FIFTH OPENING – The Sitka seine boats Hukilau and Rose Lee pump herring aboard this afternoon at the end of Deep Inlet during the fifth opening in the Sitka Sound sac roe herring fishery. The opening was being held in two locations beginning at 11 a.m. (Sentinel Photo by James Poulson) 

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Daily Sitka Sentinel

Utilities Chief Details Electric Rate Options

By ABIGAIL BLISS
Sentinel Staff Writer
    For Sitkans wondering why their utility bills are so high, Bryan Bertacchi has insight – and possible remedies.

Brian Bertacchi speaks at the Chamber luncheon. (Sentinel Photo)


    The city utility director spoke to the Greater Sitka Chamber of Commerce Wednesday to offer a snapshot of his not-for-profit, “community owned and operated” department’s current state, as well as predictions for the challenges and opportunities on the horizon.
    In assessing the department’s current situation, he said the “utility right now is performing really well” and “reliability has been very high.”
    “The number of system-wide outages in town has gone way down. We had a little problem a few weeks ago, but it’s gone way down,” he said, noting any outage costs about $2,500.
    “If the power’s out in town, it’s not saving utility any money,” he said.
    Acknowledging that utility rates might seem high to some Sitkans, Bertacchi unpacked the factors that contribute to current rates.
    He explained that the department’s rates are equal to its costs divided by the load it’s able to sell.
    “If people use less, rates have to go up. If people use more, the rates can go down,” he said.
    He pointed to the Blue Lake debt, department operations, and overhead charges as contributors to that “cost” variable
    In years past, the electric department relied heavily on checks from the Assembly, he said, and is now weaning itself off of that support.
    “As the electric department, we had to come to the Assembly and ask for a transfer payment from the general fund because the rates were so low it was not covering the cost, and the Assembly would have to write checks for two million dollars to balance the books,” he said. “The Assembly gave us a goal and said they wanted us to try and put the rates together so we would operate, but with a razor’s edge, so that we would bring in just enough money. We needed about 1.65 to 1.68 million dollars to balance the books.”
    Based on the department’s recent performance and projections for the rest of the fiscal year, it is in good shape to hit that target, he said.
    “It looks like we’re going to be right there, and we’re not going to need a check written from the general fund to be able to fund the electric department, and so the rate increase, however painful, has been working,” he said.
    Turning his attention to the department’s future, he described several infrastructure updates the department plans to tackle through a 10-year, $22 million capital plan for which the funding is already secured.
    One critical project is the Marine Street substation, which Bertacchi said serves a large portion of the department’s customers.
    “If it goes down, there is little way to restore power to the rest of the community,” he said.
    Some of its major components are 40 years old, and if there were to be an issue with them, “we would basically have no power downtown for four to six months.”
    The department also plans to finish up the final touches on the Blue Lake project, and update the 40-year-old Thimbleberry bypass and the similarly aged plant at Green Lake.
    “We don’t have enough money to overhaul the entire plant, but we’re going to try and overhaul just the water way, which is all the common stuff for the two units,” he said.
    Additionally, the department will try to home in on the cause of recent system-wide outages, manage the department’s tasks in an organized fashion, and, in the face of several upcoming retirements, ensure that all departmental draws are clear and available in a digital format.
    Bertacchi highlighted the gap between the amount of hydro power produced in Sitka after the Blue Lake project and the amount consumed. He said if the department could manage to sell that remaining generated power, rates would go down.
    “We can sell 30 percent more power, we’re non-profit, everybody’s rate goes down,” he told the Chamber crowd, adding, “Literally between SEARHC and the Coast Guard, we have the opportunity to  easily suck up all of our remaining hydro.”
    He was cautious, however, about dealing in uncertainties, especially with upcoming challenges.
    He said it was critical for the municipality to prepare itself for 2030, when the interest-only bonds on the Blue Lake dam “effectively run out.”
    Bertacchi expressed confidence that the Blue Lake project will be beneficial for Sitka in the long run, granting it expands electric capacity that could field and would attract larger customers like SEARHC and the Coast Guard.
    “Blue Lake will turn out to be a really good decision for this community,” he said. “My projection is that we’ll consume the rest of Blue Lake probably in the next five, six, seven years, and Green Lake together.”
