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ML&P rate increase set for RCA hearing Electric utility cites cost of its share of Southcentral plant; says customers benefit from lower fuel costs because of efficiency Kristen Nelson Petroleum News
Municipal Light and Power has applied to the Regulatory Commission of Alaska for an increase in its rates, an increase RCA has temporarily allowed.
The commission said Oct. 24 that it is suspending the tariff revisions, although allowing them on an interim and refundable basis. ML&P has the choice of placing amounts it receives from the increase in escrow or agreeing to pay the 10.5 percent statutory interest rate on any refunds to customers.
RCA has invited the participation of Alaska’s attorney general in the matter; other interested parties may petition to intervene by Nov. 7. A prehearing conference will be held Nov. 26.
Alaska statutes require the commission to issue a final decision within 450 days after a complete filing that changes a utility’s revenue requirement or rate design, RCA said. Based on the Sept. 9 filing, the required decision date is Dec. 3, 2014.
In its filing, ML&P requested a 24.32 percent increase effective for billings on or after Oct. 24, the first phase of a proposed 31.52 percent increase over a two-year period. RCA said this is an across-the-board increase to recurring demand and energy rates.
ML&P told RCA the primary driver for the rate increase is costs associated with ML&P’s 30 percent interest in the Southcentral Power Project.
Fuel cost savings The utility said fuel cost reductions associated with the Southcentral Power Project, SPP, have already been reflected in ML&P’s cost of power adjustment.
ML&P said in a mid-September statement on the proposed rate increases that the average customer would see an increase of about 17 percent as a result of the interim rates this year, and an additional 5 percent increase in early 2016.
The utility said the two-phase increase is proposed “to mitigate the immediate rate impact and spread the increase over a three year period.”
SPP went into operation Jan. 31, and Chugach Electric Association Inc., which owns 70 percent, has been recovering its share of SPP costs in retail electric rates since early in the year, ML&P said.
Revenue deficiency ML&P told RCA it is experiencing “a retail service revenue deficiency” of $25.6 million. A 33.53 percent increase to demand and energy charges would be required to fully recover that deficiency, however the Anchorage Municipal Assembly only authorized a permanent increase of 31.52 percent to demand and energy charges.
RCA said ML&P’s filing raised “a number of issues that require investigation” and therefore suspending the tariff for further investigation.
ML&P requested interim relief if RCA suspended the tariff for investigation because of the substantial nature of the revenue deficiency, $25.6 million, nearly a quarter of ML&P’s adjusted test revenue. The utility told the commission that without rate relief, it would likely have negative net income, and said current rates are so low they could be considered “confiscatory.”
Without the relief of an interim rate increase, ML&P said it would suffer irreparable harm, as Alaska utilities are generally prohibited from retroactive base rate relief.
In prefiled testimony Eugene Ori, acting general division manager of ML&P, reviewed SPP and discussed why ML&P chose to participate in the new plant.
Ori said “the SPP uses three new aero-derivative combustion turbines, operating in combination with a heat recovery steam turbine (combined cycle), which has significantly increased ML&P’s and Chugach’s overall generation efficiency.”
ML&P is in the process of constructing a 120 megawatt combined cycle gas turbine plant planned for operation in the second quarter of 2016, but participated in SPP because the utility didn’t believe it could build a large enough facility at its planned site and there is an advantage, Ori said, to not concentrating a very large percentage of capacity at one location.
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