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Economic & Energy Load Forcast City of Kake, Ak 1982
ECONOMIC AND ENERGY LOAD FORECAST CITY OF KAKE, ALASKA prepared for The Alaska Power Authority under subcontract to Ebasco Services, Incorporated June 24, 1982 DRAFT David M. Reaume ALASKA ECONOMICS, INC. 8453 KIMBERLY ST. © JUNEAU, ALASKA 99801 © (907) 586-9677 Il. Ill. IV. CONTENTS EXGCUEIVG SUNMAFY.s si.ccchecosek avaweacssGmmaven seawall. esp e-n9,e 1 ECONOMIC: PHOJECET OM ia: se iorsiv cee 510 ws 01 oj ein wteiviw otalele: @ wis teres ew wieeis 6 Commercial FiShing........ cece cece cree e ee eee eee eee e ee eeeee 8 Logging and:Sawmi \Siicsennisqe mcs wrinssseieweeerninep wiieennisie 10 Earnings. 0utside: Kake ss sc.ngiccccncccaivcnmnswn wan ceere tees is 11 Methodological Considerations..........c cece eee cece e cence 12 Growth: 1970-1980 ccss.cccwqwitres sainsse wenwa wae swiewven enewewivis 13 Kake Energy Consumption, 1981......... cece cece ee ee eee eeee 16 Kake Electricity Consumption, 1981............c cece eee ee eee 18 Other Kake Energy Consumption, 1981...........cceeeeceevees 18 DiSEIMGUTSHING -FeatUNES 6 1.0 sioi2 6 screws ie eisie ool o1e:s0. wire emyerersres wre 19 The April 1982 Survey....... cece cece cece cece eee eee eeeees 20 RESTGENCIAD SUPVEY cps ie: 550 0101605 iani eee s ies ow i601 1s eieisioe Wines wire 21 Commercial/Public Building Survey.........ceeeceececeeceece 29 MANUTACCUT ING SCCEOM oo. « 0:0 016101416 1sieieise ieyere'e wie’ e) oi0's ie ter e/wie joie: 0: s:0 were 32 Soderberg Logging Company.........cceeeceeeceeeeceeees 33 Kake Cold Storage........ cece cece ccc c cece erect ee eeeeee 34 Keku Canning Company.........cccceee cece cc eeeeeeeeeeee 34 Kake Energy Consumption Forecast, 1981-2005............6.6- 36 Price® EFRECES ss cccccacscwanamemanceranneew onwewnindees asewier 43 Income EFFECTS... .. cece ce cc ce eee cee eee e eee eeeeees 48 TWO! CAVCAES as s0nics stare cows wrsieewn. one ee wieisieiniewie eis ewe sewers seieis 54 The Effect of Deep Price Discounts........eeee cece eeeeeeees 55 CONCTUSION. ... cece eee cece cece eect eee eee eee eee eeeeeeeeees 57 I. EXECUTIVE SUMMARY Table I-1 gives the base case forecast of Kake energy demand through the year 2005. This forecast is premised on the Kake economic forecast presented in Section II, and on a set of behavioral demand assumptions discussed in Sec- tion IV. Between the years 1981 and 2005 total Kake energy demand (all fuels) is pro- jected to increase by 61.6 percent, and by 21.8 percent on a per capita basis. Kake's annual demand for electricity rises in the forecast from 2026 megawatt hours (MWh) in 1981 to 4612 MWh in the year 2005, a gain of 128 percent overall, and 71.6 percent on a per capita basis. Using the reported 1981 peak to average load ratio for THREA, Deak Kake electricity demand in the year 2005, is an estimated 2.04 megawatts (MW), of which only 1.14 MW will be required to serve the customers of the Tlingit-Haida Regional Electric Authority (THREA). The remaining 900 kilowatts (KW) of peak capacity is projected to be self-supplied by the Kake Cold Storage. !/ As required by the Alaska Power Authority, this forecast assumes that real electricity prices will remain at 1982 levels and that the real prices of alternative energy sources will rise 2.6 percent per year. Given these price assumptions, Kake's electricity demand will be muted by the absence of a price incentive to shift to electric space heating. Even if real Kake prices for electricity substitutes rose a somewhat more rapid 5.2 percent per year, there would be no discernible difference in the electricity load forecast. 1/The THREA generators are not demand metered. The 1981 peak to average ratio was obtained by dividing an estimate of peak load (475 KW) by THREA's annual load of 1525 MWh. The estimate of peak 1981 load was provided by the Kake power plant operator. 1981 ALL SOURCES (MMBTUS) RESIDENTIAL 35658.94 COMM/GOVT 24375 ..27 MANUFACTURING 3912.13 ALL SECTORS 63946. 33 ELECTRICITY (MWH) RESIDENTIAL 713.49 COMM/GOVT 51.36 MANUFACTURING 61.47 ALL SECTORS 2026.32 FUEL OIL (000'S GALS) RESIDENTIAL 166.22 COMM/GOVT 158.38 MANUFACTURING 11.83 ALL SECTORS 336.43 BOTTLED GAS (000'S GALS) RESIDENTIAL 18.96 COMM/GOVT 1.49 MANUFACTURING 22 ALL SECTORS 20.66 WOOD (CORDS) RESIDENTIAL 600.00 COMM/GOVT 10.00 ALL SECTORS 610.00 1985 44376 .66 27945.51 5868.19 78190.36 1165.88 865.31 992.21 3023.40 206.03 178.68 17.75 402.46 27.67 1.68 33. 29.68 662.21 11.28 673.49 TABLE I- KAKE ENERGY CONSUMPTION 1990 48249 .58 30149 .82 6043.76 84443.17 1279.61 1011.90 1043.19 3334.70 223.99 190.86 17.75 432.61 30.29 1.79 -35 32.43 715.99 12.05 728.04 EXCLUDES FUEL OIL USED FOR POWER GENERATION BY THREA AND THE KAKE COLD STORAGE 1 SUMMARY 1995 50708. 30 33159 .93 6219.33 90087 .56 1399.95 1228.16 1094.17 3722.28 235535 207.11 17.75 460.21 32.77 1.95 36 35.08 733.91 13.08 746.99 2000 53713.96 35474.95 6394.90 95583.80 1532.79 1407.18 1145.15 4085.13 249.27 219.29 17.75 486.31 35.58 2.06 +38 38.02 760.28 13.85 774.12 2005 57320.81 39438 .96 6570.46 103330.23 1679.13 1736.51 1196.14 4611.78 265.99 239.59 17.75 523.34 38.74 2.25 -40 41.39 796.13 15.13 811.26 Indeed, annual real price increases of 5.2 percent for alternative fuels would generate significant negative income effects on all forms of Kake energy consumption except wood for space heating. For this reason we have not given an explicitly detailed demand forecast for the 5.2 vercent case. Kake-THREA generating capacity in 1981 was 1.6 MW or 40 percent greater than the projected peak THREA demand in the year 2005. In the absence of a substan- tial reduction in the price of electricity to Kake users, the 1981 capacity should be adequate to handle year 2005 loads, assuming normal maintenance of generating units, and their replacement after twenty years. The absence of a price incentive to shift space heating from fuel oil (68.4 vercent of space heating demand in 1981), and wood (31.3 percent in 1981) to electricity (0.3 percent in 1981), is largely responsible for the conclusion reached in this study. In 1982, the average THREA residential price for elec- tricity, inclusive of State government subsidies, stood at $55.40 per million BTu's (MMBTu's), and the average THREA non-residential price at $88.40/MMBtu. With fuel oi] priced at $10.33/MMBTu, bottled gas at $24.63/MMBTu, and wood at $3.60/MMBTu, even a 5.2 percent rate of increase in the prices of fuel oil, wood, and bottled gas, would leave electricity the high priced alternative in the year 2005. Given the ready availability of wood for space heating in Kake, only an absolute (as well as relative) decline in thereal price of electricity of Kake users, on the order of 50 percent or more from 1981 levels, would suggest the possibility of a switchover to electricity for space heating and a sub- sequent demand for increased peak load generating capacity. A shiftover of the Kake Cold Storage from self-supplied power to THREA power would also increase THREA's peak load requirements, However, at 1982 prices, such a shift is unlikely to occur since the 1982 self-supnlied price of elec- tricity to the Cold Storage is an estimated $39.51/MMBTu or 55 percent lower than the THREA commercial price. Should Kake-THREA electricity prices be lowered to the point where all space heating presently supplied by fuel oi] is shifted to THREA power, the implied increase in annual load would be 10,881 MWh at 1981 consumption levels and 15,604 MWh at projected, year 2005 consumption levles. In the year 2005, peak THREA capacity requirements would rise by an additional 4.9 megawatts from 1.14 MW to 6.04 MW. Apart from the price assumptions, the premises upon which our forecast is based have been selected to produce an energy load forecast that errs on the high side of what can reasonably be projected, given present information and pre- sent expectations of economic growth. (This point is discussed in Section IV, below.) This was done in order to strengthen our fundamental conclusion that THREA's 1981 Kake capacity of 1.6 MW, would be adequate to handle projected loads throughout the forecast period, assuming normal maintenance and replace- ment of generators after a twenty year uselife. THREA Keke Electric Power Consumption Total *Tlingit Haida Regional Electrical Authority Non-Residential o—o—o—o—o Residential s—s—s—s—s Thpxsand 200 - 190 - 180 - 170 - 160 - 150- 140 130- 120- 110- 100- 90- 80 - 70- 60- 50- 40- 30- 20- 10- II. ECONOMIC PROJECTION The Kake economic forecast presented in Table II-1, while necessarily limited by data availability in the variety of community economic characteristics sampled, fairly represents our somewhat optimistic view of the City's long- term (twenty-five year) economic outlook. In brief, the Kake economy is highly likely to remain small and oriented toward commercial fishing, sub- sistence harvesting, and logging, with much of the future job growth in logging and sawmills provided in the village of Klawock, or at remote log cutting sites elsewhere in Southeast Alaska (Prince of Wales, Chichagof, and Baranof Islands). Some additional jobs for Kake residents may be provided in the mining industry at locations such as Noranda's Greens Creek operation on Admiralty Island, and U.S. Borax's molybdenum mine at Quartz Hill. The growth in Kake nonagricultural employment shown in Table II-1 after 1985 is primarily support sector growth stimulated by the spending of wages earned by Kake residents in the fishing and timber industries, and at jobs held out- 1/ side Kake itself. Much of the difference between Kake personal income ‘ and Kake nonagricultural payrolls shown in TableII-1 is proprietors' income of commercial fishermen, and wages earned outside of Kake. We envision no change in this structural relationship. 1/Personal income is defined to be the resident sum of wages and salaries, rental income of persons, interest and dividend income of persons, and transfer payments received, less employee contributions for social insurance. (U.S. Department of Commerce definition.) TABLE II - 1 THE KAKE ECONOMY, 1980-2005 BASE CASE een-Historyen-- 0 tree ene nnnn------- Forecast--------------------- 1980 1981 1985 1990 1995 2000 2005 Population, April 1 555 569e 628 679 696 721 755 Personal Income (000's of 1981 $) 2,850e 2,962e 5,006 5,500 6,043 6,639 7 gene Housing stock!/ (Units) 181 188e 214 239 245 264 269 Commercial /Public Buildings NA 41 44 47 51 54 59 Nonagricultural Employment 56e 60e 147 155 165 178 184 Government 32e 32e 37 40 43 46 49 Private 24e 28e 110 115 122 132 135 Nonagricultural Payroll (000's of 1981 $) 866.le 1,020e 2,499 2,797 3,160 3,619 31971 Commercial Fishing Permits Held NA 92 95 100 105 110 115 Hand Troll, Salmon NA 63 63 63 63 63 63 Power Troll, Salmon NA 5 5 5 5 5 5 Seine, Salmon NA 1 Wl a} 1 a] 1 Gill Net, Salmon NA ] 1 ] ] ] 1 Long Line NA 12 15 20 25 30 35 1/Includes 50 mobile units added in 1982 in association e - estimated by Alaska Economics, Incorporated NA - not available with the Hobart Bay - Kake transhipment venture. Compound annual average rates of growth implicit in Table II-1 for the twenty-five year period ending in the year 2005 are: Population snnmisonsceicisccccinasctaoccsgectascruise 1.1 percent Real Personail) IncOme’s.sts sia 7fs1s1s, 431 a s:s1 ale teis,ole's¥ousiel o's (sis; 3.8 percent Real Per Capita Personal Income.................6.. 2.5 percent Housing) StOCK!:.