2017 Rate Case

What is a Rate Case?

The Regulatory Commission of Alaska works to ensure base rates are just and reasonable. MEA submits quarterly filings to the RCA, documenting our costs and revenue. From time to time, the RCA will require, or MEA will request, what is called a ‘Rate Case’, which is a more in-depth review of rates. The RCA reviews our financials to verify MEA rates only recover appropriate costs.  They also confirm that specific member groups are paying what they should and are not being subsidized by others.

Why now?

This is the final step in MEA’s unprecedented transformation from an all-requirements purchaser of power to a wholly self-generating, vertically-integrated utility. MEA took a conservative and transparent approach in the transition through RCA-approved quarterly adjustments that left a full year of transparent, audited and approved financial data.

What is MEA trying to accomplish?

MEA’s goal for the rate case is to confirm rates adjustments during the EGS transition were:

  • adequate to ensure the sustainability and financial health of the cooperative
  • fair to members
  • equitable across rate classes

Our analysis shows only small adjustments needed. MEA’s guidance over our financial decision making, including rate design, is the Board-approved Equity Management Plan which serves as a framework for the future with the flexibility to meet MEA ever-changing conditions.

How are rates changing?

  • 2.75% total increase in base rate revenues (based on cost of service study) equating to a less than 1% change to the overall monthly bill.
  • Single phase (residential and small businesses) will see a 2.57% increase.
  • Larger power users (3 phase, commercial) will see a 3.30% increase.

What does that mean for a typical member’s bill?

MEA’s typical member (using 680 kWh/mo) will see a total bill impact of $1.12 or less than 1% (.83%), assuming the fuel and purchased power costs that make up the COPA (Cost of Power Adjustment) portion of your bill is constant.

Additional items to understand:

  • MEA is not requesting interim rates. This is a benefit to our members and MEA.
  • Members will see the biggest change in their facilities charge which is going from $5.65 to $13.00 for single phase members.
    • Biggest benefits: Because they work together, a higher facilities charge reduces the per kWh charge for our typical member. This will have a bill leveling effect during high demand times.
    • Because the facilities charge is relatively small component of the bill for many members, the average base rate increase will remain around 2.75% with total bill impact <1% depending on member’s usage.
    • The facilities charge has been artificially low for decades and has not been adjusted since 1999.
    • The increase is meant to better reflect the current allocated costs, consistent with RCA guidelines. If we based on the actual, fully allocated costs, the charge would be an additional 2-3 times higher.

What exactly are Base Rates?

Base rates cover the utility’s non-fuel revenue requirement.  As a non-profit, member-owned cooperative, the revenue requirement includes only approved costs associated with providing electric service to members. Base rates include two components, a Facilities Charge – a fixed monthly charge that covers the hard cost of providing service – and an Energy Charge that is charged for each kWh consumed.

Are there other changes?

  • Addition of an optional standby and buyback rate for members interested in selling power back to MEA’s system. This does not include net metering (members who can sell back up to 25kWh of self-generated renewable power) because that program is governed by Alaska statute.
  • The addition of a Large Power Contract – provides a protocol to negotiate large power agreements as necessary. None of MEA’s current members meet the criteria (2MW for 3+ consecutive months)
  • Closing Off-Peak Thermal Storage to new applicants – all existing members (49 current members) will be grandfathered into the program until they leave their residence.
  • Discontinuation of old programs with no current registered members.
  • Slight adjustments are being made to our transmission rates. We determine those rates based on the costs of the contracted path, not a system-wide usage.

How is MEA’s new power plant performing?

After one full year of operations, the Eklutna Generation Station (EGS) demonstrated why it was chosen as the right design to efficiently serve our members:

  • Achieved the lowest thermal heat rate compared to all other Railbelt utilities.
  • Provides a new and valuable service to the Railbelt (small increments of power) as evidenced by $12.9M in sales revenue that directly back to members to offset COPA.
  • Modeling shows additional system-wide savings through economic dispatch.
  • During this time, we have also invested in reliability improvements including implementation of new AMI meters and related infrastructure, execution on a new 7-year right-of-way clearing cycle, construction of a new transmission line, modernization and upgrade of two substations and many other smaller projects.
  • To do all of this with small rate adjustments for members was a result of conservative, transparent and prudent financial management on behalf of our members.

What is MEA doing to keep my rates reasonable?

The reality of our business nationwide is that electric costs will continue to increase.  Here is what we are doing to reduce the impact of price increases to our members:

  • Burn less fuel, the largest cost of power – EGS allows us to provide electricity with the lowest amount of fuel for our members and work with other utilities for more savings.
  • Doing more with less. We have significantly fewer employees per member than many other Railbelt utilities.
  • Process improvements and efficiencies.
  • Prudent capital investment to balance financial costs with reliability benefits.

A Message from MEA CEO and General Manager, Tony Izzo

Over the last year, MEA collected detailed cost data necessary to understand with specificity the rate impact of moving to self-generation.  MEA’s filing seeking only a small rate adjustment reflects the careful planning of the Board and management for transition to self-generation and the conscientious execution of that transition plan by all MEA employees.