Spike in ML&P electricity bills draws complaints

Some Anchorage utility customers have been expressing shock after getting their latest electric bill from city-owned Municipal Light and Power, with average customers seeing a 19 percent spike as the utility seeks to pay off a new plant in East Anchorage.

"I said, 'Oh my God,' " said Nancy Harbour, president of the Alaska Center for the Performing Arts, upon seeing the center's recent power bill. "This increase is a killer for us."

The center's bill jumped about $3,600, to just over $27,000, she said. At that pace, the higher rate could add at least $30,000 to annual power costs, currently budgeted for about $250,000. She plans to ask the utility if the center, whose crowds support restaurants and stores in the area, can qualify for a lower rate.

"I'm being charged at the highest commercial rate, and we can't afford this anymore," she said.

ML&P has been working to notify its 30,000 commercial and residential customers about the proposed increase in recent months, including through community council meetings, on its website and in a bill insert.

The Regulatory Commission of Alaska set the refundable, interim rate increase on Feb. 13 while it considers long-term rate increases requested by ML&P. The new rate means the average ML&P bill for $91.31 jumps to $108.78.

The RCA has until March 25, 2018, to make a final order. The interim increase could be in effect for up to a year, the utility said in an insert that will soon be arriving with electric bills.

If the commission ultimately decides to lower the rate, the utility would owe ratepayers a refund.

Retired Anchorage homeowner Barbara Karl, who relies on electric heat, will see her household electricity cost increase at least $49 a month to more than $300, according to a Feb. 3 letter she sent the RCA.

"I'm not happy about it," Karl said on Tuesday.

Her letter called the increase "severe," particularly for an elderly person on a fixed income. She'd like to see rate increases spread out over time to smooth out the impact to consumers.

The utility, though, argues it needs the increase to pay off its $306 million investment in Plant 2A, an expansion of the 1970s-era George M. Sullivan Power Plant 2. Construction on Plant 2A started in 2014 under the administration of Mayor Dan Sullivan.

The more efficient plant began operating in 2016, replacing six power-generation units that had met or exceeded their 35-year design life, the utility says. The new plant is estimated to save $8.4 million in fuel costs annually.

"Modernizing infrastructure means lower maintenance costs and fewer outages, ensuring the lights stay on for our customers" the insert says.

Julie Harris of ML&P public relations said the utility's rates are now "slightly higher" than rates charged by the larger Chugach Electric Association, after being "slightly lower" for many years. Chugach also serves a portion of the Anchorage area.

Before the interim rates were raised, ML&P said it faced a "revenue deficiency" of $39.5 million, according to RCA's order. The utility said without interim relief, it would suffer "irreparable harm" because Alaska utilities are generally not allowed to recover past losses through future rates, known as retroactive rate-making.

The commission's Feb. 13 decision, noting it did not approve construction of the new plant, said "ML&P is suffering a significant revenue deficiency and is entitled to interim rate relief."

ML&P had asked the commission to approve a "rate stabilization plan," which it says would have led to an increase in the average customer's bill of 14 percent, lower than the interim increase RCA set.

Under that plan, rates would gradually increase over time. RCA rejected that interim option, saying it might violate the rule against retroactive rate-making. ML&P should consider other ways to "mitigate against rate shock," the agency said.

As a second option, ML&P requested an alternative that would have led to a higher rate increase upfront than the interim rate set by the RCA, but it wouldn't increase over time. RCA also rejected that alternative.

RCA's decision was narrowly approved by the commission, with Chair Robert Pickett, Rebecca Pauli and Jan Wilson voting for the increase and Stephen McAlpine and Norman Rokeberg dissenting.

A handful of large ML&P ratepayers are parties to the case, including Providence Health and Services. The hospital has millions of dollars at stake in what the commission decides, according to its Feb. 3 comment to RCA.

The utility's proposal raises several questions, including why the new plant costs so much money and whether it was even necessary, Providence said.

The proposed increase comes "at a time when Alaska generally and Anchorage in particular are reeling from the effects of a downturn in oil and gas prices," Providence said.

The utility is "fast approaching a doubling of its base rates in less than four years, resulting in rate shock to its retail customers," Providence said.

A hearing date for new rates covering Plant 2A construction has not been set, but ML&P says it is expected in late 2017.

Bob Maier, a property manager in Anchorage who has protested the proposed rate increase before the RCA, said the utility should not have partnered with Chugach Electric Association in the new Southcentral Power Project near International Airport Road in Anchorage, commissioned in 2013.

He believes ML&P and its owner, the municipality, should be responsible for repaying the Plant 2A costs.

"They didn't need two plants, they just needed one," he said Tuesday.