<\<5 sid isteisic15 ss0.s1c1 to usys: viele oiayois ote ias a svereyerala 1.6 percent Nonagricultural Employment (in Kake)............... 4.9 percent Real Nonagricilitural Payroll lc. scn%.<.cccnc ccscn aocemian 4.3 percent Real Nonagricultural Payroll Per Job............4.. 1.4 percent Number of Commercial Salmon Permits..........eeeee- 0.0 percent Number of Commercial Long Line Permits............. 4.6 percent This forecast is premised on the following assumptions. COMMERCIAL FISHING!/ Alaska's limited entry salmon permitting system is projected to remain in effect throughout the forecast period. An increasing number of Kake fishermen are assumed to enter the halibut, pacific cod, rockfish, and black cod fisheries in response to State and Federal initiatives to increase the domestic harvest of these species. We view this assumption as reasonable in terms of its implications for Kake income from commercial fishing, but by no means transparently obvious in terms of its details. At the present time, conflicts with Canadian authorities 1/Much of this discussion is based on talks with staff of the Alaska Office of Commercial Fisheries Development, the Alaska Commercial Fisheries Entry Commission, and the Commercial Fisheries Division of the Alaska Department of Fish and Game. and Washington State Native tribes over allocations of salmon stocks, the possible (probable ?) construction of the Stikine River Dam in British Columbia, and an economically conditioned hatchery preference for the pro- duction of pink and chum salmon, leave considerable doubt as to the overall future size of the Southeast Alaska salmon fishery, and its future com- position. Conditions today suggest stable or declining stocks of troll fishery salmon (king and silver salmon) and considerable potential for increased stocks of / If such trends seine and gill net fishery salmon (pink and chum salmon). | continue, one can expect holders of hand troll and power troll limited entry salmon permits to either cease fishing, enter other salmon fisheries, or to enter fisheries presently of limited importance to Southeast Alaska (e.g. octopus, clams, shrimp, bottomfish). Present limited entry regulations do not preclude the creation of additional limited entry permits if one or more fishery stocks increase sufficiently. With respect to bottomfish, it is clear that our long line projection in Table II-1 is probably too generous, if projected out to all of Southeast Alaska in proportion to Kake's relative share of the population of commercial fishermen. One should view the long line projection as a measure of overall effort toward bottomfish (long line, seine, trawl). The question of capital cost to enter the fishery looms large here. Implicit in our assumption is adequate financing for boats and gear from such institutions as the Alaska Commercial Fishing and Agricultural Bank, and expansion of processor and/or cold storage facilities to handle an increased catch. (The Kake Cold Storage 1/This is particularly true for the Inside waters of the Alexander Archipelago, where the bulk of Kake handtroller effort has been concentrated. For a dis- cussion of the outlook for the Southeast salmon fishery see the "Comprehensive Salmon Plan For Southeast Alaska, Phase I," developed by the Joint Southeast Alaska Regional Planning Teams, April 1981. (available from the Alaska Department of Fish and Game, FRED Division) 9 facility owned by the Kake Tribal Corporation is in the process of doubling its freezer capacity this season and has discussed the possibility of further plant expansion.) !/ Finally, we note that although our projection of salmon troll permits is numerically constant, given present limitations on the resale of hand troll permits, it implies an actual increase in re-sellable permits held by Kake residents, assuming at least some holders of non-marketable permits die or otherwise leave the fishery over the twenty-five year forecast period. LOGGING AND SAWMILLS With the passage of the Alaska National Interest Lands Conservation Act on December 2, 1980, and subsequent and pending conveyances of land titles to Southeast Alaska Native corporations, the entry of Southeast Alaska Native village corporations into the timber industry became a reality. Coordinating the efforts of the village corporations is the Sealaska Timber Corporation, a subsidiary of the Sealaska Native Corporation. Present and projected logging and log transporting operations at Kake include a projected annual harvest of twenty to twenty-five million board feet of spruce and hemlock (some yellow cedar), and Valentine Logging Company's plans to load on Japanese freighters up to twenty-five million board feet per year of logs cut at Hobart Bay. (The logs are to be rafted from Hobart Bay to Kake. )°/ T/Per Phillip Riggs, Ocean Fresh Seafoods (a subsidiary of the Kake Tribal Corporation.) The Kake long liners presently target on black cod. 2/Per Sealaska Timber Corporation. 10 According to Sealaska Timber Corporation, Valentine Logging Company will establish a 50 unit mobile home camp in Kake to house up to 100 longshoremen and loggers engaged in the nine month per year operation. The sharp increase in Kake private sector nonagricultural employment shown in 1985 (Table II-1) is caused by the addition of the 100 jobs associated with the Hobart Bay venture (75 jobs on a full time annual basis) and multi- plier induced support sector growth. Our forecast assumes that long term annual average timber production at Kake will be 25 million board feet per year and that combined logging and transshipping employment will cycle about the 1985 level through the year 2005. In effect, we are assuming that once established as atransshippment point, Kake will remain so, if necessary, shipping logs harvested in locations other than Hobart Bay. Given the sensitivity of the Alaska logging industry to World market conditions, we view this as an opti- mistic statement, designed to preclude downward bias in our economic projection, and, therefore, downward bias in our energy load forecast. EARNINGS OUTSIDE KAKE Apart from commercial fishing and logging, the major sources of Kake income are transfer payments and income earned by Kake residents who work in other parts of Southeast Alaska for all or part of the year. While no current data are available on the size of the latter (outside Kake earnings), discussions with Kake community leaders and officials of the Sealaska Native Corporation have made it clear that Sealaska's long term prospects in a variety of South- east Alaska ventures (logging and mining in particular) hold promise for the future employment of Sealaska shareholders. Our Kake income projection 1 embodies the assumption that these opportunities will materialize and be taken advantage of at a rate that allows total Kake "outside" income to keep pace with the growth in other sources of Kake income. METHODOLOGICAL CONSIDERATIONS Data for the Kake economy are fragmentary at best. The official U.S. Department of Commerce personal income series was last updated for 1977. Alaska Department of Labor employment and payroll data are available only on a government-private basis, and only through the third quarter of 1980. (Further disaggregation is precluded by disclosure regulations.) Housing stock data consist of the decenniel Census counts and an April 1982 count taken by AEI in conjunction with our survey of energy use characteristics. Much of the 1980 Census detail has not yet been made available. Under these conditions, it is clear that econometric forecasting techniques are valueless. Indeed, they were not even considered for this project. Our forecast is strictly judgemental. Care has been taken to keep fore- casted magnitudes reasonable in light of what we know about the actual opportunities for economic growth in the Kake area. These opportunities are limited to (i) exploitation of local timber resources, \/ (ii) gains in commercial fishing, and (iii) very very preliminary and tentative discussions 1/Any expansion of Southeast Alaska sawmill or pulp operations is likely to occur in places such as Klawock, where such operations presently exist (Alaska Timber Corporation) and can be expanded more economically than at Kake. Because Alaska Native corporations are exempt from Federal prohibi- tions against round log exportation, logging operations near Kake are most likely to center on the production of round logs for export. Such is the case in the Valentine Logging, Hobart Bay operation which will use Kake as a transshipment point only. Given the relatively high cost of sawmilling and pulp making in Alaska, there is no reason to expect a change in this state of affairs in the forseeable future. 12 of possible future mining operations somewhere "near" Kake. The overriding consideration is that nothing we have found points in the direction of major structural change in the Kake economy. Our 2.5 percent per year compound average rate of growth of real Kake personal income should, therefore, be viewed as at least reasonable, if not optimistic. GROWTH 1970-1980 Growth rates for the decade of the 1970's can provide an historical prespective against which to judge the forecast in Table II-1. There is, of course, no automaticity to the growth process. There is, however, the meaningful question as to whether or not the present forecast, on the whole, calls for higher or lower than historical growth rates. Between 1970 and 1980, the U.S. Census Bureau recorded a gain in Kake City population of 107 persons. For the decade as a whole, the recorded annual average growth in Kake population was 2.2 percent. At least some part of this growth is attributable to State funded municipal grant programs, loan programs, and public transfer payments that grew rapidly in the late 1970's. !/ Studies by David Reaume, by the Alaska Pacific Bancorporation, and by the University of Alaska, all have shown that recent historical rates of increase in State government spending are not sustainable beyond 1/Between fiscal year 1976 and fiscal year 1980 real (inflation adjusted) Alaska State government grants to local communities rose an average of 4.3 percent per year. (U.S. Census, State Government Finances) 13 the late 1980's. !/ The 1.1 percent annual average 1980-2005 rate of growth of Kake population implicit in Table II-1 hardly seems low from this per- spective. We would, therefore, expect our energy load forecast to be some- what high, at least from the point of view of its dependence on forecasted population growth. Between 1970 and 1980, the estimated Statewide timber harvest (most of which is taken from Southeast Alaska) declined from 628 million board feet to approx- imately 550 million board feet .2/ Conversations with Regional Forester John Sandor (U.S. Forest Service, Juneau), and our own market analysis, suggest a max- imum annual harvest of 650 million board feet (all lands) for the forseeable future. Thus it would appear that unless a greater percentage of harvest is concentrated in the Kake area, the potential for sustained growth in employment and income from this source is limited. 