This year’s election packets from the Kodiak Electric Association include a question about whether the association’s bylaws should be changed. If local energy consumers vote yes, then the association will be able to choose to allocate all earnings to its members, or not.
Based on the current bylaws, all earnings which encompasses revenue from all sources, are given back to utility members as capital credits each year.
Dan Menth is the CEO and president of the Kodiak Electric Association. He told KMXT during a Talk of the Rock public affairs show, last month on March 25, that the board unanimously is asking members to separate operating earnings from non-operating earnings. Generally speaking, operating earnings are revenue received from electricity sales, while non-operating earnings are received from other sources such as interest generated by bank accounts. The bylaw change would mean potentially less energy credits going back to the membership during certain years.
But Menth said this change will give the board the option to be financially flexible and respond to unforeseen expenses, or even increased non-operating earnings in the future.
“What this bylaw change would do is allow the board on a yearly basis to say, well those non-operating margins are…it would be disadvantageous to allocate them to the membership, more than likely due to the size [of the margins]," he said.
Menth said the requested bylaw change is proactive. The association is expecting to strike a new contract with the U.S. Coast Guard Base Kodiak called a Utility Energy Services Contract, or UESC, but that hasn’t officially been approved yet. If approved, it would be a brand new undertaking for Kodiak Electric and include more work for the association to make energy efficiencies on the Coast Guard base.
The electric cooperative hopes that membership will approve the bylaw change in advance of the contract. Menth said if the contract with the Coast Guard is awarded, it’s expected to come with a substantial increase of revenue for the association over the next few years.
“If that substantially increased the margins, that’s not going to be there for more than a couple of years during the construction phase,” he said.
How that potential influx of money is paid back to members in the future is part of the association’s justification for the bylaw change. Rather than raising rates in the future to cover what will likely be significantly bigger payouts to members from the potential UESC, Menth said the utility wants to keep its earnings and the credits going to its members more even-keeled.
“There’s multiple things that could happen. The number one goal is to not, call it, unjustly punish the membership in the future; or you could say the other way, don’t give the membership today an undue amount that they really didn’t earn," Menth explained.
Traditionally, Kodiak Electric’s earnings are paid back to its oldest members first to cover past years’ credits, rather than the most recent year’s earnings being paid out immediately in the following year. In financial terms this would be akin to first in, first out rather than last in, first out, but Menth told KMXT via phone that KEA sometimes uses a hybrid model for retiring credits and has been trying to shorten the retirement cycle for members’ credits.
Menth said the association is expected to find out if it receives the contract with the Coast Guard or not by the end of this year.
All Kodiak residents who pay for electricity from the co-op are eligible to vote on the bylaw change and should have submitted their election packets by the end of last week, April 11.
Final results will be announced at Kodiak Electric Association’s annual meeting, which is scheduled for Monday, April 21 at 7 p.m. in the Gerald C. Wilson Auditorium. For more information, go online to Kodiakelectric.com
*Editor's Note: The headline of this article was updated on April 17 to more accurately reflect the nature of members' allocations and earnings.
