At Fire Island Rustic Bakeshop near downtown Anchorage, customers probably don’t make the connection between utility bills and the price of a chocolate chip cookie. But bakery owner Janis Fleischman explained electricity costs are a big factor when she looks at her balance sheets.
“A bakery uses an enormous amount of electricity,” Fleischman said. “We run all kinds of ovens and all kinds of equipment, most of which is electrical. We are manufacturing this stuff from scratch every day.”
When Fleischman heard about a recent electricity rate increase, she started to worry. She said for business owners like her, higher electricity bills can lead to tough choices.
“How do you communicate to a customer that this jump in electrical is going to really affect your bottom line — how do I do that?” Fleischman said. “It’s a hard time. I don’t really want to raise prices on people.”
Fleischman isn’t alone. Many businesses in Anchorage aren’t happy with the sudden increase in electric bills. Some are taking their case to state regulators, while others are trying more creative solutions to cut back on electricity costs.
This spring, Municipal Light & Power raised the energy charge portion of customer bills by over 37 percent, affecting close to 31,000 residents and businesses in the heart of the city. The utility needs to pay off a $300 million power plant that started operating in East Anchorage last year, called Plant 2A.
ML&P said the new plant is more reliable and efficient. By July, the more efficient power plant will mean a different line item on customers’ electric bills — fuel cost — will go down. ML&P claims the total customer bill will increase by an average of 19 percent.
But ML&P General Manager Mark Johnston acknowledged it’s not surprising many customers weren’t sure what happened when they opened their latest electric bill.
“I know that it can be extremely confusing because of the timing of the various components of it,” Johnston said.
To further complicate matters, the state regulator that approves electric rate increases hasn’t given ML&P a final thumbs-up on how much it can increase rates. Instead, the Regulatory Commission of Alaska in February approved what’s called an “interim and refundable” rate increase. That means that over the next year, the commission will hold hearings on ML&P’s plan to raise electric rates and won’t make a final decision until March 25, 2018.
As an example, Johnston said the state ultimately could decide then that ML&P’s rate went up by a dollar more than it should have.
“If [on] March 25, they send out an order and they say, ‘you know what, you shouldn’t have been able to collect the dollar,’ then for every dollar that we collected, we have to give it back to the customers,” Johnston said.
Meanwhile, some organizations grappling with higher electricity bills are taking their case to the state. As part of the rate case, the commission will hear from several big electricity buyers. including real estate firm JL Properties and the Alaska Native Tribal Health Consortium, which reported to the commission that the new rate will increase its electricity payments by more than $800,000 this year. Providence Health and Services, which operates the largest hospital in the state, is also intervening in the case. In an emailed statement, Providence said their electricity bill has already increased from $3.6 million in 2012 to almost $6.9 million in 2016.
Assemblyman Patrick Flynn, who represents downtown Anchorage, said the situation highlights several larger issues with Alaska’s electric utilities. Under current regulation, utilities can build a new power plant and then ask the state to raise rates to pay for it, instead of getting approval to build the power plant in the first place. Then, Flynn said, there’s no easy mechanism for utilities to slowly ramp up rates to prepare for big capital costs like a power plant.
“It’s a source of frustration for me because it creates these rate shocks that were really unnecessary if it had been better planned for,” Flynn said.
Finally, Flynn said coordination between all six power companies serving Alaska’s Railbelt — an unusually large number of utilities for a relatively small population — would make the whole system more efficient and lower customer bills. ML&P and two other Anchorage-area utilities are moving in that direction, but a final agreement between all six utilities isn’t likely to happen soon.
As all this plays out, Fire Island’s Fleischman isn’t waiting for outside forces to help lower her electric bill. Fleischman is planing a new expansion to one of her bakeries and recently decided to add solar panels.
Update: This post has been updated to clarify that the rate increase is not yet finalized and that the RCA hasn’t issued a final order on the specific amount of the rate increase.
Elizabeth Harball is a reporter with Alaska's Energy Desk, covering Alaska’s oil and gas industry and environmental policy. She is a contributor to the Energy Desk’s Midnight Oil podcast series. Before moving to Alaska in 2016, Harball worked at E&E News in Washington, D.C., where she covered federal and state climate change policy. Originally from Kalispell, Montana, Harball is a graduate of Columbia University Graduate School of Journalism.