1/(a) Reaume, D.M., "Government Fiscal Planning In the Face of Declining Resource Revenue," (mimeo, September 1978); (b) Alaska Pacific Bank, "Alaska's Emerging Fiscal Crisis," (1978); and (c) University of Alaska Institute For Social and Economic Research, "Alaska Revenue Forecasts and Expenditure Options," in Alaska Review of Social and Economic Conditions, July 1978. Alaska Economics, Incorporated has recently updated these actuarial calculations. Given presently projected State oi] revenue (actually September 1981 projections which are higher than the current official projections), a 3 percent per year real gain in non-oil related economic activity, and a real yield of 3 percent per year on general fund and Permanent Fund assets, real State spending and lending growth rates in excess of 2 percent per year could not be sustained past 1992 without tapping the principal of the Permanent Fund. At historic average real spending growth rates, the Permanent Fund would be fully depleted by 1997. 2/The Alaska Statistical Review 1980 (Alaska Department of Commerce and Economic Development, Page B-8; and The Quarterly Report of the Alaska Economic Information and Reporting System, January 1981 (same source) , Page 28. 14 The total real (1967 dollars) value of all fish landed in the Petersburg- Wrangell district (ADF&G District) rose from $3.138 million in 1970 to $11.345 million in 1980, !/ for an annual average real gain of 13.4 percent per year. We do not believe that such gains can reasonably be projected into the future, at least noton a sustained twenty-five year basis, unless a major breakthrough occurs in the Southeast Alaska bottom fishery, an event that would require either or both of two conditions to be fulfilled: (1) massive public sector financial involvement, or (2) removal of foreign fleets from the "200 mile limit" fishing grounds. We hesitate to project either event. In sum, despite hefty increases in State government spending, lending, and grants to local government, and an annual average 13.4 percent real gain in regional fishermen's income between 1970 and 1980, Kake population grew only slightly faster during the 1970's than the 1.1 percent rate embodied in our 1980-2005 projection. Given no indication of major new economic development in the Kake area, and no dramatic shift in Kake's percentage of State govern- ment spending and Wrangell-Petersburg fishing income, the economic projection given above appears to be judiciously biased toward the high side - a con- clusion which will become more meaningful as the features of the energy load forecast are described below 1/Nominal values from Alaska Catch and Production Statistics, 1970 and 1980 (Alaska Department of Fish and Game, Division of Commercial Fisheries). Real values are nominal values deflated by the Anchorage all items consumer price index. III. KAKE ENERGY CONSUMPTION, 1981 The Tlingit-Haida Regional Electric Authority (THREA) has supplied detailed Kake electricity use data for the period January 1979 through April 1982. These data are disaggregated into consumption by residential, small commercial, large commercial, and public users. In this section we describe how the 1981 THREA data were further disaggregated within each customer class into consump- tion for (1) lights and appliances, (2) space heating, (3) water heating, and / (4) industrial processes, ’ and how we apportioned THREA "commercial" useage between manufacturing (logging camp and Kake Cold Storage) and "other" commer- cial. The apportioned 1981 data constitute the base year electricity con- sumption database presented in Table III-1. Data on Kake consumption of wood, fuel oil, and bottled gas (propane) are not 100 percent tabulated by any source. The base year estimates of consumption of these fuels by use end use category, also presented in Table III-1, have been built up from observations made during an April 1982 survey of Kake households and establishments conducted by Alaska Economics, Incorporated. Fuel and bottled gas consumption figures were compared to data compiled by the U.S. 2/ Army Corps of Engineers on shipments into the Kake Harbor during 1978. 1/0ffice equipment is included in "industrial .process." 2/Waterborne Commerce of the United States, calendar year 1978, part 4, Water- ways and Harbors, Pacific Coast, Alaska and Hawaii. (The most recent issue available.) At a conversion factor of 280 gallons of fuel oil per short ton, the Corps reports 304,080 gallons shipped into Kake Harbor in 1978. The approximate 1981 consumpotion we estimate is 336,493 gallons for final consump- tion and 219,169 gallons for the THREA power plant and Kake Cold Storage. The Cold Storage was not in operation in 1978 and the THREA power plant's predecessor used an undetermined (but smaller) quantity of fuel oil (less generating capacity). Given that the Corps of Engineers' figures report shipments rather than consumption, and therefore, that fuel oil inventories may have been drawn down in 1978, the 1981 fuel oil consumption estimate shown in Table III-1 appears to be reasonably accurate. In the absence of of better 1978 and 1981 data we are inclined to accept our 1981 estimate. 16 ZL TABLE III - 1 1981 BASE YEAR KAKE ENERGY CONSUMPTION BY END USE Voted = — pa electri citves==? [f ee ener cal ee Percentaye AN Fuels C Electricity Fuel 0i1 ICL Bottled Gas J £-- Wood. Jj efitotal (MMBtu) - (Thous. KWh) (MMBtu) (Thous. Gallons) (MMBtu) (Thous. Gallons) _(MMBtu) (No. Cords) (MMBtu) Kake Requirement Space Heating --Residential 27336. 182 23.917 81.629 135.447 18704 .553 600 8550 42.749% --Commercial/Gov. 17653.852 3.3 11.263 *126.725 17500 .089 10 142.5 27.607% ~-Manufacturing 1329.047 6.237 21.287 * 9.470 1307.76 2.076% --TOTAL 46319.081 33.454 114.179 271.642 37512.402 610 8692.5 72.432% Water Heating ~-Residential 5238.17 44.259 151.056 30.803 4253.74 9.211 833.374 8.192% ~-Commercial/Gov. 4391.62 4.873 16.632 * 31.681 4374 .988 6.868% --Manufacturing 359.213 9.476 32.342 * 2.367 326.871 562% --TOTAL 9989 .003 58.608 200.03 64.851 8955.599 9.211 833.374 15.6222 Lights/Appliances ~-Residential 3084 .584 645.31 2202.443 9.75 882.141 4.824% --Comnercial/Gov. 748.354 179.82 613.726 1.488 134.628 1.17 % --Manufacturing 344.379 95.07 324.474 220 19.905 5396 --TOTAL 4177.317 920.2 3140.643 11.458 1036 .674 6.533% Industrial Process . --Residential --Commercial/Gov. 1581.444 ** 463.359 1581.444 2.473% --Manufacturing 1879.488 ** 550.685 _1879.488 __ 2.939% --TOTAL 3460.932 1014.044 3460.932 5.412% GRAND TOTAL 63946 . 333 2026. 306 6915.784 #*4336 493 46468.001 20.669 1870.048 610 8692.5 % Of Kake Total 10.815% 72.667% 2.924% : 13.5942 100.00 % *Assumes 80% space heat and 20% hot water. **Industrial processes in the commercial/government and manufacturing sectors are defined as total consumption minus space, water heating, and lights. ***Does not include the 219,169 gallons of fuel oil consumed by the Kake Power Plant and Kake Cold Storage to generate electricity. The fuel oil estimates presented in Table III-1 exclude fuel oil used in power generation by both THREA and the Kake Cold Storage. KAKE ELECTRICITY CONSUMPTION - 1981 In 1981 Kake consumed 2.026 megawatt hours (MWH) of electric power of which 1.525 MWH were supplied by THREA and 0.501 MWH were self-supplied by the Kake Cold Storage. Installed peak capacity at the THREA plant was 1.6 megawatts (two 0.500 MW and two 0.300 MW generators). The Kake Cold Storage had three 0.325 MW generators on line, and now plans to install a fourth. Total installed and scheduled capacity at Kake is, therefore, 2.9 megawatts. THREA reported a peak instantaneous load of approximately 0.475 mw. '/ In April 1982, Alaska Economics, Incorporated surveyed 21 percent of Kake households and 56 percent of Kake public and commercial buildings in order to obtain the data needed to apportion published THREA electricity consumption data across the categories shown in Table III-1. Details of the procedure used are reported below. OTHER KAKE ENERGY CONSUMPTION - 1981 Based on the April 1982 survey of Kake energy users, estimated 1981 Kake fuel oil consumption, net of fuel oi] used for electricity generation was 336.5 million gallons, (No. 2 distillate except for the Soderberg logging camp which used No. 1 distillate). Number 1 and 2 distillate fuel oil is supplied through the Kake Tribal Corporation for the village, No. 1 on direct purchase by Soderberg to residents of the logging camp. The bulk of Kake 1981 fuel oil consumption was used in space heating. Virtually no Kake residences or 1/The THREA generating units are not demand metered. The peak load of 475 KW was estimated by power plant operator Marvin Kadake. commercial/public buildings used electric space heat or water heat in 1981. Bottled gas consumption in Kake (21,000 gallons propane) was used in small amounts for residential water heating, and for powering lights and/or appli- ances in all sectors (largely for residential cooking and clothes drying). Wood use .in Kake is limited to space heating. Based on our April 1982 survey an estimated 610 cords of wood (spruce, hemlock) provided 8,692 MMBTU of space heating energy, or 18.8 percent of Kake's total space heating energy require- ments in the base year. DISTINGUSHING FEATURES Kake energy consumers all but ignored electricity for space heating and water heating purposes in 1981, using principally fuel oil (82.5 percent of total BTU energy useage for these purposes) and wood (15.4 percent). At average 1981 prices the incentive to use electricity was slight, given the lower cost alternatives. Per MMBTU, mean 1981 prices paid by Kake residential energy users were; electricity ($72.67), bottled gas ($24.01), fuel oi] ($10.07), and wood ($3.51). Some 50.0 percent of Kake electricity useage (including the Kake Cold Storage) powered industrial processes, with another 45.4 percent powering lights and a variety of appliances. Without a dramatic reduction in the relative price of electricity these patterns can be expected to continue. 19 THE APRIL 1982 SURVEY A random forty household residential probability sample was taken in Kake between April 14 and April 23, 1982 and the households surveyed. !