The City of Sitka is facing a tough balancing act, between meeting their debt service on the Blue Lake Dam project and keeping rates reasonable for low-income Sitkans. Some are struggling to pay their electric bill. To address this, the Sitka Assembly decided to implement a seasonal rate structure. Beginning October 1st, rates will be higher in the summer and lower in the winter, when keeping a house warm and well lit can rack up a big bill.
While this was a step in the right direction, the city is still short what it needs to meet the bond payment on the Blue Lake dam this year.
The City of Sitka is under major deadline pressure to raise rates. By July 1st, the annual bond payment for the Blue Lake Dam is due, but the city is far below what it needs to meet it. The finance department estimates the deficit is somewhere between $500,000 and $1 million.
Assembly member Kevin Knox said defaulting on the payment or filing for bankruptcy is not an option.
“That would be devastating here. We cannot, at this point, view that as an option,” Knox said.
The city’s solution is to charge customers more. Sitka’s electric department calculated that a 15% rate hike, effective April 1st, would make up the difference. Their proposed ordinance (Ord 2017-05S) also eliminates the tiered rate structure. No matter how much energy a customer uses, they’d be charged the same rate.
But three Assembly members disapproved of the ordinance as written, for different reasons.
Tristan Guevin pointed out that in the last two years, the Assembly has subsidized the electric fund with $3.5 million from the general fund to keep rates low for all. He thinks that a broad-based subsidy is unfair. “If I don’t get a subsidy, it means I cut back on going out to dinner or I don’t take that vacation. I eliminate some of those wants. But some people don’t have that flexibility,” he explained.
Guevin would prefer the city establish a permanent needs-based subsidy program. Along with Assemblyman Bob Potrzuski, he’s developing an ordinance to create such a program.
“I think that’s been a value that’s been really important since time immemorial: holding one another up. That’s what I see this assistance program as,” Guevin said.
Guevin’s sticking point is with rate structure and iniquity, while on the other side of the table, Assemblyman Aaron Bean opposes a rate hike altogether. He wants the Assembly to invite Regulatory Commission of Alaska to perform an audit of the energy department and suggest a rate for Sitka.
“If they hand down a rate, they ensure that it’s reasonable, affordable, and not discriminatory in nature. You can’t treat one user group differently than the other,” Guevin said.
Aaron Swanson supported the idea of involving the state before raising rates again. “I think that we have raised our rates so high, that people are starting to switch to alternative heating sources. And once they switch to those alternative heating sources, they’re not switching back,” he said.
In short, Swanson, Bean and Guevin all opposed the 15% rate hike on the principle of fairness and out of concern for over-taxing Sitkans. Assemblyman Kevin Knox voted yes. Steven Eisenbeisz and Bob Potrzuski, the other two members, were absent. When his turn came, Mayor Matthew Hunter voted with “No” majority and in doing so, asked for the ordinance to re-considered at the Assembly’s next meeting on April 11th. Electric rates remain fixed in Sitka, at least for now.
Hunter pointed out that the bond payment for the Blue Lake Dam will need to be paid somehow and the clock is ticking.
“If we don’t pass this because of principle or because of other options we wish to look at that may take months to actually enforce, we’re going to find ourselves with our hands tied, no money in the bank, and still having to raise rates anyway,” Hunter said.
The Assembly did pass the second electric rate ordinance (Ord 2017-06S) before them Tuesday night. Starting October 1st, Sitka’s electric rates will change with the seasons. Residential customers will pay 19 cents per kilowatt hour in the summer and 12 cents per kilowatt hour in the winter. Small commercial users and boat slips qualify, while large commercial users and government facilities do not.
Take a family in a home without a heat pump. Their bill in July, using 900 kwhrs, is currently $108, Their bill in December, using 2000 kwhrs, is $278. Under this new structure, expending the same amount of energy, their July bill would be $193 and their December bill $260.
Knox defended the measure as a chance to soften rates when temperatures are coldest and encourage people to stay with electric energy throughout the year, rather than go to diesel or wood stoves.
“It will discourage people from switching over to alternatives, or at least the alternatives won’t be as enticing,” Knox said.
This ordinance passed 4-1, with Bean voting against.
But the first ordinance – that immediate rate hike – is in limbo for two weeks. Utility Director Bryan Bertacchi said that creates a bit of a problem.
“Every two weeks delay between Assembly meetings is about $75,000 to $100,000 that we’re not collecting from the rate payers for better or worse,” Bertacchi said.
If the ordinance doesn’t pass and there’s no rate increase this spring, the electric fund will be short yet again – by $450,000 in FY18, Bertacchi estimated. The hamster wheel that is the electric fund deficit could just continue, unless the Assembly does something soon.
Speaking during persons to be heard, Hugh Bevan suggested the Sitka Assembly look beyond customers to pay off the Blue Lake Dam.
”In some ways, we need to shoot the alligator that’s closest to the boat,” Bevan said. “If we’re able to bring other resources to bear on the debt part, we can release the capital budget from those pressures and avoid trouble down the road with some of our substations.”
The Assembly meets next on Thursday, April 6th to talk about Sitka Community Hospital’s budget. Their next regular meeting is on April 11th.
