Anchorage residents pay.

“Everyone is on edge and hoping for the best and hoping that our governor will pull through,” Adkins said.

Alex DeMarban can be reached at (907) 348-2444 or (800) 770-9830, ext. 444.