/ The Survey questionaire was designed to inventory the existing appliance stock, provide estimates of fuel oi1, bottled gas, and wood useage, estimate the potential for energy conservation, and to otherwise assist in dividing residential electricity consumption and other residential energy consumption into the categories (1) space heating, (2) water heating, and (3) lights and appliances. The households sampled were identified by THREA meter number. (One hundred percent of Kake residences are electrified, per THREA.) Meter number cross references to monthly electricity bills (provided by THREA) facilitated the construction of detailed electricity use characteristics for the residen- tial sample. In addition to the residential survey, a commercial/public building energy use survey of twenty-two (of thirty-nine total) structures was conducted. In ten of the twenty-two interviews, detailed energy use data were obtained from billing records. In the remaining twelve cases, user estimates and physical use characteristics of appliances, machinery, and lighting systems were combined to complete the sample record. Because electricity consumption totals were available monthly for each residential and non-residential user, the survey was needed only to apportion electricity consumption among end uses. In contrast, the absence of a Kake control total for fuel oil, bottled gas, and wood useage required the esti- mation of total consumption of these fuels, as well as its apportionment across end uses. T/The three residential areas which were surveyed partitioned the town. Each was sampled in proportion to its share of Kake housing units. RESIDENTIAL SURVEY Table III-2 relates building size, number of persons in the household, total insulation, and lighting stock to energy consumption by fuel type. The "none" entries in propane and fuel oil consumption are for households that did not use these fuels. It was necessary to rely entirely on respon- dents' estimates and records of consumption of propane, wood, and fuel oi] because there were no individual customer records available from suppliers. Fuel oi] is supplied by the Kake Tribal Fuel Corporation and propane is sold in both Bean's store and Jackson's store. The incomplete entries for electrical consumption are for households that moved during the 1981 base year. THREA operators change meters as a standard procedure when new occupants move into a house. No record is kept of the previous occupant's meter number, making it impossible in these cases to track electrical con- sumption either by occupants or building if occupants move from one house to another. The average household in the sample was insulated to an R-value of 7.8 in the floor, 11.9 in the ceiling, and 8.7 in the walls. Other weatherization measures noted in the 40 household sample were as follows: - 13 households had at least some weatherstripping around doors and windows - 2 households had storm doors - 19 households had windows with double pane glass - 2 households had attended to all of the above weatherization measures 21 TABLE Ltt - 2 40 HOUSEHOLD RESIDENELAL SAMPLE Sample Sq. Fe. Sq. Fe. # of Persons cocusstsa Prop. Estimated cat Jota Elec. KW Estimated call *Tocal R-value # Waces # Waces Number House Windows in Household Cons Fuel Oil Cons Cons of Insulation Incande- Neon Cons/yr. (cord) sceuc L 1120 126 6 400 Unknown 3382 0 33 355 80 2 1120 126 z None 700 5842 ° 3 380 80 3 1120 126 5 None 1000 4870 2 33 470 108 4 1380 186 10 500 1440 5868 6 3 12s 80 5 1380 186 8 200 2200 6035 10 3 1215 80 6 1120 126 4 100 500 3022 4 33 ns 105 ? 1120 126 L None 300 2955 2 3 660 80 8 1380 186 7 600 600 6483 10 33 1250 80 9 1120 126 6 Nore 1000 710 o 33 720 80 un 1056 us 6 None Unknown ea 7 4. 635 80 2 1248 136 6 None 800 5890 9 4. 900 80 lb 1268 136 5 300 2000 6350 5 4. 530 1s 1s 1056 us 7 100 1700 3260 L a 635 80 16 1056 us 3 None 750 4030 5 a 360 80 18 398 198 3 800 Unknown a None o 525 1s a 1600 168 ‘ Unknown None 3310 Unknown a 600 160 2 2400 296 9 2400 2400 5010 2 27 1200 80 23 1148 167 l 300 900 2083 6 4 900 80 2 1008 62 8 400 1200 2228 None o 345 ° 2s 583 79 6 1600 Unknown 7 4580 None 4. $00 25 26 1008 252 5 400 —— 3280 6 1120 105 27 432 76 2 559 324 ice a None 530 ° 28 1000 76 4 800 1000 tncomtiace None 330 ° 29 612 96 1 200 Unknown 2878 None 16 420 30 3 1260 140 7 600 800 7210 None 22 160 125 cry 720 108 s 600 500 7666 None 3 375 o 35 850 6 ? 400 1200 3460 None n 360 o 36 1697 86 5 200 300 1827 3 o 525 ° 37 1120 100 3 200 500 4320 10 36 40 120 39 486 75 3 None 500 ipecopiace 6 19 205 ° 40 756 96 ‘ None 700 4180 None a 720 25 an 1404 120 7 1200 2400 5280 None u 300 18 42 1344 108 3 None Unknown 10563 4 41 920 530 43 1200 96 4 300 None 330 2 37 1000 ° 4 sz uz 2 900 650 2989 None 3 1700 ° 43 500 36 Vacant o Unknown 3663, None 33 660 ° 46 720 96 Vacant ° 1000 tacoevete wee 3 180 7 49 660 ue 5 1200 720 4643 1 3 900 ° 50 1899 128 3 300 800 tosewes None 37 680 138 31 950 _105 4 200 —None_ tncotifce None a 40 TOTAL 43929-5089 183 15950 28886 156593 12a _ 26875 2953 Average 1098.225 127.225 4.575 408.974 875.27 3915. 3.10 28.48 671.875 73.825 Range H 2400 296 10 2400 2400 10563 12 37 1700 530 L 432 62 Vacant: o 300 330 o o 40 ° *Total of insulation R-value for floor, walls, and ceiling without regard to relative efficiency. 22 Table III-3 summarizes our sample and population estimates of residential energy consumption for appliances. The following appliance and water heater characteristics were also noted jin the survey. Space Heaters (7 Water Heaters (34 Average capacity - 33.91 gallons Thermostat setting - low (less than 120°) - 5 heaters - medium (120-140°) - 26 heaters - high (greater than 140°) - 3 heaters Dryers (27) Three households in the sample noted that they had electric dryers but did not use them at all because they were too expensive to operate. A majority of respondents indicated that they hung their clothes out to dry for at least part of the year while only 5 said that they used their clothes dryers all year long. Dishwashers (6) Two households had electric dishwashers , but did not use them because of the expense of operation. Referigerators (39) Average capacity - 16.33 cubic feet Freezers (37 Average capacity - 17.59 cubic feet Five households had two food freezers. A majority of households with food freezers indicated that they unplugged their units for part of the year. 23 TABLE III - 3 APPLIANCE SATURATION AND CONSUMPTION DATABASE GENERATED FROM SAMPLE USING NATIONAL AVERAGE USEAGE INTENSITY DATA ae Estimated EEI Est. MRI Est. MW Est. **Q0E Est. Total Annual *Estimated Saturation Individual Total Annual Total Annual Total Annual Total Annual Consumption For Anoliance # In Sample _# In Population Percentage Ann. Cons. _Consuimption/]_ _Consumption/2 Consumption/3 Consumption/4 _Kake, Alaska (est.) Space Heater Oil Heater 36 171 9014 856 gal. 1182_therms. 146376 gal. Woods tove 24 4 60 5.26 cords ***500 ards Portable Electric 2 Heater 4 19 10 2079 KWh 2558 _KWh 1600 _KWh 39501_Kwh Portable Kerosene Heater 3 15 8 50 gal. 750 gal. Water Heater Oil Fired 24 4 60 292 gal 403 therms. 33288 Propane 7 34 8 269 g 403 therms q Electric 3 15 8 4873 KWh 4 KWh 4046 _KWh 4515 KWh KWh 73095 KWh Range/Oven Propane 21 101 53 63 gal. 95 therms. (both 8757 gal. ata Unavailable une S.C. te 38 2 = For S.C. ectric 48 T195_Kwh T175_Kwh KWh 2071 kwh 750_Kwh 37360_KWh Electric S.C. 2 10 a T205_KWh 1205 Kwh 12050 kwh Clothes Washer Electric 38 181 95 94 Kuh 103 KWh 88_Kwh 90_Kwh 17014 Kah Clothes Oryer Propane. 5 25 13 37_gal gal. 55 therms. 925 gal. ETectri¢ 22 105 59. 985_KWh 993 KWh TO32 kWh —*993-KWh S20 KWh_ «103425 KWh Dishwasher Electric 6 29 - 15 292 kWh 363 KWh 149 kWh 363_Kwh 8468 KWh Refrigerator 1/8 Model 18 86 45 1447_KWh 1665_KWh 1228 kWh 124442 _Kwh we rost Free 8. 86. a5 Té27_KWh 1795_Kwh Ta58 kWh ~—~—~*'1a9022 ~ KWH S/S Model FF 3 15 8 T627_Kwh 24405 KWh Freezer 7 Chest Type 19 Al 48 1330_KWh___1320_KWh 1342_KWh 1480_kwh 1176 _KWh 121030_KWh Chest. Type TO 48 25 T985_KWh__1985_KWh 95280_KWh Upright 6 29 15 FRTI59 KWH 39411_KWh Uoright FF 2 0) 5 2028 kwh 2028 _Kwh 20280_KWh Television Color 42 200 105 268 _Kwh 268_KWh 53600_KWh Black & White 24 4 60 129_KWh Kw 4706_KWh xeet*Video Recorder 17 82 43 T36_KWh, T1152_KWh Misc. Appliances : Stereo 35 167 109 kWh 109 _KWh 18203_KWh CB Radio 23 ie a 86_KWh 86 _KWh - 9460_KWh Microwave 6 T90_Kwh T90_KWh 5510 KWh. Heat Tapes 6 $3 iE No Data - Household Lights Neon and Incandescent. 40 190 100 1000_kWh 1000_KWh 190000_kWh Calculations involved in Table III 3: To blow up sample date to population - (number of each appliance in sample)/(40 household sample size) = saturation percent. - (saturation percentage) X (190 household population) = estimated number of each appliance in Kake. Annual consumption data - (number of each appliance in population) X (national average annual consumption by appliance) = total Kake consumption at national useage intensity. Estimated individual annual consumption data is computed by averaging the four national data sources for the particular appliance or, in the cases where DOE information is therms, by converting it to the appropriate fuel type. The purposes of this approach are to calculate the saturation levels of appliances in the sample and consequent number of each appliance in the community by fuel type and to benchmark Kake appliance useage to national data. *There was an average of 190 occupied households in Kake for 1981. **High efficiency and low efficiency are averaged. ***Generated from sample data only. ‘Weighted average assumes ratio of consumption for regular chest type to chest type frost free holds for upright models. #eee*Assumes 62 watts/hour X 2200 hours average viewing/year = 136 KWh. Wattage per set comes from local Magnovox dealer and average viewing hours comes from DOE. 1/Edison Electric Institute, "Annual Energy Requirements of Electric Household Appliances," New York, New York, 1975. 2/Midwest Research Institute, "Patterns of Energy Use By Electrical Appliances," Kansas City, MO, 1979. 3/Merchandising Week, "Tabbing Appliance Energy," P. 3, December 1973. 4/Department of Energy, “Estimate of Appliance Average Annual Operating Costs," Office of Conservation and Solar Energy - Energy Conservation Program for Consumer Products, June 30, 1980. é The most intensive use of food freezers occurs during August, September, and October when most households are freezing fish and game for winter consumption. Television Sets (83) There was only one occupied household in the Kake sample without a tele- vision set, fifteen households owned more than one television set. All but one reported that they watched their set(s) more than three hours per day. Miscellaneous Appliances Of the twenty-three households with CB radios, a majority said that they had them on for more than twelve hours per day. Six houses in the sample indicated that they used heat tapes extensively during the winter to keep pipes from freezing. Other appliances noted in the sample but not listed in Table III-3 included 2 video games, one convection oven, a battery charger (used "daily"),a table saw (used "often"), and one large "Casablanca" type ceiling fan. Table III-4 provides a comparison of use ratios for various electrical and propane fueled appliances found in the Kake residential sample with national average use ratios published by the U.S. Department of Energy. The most striking difference between the Kake sample and the national averages is Kake's considerable substitution of propane and fuel oil for electricity in the appliance stock. Other major differences, such as Kake's greater per household use of freezers, can be explained by Kake's fishing based economy and the expense of bringing in grocery store items to the community, or in the case of the greater percentage of clothes washers and dryers, by the cold, damp Southeast Alaska climate. 25 TABLE III - 4 COMPARISON OF ELECTRICAL APPLIANCE USE ratios !/ KAKE SAMPLE DATA VS. NATIONAL AVERAGE APPLIANCE KAKE NATIONAL DIFFERENCE Refrigerator/Freezer 98% 95.6% + 2.4% Freezer 82.5% 45% +37 .5% Dishwasher 15% 42% -27% Clothes Dryer 55% 43% +12% Water Heater 8% 40% -32% Color Television 85% 85%. + 0% Black & White Television 35% 99% -64% Conventional Range 30% 71% -41% Clothes Washer 95% 75% +20% Furnace 0% 14% -14% Heat Pump 0% 3% - 3% PROPANE FUELED APPLIANCES Clothes Dryer 13% 15% - 2% Water Heater 18% 55% -37% Conventional Range 73% 29% +44% Furnace 0% 44% -44% SOURCE: Department of Energy 1/The "use" ratio is defined as the ratio of the number of households having an appliance to the total number of households. 