The electrical cooperative that powers communities across Western Alaska, Kodiak Island, Southeast Alaska and Southwest Alaska is proposing an average rate increase of almost 15%.
Alaska Village Electric Cooperative President and CEO Bill Stamm said that the cooperative is proposing a rate increase because “everything is more expensive.”
“I think everybody that lives in rural Alaska has felt the increase in costs of just about everything,” Stamm said. “And unfortunately, we’re not immune to that.”
Stamm said that the proposed AVEC rate increase is what the cooperative needs to stay in business. He said that the financial contrast between 2021 and 2022 was stark for AVEC. In 2021, the electrical provider had an operating budget with a $1.7 million surplus. The next year, it was $4.8 million in the hole.
Higher prices don’t just impact day-to-day operations. As a cooperative, Stamm said, the budget surplus gets reinvested into capital improvement projects in member communities. He said that increased costs and longer lead times on materials have significantly delayed infrastructure projects for the electric cooperative, which serves 59 communities, most of them in Western Alaska.
Stamm said that the cooperative did a cost-of-service study in 2023.
“We found that not only were we under-collecting revenue in general, there were some communities that were under-collecting more than others,” Stamm said.
AVEC has different rates for small and large customers in different communities, as well as for residential and commercial customers. Proposed rate increases vary depending on the type of service, but basically work out to 14.9%. This is on top of the prior year’s increase of around 9%, Stamm said.
How exactly a rate increase impacts customers will depend on fuel costs, which vary widely between communities throughout the cooperative’s service areas and are charged separately from other electrical costs.
“We burn over nine million gallons of diesel fuel a year throughout Alaska,” Stamm said. “All of that diesel fuel has to be transported and stored in the communities, and then brought to our power plants and used. And the cost of doing that in each community varies greatly depending on how far away they are from the source and how difficult it is to get fuel there. Some of it’s delivered by barge; some of it has to be flown in.”
If approved, rate increases would go into effect on the last day of February 2024.
An increase to AVEC rates won’t necessarily directly translate to the same increase on a customer’s electricity bill. That’s in large part due to the state’s power cost equalization program, which subsidizes energy costs in rural communities. Stamm told KYUK in 2021 that if power cost equalization were not in place, electrical costs in some rural areas could more than double.
AVEC will hold a public hearing on the proposed rate increases at 10 a.m. on Jan. 29 in its Anchorage boardroom. Members can register to join in person or by teleconference. Find more information here.