Residents across the Kenai Peninsula will soon vote on whether Homer Electric Association can operate without rate oversight from the Regulatory Commission of Alaska. The utility said deregulation would save time and money and give it more local control. But it would also allow HEA’s board to raise rates as high as they want.
Brad Janorschke, general manager for Homer Electric Association, said the vote is about local control.
“Local control being giving the Homer Electric Board of Directors the ultimate say or the final authority in the direction of the cooperative, and the rates we set,” Janorschke said.
HEA began the campaign to convince its members to vote “yes” for local control in late August. The cooperative is the only power provider for most of the Kenai Peninsula, with around 23,000 members.
Under the Regulatory Commission of Alaska, or the RCA, cooperative utilities already have a lot of local control. For example, they can can raise their rates up to eight percent, not to exceed 20 percent in a three-year period.
But Janorschke said having the extra step of going before the RCA, for final approval of things like tariff changes, line extensions and more, adds an unnecessary layer of bureaucracy and expense.
“Somebody asked me the other day, ‘How much do you think you would save?’ And I said, ‘We’d save a half million a year, easy, just in staff time and attorney fees.’” Janorschke said. “And I had one of the employees I worked with who is involved in a lot of these processes — [he] looked at me and said, ‘No, it’s probably double that.’”
Janorschke said that about 80 percent of cooperatives in the Lower 48 are not regulated.
Unregulated electric cooperatives have elected boards of directors that determine policy matters and approve rates and fees.
But part of the RCA’s job is to look out for ratepayers.
That’s something Homer resident Mike O’Meara feels strongly about. He was a spokesperson for the HEA Members Forum for years. The watchdog group formed in 2009 to counter the cooperative’s efforts to introduce coal power. They were successful and the group stopped meeting regularly in 2013.
“With the issue of deregulation, I’ve started getting emails and telephone calls from people,” O’Meara said.
O’Meara is skeptical of deregulation. He says that, without the RCA, there would be no consumer protection.
“A big part of its job is making sure that ratepayers are treated fairly, that the prices that are charged are within reason, that if there are significant ratepayer complaints, the RCA can intervene,” O’Meara said.
Mike Pate, also from Homer, was on the HEA board for 22 years. But he resigned in 2009 because he says he felt he could no longer trust the administration.
He’s a strong advocate for local control, but has reservations about what HEA is pushing for.
“I will be voting against deregulation. The final reason that I resigned from the board was I did not feel comfortable with the quality, integrity of the information that the board was receiving from the administration,” Pate said.
Bob Pickett is chair of the RCA.
“This is a very important deregulation election. I would suggest it’s probably the most important deregulation election that the commission has ever been involved with,” Pickett said.
Pickett said other utilities have deregulated in Alaska. Matanuska Telephone Utility went independent earlier this year, but they have competition. HEA is a monopoly.
HEA claims regulatory operating costs could decrease with deregulation. Pickett says a rate decrease is very unlikely. He says the cooperative’s debt has grown from $172 million to more than $350 million in five years. He said that debt is having an impact on ratepayers.
“At this point, HEA has, on a per-kilowatt hour charge, the highest rates in the railbelt,” Pickett said.
Janorschke said HEA’s bylaws protect ratepayers from unreasonable rate increases. And he said members can trust the board.
KBBI: “You could raise them as high as you wanted, right?”
Janorschke: “We could. However, they respond to the members.”
HEA board members respond to the cooperative members, Janorschke says, but he says they also have another responsibility.
KBBI: “Do they have that fiduciary responsibility to their members or to the viability of the cooperative?”
Janorschke: “Um, it is the viability of the cooperative.”
The destiny of the cooperative depends on the engagement of the members. If the co-op members feel their board is not making the right decisions, they always have the option to vote them out, Janorschke said.
Informational meetings are scheduled for Kenai Peninsula communities in September and October. Ballots will be mailed out in October and must be returned within 30 days. Election results will be made public in December.
Bob Pickett, the chair of the RCA, said he plans to attend both the upcoming HEA informational meetings in Homer on Wednesday September, 28 and in Soldotna on October 10.