26 Until 1979, Kake had one television channel. In that year, a satellite receiving dish was purchased by the community and thereby added a second channel. According to Marvin Kadake, power plant operator and City council member, a cable television distribution system will be in place by the end of 1982. This will add four more channels to the present television system. Table III-5 allows a comparison of the various fuels used by Kake households in terms of their relative importance as energy sources and their price per million BTu's (MMBTu's). This table dramatically illustrates the disparity in.prices between electricity and other end-use energy sources. Electricity per BTu is over 20 times as expensive as wood, seven times as expensive as fuel oil, and three times as expensive as propane. It should be noted that the price of fuel oil listed here does not include the cost of delivery. Likewise, the propane price does not include a $100 tank deposit required for initial service. Only three households in the sample purchased their wood and these at $50 per cord, This figure may be subject to considerable small sample basis. 26 TABLE III - 5 RESIDENTIAL SAMPLE CONVERSION TABLE % OF KAKE HOUSEHOLD ENERGY SOURCE TOTAL BTU'S ENERGY USEAGE PRICE/MMBTU Fuel Oi] 2.2958E10 = 64.67% $10.07 Propane 1.7155E9 = 4.83% $24.01 Wood 8.3933E9 = 23.64% $ 3.51 *Electricity 2.4351E9 = 6.86% $72.67 TOTAL 3.5502E10 = 100.00% Assumes the following conversion factors: 1- Diesel Fuel or Stove 0i1 - 1 gallon = 138095 BTu's @ $139/gallon 2- Propane - 1 gallon = 90476 BTu's @ $2.17/gallon (100 1b. bottle contains 24.4 gallons and sells for $53.00 in Kake) 3- Wood - 1 cord = 14.25 million BTu's @ $50/cord (assumes each cord contains 4 hemlock and 4 spruce and that half of each species is green or wet and }$ seasoned) 4- Electricity - 1 KWh = 3413 BTu's @ $.24803/KWh (1981 household rate average including the Alaska Power Cost Assistance subsidy) Sources: 1- For BTu's - Department of Energy, price - Tlingit-Haida Corporation 2- For BTu's - Department of Energy, price - Jackson's Inc., Kake, gallons/100 1b. bottle - Petrolane, Juneau 3- For Btu's - U.S. Forest Service, Juneau, price information came from 3 separate households in the sample that purchased wood, most people in Kake cut it themselves 4- For BTu's - Department of Energy, price - THREA *Actual 1981 useage. 27 The great majority of households cut their own wood and thus aside from gas and oi] incur only the opportunity cost of their own time and labor. With logging areas in close promixity to town and with unemployment at very high levels for much of the year, this opportunity cost was understandably viewed as slight by those sampled. The price of residential electricity shown in Table III-5 is an effective average rate that includes the KWh charge from the residential rate schedule, a fuel surcharge, the State of Alaska Power Cost Assistance subsidy, and 1/ local sales tax. Though all residential customers face the same rate schedule for electricity prices they do not necessarily pay the same price per KWh. The Federal Energy Assistance Program makes payments directly to energy vendors if a low income resident is unable to pay his or her Lill and to those residents who meet qualification criteria. Since January 1982, the program has been administered directly by the Tlingit-Haida Regional Council. According to Art Holmberg, Council Director, about $42,000.00 will be made in payments in 1982 with 65 families qualifying for the program. The Soderberg logging camp supplies No. 1 distillate ($1.18 per gallon) and propane ($40 per 50 1b. tank) to its employees at cost. In January of each year, those employees that have worked for the camp during the entire logging season receive a payment equal to one-half of their year's electrical bi1.2/ 1/Individual customer detail withheld for reasons of confidentiality. 2/Virgil Soderberg, Soderberg Logging Company, general manager. 28 Given the average annual consumption rates for the various energy sources itemized in Table III-5, a typical annual energy bill for a Kake household is: Fuel oi] - 875 gallons @ $1.39/gal. $1,216.25 or 48.27% of total!/ $ 216.77 or 8.6% of total!/ " Propane - 409 lbs. @ $.53/1b. Wood - 3.1 cords @ $50/cord = $ 155.00 or 6.16% of total Electricity - 3755 KWh @ $.24803/KWh $ 931.37 - or 36.97% of total TOTAL ENERGY BILL $2,519.37 or 100.00% Since December 1981, the State of Alaska Power Cost Assistance Program has increased the residential rate subsidy for THREA users to 21.86¢/KWh for the first 55 KWh consumed by each resident in the community. Table III-6 lists the available information on energy subsidy payments made to date (April 1982) to residential users in Kake. COMMERCIAL/PUBLIC BUILDING SURVEY A total of twenty-two non-residential establishments were surveyed (out of a 1981 total of thirty-nine metered establishments in service). The same questionaire and techniques were used as in the residential survey. Indivi- dual electricity bills for 1980 and 1981 were cross referenced to survey data using electricity meter numbers. Table III-7 is a listing of the Kake commercial/public building sample. The typical or average building in the sample was insulated to R-value 4.7 in the flcor, R-value 14.2 in the ceiling, and R-value 9.3 in the walls. 1/Assumes fuel oi] purchased at Tlingit-Haida Corporation and propane at Jackson's Inc. 29 TABLE III - 6 SUBSIDY PAYMENTS TO KAKE RESIDENTS State of Alaska Energy Assistance@/ Power Cost Program Total Assistance Program State/THRC Subsidy 1980 September - $ 3509.55!/ October - 5531.70 November - 7457.89 December - 7488.97 1980 TOTAL $23988.11 1981 January - $ 7516.18 February - 6569.47 March - 4182.20 April - 7195.91 < May - 7779.34 June - 9346.88 July - 10994.33 August - 7730.07 September - 12078.47 October - 9187.65 November - 18149.39 December - 21866.34 1981 TOTAL $122596.23 1982 January - $20709.96 February - 19,731.27 March - 19718.82 April - _18928.18 1982 TOTAL $79088.23 $42000.00°/ $121088.23 SOURCES: 1/THREA 2/Jim Dalman, Director, Alaska Energy Assistance Program. 3/Art Holmberg, Director, Tlingit-Haida Regional Council, Low Income Energy Assistance Program. 30 = TABLE III - 7 KAKE: PUBLIC BUILDING/COMMERCIAL ESTABLISHMENT SAMPLE DATA 1981 Est. 1981 Est. 1987 Actual 198i" effec. ae Est. Annual #4 Sample Sq. Ft. in Sq. Ft. of Number of Propane Fuel Oil KWh Elec. Total R-value Avg Price 1981 Total No. of Watts No. of Watts Wood Cons. THREA Rate Number Building Windows Employees Consumption Consumption Consumption of Insulation Electricity Electric Bill Incandescent Neon (cords) Classification 1 20950 1342 22 Emp. Unknown *2139 gal. 148510 41 37538 $5747.62 20000 8000 ---- 42 104 Stud. 2 5100 9 Included None *5193 gal. 22678 20 -35921 8146.13 == 6720 Sooe 42 In Above 3 14642 3212 23 Emp. Unknown *1495 gal. 39142 30 39304 15384.24 580 - 4969 ny 42 . 103 Stud. 4 1926 404 4 Emp. None Unknown 15750 22 -21406 3371.41 750 4000 — 52 5 6750 648 13 Renters None —._ 6000 gal. 3051 68 24179 737.70 7920 960 ease 33 15 for Lunch 6 1220 144 1 Emp. None Unknown 56650 22 22756 12876 .39 1410 -s- —— 33 7 1326 185 2 Emp. None 4500 gal. 3220 22 ~33759 1087.04 1320 100 one 52° 8149 130 5 Emp. 800 Ibs. 4800 yal. No Data 19 ocee ocee 600 1200 — 52 23 Child. 9 1500 40 1 Emp. None 1200 gal. 4047 19 «23904 967.38 600 360 ---- 52 10 2501 50 Unknown Unknown 1300 gal. 3560 22 24396 868.50 720 960 a 51 in 984 44 2 Emp. None Unknown 10378 4) -33763 3503.88 1100 — a 22 12 990 25 1 Emp. None Unknown 3690 33! 33864 1249.58 165 1360 a 42 13 1600 72 Transient Unknown Unknown 1990 30 «35745 711.32 1200 -— sae 42 4 875 136 1 Emp. Unknown Unknown 3610 33 34278 1237.45 210 320 4 42 18 450 24 Transient None Unknown 1450 30 «35712 517.83 50 240 42 16 9800 254 2 Emp. 800 Ibs. 3000 gal. 38671 30 33619 13000.84 480 4200 22 7 5307 280 4 Emp. 500 Ibs. 1350 gal. 15154 22 -33786 5119.97 255 “480 6 22 13 288 9 None None None None Unknown oon- ST osevela Unknown Unknown 22 19 280 Q None None None 16179 Unknown +33754 5461.15 Unknown Unknown a 20 800 72 3 Emp. **2200 Ibs. **1683 gal. 6010 33 23081 1988.17 840 400 — ee 21 1776 190 1 Emp. 1200 Ibs. 4300 gal. 5600 33 £33243 1861.61 2475 160 — e 22 5880 121 4 Emp. None **1060 gal. 77271 49 33514 25896 .61 450 8320 ---- 33 TOTAL 93394 7373 5500 Ibs. 70739 gal. 476521 619 6.37532 160157.51 41125 42740 10 Average 4245 355 250 3215 21660 28 -28978 7279.89 1869 1943 *Couputed by a square foot weighted average of total oi] consumption for the school district. **Actual 1981 THREA billing data. *** The THREA rate classification schedule is as follows: Source: Will Riggen, Kake Superintendent of Schools. Class 11 - Residential; Class 22 -Small Business; (less than 10 KW demand); Class 33 - Large Commercial (greater than 10 KW demand); Class 42 - Public Building (State or U.S. Government) ; Class 51 - Churches andCharitable Organizations; Class 52 -Community 3uilding. All of the buildings in the sample, with the exception of the Sitka Phone Company switching centerused fuel oi] for space and water heating. Two buildings had auxilary wood heat. Lighting accounted for about 35% of the total electrical consumption. !/ The four retail establishments in the sample had a total of 560.5 cubic feet of referigerator space, 1742.5 cubic feet of freezer space, and one commercial sized ice maker. The Kake Community Center, currently under construction, will be a major energy consumer. When completed, the 15,825 square foot steel building will contain a gymnasium, locker rooms, and 3,000 square feet of office space. There will be no insulation in the floor. The ceiling over the offices will be insulated to R-value 42, the ceiling over the rest of the building R-value 11, and the walls to R-value 25. If one assumes the same fuel oil/sq. ft. ratio as in the rest of the non-residential sample, the Community Center will consume approximately 13,000 gallons of No. 2 distillate per year. A peak load capacity of 31 KW (30480 W) was computed off of the main circuit breaker panel. An average daily load of-20 KWh is expected, according to Marvin Kadake, power plant operator. Assuming the building is used 10 hours per day, all year, it would consume 73,000 KWh of electricity. The building will have 17.5 KW of lighting and an all electric kitchen is planned. MANUFACTURING SECTOR There are three industrial plant operations in the Kake area at the present time: the Soderberg Logging Camp, Ocean Fresh Seafoods (Kake Cold Storage), and Keku Canning Company. T/Total lighting watts = (83,865 W X 2,000 hours/year)/1,000 hours/KWh = 167,730 KWh/476,521 total electric conservation = .351989 or 35% of total electric conservation. ot Soderberg Logging Company The main camp complex includes the following building stock: 2 bunkhouses - 800 square feet each 1 cook's quarters - 800 square feet 1 office - 800 square feet 1 cookhouse - 1,600 square feet 1 laundromat - 600 square foot trailer 1 owner's trailer - 840 square feet 1 shop - approximately 5,000 square foot steel building An average of fifty loggers and six office personnel are employed in the camp for the nine month logging season. In addition to the buildings in the main camp complex listed above, there are thirty-three trailers occupied by logging families for a total camp population of about 150 people. Each trailer in the camp with the exception of those included in the main complex, has it own electric meter. The Soderberg Logging Company plans to move its logging operation to Portage Bay this summer. !/ Another operation of approximately the same magnitude is expected to take its place at the Kake logging camp site. Non-disclosure problems prevent a building by building breakout of appliance stock and useage intensity. Data on energy consumption for the logging camp are in- cluded in Table III-1. 1/Virgil Soderberg, General Manager. 