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Chugach to sell to Seward through 2016 Utility asks RCA to extend existing contract another five years; Seward soon to be Chugach’s only regular wholesale customer Eric Lidji For Petroleum News
Chugach Electric Association plans to sell power to the city of Seward — its smallest and soon to be only wholesale customer — through at least the end of 2016, the utility said.
Chugach and Seward asked the Regulatory Commission of Alaska in early May to approve the extension. Chugach currently sells power to Seward under a contract approved in 2006. That contract expires at the end of this year, but can be automatically extended five years with the consent of both parties and the approval of the RCA.
The news represents a constant during a period of change for Chugach.
As the largest electric utility in Alaska, Chugach not only serves more than 81,000 of its own customers, but also currently sells power to three Southcentral wholesale customers: Seward, the Homer Electric Association and the Matanuska Electric Association.
Chugach also maintains a connection with Golden Valley Electric Association in Fairbanks, allowing it to send power north (or receive it from the north, as needed).
More than half wholesale Those three customers bought 352 million kilowatt-hours of electricity in the first quarter of 2011, up from 331 million kWh during the same period of 2010. By comparison, Chugach sold just 319 million kWh to its retail customers during the first quarter of 2010.
However, HEA plans to stop buying electricity at the end of 2013 and MEA plans to do the same at the end of 2014. With the end of those two contracts, Chugach will lose roughly half its power sales load and around 40 percent of its annual sales revenue.
“While financial management plan scenarios indicate Chugach can sustain operations and meet financial covenants in the event these two customers leave the system, the remaining customers will have to shoulder the burden imposed by the remaining costs and will likely face higher rates,” Chugach wrote in first-quarter financial filings.
By securing power sales agreements and “wheeling” contracts (for renting out power lines to third parties generators), Chugach believes it can recover some lost revenue and mitigate the rate increases expected in 2014 and 2015, but added, “we cannot assure that we will be able to replace sources of revenue or that any replacement of revenue sources or revised tariffs will fully mitigate any anticipated rate increases in this timeframe.”
SPP construction eminent That projected revenue loss comes as Chugach is working on bringing the Southcentral Power Project, a new $300 million natural gas fired power plant, online by 2012.
Chugach will own 70 percent of the power coming from the 183-megawatt plant and Anchorage Municipal Light & Power will own the rest. Chugach will operate the plant.
Chugach said it has ordered the major components for the project, and that final design and initial permitting are under way for construction to begin as soon as this spring.
Chugach currently has contracts for all its fuel needs through the end of 2013.
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