MEA raises electric bills as natural gas costs climb

What you need to know:

• Matanuska Electric Association increased its Cost of Power Adjustment, or COPA, by 29.4% starting July 1. The charge is added to every electric bill and will increase the average monthly residential bill by $14.53 for members using 623 kilowatt-hours of electricity.
• The increase was driven largely by higher Cook Inlet natural gas costs, officials said. Higher fuel prices, colder weather that boosted electricity demand, reduced access to lower-cost shared power, lower hydropower generation and a new $170,000 monthly natural gas storage fee all contributed to the higher COPA.
• MEA is planning for long-term energy challenges. With Cook Inlet gas supplies declining, the utility has extended its natural gas contract through 2029, is evaluating expanded oil-fired generation at its Eklutna plant as a backup and is seeking proposals for new energy sources, including hydropower, solar, wind and coal.

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Matanuska Electric Association members will see higher electric bills starting now because of rising Cook Inlet natural gas costs and new complications in the fuel supply for power generation in Southcentral, MEA officials announced last month.

A typical residential MEA member using 623 kilowatt-hours per month will pay $14.53 more each month because of the increase in the Cost of Power Adjustment, or COPA, according to a fact sheet prepared by MEA. Base electric rates are not changing.

The increase is 29.4% above the current average and reflects higher costs for the fuel used to generate electricity as well as less low-cost power shared by neighboring utility companies in the region, according to the sheet. Those companies include Chugach Electric Association.

MEA serves the Mat-Su region north of Anchorage and a northern segment of the Municipality of Anchorage. It depends on natural gas for 84% of its fuel for power generation, but the cost of that fuel makes up only 37% of a member’s bill.

The fee boost reflects the increasing complexity of assuring energy supply in the region. There are higher costs for natural gas; higher-than-expected use of electricity during a colder-than-usual March through May period; maintenance outages in neighboring utilities that reduced the sharing of lower-cost power; and lower water flows that reduced generation at hydro facilities in the region, MEA said in briefing materials.

(Matanuska Electric Association is a Mat-Su Sentinel corporate sponsor.)

The boost is also triggered by a new monthly $170,000 fee MEA must pay to Hilcorp Alaska for natural gas storage starting in April under a new contract. Gas storage allows the storage of gas purchased that was produced in summer, when there is less customer demand, and banked to meet higher winter demand.

Chugach Electric, the other Southcentral electric utility, also has a contract with Hilcorp to store gas and is looking to store gas in the Beluga gas field, which is owned 60% by Chugach.

There is concern about regional power because of declining Cook Inlet gas supplies and uncertainty over a planned pipeline to tap large North Slope gas reserves.

MEA was able to negotiate a one-year extension to its gas supply contract with Hilcorp Energy. The new expiration comes in 2029 instead of 2028, but MEA had to accept a slightly higher price for the gas as part of that, MEA Chief Strategy Officer Julie Estey told legislators on the House Finance Committee earlier this year.

MEA is studying a contingency plan to generate more oil-fired power from its dual-fuel Eklutna Generating Station, Kim Henkel, the cooperative’s chief financial officer, told lawmakers. This would be beyond short periods during power outages and would extend to longer periods through the winter, she said.

The Eklutna plant is equipped to use both natural gas and oil for generation. However, if the plan is implemented, it will raise costs to pay for expanded fuel storage tanks and would also require permits for more storage, Henkel said. Currently, MEA can store a four-day supply of fuel oil at the Eklutna plant, she said.

For the longer term, MEA is also looking to diversify its supply with renewable energy, including more hydropower and more solar and wind power. A request for proposals is being prepared to solicit information on possible new projects, Estey told the committee. The RFP will be issued in late summer or early fall.

“We want to find out what ideas are out there. We’re open to solar, wind, hydro and coal,” Estey said. “The last time we solicited ideas, we couldn’t find anything that would pencil out. But this time, things may be different, with Cook Inlet gas declining and prices rising,” she said.

Other utilities are working on plans, too. Enstar Natural Gas, which supplies gas for heating, and Chugach Electric Association, the Anchorage-based electric cooperative, are involved in separate plans for imports of liquefied natural gas, or LNG.

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