Kassie Andrews: ‘Green’ rate case puts Chugach Electric vs. ratepayers and taxpayers

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By KASSIE ANDREWS | MASTER RESOURCE

With the start of the Alaska legislative session next week, pre-filed bills have trickled in. Legislation for a green bank, renewable portfolio standards, carbon capture utilization and storage, and Cook Inlet gas incentivizes appear imminent this session.

Alaska is an oil and gas state. In 2022, natural gas, oil, and coal fueled two-thirds of Alaska’s electricity generation, with hydro at 29 percent and wind, solar and biomass accounting for the last 3 percent. In personal and mass transportation, electric vehicles are riding on government subsidies to get a foothold, even more so than in the Lower 48.

In 2022, Alaska ranked in the top five oil producers in the United States, producing about 4 percent of the total. Alaska is first in oil and gas contribution to total GDP as a state. Proved oil reserves are the fourth largest of any state. Alaska ranks fourth in the nation in natural gas extraction; however the majority of this is primarily used for reinjection into the ground on the North Slope to maintain oil reservoir pressure and low-cost oil production.

GREEN POLLUTION

So how does the state’s electricity get polluted by “green” politics? Big Environmentalism and Washington, D.C., abetted by Alaskan politicians, have found a way. 

First, proclaim a local natural-gas supply crisis. Second, hike gas rates in the name of “conservation” to reduce usage and make cost-prohibitive green energy solutions less uncompetitive.

In the middle of all this is Alaska’s major electric company (a cooperative), Chugach Electric Association, which has agreed to “decarbonize” by at least a 35 percent carbon reduction by 2030, and 50 percent by 2040.

BACKGROUND

On Oct. 30, 2020, Municipal Light & Power was acquired by the Chugach Electric Association. The sale was roughly $1 billion, approved by the voters of Anchorage in April of 2018. Today, Chugach Electric provides service to over 90,000 members. 

The co-op is the sole electric utility provider to Alaska’s largest city, Anchorage, which is where roughly 40 percent of Alaskans reside. Chugach, along with other adjacent utilities on the same grid, provide power to 75 percent of Alaska’s population along the Railbelt. During the acquisition, it was said: “The combination of the two utilities is expected to lead to lower long-term rates for all utility ratepayers with an estimated savings of more than $200 million over the next 15 years.” 

Since that time, as discussed here, we’ve been fed a narrative of a looming gas shortage in the Cook Inlet, where 80 percent of the energy load for Alaska’s largest population center comes from. Contracted gas supply has become a political football, with Alaskans on the hook for all of the risk. A Green New Deal faction is opening the door for mega-grifters after taxpayer/ratepayer dollars to push a delusional “energy transition” upon Alaskans, regardless of cost or risk.

Written into the acquisition of ML&P was a requirement by the RCA to combine rate classes. The proposed rate increase, or “rate case,” was filed with the RCA on June 30, 2023. According to the Chugach FAQs, the proposed rates come with an interim increase of 3.6 percent, effective September of 2023, and a permanent increase to base rates that equate to approximately a 5.8 percent increase on an total bill basis, with final implementation complete in September of 2024. 

The promise of rate increases not being due in part to the sale, is up for debate. The area for savings is mostly found in the fuel component of the cost. With the Chugach board adding decarbonization goals to its Strategic Plan (“reducing our carbon intensity by at least 35 percent by 2030 and at least 50 percent by 2040, using 2012 as the baseline year without a material negative impact on rates”), one begins to wonder how such a grand idea is paid for if not in the fuel rates, or base rates. Did ratepayers actually even ask for that?

INTERVENORS

A total of 12 parties have joined onto the rate case, all representing their own special interests either being in opposition to the increase and others seeing this as an opportunity to introduce ulterior motives.  These include the University of Alaska, City of Seward, JL Properties, Inc, United States Military (ULFSC), Renewable Energy Alaska Project (REAP), and American Association of Retired Persons (AARP) to name the most influential.

