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HomeMy WebLinkAbout6 I Power Worries 2005 ArticleWeb posted Sunday, July 24, 2005 Worries over fuel costs may turn to nightmares By Tim Bradner Alaska Journal of Commerce The difference rural Alaskans will pay for fuel between this year and last could amount to $30 million, says Meera Kohler, manager of Alaska Village Electric Cooperative, the electric utility in 56 villages. That's money villagers won't have for other needs if they can rustle up the cash, Kohler said. There's a possibility some won't, and the prospect of fuel tanks running dry and electricity being cut off this winter is a nightmare that could potentially come to life in some financially stressed communities. What's really disturbing to state officials is the prospect of damage to newly built village water and sewer systems -worth hundreds of millions of dollars -if communities are not able to provide heat and power to them. The possibility of having to mothball some of the facilities through the winter to prevent them from being severely damaged was discussed in a meeting of state and federal officials called together July 8 to discuss the problem. Temporarily shutting down a village's water and waste system seems almost unthinkable because it could create human health emergencies, but it's an option that must be considered if the facilities can't be maintained, Black and others at the meeting said. How serious is the problem? Diesel prices in rural Alaska are up 35 percent over last year, and prices last year were up 25 percent over the year before. Reports from many rural communities are that diesel prices are typically running 50 cents a gallon above 2004 levels. A typical rural village of 300 uses about 300,000 gallons, or about 1,000 gallons of fuel per person to get through the year, Kohler said at the July 8 meeting. Multiply that by 200 rural communities, and that's 60 million gallons. Multiply that by the 50- cents-a-gallon average increase, and it's $30 million in added costs in 2005. Kohler thinks its possible that rural communities might be able to absorb half of that, but that means they will still be short $15 million for this year. Shaen Tarter, vice president of marketing for Yukon Fuel Co., a major distributor in rural Alaska, said what's remarkable is that most rural communities have been resilient, with some help from the state, in their ability to roll with the punches. Most are current in their payments, Tarter said. That's no small accomplishment in the wake of declining income from commercial fishing and a cut-off of various kinds of state assistance like municipal revenue sharing. Yukon Fuel serves Interior communities along the Yukon River and its tributaries, the Kuskokwim River, Bristol Bay and Western Alaska; the latter two markets are also serviced by Yukon's competitor, Crowley Marine Services Inc. Chevak is the only community that still owes Yukon Fuel for 2004 deliveries. Tarter said management issues are at the root of the problem in a few communities are that distressed. The vast majority of rural communities are still financially strong enough to participate in the state's Bulk Fuel Loan Program that is managed by the Alaska Energy Authority. Last year eight villages fell behind in their repayments to AEA and were disqualified for 2004 loans to buy fuel. The state and the Denali Commission put together $868,000 for an emergency loan program to help the troubled communities. Except for one village, Ivanoff Bay, all of the emergency 2004 loans have been repaid, according to Del Conrad, manger of the program. Ivanoff Bay still owes $18,000. AVEC sees a grimmer trend developing, however. Kohler said the cooperative's past- due accounts from residential consumers is running at normal levels, itself a good sign, but money owed by municipal governments has doubled to $400,000 this summer compared to what was owed last year at this time. That's a worrisome trend because city governments manage village water and sewer systems which also require electricity to operate. The cooperative can't afford to allow bad debt to continue building, and Kohler has already ordered power to be cut to city-operated facilities in Chevak, including its utilities. Power cutoffs in other communities may follow in August, she said. It's not that the communities aren't trying, Kohler said. Chevak rustled up $35,000 to pay on its $140,000 debt to AVEC. Russian Mission recently sent in $6,500 on its bill, Kohler said. A one-time distribution of $6.45 million in state emergency fuel grants earlier this year helped most communities pay on what they owe and to pay for their 2005 fuel. But many communities face other problems, like debts owed to the Internal Revenue Service and an inability to pay, workers' compensation and other insurance, which could make them ineligible for state capital grants. Kohler is worried that the 2005 price jump may finally push many communities over the edge. Conrad said his $860,000 emergency loan program is intended to work like a revolving loan program so distressed communities can borrow again to pay this summer's fuel bill. But with higher prices,the villages won't be able to buy enough, he said. The loan fund isn't big enough. For example, the village of Kotlick has asked to participate in the loan program again this year, Conrad said. But while