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November 2017 Back Page – Fuel Costs are Rising

by / Friday, 08 December 2017 / Published in Messages from the CEO

For the past three years, we have enjoyed the benefits of a depressed fuel market that has, unfortunately, also resulted in a severe budget shortfall for the state of Alaska. We have all felt the impacts of that budget shortfall, with critical services cut and programs sharply reduced.

As the state’s coffers have depleted, the cost of electricity in our communities has fallen as well, with many communities seeing fuel cost as low as 12 to 15 cents a kilowatt-hour when oil was as low as $35 a barrel.

This year, however, the cost of oil has been edging upward—to more than $50 a barrel. That means our cost of fuel has gone up in recent months, and you will see the impact of that cost increase in your electric bill. In general, we have seen a cost increase of 25 to 50 cents a gallon, which leads to a cost increase of 2 to 4 cents per kWh.

For residential consumers covered by Power Cost Equalization, there will be little change to your electric bill because PCE will change as the fuel cost changes. Only homes that use more than 500 kWh a month and businesses that are not eligible for PCE will be affected.

While it is always disappointing to have to report that the cost of electricity is going up, we should not forget the cost has gone down significantly in the past few years as the cost of oil has dropped. It is indeed a quandary. We wish for lower oil prices so the cost of heating and lighting our homes stays low, and we wish for higher oil prices so our state can earn higher revenues to deliver the services that we need.

The days are rapidly growing shorter and we have all seen our temperatures plummet as winter approaches. We hope you had a successful harvest season and that everyone’s freezer is full of the bounty of the land.

 

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