33 Ocean Fresh Seafoods (Kake Cold Storage) The Cold Storage is the fastest growing operation in the Kake industrial sector. The plant opened in June 1981 and is expected to provide some fifty-five jobs for the May 1 through September 15 season. The main 22,800 square foot steel building contains 92,944 cubic feet of freezer capacity and is insulated to R-value 11 in the ceiling and walls. The company plans to double the present capacity by the 1983 fishing season. '/ Federal law requires fish processing plants to have a backup electrical generating system. The Cold Storage plant chose to install its own primary, as well as backup generating system because management estimates that own produced electricity will cost only 15¢/KWh2/ as opposed to the 1981 effective THREA large commercial rate of 32.74¢/KWh. As of May 1982, the average Cold Storage power load was 250 KW with peak load near 450 KW. By the end of the 1982 summer, peak load demand is expected to reach 800 KW. Keku Canning Company The Kake salmon cannery will not be operating during the 1982 season. Furthermore, there are no plans at present to operate in the future. The last of its one pound can processing lines has been sent to Icicle Seafoods in Petersburg in return for Icicle's processing of fish taken by Keku boats .2/ 1/Lloyd Williams, Chief Engineer and Purchasing Agent. 2/Price includes fuel, oil and filters, maintenance, depreciation, and contingency fund. 3/Ed Hansen, General Manager. 34 Existing building stock at the cannery includes: 3 unheated warehouses totalling 26,250 square feet 2 building, unheated, cannery complex totalling 30,000 square feet 2 bunkhouses totalling 4,500 square feet 1 mess hall at 1,500 square feet 6 small crew houses with unknown dimensions At present the warehouses and cannery complex are used for storage. There is a minimal amount of electrical consumption for lights and power tools as fishermen work on boats, hang nets, etc. during the off season. The cannery has its own 275 KW backup generator that is not being used. 35 IV. KAKE ENERGY CONSUMPTION FORECAST 1981 - 2005 In 1981 the Tlingit-Haida Regional Electrical Authority (THREA) and the power generation facility owned and operated by the Kake Cold Storage produced a combined 2,026 megawatt hours of electric power (1,525 MWH by THREA and 501 MWH produced for own consumption at the Kake Cold Storage). The peak in- stantaneous load registered at the THREA facility was a reported 475 kilowatts, that at the Cold Storage, 450 KW. Peak generating capacity at THREA was 1,600 KW, and at the Cold Storage, 975 KW. The average 1981 price per million British thermal units (MMBTu) paid by THREA residential users was $72.67, or 7.2 times the average 1981 price per MMBTu paid in Kake for fuel oi], and approximately 1.9 times the cost of self-generated power to the Cold Storage. The average 1981 price paid by Kake's THREA non-residential users came to $95.35 per wuBTu. '/ Increased State subsidies to Kake users have lowered average 1982 electricity prices to $55.41/MMBTu for residential users and $88.15/MMBTu for non-residential users. Tables IV-1 through IV-4 give the detailed base case energy load forecast for Kake by class of user and end use, premised on the economic forecast presented in Section II and the following additional postulates. The rationale for each is discussed below. 1/On a ¢/KWh basis inclusive of State of Alaska subsidies to Kake residential users the average 1981 price of electrical power was: 24.83¢/KWh - residential 32.58¢/KWh - non-residential Average 1982 prices through April were: 18.93¢/KWh - residential 39.12¢/KWh - non-residential 36 Le 1981 ALL SOURCES (MMBTUS) RESIDENTIAL 35658.94 COMM/GOVT 24375.27 MANUFACTURING 3912.13 ALL SECTORS 63946. 33 ELECTRICITY (MWH) 713.49 COMM/GOVT 651.36 MANUFACTURING 661.47 ALL SECTORS 2026.32 FUEL OIL (000'S GALS) RESIDENTIAL 166.22 COMM/GOVT 158.38 MANUFACTURING 11.83 ALL SECTORS 336.43 BOTTLED GAS (000'S GALS) RESIDENTIAL 18.96 COMM/GOVT 1.49 MANUFACTURING 22 ALL SECTORS 20.66 WOOD (CORDS) RESIDENTIAL 600.00 COMM/GOVT 10.00 ALL SECTORS 610.00 1985 44376 .66 27945.51 5868.19 78190.36 1165.88 865.31 992.21 3023.40 206.03 178.68 17.75 402.46 27.67 1.68 33. 29.68 662.21 11.28 673.49 TABLE IV-1 KAKE ENERGY CONSUMPTION SUMMARY 1990 4824958 30149 .82 6043.76 B84443.17 1279.61 1011.90 1043.19 3334.70 223.99 190.86 17.75 432.61 30.29 1.79 +35 32.43 715.99 12.05 728.04 EXCLUDES FUEL OIL USED FOR POWER GENERATION BY THREA AND THE KAKE COLD STORAGE 1995 50708 .30 33159 .93 6219.33 90087 .56 = 1399.95 1228.16 1094.17 3722.28 235.35 207.11 17.75 460.21 32.77 1.95 +36 35.08 733.91 13.08 746.99 2000 53713.96 35474.95 6394.90 95583.80 1532.79 1407.18 1185.15 4085.13 249.27 219.29 17.75 486.31 35.58 2.06 +38 38.02 760.28 13.85 774.12 2005 57320.81 39438.96 6570.46 103330.23 1679.13 1736.51 1196.14 4611.78 265.99 239.59 17.75 523.34 38.74 2.25 40 41.39 796.13 15.13 811.26 8€ SPACE HEATING FUEL OIL BOTTLED GAS wooD ELECTRICITY TOTAL WATER HEATING FUEL OIL BOTTLED GAS wooD ELECTRICITY TOTAL LIGHTS & APPLIANCES FUEL OIL BOTTLED GAS wooD ELECTRICITY TOTAL TOTAL ALL USES FUEL OIL BOTTLED GAS wooD ELECTRICITY GRAND TOTAL 1981 18704 .55 0.00 8550.00 81.63 27336 .18 4253.74 833.37 0.00 151.06 5238.17 0.00 882.14 0.00 2202.44 3084.58 22958 .29 1715.52 8550.00 2435.13 35658.94 1985 20644 .04 0.00 9436.56 90.09 30170.69 7812.72 1530.63 0.00 166.72 9510.07 0.00 973.61 0.00 3722.29 4695.90 28456.76 2504.24 9436.56 3979.10 44376 .66 TABLE IV-2 KAKE RES(DENTIAL ENERGY FORECAST (MMBTU'S) 1990 22320.55 0.00 10202.90 97.41 32620.86 8617.81 1688 . 36 0.00 180.26 1048644 0.00 1052.68 0.00 4089.61 5142.29 30938. 36 2741.04 10202.90 4367.28 48249 .58 1995 22879 .38 0.00 10458.35 99.85 33437 .58 9627.39 1886.16 0.00 184.77 11698. 32 0.00 1079.03 0.00 4493.37 5572.40 32506.77 2965.19 10458 .35 4777.99 50708 .30 2000 23701.20 0.00 10834.01 103.43 34638.64 10727 .83 2101.75 0.00 191.41 13020.99 0.00 1117.79 0.00 4936.54 6054. 33 34429 .03 3219.54 10834.01 5231.38 53713.96 2005 24818.87 0.00 11344.90 108.31 36272.09 11920, 32 2335.38 0.00 200.43 14456. 13 0.00 1170.50 0.00 5422.08 6592.59 36739.19 3505.88 11344.90 5730.83 57320.81 6€ SPACE HEATING FUEL OIL ELECTRICITY wooD TOTAL WATER HEATING FUEL OIL ELECTRICITY TOTAL LIGHTS & APPLIANCES BOTTLED GAS ELECTRICITY TOTAL INDUSTRIAL PROCESSES ELECTRICITY TOTAL TOTAL ALL USES FUEL OIL BOTTLED GAS ELECTRICITY WOOD GRAND TOTAL 1981 17500 .09 11.26 142.50 17653 .85 4374.99 16.63 4391.62 134.63 613.73 THB. 35 1581.44 1581.44 21875 .08 134.63 2223.07 142.50 24375 .27 1985 19743.69 12.71 160.77 19917.17 4935.88 18.76 4954.65 151.89 T94.N9 946.38 2127.31 2127.31 24679 .57 151.89 2953.27 160.77 27945 .51 TABLE IV-3 KAKE COMMERCIAL/GOVERNMENT ENERGY FORECAST (MMBTU'S) 1990 21089.85 13.57 171.73 21275.15 5272.42 20.04 5292.47 162.24 915.21 1077.45 2504.75 2504.75 26362.27 162.24 3453.58 171.73 30149.82 1995 22884 .73 14.73 186.35 23085.81 5721.14 2is15) 5742.89 176.05 1090.29 1266.35 3064.89 3064.89 28605 .87 176.05 4191.66 186.35 33159.93 2000 24230.89 15.59 197.31 24443 .80 6057.68 23.03 6080.71 186.41 1232.52 1418.93 3531.52 3531.52 30288.57 186.41 4802.66 197.31 35474.95 2005 2647449 17.04 215.58 26707.11 6618.57 25.16 6643.73 203.67 1490.04 1693.71 4394.41 4394.41 33093.07 203.67 5926.65 215.58 39438.96 ov SPACE HEATING FUEL OIL ELECTRICITY TOTAL WATER HEATING FUEL OIL ELECTRICITY TOTAL LIGHTS & APPLIANCES BOTTLED GAS ELECTRICITY TOTAL INDUSTRIAL PROCESSES ELECTRICITY TOTAL TOTAL ALL USES FUEL OIL BOTTLED GAS ELECTRICITY GRAND TOTAL 1981 1307.76 21.29 1329.05 326.87 32.34 359.21 19.91 324.47 344.38 1879.49 1879.49 1634.63 19.91 2257.59 3912.13 1985 1961.64 31.93 1993.57 490.31 48.51 538.82 29.86 486.71 516.57 2819.23 2819.23 2451.95 29.86 3386.39 5868.19 TABLE Iv-4 KAKE MANUFACTURING ENERGY FORECAST (MMBTU'S) 1990 1961.64 31.93 1993.57 490.31 48.51 538.82 31.43 5i2.53) 543.76 2967.61 2967.61 2451.95 31.43 3560.38 6043.76 EXCLUDES FUEL OIL USED FOR POWER GENERATION BY THREA AND THE KAKE COLD STORAGE 1995 1961.64 31.93 1993.57 490.31 48.51 538.82 33.00 537.94 570.94 3115.99 3115.99 2451.95 33.00 3734.38 6219.33 2000 1961.64 31.93 1993.57 490.31 48.51 538.82 34.57 563.56 598.13 3264.37 3264.37 2451.95 34.57 3908.38 6394.90 2005 1961.64 31.93 1993.57 490.31 48.51 538.82 36.14 589.18 625.32 3412.75 3412.75 2451.95 36.14 4082.37 6570.46 Assumption 1: Assumption 2: Assumption 3: Assumption 4: Assumption 5: Assumption 6: Assumption 7: Assumption 8: Assumption 9: Assumption 10: Real (inflation adjusted) subsidized, THREA electricity prices remain at 1982 levels. Real fuel oi1, bottled gas, and wood prices rise at a constant 2.6 percent per year. Residential energy consumption for space heating, (all fuels), rises at the rate of Kake population growth. Per capita residential energy consumption for water heating, (fuel oil and bottled gas), rises at a rate equal to 1.25 times the rate of growth of real per capita income. Per capita residential energy consumption for water heating (electricity) holds at the 1981 level. Per capita residential energy consumption for lights and appliances, (electricity), grows at the rate of growth of real per capita income. Per capita residential energy consumption for lights and appliances, (bottled gas), remains constant. Per establishment commercial/government consumption for space heating, (all fuels), remains constant. Per establishment commercial/government consumption for water heating, (all fuels), remains constant. Per establishment commercial/government consumption for electricity (for lighting) rises 15.0 percent every five / years. 1/0ffice machine energy consumption is included under "industrial processes" in the commercial sector. 41 Assumption 11: Assumption 12: Assumption 13: Assumption 14: Assumption 15: Per establishment commercial/government consumption of bottled gas for lighting remains constant. Per establishment commercial/government consumption of electricity for industrial processes rises 50.0 percent every five years (8.5 percent per year). Between 1981 and 1985, manufacturing consumption of energy (all uses) rises 50.0 percent (largely Cold Storage expansion). Between 1985 and 2005, manufacturing consumption of energy for space heating and water heating remains constant. Between 1985 and 2005, manufacturing consumption of energy for lights and appliances, and for industrial processes rises at the rate of growth of Kake commercial fishing permits. Given these assumptions, total Kake end use energy consumption, all fuels, in the year 2005, will be an estimated 103,330.24 MMBTu's (Table IV-1), of which 15.2 percent will be supplied by electric power, 70.0 percent by fuel oil, and the remainder by bottled gas (3.6 percent) and wood (11.2 percent). !/ 1/Respective percentages in the base year (1981) were 10.8 percent (electricity), 72.7 percent (fuel oi1), 2.9 percent (bottled gas), and 13.6 percent (wood). The rise in electricity's share of total MMBTu consumption over the forecast period is due to increasing appliance saturation by residential and commercial/ government users. 