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The Outlook for Energy Costs in Rural Alaska in 2017

by / Wednesday, 05 July 2017 / Published in Featured Stories

By Meera Kohler

About 15% of all Alaskans live in some 200 rural communities spread across more than 500,000 square miles. Thirty-thousand (30%) of those live in one of 58 communities served by AVEC. Our communities, sadly, suffer from some of the highest costs of living anywhere in the United States.

A recent study found that one in five rural households is spending almost half their annual income on home energy. This is three times what they were spending ten years earlier and has been driven by the enormous increase in the world price of petroleum. Despite world oil prices having fallen, costs in rural Alaska have not shown much improvement.

AVEC has been an aggressive leader in the battle to combat the high cost of energy.

 

  • We continue to reduce our non-fuel expenses. We reduced our rates seven years ago by two cents a kWh, resulting in a reduction of income of $1.5 million annually.
  • We added several communities in the last few years – Teller, Kotlik, Ekwok, Kobuk, Bethel and Oscarville. Adding communities allows us to spread our fixed costs over more kWh sales.
  • We have installed wind turbines – our 34 machines are the largest fleet in the state. 5% percent of our generation came from wind in 2016, even after adding Bethel. In 2016 we ordered two 900-kW wind turbines to serve Bethel, Oscarville and Napakiak and St. Mary’s, Andreafsky, Mt. Village and possibly Pilot Station in the future.
  • We invested in two sets of tugs and barges and contracted with Vitus Marine to operate them. This reduced our cost of fuel transportation by about 20 cents a gallon, which is about 1.6 cents per kWh. These savings are passed on entirely to our consumers.
  • Vitus’ entry into the fuel delivery market has lowered fuel costs to everyone in rural Alaska.
  • We continue to urge the State of Alaska to develop and implement an energy plan that reduces costs for all Alaskans.
  • We continue to spearhead the Alaska Grid project that would develop gas-fired generation on the North Slope and a robust transmission system to deliver low-cost power to urban and rural hubs as well as fish processors, military bases, mines and other resource developers. Since heat and electricity comprise 80+% of the homeowner’s energy budget, lowering these costs while supporting job creation would be a huge step toward self-sufficiency and sustainability in rural Alaska.

 

So what is the outlook for 2017?

In 2016 the average cost of a gallon of diesel delivered to our tank farms was $2.56, 55 cents less than 2015’s $3.11, resulting in an average fuel charge of 20.4 cents in addition to the average non-fuel rate of 27 cents a kWh. We are now back to pre-2008 fuel charges.

Minto is currently where the fuel charge is lowest at 12 cents and in Noatak, where fuel must be flown in, the fuel charge is 48 cents.

Fortunately, Power Cost Equalization lowers the cost to the homeowner to about 22 cents per kWh, but more than half the kWh used in our villages are not eligible for PCE.

We expect the cost of fuel to be about the same or a little higher in 2017 than in 2016. We expect that electricity will cost about the same or 2-3 cents more, but that lower-priced fuel will continue to bring relief to the cost of heating homes and businesses in our communities.

We will continue to press for significant changes in how the State develops an energy plan for the entire state. We will advocate for fair and equitable treatment of all Alaskans.

 

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