Providing coverage of Alaska and northern Canada's oil and gas industry
December 2016

Vol. 21, No. 52 Week of December 25, 2016

HEA members reject deregulation

The members of Kenai Peninsula utility Homer Electric Association have voted decisively to reject a move by the utility to become deregulated from the Regulatory Commission of Alaska. An RCA order issued on Dec. 20 certifying the results of the deregulation election said that, of the valid ballots received, 4,854 had voted against the move, with 2,042 voting in favor. That represents a 70 percent vote rejecting deregulation. The accounting firm commissioned to count the ballots rejected 375 ballots as invalid, the RCA said.

“The HEA board of directors would like to thank each and every one of the members for voting on this important matter,” Homer Electric said in a Dec. 20 statement. “Almost one third of the membership voted which highlights one of the values of the cooperative model, enabling members to provide direction to their utility.”

Under Alaska statutes a utility can opt to deregulate, if it conducts a ballot of its members, at least 15 percent of the membership votes, and a majority of the voters approves the deregulation move. After deregulation, a utility would still require a certificate of public necessity and convenience from RCA, but the utility’s board, and not RCA, would provide oversight of issues such as the utility’s rates.

A utility such as Homer Electric is commonly subject to government regulation because, being a natural monopoly in its service area, the utility does not face competition over pricing or services. However, Homer Electric has said that deregulation would enable a more nimble approach to implementing or piloting new services and rate structures, and that members could pursue complaints though the utility’s board and the state court system.

AEEC dispute

The results of the Homer Electric deregulation election may render moot a dispute that is simmering at RCA over a pending election for the deregulation of Alaska Electric and Energy Cooperative, the Homer Electric affiliate that owns and operates the Homer Electric power generation and transmission facilities on the Kenai Peninsula.

The AEEC board had filed a notice of intent to ballot its membership for deregulation approval, following Homer Electric’s deregulation election. But AEEC only has one member: Homer Electric. And Homer Electric indicated that, if its membership approved deregulation, Homer Electric would vote to deregulate AEEC. Thus, by voting to approve the deregulation of Homer Electric’s power distribution operations, Homer Electric members would automatically be voting to also deregulate the AEEC transmission and generation assets.

In response to a complaint by two Homer Electric Association ratepayers over the AEEC election, RCA has ordered an investigation into the manner in which the election is to be conducted. Homer Electric and AEEC, in a Dec. 14 RCA filing, requested a briefing schedule for the investigation but suggested that the issue under investigation could become moot, should Homer Electric’s members vote against the deregulation of Homer Electric.

AEEC had objected to the complaint, arguing that the AEEC deregulation election was being conducted in a legally correct manner and that RCA does not have jurisdiction to deny or disrupt the election. RCA says that AEEC has inadmissibly excluded Homer Electric’s consumers from the election.


The complaint against the AEEC deregulation proposal came on Nov. 15 from Homer Electric ratepayers Peter McKay and Bob Shavelson. Shavelson, executive director of environmental organization Cook Inletkeeper, has previously expressed concerns about the proposal to deregulate Homer Electric. In a letter to RCA, McKay and Shavelson wrote that the mechanism whereby the AEEC deregulation ballot is being arranged denies the rights of Homer Electric members to participate in the AEEC deregulation decision.

“We believe the AEEC/Homer Electric board is making the decision (on whether to exempt AEEC from RCA regulations) that the AEEC/Homer Electric members/owners should be deciding by an election of the members,” McKay and Shavelson wrote.

McKay and Shavelson also claimed that Homer Electric was conducting its deregulation election without notifying its members that a vote to deregulate Homer Electric would also deregulate AEEC.


The two complainants cited as precedents two previous cases in which an Alaska regulatory commission has ruled in favor of the need for a broad vote of the consumers for an electricity utility to vote in a deregulation election.

In 1985 the Alaska Public Utilities Commission, RCA’s predecessor agency, ruled in a case involving the potential deregulation of Alaska Electric Generation & Transmission Cooperative, the utility that operated Homer Electric’s generation and transmission facilities prior to AEEC. AEG&T was jointly owned by Homer Electric and Matanuska Electric Association, with those two utilities being AEG&T’s only members. In that 1985 case APUC ruled that the deregulation of AEG&T must be based on a vote of all the consumers of the members of AEG&T.

In the second case, dating from 2005, RCA, citing the 1985 case, denied a deregulation request from Kwaan Electric Transmission Intertie Cooperative, a utility owned by two other utilities.

RCA response

In a Dec. 7 order initiating an investigation, RCA responded to the election complaint and to AEEC’s response. RCA said that after AEEC had taken over AEG&T’s Kenai Peninsula generation and transmission assets in 2001 RCA had issued a new certificate to AEEC. And, whereas AEG&T’s certificate had specifically prohibited deregulation without a vote by consumers who used AEG&T’s services, the AEEC certificate did not include that particular provision.

But, with Homer Electric being aware of the election condition placed on AEG&T’s certificate and the universally applicable reasoning behind that condition, AEEC, the successor to AEG&T, is implicitly bound by that same condition, RCA commented. It is clear from precedent that the deregulation condition placed on the AEG&T certificate is generally applicable to all generation and transmission cooperatives, without have to be explicitly stated in the cooperatives’ certificates, RCA said.


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