42 On an MWH basis,. inclusive of self-supplied power at the Kake Cold Storage, terminal year (2005) electricity consumption, all sectors, all users, is an extimated 4,611.78 MWH, implying a peak load of 1.14 megawatts for THREA and 900 kilowatts at the Kake Cold Storage (given 1981 peak to average ratios for each), or a combined peak load of 2.040 megawatts. Current (1982) peak generating capacity at the THREA facility is 1.6 megawatts, and at the Cold Storage 975 kilowatts, with a planned addition of 325 kilowatts at the Cold Storage. This capacity appears adequate to handle projected peak loads through the year 2005, assuming normal maintenance and replacement of generating units after a 20 year use life. PRICE EFFECTS Table IV-5 (next page) gives average real Kake energy prices ($/MMBTu) through the year 2005 under the price increase assumptions mandated for this study by Alaska Power Authority regulations. Real electricity prices are assumed to hold at their 1982 levels, other prices to inflate at 2.6 percent per year (base case) or 5.2 percent per year (alterna- tive). At 2.6 percent or 5.2 percent annual rates of increase, electricity prices remain significantly higher than the prices of alternative fuels, with one exception. Given a 5.2 percent per year relative price increase of bottled gas, its price per MMBTu would exceed the price of residential electricity by the year 2000. 43 ELECTRICITY Residential Non-resid. Cold Storage FUEL OIL @2 .6% @5.2% BOTTLED GAS @2.6% @5.2% WOOD @2.6% @5.2 TABLE IV - 5 KAKE ENERGY PRICES ($/MMBTu) 1982 1985 1990 1995 2000 2005 55.40 55.40 55.40 55.40 55.40 55.40 88.15 88.15 88.15 88.15 88.15 88.15 39.51 39.51 39.51 39.51 39.51 39.51 10.33 11.16 12.69 14.43 16.40 18.65 10.59 12.33 15.89 20.47 26.38 33.98 24.63 26.60 30.24 34.38 39.09 44.45 25.26 29.41 37.89 48 .83 62.91 81.06 3.60 3.89 4.42 5.03 5.72 6.50 3.69 4.30 5.54 7.14 9.20 11.85 44 The maintained disparity in the relative price of electricity heavily influences the base case load forecast (2.6 percent price increases for fuels other than electricity), and assures that an alternative electricity load forecast pre- mised on a 5.2 percent per year decline in relative electricity prices will not differ significantly from the base case forecast presented in Tables IV-1 through IV-4. If relative electricity prices decline no faster than 5.2 percent per year in Kake, one can safely project that energy requirements for space heating and for water heating in Kake will continue to be met by fuel oi] and wood. Given no price incentive for residential and ccmmercial/government users to shift to electric space heating and water heating (see Table IV-5), there is no reason to expect total THREA Kake electricity demand to exceed that level which can be met from THREA's existing (1982) peak generating capacity, unless the Kake Cold Storage plant is shifted over from self-supplied to THREA supplied electric power. With self-supplied power at the Cold Storage available at less than one-half the THREA non-residential average price, there is no price incentive for the Cold Storage to shift to THREA power. Because relative prices so clearly dictate that THREA users not shift to electric water heating and space heating, the base case load forecast presented above is driven solely by income, population, and the number of commercial/government establishments. We have not presented a detailed forecast for the 5.2 percent relative price case, because the additional impacts on electricity consumption over the 2.6 percent base case would be so slight. Indeed, if fuel oil, bottled gas, and 45 wood prices were to advance at a steady 5.2 percent annual rate, the result would not be increased consumption of electricity but rather the opposite. More rapid escalation of these prices (provided the posted prices do not rise to the level of electricity prices) would exert what economists refer to as a negative income effect on all forms of energy consumption. Given an annual average price increase of 5.2 percent for fuel oi], bottled gas, and wood, (all other things equal to the base case), we would project reduced consumption of energy in total relative to the base case as consumers turn more heavily to the cheapest fuel for space heating (wood), and take steps to conserve on overall energy consumption. An examination of Kake residential energy bills and Kake personal income will clarify this point. Table IV-6 gives the relevant calculations. The calculations show projected Kake residential energy consumption and expen- diture in the 2.6 percent price increase base case, and show expenditure as it would be if real energy prices other than electricity prices rose at a 5.2 percent annual rate, and if consumption patterns did not change from the base case. In the 2.6 percent base case, total residential energy bills in Kake absorb only a slightly higher percent of Kake personal income in the year 2005 than in 1981 (16.9 percent versus 16.2 percent). In the 5.2 percent alternative case, the higher prices of wood, fuel oil, and bottled gas (relative to the base case) imply a considerable extra expenditure for energy both in the ab- solute and as a percentage of personal income, assuming no substitution toward lower priced fuels occurs. Substitution possibilities do, however, exist. As shown in Table IV-5, above, real wood prices would remain considerably below fuel oi] prices throughout the forecast horizon. A switch from fuel oil to wood for residential space heating could yield significant savings. 46 FUEL OIL MMBTu's Expenditure Expenditure BOTTLED GAS MMBTu's Expenditure Expenditure WOOD MMBTu's Expenditure Expenditure ELECTRICITY MMBTu's Expenditure TABLE IV - 6 KAKE RESIDENTIAL ENERGY BILLS (Expenditure in 000's of 1982 $) 1981 22958.29 231.2 231.2 (2.6%) (5.2%) 1715.52 41.2 41.2 (2.6%) (5.2%) 8550.00 30.0 30.0 (2.6%) (5.2%) 2435.13 177.0 TOTAL EXPENDITURE AS PERCENT OF PERSONAL INCOME 2.6% Case 5.2% Case _ 16.2 16.2 1985 28456.76 3 317.6 350.9 2504.24 66.6 73.6 9436.56 1 36.7 40.6 3979.10 220.4 12.8 13.7 47 1990 995 2000 2005 0938.36 32506.77 34429.03 36739.19 392.6 469.1 564.6 685.2 491.6 665.4 908.2 1248.4 2741.04 2965.19 3219.54 3505.88 82.9 101.9 125.9 155.8 103.9 144.8 202.5 284.2 0202.90 10458.35 10834.01 11344.90 45.1 52.6 62. 73.7 56.5 74.7 99.7 134.4 4367.28 4777.90 5231.88 5730.83 241.9 264.7 289.8 317.5 13.9 14.7 15.7 16.9 16.3 19.0 - 22.6 27.2 If, for example,- one-half of the projected year 2005 base case residential fuel oil consumption for space heating (total of 24818.7 MMBTu's, Table IV-2), was shifted to wood consumption at $11.85 per MMBTu in the 5.2 percent alternative case, residential energy bills would decline by $275 thousand from the amounts shown in Table IV-6, bringing total year 2005 residential energy expenditure down to 23.4 percent of personal income. An additional shift of one-half (year 2005) fuel oi] consumption for water heating to wood would save another $132 thousand, and would bring total 2005 residential energy expenditure in Kake down to 21.7 percent of personal income. Increased conservation and technological advances in home heating unit con- struction could yield further savings. What can not be expected under either the 2.6 percent price assumption or the 5.2 percent price assumption is a price induced shift to electric space and water heating from fuel oil, bottled gas, and wood. In either the 2.6 percent or the 5.2 percent case, electricity prices remain prohibitively high through the year 2005. INCOME EFFECTS In neither the 2.6 percent case nor the 5.2 percent case do relative THREA electricity prices decline enough to induce a measureable price substitution effect in favor of increased electricity consumption. Rising real per capita incomes in Kake, and an increasing population do, however, portend an increasing demand for electricity. The important question is, How much of an increase? 48 An elasticity is.a ratio of two percent changes. If a 10 percent increase in real per capita income produces a long term (2+ years for our purposes) 15 percent increase in the demand for electricity to operate appliances, we say that the long term income elasticity cf appliance electricity demand is 1.5 (ratio of 15 to 10). Although the database for Kake is much too small to allow one to confidently estimate Kake income elasticities for energy sources, one can at least exa- mine behavior in other parts of Alaska and the United States to gain some potentially valuable insights. Table IV-7 is reproduced from a survey article by Lester Taylor. It summarizes econometric work published prior to 1975 pertaining to measurement of the income elasticity of electricity demand. Measured income elasticities for residential energy demand vary from -0.20 to 1.94. The only estimate of the commercial income elasticity of demand is 0.86. A more recent survey of energy elasticities published by Resources For the Future, shows that measured income elasticities of electricity demand for 1/ residential and commercial users continue in this range. On a per capita or per customer basis, theory tells us that the income elasticity of electricity demand should be lower for very low income demanders, than for higher income demanders. Much of the historical increase in electri- city demand attributable to income gains, was generated in a two stage, derived demand process. Rising incomes led to increased purchases of energy-using 1/Bohi, Douglas R., Analyzing Demand Behavior, A Study of Energy Elasticities, (Resources For the Future by Johns Hopkins Press, Baltimore), 1987. 49 RESIDENTIAL Study No. Study No. Study No. Study No. Study No. Study No. Study No. Study No. COMMERCIAL Study No. NOTE: NE - Not Estimated CS - Cross Section TS - Time Series 1 (1962) 2 (1962) 3 (1970) 4 (1971) 5 (1973) 6 (1973) 7 (1973) 8 (1973) 5 (1973) TABLE IV SHORT-RUN 1.16 0.104 0.13 NE 0.02 NE (-0.20) 0.14 0.11 -7 LONG-RUN NE Smal] 1.94 O+ 0.20 0.80 1.64 0.86 SUMMARY OF INCOME ELASTICITIES OF ELECTRICITY DEMAND TYPE OF DATA CS, Cities CS-TS, States TS, US CS, SMSA's CS-TS, States CS, States CS-TS, Utility Svc. Areas CS-TS, States CS-TS, States SOURCE: Taylor, Lester, "The Demand For Electricity: A Survey," The Bell Journal of Economics, Spring 1975, excerpted from Table 4. 50 appliances, or more frequent and intensive use of the existing appliance stock. This, in turn, generated at increased demand for energy. Lower in- come energy consumers can be expected to increase their derived demand for energy as real per capita income goes up, but may divert a larger portion of their income gains to such necessities as food and medical expenses or to improving their means of transportation, than would higher income consumers. In 1981, estimated Kake real per capita personal income was $5,205.00 or just about 36 percent of the Statewide level. Although our economic projection shows Kake real per capita personal income rising to $9,658.00 by the year 2005, this is still just 67 percent of 1981 Statewide real per capita income. Kake qualifies as a low income community relative to the Statewide average, throughout the forecast horizon. A check of the assumptions used to generate the Kake energy demand projections will show that at a minimum, per capita (or per establishment) energy demand remains constant. In certain cases per capita (or per establishment) energy demand has been projected to increase using income or per establishment elasticities greater than or equal to 1.0. Those cases where increased per capita (per establishment) demand have been projected are: Residential Water Heating (Fuel Oil, Bottled Gas) - The income elasticity per capita of demand is 1.25, (Assumption 4). Residential Lights and Appliances (Electricity) - The income elasticity per capita demand is 1.0, (Assumption 6). Commercial/Government Lighting (Electricity) - Per establishment demand rises 2.85 percent per year, (Assumption 10). Commercial/Government Industrial Processes - Per establishment demand rises 8.5 percent per year, (Assumption 12). 