In an Oct. 18, 2023, webinar, REAP and the AARP discuss the rate design, with statements in part “incentivizing certain consumer behaviors” and “aligning them in a way that helps us to address these gas prices” and “this pivotal moment and how unique it is to have this general rate case happening right now at the same time as we are considering solutions to the gas crisis in Cook Inlet.”

AARPs position is that the largest increases are proposed for residents with the lowest usage, in a release stating “This case could set a precedent for the future, when we are likely to see additional rate increases as Cook Inlet gas runs short and companies seek to transition to higher-cost alternatives. We want to make sure there’s someone at the proverbial table to ensure that residential households are treated fairly as cost increases are allocated now and in the future.”

In this press release, REAP capitalizes on the narrative that there is a looming gas shortage (according to the USGS there is no shortage); REAP uses this as leverage to weasel their way into the discussion on Alaska’s energy, stating in part:

“REAP is intervening to advocate for innovative rate design for Alaska’s largest electric utility that will reduce dependency on imports of foreign LNG by promoting energy conservation, consumer investment in rooftop solar and other natural gas-conserving technologies. REAP seeks to protect consumers and foster economic resilience in the region.”

And: “It is a pivotal moment for Alaska’s energy future. This RCA proceeding will set permanent rates for the foreseeable future, including the next few years when Railbelt Alaskans must work to minimize the negative impacts of a dwindling local gas supply. It is imperative that Chugach adopts a rate design that promotes energy conservation. Chugach’s own consultant report shows that doing so can extend the life of our local natural gas resources, buy us time to diversify our over-reliance on a single fuel source, and allow us to take advantage of renewed and enhanced federal tax credits for clean energy.”

EARTHJUSTICE

The most consequential detail of all – “REAP’s effort will be supported by lawyers at Earthjustice.”

Earthjustice’s stated goal is to: “End the Extraction and Burning of Fossil Fuels. Earthjustice works alongside communities impacted by coal, oil, and gas and uses the power of the law to loosen the fossil fuel industry’s destructive grip on our world. Earthjustice is the premier nonprofit public interest environmental law organization. We wield the power of law and the strength of partnership to protect people’s health, to preserve magnificent places and wildlife, to advance clean energy, and to combat climate change.  We are here because the earth needs a good lawyer.”

This is not Earthjustice’s first rodeo in Alaska.  Earthjustice, along with NRDC (lawyers, not scientists) was instrumental in the delayed approval of the ConocoPhillips Willow development and key to the insertion of language resulting in an alternative leaving 53 million barrels of oil in the ground, contrary to the maximum benefit and settlement of the citizens of Alaska (Article VIII).  This alternative was the lowest “Social Cost of Carbon.”  Earthjustice has also filed suit against the federal government for the approval of exports from the potential Alaska LNG Project.

The million-dollar question is – why certain organizations were allowed standing on this rate case, specifically REAP, and what is their overall motive? The decision is interesting when you consider they don’t own anything, and the needs of the members are to be represented through the Board and Board elections. 

With renewables badly needing any leverage or deal they can force us all into, and Chugach agreeing to net zero targets – could this be the long game for legislative record and promises? If the idea of renewables is so great that it requires federal subsidies, and most of the opportunity for cost savings within the rates is in fuel price, how exactly does REAP think they have standing to enter a conversation about our rates, if not extortion? 

REAP’s involvement in the rate case should have been vehemently rejected by all commissioners. Only one RCA member dissented in the decision to allow both REAP and Ethan Schutt, who oversaw the CIRI Fire Island Wind Farm project, onto the rate case. This dissent was under the basis that it would “broaden the basis” and “delay the process.”  Regardless, even if the RCA wanted to allow everyone in to hear them all out, the irrelevance of a few will come at a cost to Alaskans, and with Earthjustice involved, that cost is bound to be big. 

