Shocking rate increase zaps CVEA customers
FPPC rate climbs over 40 percent in two months
By Lee Revis
Editor, Valdez Star
With little notice or warning, Copper Valley Electric Association raised the price for fuel and purchased power for its customers- an increase of over 16 percent above October’s announced increase of 28 percent. The FPP jumped from 11.47 cents per kilowatt hour to 14.72 cents to an astounding 17.12 cents. That is an increase of over 49 percent in less than two months.
The FPPC is the cost of fuel – essentially diesel to run generators - used by CVEA to generate a kilowatt-hour of electricity. This cost is passed on directly to consumers.
In an update posted on its website November 19, CVEA claimed the increase was necessary to cover a 45 cent per gallon increase in the cost it pays for diesel.
When last month’s FPPC increase was announced the co-op placed an advertisement in the Valdez Star stating the board authorized the use of $1.5 million in margins to subsidize the fuel charge. In co-op speak, margins are what other companies would call profits. In a co-op like CVEA, its members are the owners and the margins are usually paid out to members as capital credits, essentially refunding members monies collected that are not needed to run the co-op. In this case, CVEA claimed margins used to offset the cost of diesel came primarily from heat sales and would be used to offset the FPPC on monthly electric bills.
October’s advertisement also claimed that the FPPC would be as high as 18.58 cents per kwh without the subsidy. It further expressed hopes that the FPPC would not increase and remain stable until March of 2008 when the board would revisit the FPPC “Unless CVEA sees a dramatic increase in fuel costs.”
CVEA could not define what would constitute a dramatic increase in October, but apparently 45 cents more for a gallon of diesel did indeed cause a dramatic increase for both CVEA and its customers alike.
CVEA purchases diesel by a contract that is competitively bid every three years. The price is based on the Anchorage OPIS Price Index. OPIS – the Oil Price Information Service – is the worldwide organization that sets the benchmark for the price of petroleum products.
When the Board approved the increase, the CVEA rate was $3.0037 per gallon.
This month’s message on the CVEA website expressed regret at the latest rate increase and touted cost saving measures instituted – including past use of margins.
One paragraph of the internet message reads: One thing CVEA cannot do, however, is control the high price of fuel. "The future forecast for the cost of a barrel of oil does not look good,” according to CVEA CEO Robert Wilkinson. “It is important for consumers to understand that as the price of oil continues to climb, the FPPC will continue to increase. It is important that our members are prepared for that reality.”
CVEA further urged consumers to reevaluate their electrical needs and to consider instituting electricity-saving measures and included the following: For those with serious concerns regarding their ability to pay for their heating needs this winter, the State of Alaska, Division of Health and Social Services offers a heating assistance program to low income households. This program assists qualified individuals with home heating expenses. Eligibility is based on income. For more information, contact Alaska’s Public Assistance office at 1-800-470-3058, visit the State of Alaska’s website at http://www.hss.state.ak.us/dpa/programs/hap or stop by either CVEA office for an application.
