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

By Lee Revis
Editor, Valdez Star 

Power costs downed-sized by fuel credit

Price is still high despite offset authorized by CVEA board


January 25, 2012

Valdez Star file photo

CVEA engineer John Duhamel, left, and Robert Wilkinson, CEO, in front of the large pipes outside the cogeneration plants.

The cost of power portion of January electricity bills have been softened by a 5.97 cent fuel credit the board of CVEA approved at its January 19 meeting.

The move comes after CVEA announced two cost of fuel price hikes for the months of December, 2011 and January, 2012 at 21.75 and 25.37 cents per kilowatt hour.

The recently approved credit brought the out-of-pocket costs to consumers down to 19.40 cents per kilowatt hour.

The cash to pay the credit to offset record-breaking fuel prices charged to CVEA members came from December sales of heat from the CVEA cogeneration plant located at the Petro Star refinery on Dayville Road. Half a million dollars in total was approved to provide the credit until May.

The cogeneration plant generates electricity using a near-naphtha product that is costly to buy. The heat generated by the cogeneration plant in return is sold to Petro Star as energy and generates income for CVEA. Since 2008, a portion of the fuel credits has been used to offset high cost of power charges.

Heat sales were blunted until December, 2011 and the board had not allocated a credit for bill members received last month, causing sticker shock for many consumers in the CVEA service area, which includes Valdez, Glennallen and other outlying areas.

CVEA issued a press release last week outlining a proposed change in future billing procedures that will eliminate the need to allocation of fuel credits by the board and instead automatically apply heat sales margins (profits) to offset the cost of power during the winter months when it is available.

The move comes after the completion of a rate study conducted by CVEA at the behest of the board and includes changes to how power bills are structured.

“We’re proposing a new line item on the bill” to reflect the automatic credit from heat sales, Crisp said.

Does the newly proposed rate structure mean that revenues from heat sales will automatically be used to offset the cost of power charges when heat sale margins are available?

“That is the theory, that the cost (fuel credit) will automatically be deducted,” Sharon Crisp, CVEA spokeswoman said. “If we have heat sales, those sales are going to be a credit.”

Crisp said she did not have information on what percentage of the heat sales the proposed automatic credit will be allocated to the cost of power members pay.

In its January edition of Ruralite, a publication sent to co-op members, CVEA reported that heat sales from the cogen plant totaled $20,791,658 from its opening in the year 2000 until August 31, 2011. Of that revenue, $7,659, 738 or 37 percent had been allocated as fuel credits toward members’ fuel charges on monthly bills. Another 16 percent was returned to co-op members as capital credits and $9,696,047 was spent by CVEA on “capital projects and operations.”

The proposed change in rate structures will require board approval and Crisp said meetings with co-op members will be held to explain the modifications.

In the un-credited Ruralite piece published in January, CVEA said there will be several changes to the rate structure and how it will be presented on power bills.

The base “customer charge” will remain unchanged CVEA said. Valdez residential customer charges are currently $10 a month.

When the changes are implemented – no exact timeline has been stated – the cost of power portion of current bills will no longer appear but will be replaced with two new components, the G & T charge and Fuel Charge.

Valdez Star file photo

CVEA engineer John Duhamel explains the inner-workings of the cogeneration plant in a tour from summer, 2011.

The G & T – generation and transmission charge – will cover the cost to generate and transmit power CVEA said.

The Fuel Charge will reflect the cost of fuel only and will not include the cost of hydro power from Solomon Gulch.

“When CVEA is not burning fuel to generate electricity, there will be no fuel charge,” CVEA said. “In the summer months, like July, when we are running mostly hydro, the Fuel Charge will be close to zero. In the winter months it will be higher.”

The heat credit will automatically apply to the fuel charge on member’s bills when heat sales from the cogeneration plant are made.

“Under normal generation cycles, a heat credit will be provided during the winter generating season; typically November through May,” CVEA said.


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