Decision near on 69.92% electricity rate hike challenged by Skagway
- Chilkat Valley News
- 1 day ago
- 4 min read
By Will Steinfeld
Chilkat Valley News
Closing arguments were submitted this week in a rate case that could see residential electricity charges in the Upper Lynn Canal climb significantly next year.
In the rate case, first filed a year ago, Goat Lake Hydro is seeking a 69.92% increase in its wholesale rate for electricity. The company operates hydroelectric plants at Goat Lake, north of Skagway, Kasidaya Creek, a remote location between Skagway and Haines, and Lutak, though the Lutak plant has not been in operation since 2020. The company is a subsidiary of, and sells all of its power to, Alaska Power Company, which is itself a subsidiary of AP&T.
According to a public notice, the full increase would result in a $21 increase over 2024 rates for a 500-kWh residential electricity bill, though it could be evened out by a corresponding increase to the state’s Power Cost Equalization credits.
As a public utility, any change to what the company charges customers must be approved by the Regulatory Commission of Alaska, or RCA.
This particular rate increase was driven largely by repairs to two miles of the subsea cable connecting the Kasidaya hydroelectric plant to Skagway, after it was damaged by a subsea landslide in 2019. The repairs cost over $12 million and took four years, finishing in 2023. Absent a rate increase, company representatives said in testimony to the RCA, the company would see an annual shortfall of $1,080,527.
The Borough of Skagway, however, is asking the RCA to deny the rate increase, arguing that the company is “entitled to no more than a 5.38% increase in rates.”
“AP&T seeks to maximize profits for its shareholders to the detriment of ratepayers, and has advanced rates that are not just and reasonable,” wrote the borough’s attorneys, Robin Brena and Jake Staser, in the borough’s closing argument, filed Dec. 8.
A large portion of the case centers around whether the company is allowed to pass the cost of the undersea cable repairs along to customers.
When the cable was damaged, the company held an insurance policy that paid just under $8 million toward the repairs, leaving over $4 million uncovered.
In case documents, Skagway has argued the company was obligated to maintain insurance covering the entirety of such an event, and in doing so protect customers from facing costs of repairs.
The borough’s closing argument cites a 1992 RCA decision in which regulators wrote that it is incumbent upon utilities to protect ratepayers from liability including “damage or destruction of facilities… that result in catastrophic or ordinary losses.” According to the decision “That shielding from liability is generally done through the purchase of commercial insurance that pays for all losses above an agreed-upon deductible.”
The Skagway borough’s argument also included filings from Goat Lake Hydro to the RCA in 1997, which claimed there would be “adequate insurance proceeds to restore the plant to its original operating condition i[n] the case of any major event.”
The borough noted that the $7.8 million insurance payout for the recent cable failure covered only two miles of cable repairs, arguing the total cost of the cable the company was responsible for would have in fact been much higher. Those two miles represent roughly 15% of the cable’s length, Alaska Power Company vice president Jeffrey Rice said in testimony.
“The system should have been insured for over ten times the amount that (Goat Lake Hydro) maintained in coverage,” Skagway’s attorneys wrote in their closing argument.
Rice and other Alaska Power Company representatives have argued that the company has been unable to find an insurance company willing to fully insure the cable “at a reasonable cost,” particularly given the size of the cable relative to the Lynn Canal’s depth and undersea activity.
Goat Lake Hydro’s attorneys Shannon Bleicher and Tina Grovier argue the company was not required to maintain insurance to cover the full $12 million cost of the repair.
According to their written argument, the company installed a new type of replacement cable in a new location. A replacement, they said, was different from just a repair. The argument also cited increased and unforeseen costs due to the COVID-19 pandemic.
Other issues in the rate case included the operation of the Lutak hydroelectric plant. The company has included the plant in its rate base, meant to encompass “used and useful” equipment and facilities. Skagway and the state Attorney General have argued the plant does not qualify as in-use, having been shut down since 2020. Alaska Power Company officials testified that they plan to have the plant operational in 2026.
The RCA’s final decision on the rate case is due before March 13, 2026. Upper Lynn Canal customers have also been paying a 40% interim rate increase since February, approved by the RCA to cover the time the rate case was being heard. Those interim costs would be paid back to customers with interest if the rate increase is denied or lower than the interim rate.
• This article originally appeared in the Chilkat Valley News.