The likes of REAP have no cost or risk to answer for.  They are as much a stakeholder in the Railbelt’s generation as a tick to a dog.  The hot match of our legislators should be applied to their backsides to make them fall off in the weeds where they belong.

TROUBLE AHEAD?

Gov. Mike Dunleavy appointed four out of the five members on the RCA commission. These NGO’s influence over the RCA and others will be a convenient straw dog to point to in the end – After all, the energy task force, the renewable portfolio standardcarbon reductiongreen bank, et al. is the governor’s plan.  In his words

“The trends are clear: For over 30 years, natural gas prices have only risen in the Cook Inlet while the cost of renewable generation has plummeted. With unrest in Eastern Europe rising and renewables now being the cheapest form of generation on earth, it’s time for Alaskans to consider where we want to be 20 years from now. We have a responsibility to look beyond the immediate future and toward the world our children will inherit. Remaining captive to a costly and unpredictable fuel marketplace is not an option. It’s time to cut the talk and put Alaska on a path toward energy independence.”

It gets worse. Alaskan Republican legislators are holding seminars with these radical eco-non-governmental organizations. Who needs Earthjustice when our costume conservatives have been co-opted or have placed themselves in service to ENGOs perfidiously against their citizen constituents?

CALL TO ACTION

How can good folks follow and affect the outcome?

With needs of members of the rate payers ultimately represented by your local utility board, a great opportunity for Chugach rate payers exists this spring.  Two board seats for the Chugach Board of Directors are up for election in 2024.  Candidate applications and resumés are due to the Nominating Committee by 5 p.m. Wednesday, Jan. 24, 2024.  Forms available here

If successful in our endeavors to elect free-market board members, it will take another two years (spring 2026) to complete a majority board changeout.  Voter apathy is a big problem in local utility elections.  Please vote.

With the start of the Alaska legislative session less than one month away, prefile release bills will begin to trickle in.  Legislation for a Green Bank, Renewable Portfolio Standards, Carbon Capture Utilization and Storage (CCUS) and Cook Inlet gas incentivization appear imminent this session.  These types of bills (or anything at the capital at all for that matter) receive very little attention in the way of public input.  Track legislation and opportunities for public testimony here.

Kassie Andrews is an energy expert on Alaskan politics and resource development. A lifelong Alaskan, her career in energy has involved project management, construction, and finance. This opinion first appeared in the Master Resource free-market energy blog and is reprinted with permission.

22 COMMENTS

  1. Everyone should read Epstein’s book “The Moral Case for Fossil Fuels” as well as his follow on “Fossil Future.” They are a quick read and he is a well researched and thoughtful author.

  2. Well written and informative. Alaska has all of the oil, gas and coal reserves necessary for energy independence and transitioning to wind or solar is a flawed strategy. A quote from the DNR on Alaskan coal reserves: “Alaska’s coal resources make up about half of the United States coal-resource base and approximately one-sixth of the world coal-resource base. Alaska’s total identified coal resources (all ranks) amount to more than 160 billion short tons, and hypothetical and speculative resources are as great as 5.5 trillion short tons.” Coal fired electrical plants can be clean or dirty…it just depends on how they’re built. Alaska needs to abandon unworkable “Green Energy” and turn toward more carbon based sources because the war on carbon has nothing to do with saving the planet, even if human caused climate change was actually real, and anyone capable of critical thought understands that. Wind and solar are what off the grid citizens turn to as a last resort when reliable and inexpensive energy sources are unavailable…these alternative energy sources don’t even work that well in individual applications, they’re expensive and high maintenance and they don’t scale well for major projects. And they’re not in any way carbon neutral unless you ignore everything that goes into the manufacture and installation of these bad ideas. Step outside of the groupthink box and turn away from the lie of Green Energy before those pushing it completely destroy our ability to produce and utilize the only source of energy that makes sense…carbon.

