After the sale of its utility to Homer Electric Association failed, again, by just a handful of votes, the city of Seward is trying to figure out what to do next.
At a meeting last month, Seward Electric Utility Manager Rob Montgomery told the Seward City Council that the situation at the utility is dire now that the sale has been quashed. That’s because the electric utility is small, with fewer than 3,000 ratepayers. Montgomery said the utility doesn’t have the money or resources it needs to make upgrades to its infrastructure, including improvements to transmission lines and cybersecurity.
“Seward simply lacks the resources, expertise and financial resources to be successful,” he told the council.
The city said selling it to a larger utility would have put the utility on the right path. The city considered a bid from Homer Electric to buy the utility. And in May, it put that sale to voters in a special election.
Seward needed a 60% margin for the sale to pass. The sale failed by just seven votes.
Now, Montgomery said the city needs to take action to move the utility forward.
One option, he said, is to outsource the work of the utility. But he said that would probably just serve as a temporary solution, and would come at a high cost.
Another option is to place a utility sale on a future ballot.
And another still is to rebuild the utility altogether, with a bigger staff and more competitive wages. Montgomery said that would be a challenge due to another issue Seward faces: a tight housing market.
The Seward City Council is now convening a committee to look into how much that option would cost. The council picked from a pool of applicants for that committee at its meeting Monday night.
In any case, Montgomery said, the utility will have to raise its rates, as operating expenses increase. He said he’s meeting with a consultant now to begin a rate study.
“I expect the increase will be fairly significant, placing additional financial hardship on those who live and work here,” he said.
He said any rate increase would go into effect in the fall. That’s on top of a rate increase that could come from Chugach Electric Association filing to raise its own rates. In a letter to council, Montgomery said that would mean a 3.5% increase on Seward customers’ bills; Chugach sells electricity to Seward today.
Whatever the city does, it will have to do so without a permanent utility director. Montgomery announced he’d be stepping down from the role last week, but said he’d stay on as a consultant through the end of the year.
