Earlier this month, Seward residents voted down selling the city’s electric utility for the second time this year.
The city currently buys its electricity from Chugach Electric Association and manages it for residents. In March,the city drafted an agreement to sell the utility to Homer Electric Association for more than 25 million dollars. In addition to the initial payment, Homer Electric would pay the city eleven million dollars over the next ten years.
Seward City Manager Kat Sorensen said that uncertainty about rate changes was a driving factor for the sale failing.
"A lot of the basis of voting against it was over the unknown future of rates in Alaska, and Seward specifically, and how those would vacillate if a sale was made to Homer Electric," she said, "and the the loss of control that the city would have over rate implementation in Seward.”
The vote to sell the utility also failed back in 2000 by 61 votes.
Now, the city is looking at rate increases in the following years. Sorensen said that a contract would have allowed residents to gain benefits of being part of a larger group of ratepayers for these improvements, especially around cybersecurity.
"Cybersecurity is becoming more and more of an issue with electric companies because of their infrastructure, and the different variables that go into it," she said, "and a lot of the regulations are increasing to a certain level and we have to keep up with that, and as a small utility, it can be difficult to keep up with that.”
A rate study Financial Engineering Company presented to the city last month showed that customers would likely see higher utility bills.
The report created four options if a sale did not go through. Two had rate increases for next year, with an additional increase beginning in 2025. One had a flat base rate increase, and one increased base rates by utility class to bring revenue closer to the cost of service while lessening the increase to residential utilities.
After accounting for infrastructure needs and hiring a cybersecurity expert, the study showed base rates would increase by $0.055 to 0.065 per kilowatt hour for residential class utilities. This year’s base rates for residents are $0.1217 in the summer and $0.0851 in the winter. That would mean an average monthly electric bill would increase by roughly 34 to 40 dollars for residents next year. That means an average monthly electric bill would increase by roughly 34 to 40 dollars for residents next year.
Even then, the city would have to investigate and adjust people’s payment in lieu of taxes and administrative fees for 2025.
Sorensen said that the city will hold a work session on November 13 to make plans for the electric utility moving forward, and that rate changes will be determined by the end of this year.