  3. This is a terrible situation. Chugach is basically run by REAP after taking over their Board. The Chugach Board is as woke as the Anchorage Assembly, if not worse. Our concern should be even greater because the Chugach Board hired a leader with zero leadership experience running a utility. The current CEO was the Board’s choice after the debacle of their hiring Hal Halpern, who lasted 3 weeks and resulted in a lawsuit. How much did that cost the ratepayer?

  4. I appreciate that this article was shared. On a personal note, my only alternative to high gas and electric costs was to install a wood stove. We don’t have the money to do otherwise. (So much for low carbon output.)

  5. This has nothing to do with saving the environment or doing the right thing (as they allege). This has everything to do with controlling your day to day lives as much as possible.

  6. Chugachconsumers.org has always been where I see what candidates you want to vote for. They tell you who has the conflicts of interest for the unions and special interest groups. Spread that website so when the package comes in, you know who to vote for.

    • Chugach Consumers is just as crazy as REAP, but on the opposite end of the spectrum. We need sanity based on economics and reliability, not ideology.

      • Explain how Chugach Consumers is crazy? They don’t want “Green Candidates and IBEW candidates” on the Chugach board. The board ratifies IBEW contracts. They don’t have the majority of shareholders interests at their viewpoints. Without explaining your position, you just validate their position.

        This is Chugach Consumers mission:
        “It is a group of fiscally-concerned ratepayers and others that support safe, reliable power at the lowest possible cost for all electric utility customers in South Central Alaska.”

        Yeah, sounds like Really Crazy People.

        • Zealots are crazy no matter left or right. Seeing IBEW ghosts when that is a small % of the utility revenue requirement is as cRAYzy as Chugach Consumers leadership.

          A mission is just words. Actions dictate relevance.

  7. This is about the money.
    All non profits should be required to pay taxes and a lot of this bs will stop.
    It’s about the money and that brings power to certain people.
    Maybe when people can’t pay to heat or light their house they will get involved in this stupid green energy power grab.
    Watch to see who’s getting the money.
    Our worthless governor could fix this but he is in the closet hiding from the right thing to do.

  8. The author failed to contact this ratepayers, I support the CEA Board. $500 Million to convert a terminal to import Natural Gas vs $10 Billion for a bullet line should be a no brainer.

    • The REAP/Chugach Board has come out publicly in favor of a bullet line on multiple occasions. Their CEO has said so in public before the legislature and the RCA.

    • What terminal would be converted for $500,000,000? There’s an LNG plant in Nikiski that already has and import/export license.

  9. The same damn “Green’ craziness has infected the Interior’s Golden Valley Electric Association. Seems their voices is more important than common sense electric generation. Wind and sun will ‘never’ replace fossil fuels in Alaska.

  10. Obviously, restoring a very minimal salmon run for a few people who really don’t care less about the harvesting the few fish seems to take priority over the best form of power production available. Facts are so much fun. And reveling of the motives. $$$

  11. We have expertise in LNG and in Solar to H2. So, let me give my 2 frank cents here.
    The situation in Alaska requires import of LNG at least for the next 15 to 20 years during which energy storage systems will ripen and that would allow gradually moving fully into renewables.
    My understanding is that there are lots of stakeholders and a common strategy is being formulated. We have seen similar situation in the Caribbean for last 20 years. If you want to make everyone happy , then you will never be able to do/ achieve anything. Everything has some amount of risk involved with it. For example, on the outset of Ukraine crisis, the price of LNG went through the roof. However, consumers who had long term agreement were not affected. Now LNG prices are back to pre-Covid level.
    So, I come back to ahwt I mentioned before. Alaska needs an LNG terminal for a period of 15 to 20 years combined with long term LNG agreement with hedging. That is the solution.
    Regards
    D.K. Das; LNG Alliance; Houston, TX; [email protected]; ‘www.LNGAlliance.com

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