the community borrowed, and repaid, $322,000 for its 2004 fuel, it will need $450,000 this year to buy the same amount of fuel, he said. The village can still borrow the same amount as in 2004 but that will buy only two- thirds of what the community needs to get through the winter, Conrad said. Unless some other source of funds is located, Kotlick will get a partial-delivery of what it needs. "In February, if people go cold and dark out there, fuel will have to be flown in, and that will cost $1.40 a gallon or more," Conrad said. "I'm not concerned about AVEC, because we'll survive. I'm more worried about the basic viability of these communities," Kohler said. AVEC supplies power in 52 villages, but there are approximately another 150 communities with small locally owned utilities, and no one knows what financial shape they're in. "The real problem is that there's not enough cash in some of these communities to pay the bills," Kohler said at the July 8 meeting. That's the concern of Bill Allen, who heads the U.S. Department of Agriculture's rural development program in Alaska, and who was also at the July 8 meeting. "We can't just keep throwing money at these problems. We've got to deal with the root causes, which is creating jobs out there," Allen said. Allen proposed formation of an informal state-federal agency team that would go into seven financially stressed communities to discuss the problem with local leaders. He offered his agency's participation, and to lend his staff to the effort. Allen's idea was presented to the Denali Commission July 13 at a meeting in Kotzebue. Black from the state department of commerce said he will head the effort. Frank Muncy, a USDA rural development specialist who will work on the team, said initial goals will be to determine who owns local utility and fuel distribution systems, and what resources there are to sustain them. The bigger question is whether there is sufficient income in the community to support it, he said. Black said it's a complex problem. "We have to find out the nature of the debt issues, and the ability of the local village corporations and tribal entities to participate in solutions," he said. But deadlines are imminent. "We know what the deadlines are for cutting off electricity and for ordering fuel. But we don't know when we'll have a solution for this," Black said. Tim Bradner can be reached at tim.bradner@alaskajournal.com. Web posted Sunday, June 26, 2005 Grant may be extended to relieve crushing rural fuel costs By Claire Chandler Alaska Journal of Commerce At about $4 a gallon, the cost of heating oil is one of the expenses that has kept the Arctic village of Point Hope in Northwest Alaska from having enough revenue to cover the costs of running its municipal government. "A lot of times it is real tough, but this thing with the energy assistance program is really going to help us. The city has been in the red so long," said Point Hope city clerk Molly Stone. "This really helps us climb out of the red." At the request of Gov. Frank Murkowski, the Alaska Legislature in early April appropriated nearly $6.5 million in funding for the Small Municipality Energy Assistance Program to reimburse the state's 135 small cities and boroughs for a portion of their fuel costs during fiscal year 2005, ending June 30, 2005. Using 2003 population statistics, communities with less than 100 people are eligible for about $22,000, communities with a population between 100 and 600 people are eligible for nearly $45,000, and communities with more than 600 people but fewer than 2,500 may be reimbursed up to about $67,000. To be reimbursed for their fuel expenses, communities are required to submit receipts verifying their fuel purchases to the Alaska Department of Commerce, Community and Economic Development, which is administering the program. The city of Pelican, about 70 miles west of Juneau, spent nearly $20,000 in fuel that it used during fiscal year 2005, and purchased a credit of about $25,000 in fuel to be used during the next fiscal year. By purchasing some of the fuel in advance, the city, with a 2003 population of 113 people, was able to submit receipts for the full amount of money it is eligible to receive under the energy assistance program, said Pelican Mayor Patricia Phillips. Some communities, however, will not have purchased the full amount they are eligible for by June 30, said Jennifer Payne, communication specialist for the state commerce department. Stone said the city of Point Hope plans to submit receipts totaling about $27,000 by June 30. That's less than half of the $67,000 available to the village, with a population of 725 in 2003. Recognizing that some communities would not be able to make the upcoming deadline, the governor asked the Legislature to amend the period in which communities can be reimbursed for the fuel they have purchased to include fiscal year 2006, said Michael Chambers, a spokesman for the governor. The Legislature included the amendment in Senate Bill 46. Chambers said Murkowski planned to sign the appropriations bill in late June. For most of Alaska's small communities that already pay a premium for fuel that is transported to their remote locations, the rising price of heating oil has made it even harder to find enough revenue to cover their energy expenses,said Kathie Wasserman, policy coordinator for the Alaska