to Establish Depreciation Rates for the SPP
February 22, 2012, Chugach submitted a filing to the RCA requesting approval to
establish depreciation rates for the Southcentral Power Project and related
transmission plant. If approved, the
depreciation rates will be effective on the commercial operation date of the
SPP, which is currently expected by year-end 2012. Chugach expects a decision no later than
August 20, 2012.
Seward Power Sales Agreement
March 1, 2012, the RCA approved Amendment No. 2 to the 2006 Agreement for the
Sale and Purchase of Electric Power and Energy between Chugach and the City of
Seward (2006 Agreement). Amendment No. 2
allows Seward to accept power from Small Power Projects on terms that are
financially neutral to both Chugach and Seward for wholesale power service
provided to Seward, without changing Seward’s status under the 2006 Agreement
as a partially interruptible requirements customer of Chugach. In addition, Amendment No. 2 facilitates
Seward offering net metering service from eligible on-site generation sources
to its retail customers without attendant compensation to Chugach. Chugach and Seward have structured the net
metering conditions to be consistent with the net metering regulations adopted
by the RCA.
Fire Island Wind Project
October 10, 2011, the RCA issued an order approving Chugach’s request for
assurance of cost recovery associated with a new power purchase agreement (PPA)
between Chugach and Fire Island Wind, LLC (FIW), a special purpose entity
wholly-owned by Cook Inlet Region, Inc.
The PPA is a 25 year agreement whereby Chugach purchases the output of
the facility over a 25 year term, commencing January 1, 2013. The Fire Island Wind project is comprised of
eleven 1.6 megawatt wind turbine generators with a total nameplate capacity of
17.6 megawatts which are expected to generate approximately 50,000 MWh per
year. The generators will be located on
the southern part of Fire Island in Anchorage, Alaska. The project is expected to become
commercially operational before October 1, 2012. An affiliate of FIW is responsible for the construction
of the interconnection between the project and Chugach’s transmission
system. Chugach is the recipient of a
grant in the amount of $25.0 million appropriated from the State of Alaska. The grant will be used to offset construction
of the transmission line. Construction
expenditures applied against the grant were $2.6 million in the first three
months of 2012 and $6.6 million in total.
Chugach is not expected to incur any unreimbursed capital costs
associated with this line, but will acquire the line once construction is
submitted a project status report on March 30, 2012, and a specific rate
recovery plan on April 2, 2012. The rate
recovery plan addressed customer intergenerational impacts resulting from
purchases made under the PPA’s fixed pricing structure. The plan levels the effective rate for
purchases made under the PPA, establishes the deferral of any differences
between purchases made under the PPA contract price and the scheduled FIW rate
changes proposed by Chugach, establishes routine rate true-up procedures to
account for differences between expected generation and actual purchases and
ensures full recovery of costs appropriately allocated to the customer classes
participating in the PPA.
January 11, 2012, Chugach issued $75.0 million of First Mortgage Bonds (2012
Series A, Tranche A) at an interest rate of 4.01 percent, $125.0 million of
First Mortgage Bonds (2012 Series A, Tranche B) at an interest rate of 4.41
percent and $50.0 million of First Mortgage Bonds (2012 Series A, Tranche C) at
an interest rate of 4.78 percent. The
proceeds of the 2012 Series A Bonds were used for the purpose of repaying
outstanding commercial paper used to finance the SPP construction and for
general corporate purposes.
12, 2012, Chugach submitted a petition to the RCA requesting authorization to
create a regulatory asset for deferred recovery of interim interest expense
associated with SPP financing and also requested approval to recover the financing
transaction costs in future electric rates over the life of the 2012 Series A
Bonds. Chugach’s request included the
approval to defer the interest expense on the portion of the proceeds not
immediately expended on the SPP and recover it in future electric rates over
the life of the bonds, or between 20 and 30 years. Chugach estimates the remaining balance of
proceeds will be completely expended on the project by November of 2012. The deferral of interest for the portion of
the 2012 bonds not immediately expended totaled approximately $1.1 million. The
RCA is expected to issue a final order no later than September 8, 2012.
December 31, 2011 Test Year Simplified Rate Filing
March 30, 2012, Chugach submitted a Simplified Rate Filing (SRF) to the RCA and
requested a system demand and energy rate decrease of 0.08 percent, or
approximately $0.8 million on an annual basis.
The filing was based on the December 31, 2011 test year for proposed
rate adjustments effective in May 2012.
On a customer class basis, Chugach requested demand and energy rate
increases of 1.3 percent to Chugach retail customers and decreases of 2.9
percent to its wholesale classes. The
RCA is expected to issue a letter order no later than May 14, 2012 approving
the filing. If so, the updated rates
will become effective May 15, 2012.
Energy Sales and Transmission Wheeling Service
April 23, 2012, Chugach submitted a filing to the RCA requesting approval to
update its economy energy and transmission wheeling services tariffs to reflect
current costs and operating conditions associated with transactions at the bulk
power supply level. If approved, the
rates and conditions of service associated with these transactions will align with
Chugach’s current operating environment.
Chugach requested the proposed changes take effect 45 days after the
filing date. If approved, based on
historical economy sales and wheeling transactions, annual revenue would
increase approximately $2.8 million.
Economy energy margin and wheeling revenue is treated as an offset
against fuel and purchased power expense recovered through the quarterly fuel
and purchased power process and thus does not impact margins.