Southeast’s public power authority will reimburse Petersburg and Wrangell for the extra cost of burning diesel for power generation. That means ratepayers won’t see any hike in rates in the near future.
The Southeast Alaska Power Agency’s board has agreed to pay out nearly $850,000 to Wrangell and Petersburg. That’s to compensate communities for extra power costs while hydro power was offline due to the region’s drought that affected Tyee and Swan Lake reservoirs.
SEAPA’s CEO Trey Acteson says the payments are about 8 percent of the power agency’s annual income.
“It also occurs in a year with one of our lowest revenues in history,” he said.
That’s because the power authority makes money on selling hydro power — burning diesel costs everybody: the agency projects it’s brought in at least $2 million less this year.
So Acteson says these kinds of reimbursements need to be a one-off.
“Obviously it’s not something we could do every year. Or it would have a financial impact on the agency, and the result would be we’d have to increase rates. If we were to do that on a regular basis,” Acteson said.
Ordinarily SEAPA has enough hydropower to meet Wrangell and Petersburg’s energy needs with surplus sold to Ketchikan. Ketchikan conventionally relies on SEAPA’s other hydro project, Swan Lake. But Ketchikan bought 32 gigawatt hours from SEAPA’s Tyee supply last summer as it struggled with low lake levels of its own.
But when the region’s drought turned out worse than expected, SEAPA’s Tyee Lake didn’t recover as quickly as managers had predicted.
SEAPA’s board admitted it had oversold power to Ketchikan, a key reason behind its decision to reimburse Wrangell and Petersburg for extra power costs.
To ensure that doesn’t happen again, the agency has approved a more conservative operations plan. It keeps 18.5 feet of water in reserve from both lakes each year as extra insurance.
Acteson says it’s a delicate dance: you need to be cautious with your supply but not by too much.
“You don’t want to get too conservative, because that does impact your overall revenues, which could also lead to a rate increase,” Acteson said. “So It’s a balance there on how you manage those resources.”
The extra reserves mean at least 7,500 megawatts won’t be sold to communities, except for emergencies. But given the uncertain outlook as Southeast grapples with drought conditions, the board has decided on this conservative approach.
In the meantime, SEAPA’s reimbursement means ratepayers in Wrangell and Petersburg are spared absorbing the extra cost of burning diesel.