5] eee Manufacturing Lights, Appliances, Industrial Processes - Per establish- ment demand rises at the rate of growth of Kake limited entry com- mercial fishing permits, (Assumption 15). All other components of demand are held constant on a per capita or per establishment basis (that is, rise at the rate of growth of population or the number of establishments). Alaska data (Statewide) published by the U.S. Department of Energy's Alaska Power Administration in Alaska Electric Power Statistics 1960-1980 (published August 1981) suggest an historical Alaska residential real income elasticity of electric power demand lying between 0.73 and 1.59. Between 1970 and 1979, Alaska residential electric power consumption per customer rose 45.2 percent. Real Alaska per capita personal income rose 28.4 percent over the same period, while real average residential electricity prices declined 24.4 percent. Ata zero price elasticity of demand, the implied income elasticity of demand is 1.59, assuming no income price effects. Assuming a price elasticity of demand of -1.0, the implied income elasticity of demand is 40.73. !/ The same Alaska data for small commercial customers show that electricity consumption per customer rose 79.4 percent over this period, while the number of customers rose 84.4 percent. As was the case for residential prices, however, real average prices for commercial electricity fell, in this case by 29.0 per- cent. The simple ratio of the percent change in per customer demand to the percent change in the number of customers was 0.94. T/Empirical estimates of the long run price elasticity of electricity demand range from zero to -2.00 for residential demand, and from -1.25 to -1.94 for commercial industrial demand. (Taylor, Lester, "The Demand For Electricity: A Survey", The Bell Journal of Economics, Spring 1975.) 52 Given that real electricity prices fell over the 1970-1979 period, while at the same time real fuel oil prices (the primary substitute in space heating) were rising, the residential demand elasticities and trends in per establish- ment electricity demand for Kake would certainly seem to lie on the high side of reasonable, particularly when one considers that (i) the trend toward energy conservation in all forms should exert a much stronger effect over the present forecast horizon, than during the 1970's and (ii) real Kake elec- tricity prices are held constant in this forecast. We view the assumptions upon which this load forecast is based as optimistic given Kake's low income, and potentially increasing use of conservation measures intended to reduce space heating and water heating energy requirements. For example, it is not at all unlikely that per capita or per establishment Kake space heating energy requirements will decline. (The April 1982 survey showed limited use of weather stripping and other conservation measures.) Particularly in the case where real fuel oi], bottled gas, and wood prices are assumed to rise at a 5.2 percent annual rate, the increasing budget shares that would be devoted to energy purchases can be expected to act as a powerful stimulant to the adoption of conservation measures, and/or a partial shift to lower priced wood as fuel for space heating. The motive for adopting relatively optimistic demand assumptions came from a preliminary finding that existing Kake electrical generation capacity was likely to be adequate to handle year 2005 electric power demands (assuming normal maintenance and replacement of units after a 20 year uselife). The projections show that even if the growth in Kake electricity demand is on the high side of "reasonable," existing capacity would remain adequate. 53 TWO CAVEATS Existing Kake (THREA) generating capacity would not be adequate to handle future loads if either (a) the Cold Storage were to shift to THREA power or (b) electric space heating were to be adopted by enough households and commercial/ government establishments. In 1981, residential fuel oi] consumption for purposes of residential space heating was an estimated 18704.553 MMBTu's. Were this energy requirement to be shifted to electricity, an additional 5480 MWh of electric power would have been required, an additional load equal to approximately 79 percent of Kake's total electricity consumption in that year, inclusive of Cold Storage consump- tion. (See Table III-1, above.) A comparable switch to electric space heating for commercial/government establishments would have added another 5128 MWh of load. Running at peak capacity, ventyetour hours a day, all year, the THREA facility would not have been able to handle such a load, and, clearly, would have been greatly overloaded during times of peak electricity demand. !/ This calculation shows rather dramatically that the relative price assumptions upon which the load forecast has been premised strongly condition the fundamental conclusion that THREA capacity will be adequate to handle future loads. Were relative electricity prices to decline to a level below that of fuel oil, and competitively close to that of wood, a major shift to electrical space heating would occur, resulting in a need for much greater generating capacity at the THREA facility, or a transmission line intertie to an outside source of power such as Tyee. T/The implied peak capacity requirement for just the increments would be 3.3 megawatts. 54 THE EFFECT OF DEEP PRICE DISCOUNTS Table IV-5, above, gives the following average historical (1982) residential energy prices: electricity ($55.40/MMBTu), fuel oil ($10.33/MMBTu), and wood ($3.60/MMBTu). At these prices, Kake residents will obtain 0.3 percent of the 1982 space heating requirements from electricity, 31.3 percent from wood, and 68.4 percent from fuel 011, assuming 1981 consumption patterns hold in 1982, (see Table IV-2). Not counting the disincentive to electricity conver- sion represented by the capital costs of purchasing electric space heating units, a 1982 price of $10.00/MMBTu for electricity would clearly provide a financial incentive for Kake residents to shift to electric space heating from fuel oil. At a price of $10.00/MMBTu for residential electric power, Kake's 1982 total residential energy bill, if all space heating were shifted to electricity, would be reduced by $116,727.00. !/ However, only $6,172.50 of this reduction would stem from reduced costs of space heating, an amount equal to about $30.00 for each of Kake's 190 residences. Since the bulk of the savings that such a price reduction would generate could be realized without converting to electric space heating from fuel oi1, and since the $30.00 per household savings, even if capitalized at a 3.0 percent real annual rate of discount, would fail to cover the capital cost of heating unit conversion or new purchase, one might presume that even at $10.00/MMBTu, a shift to electric space heating by Kake residences would be slowly drawn out over time. ]/Reduction in residential electric power bills = (55.40 - 10.00) * 2435.13 MMBTu = $110,554.90. Reduction in residential space heating fuel oil bills = (10.33 - 10.00) * 18704.55 MMBTu = $6,172.50. 55 Other considerations, however, suggest that at a price of $10.00/MMBTu (approximately 3.4¢ per KWh), residents may well shift heavily to electric space heating. These considerations are: 1. expectations of rising real fuel prices and stable electricity prices (particularly if hydro-electric power were to be supplied at $10.00/MMBTu (3.4¢/KWh) 2. ability to use the 1982 savings and subsequent years' savings on electric bills ($110,554.00 in 1982 if the price were $10.00/MMBTu instead of $55.40/MMBTu) to finance the capital cost of conversion to electric space heat The present discounted 1982 value of future savings on residential space heat- ing energy bills if space heating energy requirements rise as projected, if expected and actual fuel oil prices rise at a real 2.6 percent annual rate, and if all residential space heating were shifted to electricity at a constant price of $10.00 MMBTu, is $1.5 million (real discount rate of 3 percent, horizon year 2005). This amount of savings on residential space heating costs would clearly make it worthwhile for residents to shift to electric space heating since additional savings on electricity bills for uses other than space heating could readily finance conversion over the first several years. If electricity prices were set higher than $10.00/MMBTu, a comparable incentive to shift to electric space heating could arise as soon as real fuel oil prices rose above electricity prices. (In the example above, the first year price difference was only 33¢ per MMBTu.) For example, (referring now to Table IV-5) a permanent average price of $12.00 per MMBTu for electricity (4.1¢ per KWh) 56 could produce an’ incentive to shift to electric space heating in the year 1990, if real fuel oil prices rose 2.6 percent per year, and in 1985 if real fuel oil prices rose 5.2 percent per year. Given the potential for space heating energy requirements to swamp existing THREA capacity, it is clear that if the Kake-Petersburg transmission line were to be built, the resultant load would be heavily dependent upon the price charged to Kake users for electricity. In other words, the conclusion that existing Kake generating capacity will be adequate to handle projected loads, is valid only if electric power to Kake users is not deeply discounted from 1982 THREA levels. Finally, we note that electricity prices at or near the 1982 THREA price for electricity would produce little financial incentive to shift space heating from fuel oil to electricity, even if fuel oil prices were to rise very rap- idly, provided that wood remained a relatively cheap substitute. A greatly reduced price of electricity relative to fuel oil is not sufficient to pro- duce an incentive to shift to electricity, if both prices are significantly higher than the BTu price of wood. Given absolutely high prices for electri- city and fuel oil, the likely shift in Kake would be to increased use of wood for space heating, particularly if wood prices rose much slower than fuel oil prices. CONCLUSION Given the price assumptions upon which this study has been based, and given the economic projection presented in Section II, we project the following year 57 2005 electricity load characteristics for THREA: Annual Load - 3,800 megawatt hours !/ Peak Instantaneous Load - Wad megawatts@/ The 1982 installed capacity is 1.6 megawatts. Provided normal maintenance and replacement occurs, present THREA capacity would appear adequate to handle projected loads through the year 2005, although some additional backup capacity may be desireable. Because the THREA generating units are not demand monitored, actual readings on instantaneous peak and baseload are not available. Given the relative price assumptions, the Kake Cold Storage is likely to continue to supply its own requirements. T/Derived by subtracting an estimated 800 MWh Cold Storage load from the total (Table IV-1) of 4611.78 MWh. 2/The absence of structural change in our economic forecast, the continuation of self-supplied power at the Kake Cold Storage, and the load smoothing po- tential of time of day pricing all suggest that the year 2005 peak to average load ratio will not exceed the 1981 ratio. The projection of a peak load of 1.2 megawatts is based on the estimated 1981 peak to average load ratio given to AEI by Marvin Kodake, Kake Power Plant operator. 58