Borough to absorb wholesale electric rate hike until rate reevaluation in spring

The Southeast Alaska Power Agency (SEAPA) has approved an electricity rate hike of a quarter of a cent per kilowatt hour. The additional charge went into effect for its three municipalities — Ketchikan, Wrangell and Petersburg — on Jan. 1, but Wrangell Borough Manager Jeff Good will not consider increasing retail electricity rates until spring, during the annual rate revaluation period.

“I don’t plan on bringing it before the assembly until we do our normal rate evaluations coming up,” he said. “When we do our other rate adjustments, we’ll discuss it. I’d prefer to wait.”

The borough will absorb the rate hike for approximately three months, until April or May when the assembly typically approves adjusted utility rates.

SEAPA provides hydroelectric power to Wrangell, Petersburg and Ketchikan.

A year ago, SEAPA unexpectedly increased its rates by a quarter cent per kilowatt hour — the first increase in over 20 years — which motivated the borough to increase the retail cost of electricity by one cent per kilowatt hour for residents and businesses.

The borough increased its retail rates more than SEAPA increased its wholesale rates to save up for future infrastructure needs and ensure the sustainability of its electric utility.

Last year’s full cent price hike gave the borough a financial buffer that will help it absorb another hike from SEAPA. “There’s definitely a cost,” said Good. But last year’s increase “buys us a little bit of time before we have to do the next rate adjustment.”

He’d like to avoid putting a financial burden on residents “especially during the winter months when everyone’s electric bills are the highest.”

SEAPA has been raising its rates to cover the cost of its ongoing capital projects. In September 2019, a portion of the submarine cable between Wrangell and Petersburg failed, prompting last year’s hike. Since then, SEAPA has taken out a $13.5 million bond for cable repairs, along with a $5.9 million bond to construct a permanent office in Ketchikan.

These major capital projects “placed some urgency” on the board’s rate discussions, according to a report to the Petersburg assembly compiled by SEAPA chairman Bob Lynn. SEAPA determined that additional revenue would be necessary to finance the debt service and approved the quarter-cent hike at its Dec. 8 meeting.

“The board has always taken the position of very small increases in rates over time rather than one or two major increases,” wrote Lynn. It “is resigned to the need for wholesale rate increases to cover capital projects and operational needs of the agency after decades of rate stability.”


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