On March 1, 2021, GVEA’s Fuel and Purchase Power (F&PP) charge on your electric bill will increase from $0.08172 to $0.09655 – this is an 18% change over the prior three-month period. This change will result in an increase of approximately $8.90 to the bill of a residential member using an average of 600 kWh a month. The current rate will be effective from March 1 through May 31, 2021.
While we recognize that any rate increases are frustrating to our members, GVEA has little control over the F&PP in part due to the volatility of fuel oil prices. The F&PP is a pass-through charge to members; there are no added costs or mark-up. The F&PP rate is adjusted every quarter and reflects any increases of decreases in the costs GVEA incurs or expects to incur for fuel for our generation or to purchase power. Just like the cost of fuel at the gas pump, the cost of fuel to generate power fluctuates, as does the cost to purchase power. However, members are only charged the true cost that GVEA pays to generate and/or purchase power. In addition to projecting what GVEA expects to spend on fuel and purchased power, the F&PP rate also includes a “true-up” of what GVEA projected for the period prior to the rate going into effect and what actually occurred during those months.
For this upcoming F&PP change, the “true-up” addresses events that occurred from December through February where the actual F&PP costs were higher than estimated. These increased costs were due to two primary factors:
- Higher than Projected Fuel Cost – GVEA is required to project fuel prices three months ahead of time when establishing the F&PP rate, which can be difficult given the volatility of the fuel market. During the last F&PP period, market fuel costs increased significantly causing a shortfall in the projected cost.
- Lower Production from Healy Units 1 and 2 due to Unplanned Maintenance – While GVEA tries to schedule plant maintenance at times when it can occur at the lowest cost, unplanned issues sometimes arise that require immediate attention. That occurred during the prior F&PP period when Healy Units 1 and 2 were taken offline for several days to repair the pulverizers for both units. This maintenance was performed outside of the routine scheduled maintenance period to avoid further damage to the pulverizers, which would have resulted in a more costly repair.
The costs of the fuel price increases and unplanned maintenance was further compounded by the fact that there was limited access to power for purchase from the other Railbelt utilities. Since this lower-cost purchase power was not available, power had to be generated from some of GVEA’s more expensive generating units while Healy Units 1 and 2 were offline.
Ultimately, the shortfalls from the fuel prices and maintenance during December through February resulted in GVEA’s F&PP expenses being approximately $1.9 million more than projected. These costs will be recovered, or trued-up, through the F&PP rate effective March through May.
The upcoming F&PP rate also includes estimated power costs from March through May. GVEA is projecting higher costs to generate and purchase power during these months primarily due to the following:
- Over the next three months, Healy Unit 1 and Unit 2, which are among our least-expensive sources of power, will both undergo planned maintenance. While GVEA does not usually take both Healy plants offline at the same time, the maintenance includes improvements to a joint system, which requires both plants to be offline simultaneously. In April and May, Aurora Energy, which provides GVEA with 25 MW of coal-fired generation, is also scheduled to undergo maintenance. This will be followed by scheduled maintenance for the North Pole Combined Cycle Unit in mid-May.
- Fuel costs are also expected to continue to increase based on market demand and availability during this time.
What is GVEA doing to try to keep costs low?
Please be assured that while GVEA cannot control the volatility of fuel oil pricing, we are constantly exploring ways to stabilize the F&PP rate for members. In fact, GVEA’s system checks every four seconds for the cheapest generation options available. GVEA constantly monitors these options and when cheaper generation becomes available, we switch. GVEA also works with other Railbelt utilities continuously to determine if any economy energy is available for purchase by GVEA. This economy energy can often times be cheaper than generation utilized by GVEA, because unlike GVEA, many utilities in southern Alaska have natural gas available at reasonable rates for use by their generation fleet.
We also look for alternative options to try to stabilize or reduce F&PP costs to members including:
- Levelized COPA – GVEA is currently evaluating a modification of the way our current F&PP is calculated to provide for a more levelized approach. The implementation of a levelized methodology would help provide members relief from volatile changes to F&PP rates and offer a more stable outlook for members of all rate classes. Such a change would require approval from the Regulatory Commission of Alaska, a state entity that reviews and approves any rate changes sought by GVEA.
- Renewable RFI – In January, GVEA released a Renewable Request for Information to solicit project proposals from renewable sources with the goal of ultimately replacing some of GVEA’s existing oil-fired generation. Since the cost of fuel is one of the largest driving factors in GVEA’s rates, we are looking for projects that could provide the same reliability as GVEA’s current generation at similar prices but have less reliance on fuel oil.
- Natural Gas – GVEA is constantly searching for ways to bring natural gas to Interior Alaska. GVEA has evaluated a number of proposals on natural gas, however, the biggest challenge is the economics and availability. Without the infrastructure to bring larger quantities of natural gas to the Interior, the cost and reliability of transportation become problematic. GVEA has also been evaluating purchasing sufficient quantities of natural gas to be burned in southern Alaska and sent up the Intertie for use by GVEA. GVEA recognizes the benefit that natural gas in Interior Alaska would bring to our members and we continue to look for ways to increase natural gas in GVEA’s service territory.
Please be confident that GVEA takes the cost of power seriously and realizes the impacts that these costs have on our members. GVEA understands that some members are struggling to pay their bills and that any increase in their electric bill is a concern. GVEA has options available for our members to assist, including payment plans, certain COVID related protections and the Benevolent Fund. GVEA started the Benevolent Fund in December 2020 to assist members who are experiencing financial hardship and at risk of being disconnected. For more information about this fund or to see if you qualify, please visit http://d0q.d2f.myftpupload.com/benevolent/. In addition to the options GVEA offers, Alaska Housing Rent & Utilities Relief is also currently accepting applications through March 5 for those renters who are struggling with rent and utilities due to the impacts of COVID-19. For more information about this program, please visit Alaska Housing Finance Corporation: Apply Now for Rent & Utilities Relief (ahfc.us).
Golden Valley Electric Association serves over 36,000 members, with 44,800 meters, in Interior Alaska. The Cooperative’s mission is to safely provide these members with reliable electric service, quality customer service and innovative energy solutions at fair and reasonable prices.
For additional information:
- Meadow Bailey
- (907) 451-5676