The Valdez Star - Serving Prince William Sound and Copper River Basin

By Lee Revis
Editor, Valdez Star 

Power costs to rise another 16 percent

CVEA announced increases to fuel charges for members

 


CVEA members will be slapped with yet another increase in their monthly Cost of Power portion of electricity bills next month.

The member owned electric co-op announced fuel cost increases for December bill are an unprecedented 21. 75 cents a kilowatt hour, a sharp increase to November’s 18.66 cents a kilowatt hour. Consumers can expect an even larger increase on January bills, which will see a kilowatt cost of power charge of 25.37 cents.

A press release issued by Copper Valley Electric Association last week said the price increase will be aggravated by the lack of fuel credits toward the cost of power that the board had allotted to members the past three years.

The Valdez Star emailed questions regarding the surprise increase to CVEA spokeswoman Sharon Crisp.

Q: Can you please explain in detail what it means when the press release says there was no fuel credit in 2011?

A: In 2008, CVEA created the Residential Fuel Cost Assistance Credit (RFCAC) to help offset the high cost of fuel and was able to provide a fuel credit per/kWh on member's electric bills. Available margins, primarily from heat sales to Petro Star, have been used to fund the RFCAC. Since that time, each year, in November, the Board of Directors reviews the Cooperative's financial position to determine if we have the resources to offer the credit. A credit was given in 2008, 2009, and 2010 and began each of those years on the November bill. In 2011, after review of CVEA's financial position, it was determined that the Cooperative was unable to offer the credit. Members received no credit/kWh on their November or December bills.

Q: Why were "margins (from heat sales at the cogeneration plant) were projected to come in significantly under budget."

A: Margins for the year were projected to come in under budget, primarily due to inconsistent heat sales to Petro Star in 2011. This meant that margins needed to fund the RFCAC (fuel credit) were not available.

Q: Please explain "Several factors affected this outcome including "the planned transition to new rate schedules”"

Please explain in detail what the "new rate schedules" are, especially in words our readers understand.

A: As discussed in previous meetings and literature, CVEA has jump started the rate study previously put on hold. The specific goal of this rate study is to design a rate that covers our costs and allows us to use a majority of the heat revenue as a credit to offset the fuel cost component on member bills. When we combine all the factors, the overall impact is minor at current fuel prices; however, there are two significant changes:

How we will use heat revenue and that the components on member bills will be changing. Please check out the article in the January issue of Ruralite for additional details.

Q: Why were heat sales to Petro Star less than projected?

A: There were several issues at the Cogeneration Plant in 2011, causing operations to shut down. When the plant is not generating electricity, it is also not generating heat to be sold.

Q: Why were members not informed earlier that there would be no fuel credit?

Valdez Star archive photo

Engineer John Duhamel explains how portions of CVEA’s cogeneration plant creates electricity and heat. The heat is then sold to Petro Star refinery, where the cogeneration plant is located.

A: The fuel credit is not a guarantee, nor should it be expected from year to year. However, we recognize that the absence of the credit caused a significant variance in the cost of power between 2010 and 2011. We regret that we didn't notify the members, in advance, to expect this.

Q: How much fuel credit would members see if CVEA did not have a "need for a strong financial position as CVEA prepares to finance the Allison Creek Hydroelectric project?"

A: The question cannot really be answered the way you're asking it. The need to have a strong financial position is just one piece of the financial puzzle. The decision to not provide the fuel credit was made based on the combination of factors mentioned, that just being one of them. If any one of the factors had been different in 2011, the outcome may have been different.

I can tell you that, at this time, with our current position, we plan to ask the Board to provide a credit in the 5 cent/kWh range for the months of

January-April.

 

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