Drought continues to impact rates. Click to read more.
Customer bills will increase for April, May and June of 2019.
In December, we alerted customers that abnormally low rainfall and the resulting low reservoir levels would temporarily increase bills from January through at least June. That is still the case, and because reservoir conditions have worsened since December, there will be an increase of just under 1¢ per kWh in the 2nd quarter COPA (affecting bills in April, May and June).
Each quarter our Cost of Power Adjustment (COPA) is calculated and submitted to the Regulatory Commission of Alaska.
The average residential customer using 850 kWh a month can expect to see an increase of $7.72 to their bill as compared to the first quarter (Jan – Mar).
This increase is temporary. Once reservoir levels recover, we will again sell surplus energy to our interruptible customers, which will reinstate a reduction/credit to firm customer bills. Our COPA was a credit from January 2014 through December 2018 (five full years) due to sales to interruptible customers.
A little more about how this happened:
Our primary power sources are hydroelectric. When we get a normal amount of rain and snow, we can serve all firm and non-firm (interruptible) customers in our service area with existing hydro projects.
The system is designed so that, in years with normal precipitation, our interruptible customers share the cost of our system with our firm customers. Energy sales to interruptible customers reduce the amount firm customers pay each month.
In times with extended periods of below-average rain and snow – like the one we are in now -- our system is dedicated to our firm customers, which means firm customers pay the full cost without any discount.
How dry are we?
Drought conditions that began in Southeast Alaska in 2018 and persist in the current period have resulted in significantly lower precipitation at Snettisham (our main reservoir) and have caused us to stop making surplus energy available to interruptible customers.
In a normal water year, precipitation at Snettisham is 172.37 inches. The 2018 water year delivered only 135.52 inches to Snettisham, which is 79% of normal.
For the current water year to date (October to the end of February), normal precipitation is 90.48 inches; however, Snettisham has only seen 79.16 inches.
Low precipitation in 2018 left reservoirs lower than normal, and now that the current water year is also below normal, we have not made up the 2018 deficit.
Are we burning diesel?
No, we are not.
Why don’t we just build another hydro plant so this doesn’t happen in the future?
The short answer is that doing so would raise rates all the time, rather than just having rates increase during years with low precipitation.
Here’s the long answer:
Utilities work hard to balance generation capability with how much energy is needed in the community. AEL&P can meet all firm and non-firm (interruptible) customer needs in an average water year with our existing projects, so if we built another hydro project, in most years we would end up with much more energy than we need. The problem with this is that the project costs the same amount no matter how much energy is used. For example, if we can only sell half the energy we generate, the cost per unit is double what it would be if we were able to sell all the energy. On the other hand, if you don’t have enough hydro generation, then you risk needing significant diesel generation, especially in low water years.
In Juneau’s case, adding a hydro facility now to meet interruptible loads would add hundreds of thousands (and possibly millions) of dollars in additional costs each year. This would increase electric rates for everyone because we would not be able to sell any of that additional energy in most years. If we had built a new project in 2014 to prepare for a low water year, none of the energy from that additional facility would have been needed during the last 5 years. And only a fraction of it would have been needed in the last 6 months.
If Juneau’s electrical system was interconnected to a grid, like you see down south, then building more hydro to be prepared for a dry year might make more sense because we could sell the extra energy to customers outside of our community. But in our isolated system that isn’t connected to the grid, it would be economically damaging to our community if we built more than we can sell.
As a result of careful resource planning, interruptible loads, and responsible stewardship, AEL&P’s residential rates are the lowest among regulated utilities in Alaska, and lower than the national average. In addition, over the last five years, interruptible sales reduced the amount the average residential customer paid each month by $29.50.
We understand the impact that higher rates can have on our customers. Please give us a call at 780.2222 to speak with our energy specialist about ways to lower your usage and reduce your bill, or to speak with our credit counselor.