Municipal League, a nonprofit organization representing more than 140 local governments in Alaska. "For the most part, (fuel) has to be either flown or barged in," she said. "In most of the communities where it is really sky-high, there is not much opportunity for people to have jobs and work, and they are living on very little income. Plus, it is a much colder climate in some of the villages up north, so you have to have lots of heating fuel." In Point Hope, where the average temperature is below freezing eight months out of the year, the city pays about $200 for 50 gallons of heating oil, enough to heat its community center for five days during the long winter. The village's fuel is barged in once a year when the Chukchi Sea is ice-free, Stone said. Even though fuel can be barged to Pelican year-round, it still pays a premium for its fuel. "We are in a remote location and barge delivery services have to divert off their mainline tracks to come into Pelican," Phillips said. "We don't buy huge bulk purchases so that also increases the cost." Phillips said that the grant from the energy assistance program will have a positive impact on the city's cash flow, though it will continue to run a deficit. High fuel costs also are contributing to deficit spending by the Haines Borough. The Southeast Alaska borough had budgeted for rising fuel costs this fiscal year, but the price still surpassed its expectation. To pay for the extra fuel expenses, the city had to dip into its rainy-day fund, said chief fiscal officer Jila Stuart. The borough plans to submit receipts for about $67,000 in fuel it has purchased, which is the total amount it is eligible for with a 2003 population of about 2,300 people. Even with the reimbursed funds included in the borough's budget for fiscal year 2006, it will still run a deficit of about $70,000, she said. Stuart is pleased that the state has chosen to pass some of its added revenue due to the high price of crude onto local governments. "There is kind of an inverse relationship because when the price of oil goes up it is a benefit for the state, but a cost for the municipalities. I think it is good they are able to help out," she said. Phillips agreed. "Their revenues that are increased because of the increasing price of oil should get kicked back to the communities. It is a fair way to do it," she said. "It is meeting a basic need of communities." Claire Chandler can be reached at claire.chandler@alaskajournal.com. By Claire Chandler Alaska Journal of Commerce At about $4 a gallon, the cost of heating oil is one of the expenses that has kept the Arctic village of Point Hope in Northwest Alaska from having enough revenue to cover the costs of running its municipal government. "A lot of times it is real tough, but this thing with the energy assistance program is really going to help us. The city has been in the red so long," said Point Hope city clerk Molly Stone. "This really helps us climb out of the red." At the request of Gov. Frank Murkowski, the Alaska Legislature in early April appropriated nearly $6.5 million in funding for the Small Municipality Energy Assistance Program to reimburse the state's 135 small cities and boroughs for a portion of their fuel costs during fiscal year 2005, ending June 30, 2005. Using 2003 population statistics, communities with less than 100 people are eligible for about $22,000, communities with a population between 100 and 600 people are eligible for nearly $45,000, and communities with more than 600 people but fewer than 2,500 may be reimbursed up to about $67,000. To be reimbursed for their fuel expenses, communities are required to submit receipts verifying their fuel purchases to the Alaska Department of Commerce, Community and Economic Development, which is administering the program. The city of Pelican, about 70 miles west of Juneau, spent nearly $20,000 in fuel that it used during fiscal year 2005, and purchased a credit of about $25,000 in fuel to be used during the next fiscal year. By purchasing some of the fuel in advance, the city, with a 2003 population of 113 people, was able to submit receipts for the full amount of money it is eligible to receive under the energy assistance program, said Pelican Mayor Patricia Phillips. Some communities, however, will not have purchased the full amount they are eligible for by June 30, said Jennifer Payne, communication specialist for the state commerce department. Stone said the city of Point Hope plans to submit receipts totaling about $27,000 by June 30. That's less than half of the $67,000 available to the village, with a population of 725 in 2003. Recognizing that some communities would not be able to make the upcoming deadline, the governor asked the Legislature to amend the period in which communities can be reimbursed for the fuel they have purchased to include fiscal year 2006, said Michael Chambers, a spokesman for the governor. The Legislature included the amendment in Senate Bill 46. Chambers said Murkowski planned to sign the appropriations bill in late June. For most of Alaska's small communities that already pay a premium for fuel that is transported to their remote locations, the rising price of heating oil has made it even harder to find enough revenue to cover their energy expenses, said Kathie Wasserman, policy coordinator for the Alaska Municipal League, a nonprofit