    However, “we could easily see three, four, five, six million dollars in new added cost to the utility that we could have when those bonds come due, and it’s not that far away, and we need to be prepared,” he said.
    Faced with that ultimatum, Sitka could pursue one or a combination of several recourses available, he said.
    First, they could do nothing and count on what Bertacchi called the “magic dust,” referring to the unconfirmed grants, customers, and other revenue streams people hope for.
    “I see that in a lot of our enterprise funds,” he said, predicting this option would lead to heightened overhead charges and, as a result, “significant rate hikes.”
    He’s concerned that rates might rise to the point where it would be cheaper for residents to run a gasoline generator at their homes rather than pay City electric rates.
    “If the rates get high enough, and people start using less and less, you have to keep charging more and more to be able to pay all these fixed costs, and there’s no real good way out of it, so that could become a serious problem,” he said.
    An alternative option would be to sell the utility, he said, though he’s not optimistic about the possibility.
    “The private cost on debt and the return on equity that they expect out of those projects, just isn’t in Sitka... because we’ve got a lot of old infrastructure and a lot of debt,” he said.
    “There’s not a private company that wants to touch that or get anywhere near it,” he added.
    A third possibility is converting to a co-op or a rural electric utility. He said such structures are highly regulated, but in a “positive way.”
    “They make you do all the rational things that we currently don’t do,” he said. “For instance, they would make you have a balancing fund to take into consideration if weather is good one year and not the next year.”
    To meet the standards for compliance, the department would require at least one additional employee, and the legal costs of converting would amount to “millions of dollars,” he said.
    A fourth, and more appealing option, would be to disentangle billing from the existing City utility, setting up a board specifically focused on the subject, rather than leaving it to the Assembly members, who have a lot on their plates, Bertacchi said.
    “They’ve got so many issues, trying to get them to focus on electric utility issues is always tough,” he said.
    He said this option might lower overhead costs by some $1 million, but general fund needs would still need to be met.
    “If you have questions about why your utility rates are high... The charges in the electric utility itself, I can tell you, from across the nation, I’ve been doing this for a lot of years, they’re perfectly normal and standard,” he said. “The overhead charges are unusual, but that’s how Sitka is structured – with a six mil property tax rate  – and that funding for the general fund has to come from somewhere.”
    Gary White asked about the value of appealing to Alaska’s national delegation in order to secure funding for the Southeast intertie program, and Bertacchi responded enthusiastically.
    “If the intertie was in place, Gary, we would sell (the excess generation) today,” he said. “We would make a whole bunch of revenue.... We’d be making a ton of money and rates would be significantly lower.”
    Mim McConnell wanted to know if there had been internal discussions within City staff about decentralizing the enterprise funds, as Bertacchi had suggested.
    City Administrator Keith Brady was present, and confirmed that such possibilities were being explored.
    “The city structure is very complicated, and I would like to uncomplicate it,” he said.
    Bertacchi expressed sympathy for the Assembly members and their heavy workload, while questioning whether the City’s current system is set up for success.
    “I am so sympathetic to these Assembly members and the commitment and amount of time they put in... When you’re sitting there trying to read a budget for one of these funds, it’s tough. I mean, I have a hard time reading it... You just can’t expect that the Assembly members are going to be able to do that for every enterprise fund and understand it. I think we’ve just made it too complicated in Sitka over time. Plus, regulation is getting more complicated... We need to rethink what we’re doing... I think it’s time for a  good constructive conversation,” he said. “It’s just a stupid way to do it.”

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20 YEARS AGO

March 2004

Matthew C. Hunter of Sitka recently returned from Cuba as part of a St. Olaf College International and Off-Campus Studies program. Hunter, a junior physics major at St. Olaf College, is the son of Robert and Kim Hunter of Sitka.


50 YEARS AGO

March 1974

Eighth graders have returned from a visit to Juneau to see the Legislature. They had worked for it since Christmas vacation ... Clarice Johnson’s idea of a “White Elephant” sales was chosen as the best money-maker; Joe Roth won the political cartoon assignment; highest government test scorers were Ken Armstrong, Joanna Hearn, Linda Montgomery, Lisa Henry, Calvin Taylor and David Licari .....

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