Kodiak Electric Association’s impending rate increase partially due to lower energy sales to fish processors

For the first time in 30 years, electric rates are going up in Kodiak. The Kodiak Electric Association (KEA) announced a proposed 12.5% rate hike for all customers in an open letter published on the company’s website Friday, Feb. 23. 

That means the average resident will see a monthly bill that costs about $12 more, according to the local utility. The rate increase will likely hit customers later this spring.
For a resident who uses 600 kilowatt hours of power a month, their bill would be $117.45, with a rate of about 18.2 cents per kilowatt hour compared to the current 16.2 cents/kwh. That total bill includes a meter fee – $7.50, and a diesel fuel charge called COPA – $.60.

The utility provider’s board of directors is still finalizing details of the rate increase. But Darron Scott, the president and chief executive officer of KEA, said the proposed hike is necessary due to two specific factors.

“With inflation the way it’s been, and that’s just the cumulative effect of inflation, and then we’re seeing some lower sales and lower projected sales of fishing; those two things combined, we just would not have enough revenue to do the things we need to do,” Scott said.

This goes back to the association’s switch over to renewable energy sources, which Scott said has kept inflation impacts down and reduced reliance on high priced diesel fuel. KEA took on significant debt to fund those projects years ago and is still paying back low interest loans as well as maintaining specific financial ratios for bank covenants, which affects how much revenue the utility provider can actually take in versus how much it must use to pay back its debt.

Inflation has primarily affected the electrical equipment KEA uses in almost every home across Kodiak, with significant cost increases over the last few years since the COVID-19 pandemic. Scott said that wait times for new equipment have spiked significantly as well.

“For example, transformers. I mean every house has it [a transformer], every service has it and they have gone up astronomically over the last few years,” Scott explained. “We’ve seen, depending on the size, [transformers] going up 500% increase in cost. And [transformers’] lead times have gone dramatically longer too, which is kind of odd…But it’s been a struggle for us to keep up with those kinds of costs.”

Scott said the wait time for new transformers to be delivered went from months to years. Right now the association is focused on the day to day “nuts & bolts”, according to Scott. The main wind turbines on Pillar Mountain are 12 to 15 years old and KEA is still years away from a full-scale change out of those turbines.

On top of rising equipment costs, Kodiak’s non-residential electric sales are down too. Scott said a third of KEA’s power is sold to local fish processing plants. The company anticipates Trident Seafoods’ plan to sell off its downtown facility and an overall decline in the fishing industry will also affect rates.

“Trident is a very large consumer of power. And that impact, even with other processors having to process less fish, definitely comes right back to us in our bottom line,” Scott said.

Previously, Kodiak Electric Association has secured grants like $2 million from the Department of Energy last year to fund hydroelectric power production at Terror Lake Unit 3 project. Scott said the utility provider is exploring other grants for the long term but a rate increase in the short term was unavoidable.

The rate increase will take effect on April 1 after the utility’s board of directors finalizes the numbers during their upcoming meeting on March 28. The public is invited to attend the KEA regular Board meeting on March 28 at the KEA building on Mill Bay Road.

KEA’s chief executive officer expects this will be a one-year rate increase, not part of a multi-year step increase, and hopes this will be the only change in electric rates for the foreseeable future.

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