Assembly moves forward with electric rate increase
The Petersburg Borough Assembly voted unanimously to increase electric rates by 4 percent over a two-year period.
The rate increase comes after Petersburg Municipal Power and Light (PMPL) Superintendent Joe Nelson asked for guidance from the assembly as he moves forward in creating next year’s budget.
Nelson told the assembly one of two things needed to be decided, one of which was the rate increase.
“The other one would be to purposely approve a deficit budget which draws our reserves down and basically kicks the can down the road for a few years and potentially, a couple years down the road do another rate study,” Nelson said.
Although PMPL currently operates at a loss, its reserve fund contains around $5.8 million and Nelson said $4 million is the minimum amount of savings required to deal with potential emergencies.
“I think the best thing is to keep a healthy department healthy, which means go ahead and do the rate increase,” Nelson said.
The current declining block rate structure was established more than two decades ago to encourage electric usage. The declining block rate combined with the rise of oil prices contributed to a large conversion from oil to electric heating. Beginning around 2012, that conversion began to level out and now Nelson said it’s time for the rates to flatten as well.
He said the new rates are also designed to reduce the large price difference between small and large commercial customers.
Including harbor, residential and small and large commercial customers, PMPL would bring in more than $200,000 after two years when the full 4 percent increase is in effect—which would allow PMPL’s budget to stay in the black.
“By and large for larger consumption we are the best in Southeast,” Nelson said. “We are the lowest (price). Making a two percent adjustment in that is not going to change this picture.”
Households in Petersburg using around 2000 kilowatts per hour pay around $178 a month. Ketchikan residential customers pay the second lowest price for the same usage at $198.
The average Petersburg residential household uses around 1000 kilowatts per hour and pays $108. Ketchikan was slightly cheaper at the 1000 kilowatt per hour rate by about $6.
According to the revenue requirement study, the average residential customer using 1000 kilowatts per hour would see their monthly electric bill increase by 10 cents.
Residents using more than 1,500 kilowatts per hour will see an increase of around $5.
Before voting for the rate increase Assembly Member John Havrilek said the new rate was prudent in order to keep PMPL’s reserve funds healthy.
“A two percent raise this year and next year is so miniscule on an individual budget and has such a dramatic impact on the whole town that I’d like to pay a little now than a lot later,” Havrilek said.
PMPL is an enterprise fund of the borough, which means it has a product to sell and the organization has to fund itself through it’s product—in this case energy. It’s books are kept separately from the borough and PMPL is not supposed to make a profit but needs to grow its reserve fund to cover emergency costs and large capital projects.
Petersburg receives the bulk of its electric power from the Southeast Alaska Power Agency owned Tyee Lake Hydroelectric Plant and a smaller portion—around 20 percent—from the Blind Slough hydro project.
The rate increase must go through three readings by the assembly and a public hearing before rates officially change.