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

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.”

Rick Whitbeck: New Alaska group says ending oil and gas is the goal

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 standard, carbon reduction, green 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.