No Surprise: Fuel Prices and Energy Rates on the Rise

It is a relief that AVEC’s bulk fuel tanks across the state are being filled to provide for another year of power generation. When the US launched its offensive on Iran at the end of February, the fuel supply business was turned on its head and there was a question whether the supply chain needed to get fuel to rural Alaska could be linked back together in time for deliveries this year. At this stage it appears that all our vendors have found enough supply to meet our needs and deliveries are progressing at the normal pace. The supply of fuel under these conditions however comes at a cost.
For a few communities, the continuing ripple effects of the Iran conflict and vacillating closures of the Strait of Hormuz will continue to create spikes and dips in delivered fuel prices this year. However, for the vast majority of AVEC communities, even if the fuel barge has not yet delivered, the fuel pricing was locked in when the tankers that supply them were filled. For communities that have received fuel this year the delivered cost of fuel has been 35-40% higher than last year. That is better than the projected 50-60% increase anticipated back in March but it is still a big hit to the cost of power. Those 35-40% increases translate to $2-3 per gallon of diesel, and at an average generating efficiency of 13.5 kWh/gal, an increase of $0.15 to $0.22 per kilowatt-hour (kWh).

That puts barge delivered fuel costs for most communities above $0.50/kWh just for the fuel to generate
power. For fly-in fuel, the cost per kWh is over $1/kWh, just for fuel. The other part of the cost of electricity equation for our members is the “energy rate”. This is the cost per kWh that it takes for AVEC to recover its cost for the operation and maintenance of 46 prime power plants, 9 standby power plants, 500 miles of distribution lines, 590 bulk fuel tanks, 33 wind turbines, 11,500 services and employing 90 full time employees to serve a population of
more than 31,000 people in 58 communities. Every year AVEC reports its operating expense to the Regulatory Commission of Alaska and at the end of 2025 that number came out to be $0.36/kWh for most communities.
There does not appear to be any relief on the horizon for energy rates. The persistent rate of inflation, the high cost of commodities, (including fuel), continuing uptick in transportation and freight cost, cost of living, and wage growth to remain competitive all add up to higher operating expense year over year. In order to keep pace with the cost of doing business AVEC will need to increase its revenue by 10%. We are calculating rate adjustments and will be publishing proposed rates for public comment later this summer. It is disappointing that the cost of everything
continues to climb, but there is some relief in knowing that the supply of fuel and electricity
continue to be met.

(Published August 2026)