Pandemic impacts Chugach Electric sales, primarily in old ML&P areas

Alan Bailey

for Petroleum News

The COVID-19 pandemic has significantly impacted sales of electricity by Anchorage based Chugach Electric Association, causing the utility to seek a means of ensuring that it can maintain adequate margins for its business. In a July 1 petition to the Regulatory Commission of Alaska the utility requested the commission to approve a modification to the terms of the agreement under which Chugach Electric purchased Municipal Light & Power in October 2020. The only other options, both undesirable, would be to increase electricity rates or to decouple profits from energy sales in rate setting, the utility told the commission.

Chugach Electric said that reduced electricity demand has resulted from both the impact of the pandemic and the improved energy efficiency of customers. However, the bulk of the reduced demand has happened in the former ML&P service area, where commercial customers, presumably vulnerable to the impacts of the pandemic, dominate electricity usage. In Chugach Electric’s service area prior to the ML&P purchase, where residential customers dominate the demand for electricity, the drop in demand has been relatively small.

In the erstwhile ML&P service area there was a $16.2 million decrease in base rate revenue in the 12 months ending May 31, 2021, relative to 2015, the year used to determine Chugach Electric’s current electricity rates, the utility told the commission.

Chugach Electric’s proposed change to the ML&P purchase agreement involves retrospectively reducing the level over a year of some amortization payments associated with the purchase, if the utility’s margin at the end of the year drops below its required level. The utility told the commission that entities impacted by the proposal, including major customers and other utilities, concur with what Chugach Electric proposes.

- ALAN BAILEY