organization representing more than 140 local governments in Alaska. "For the most part, (fuel) has to be either flown or barged in," she said. "In most of the communities where it is really sky-high, there is not much opportunity for people to have jobs and work, and they are living on very little income. Plus, it is a much colder climate in some of the villages up north, so you have to have lots of heating fuel." In Point Hope, where the average temperature is below freezing eight months out of the year, the city pays about $200 for 50 gallons of heating oil, enough to heat its community center for five days during the long winter. The village's fuel is barged in once a year when the Chukchi Sea is ice-free, Stone said. Even though fuel can be barged to Pelican year-round, it still pays a premium for its fuel. "We are in a remote location and barge delivery services have to divert off their mainline tracks to come into Pelican," Phillips said. "We don't buy huge bulk purchases so that also increases the cost." Phillips said that the grant from the energy assistance program will have a positive impact on the city's cash flow, though it will continue to run a deficit. High fuel costs also are contributing to deficit spending by the Haines Borough. The Southeast Alaska borough had budgeted for rising fuel costs this fiscal year, but the price still surpassed its expectation. To pay for the extra fuel expe nses, the city had to dip into its rainy-day fund, said chief fiscal officer Jila Stuart. The borough plans to submit receipts for about $67,000 in fuel it has purchased, which is the total amount it is eligible for with a 2003 population of about 2,300 people. Even with the reimbursed funds included in the borough's budget for fiscal year 2006, it will still run a deficit of about $70,000, she said. Stuart is pleased that the state has chosen to pass some of its added revenue due to the high price of crude onto local governments. "There is kind of an inverse relationship because when the price of oil goes up it is a benefit for the state, but a cost for the municipalities. I think it is good they are able to help out," she said. Phillips agreed. "Their revenues that are increased because of the increasing price of oil should get kicked back to the communities. It is a fair way to do it," she said. "It is meeting a basic need of communities." Claire Chandler can be reached at claire.chandler@alaskajournal.com. Web posted Sunday, July 24, 2005 Chevak struggles to keep the lights on By Margaret Bauman Alaska Journal of Commerce Financial woes that have put the village of Chevak's electric power in peril are prompting a joint government effort to keep the lights on in the Yu'pik Eskimo community in the Yukon-Kuskokwim Delta. Mayor William Vaudrin said he hopes resolution can be reached before Aug. 1, the date the Alaska Village Electric Cooperative has set to shut off power to Chevak's water and sewer system and municipal facilities. Those facilities include a health clinic and fire fighting operations that serve the community of nearly 900, Vaudrin said. "I'm trying to do what I can here," he said. Chevak's only hope at this point is that the Rural Utilities Cooperative in Bethel, which is affiliated with the Yukon Kuskokwim Health Corp., will take over the utilities, Vaudrin said. RUC officials are to meet with a local government specialist from the state at Chevak July 24-25, in an effort to identify the municipal utility's true financial situation, said Mike Black, director of community advocacy for the Alaska Department of Commerce, Community and Economic Development. Vaudrin, a construction worker, said when he was sworn in as mayor in January the city was already about half a million dollars in debt. The bills in hand still include $75,000 owed to the Internal Revenue Service, $158,000 to Yukon Fuel Co. and $150,000 to the Alaska Village Electric Cooperative. Vaudrin declined to go into detail on the financial woes of the municipality. "It sure looks like it was poor management," he said. Vaudrin sought help from RUC, which has offered to take over management and operation of the utility Aug. 1, establishing a consistent cash flow and uninterrupted payments for operations. "What we are offering is an opportunity to bring some revenue in and continue to have water and sewer for the community of Chevak," said RUC director Seth Smith. "We're already working on ordering the fuel (for winter)." RUC,a pilot cooperative program similar to AVEC, already serves six villages. It is a joint effort of the Rasmuson Foundation, Denali Commission, Environmental Protection Agency and the Alaska Native Tribal Health Consortium. RUC and officials with the state Department of Environmental Conservation hope their efforts will determine the true financial health of the utility and set up a game plan for its future operation. That won't, however, resolve the issue of AVEC debts, another matter that must be negotiated quickly, Smith said. AVEC officials, who must answer to members of their own cooperative, said any deal must include payment of debt. "The problem involves the delinquent amount, $150,000, owed to AVEC," said Mark Teitzel, vice president and manager of engineering for the co-op. "The delinquent amount needs to be paid, in fairness to our other cooperative members." Teitzel said RUC should establish a rate sufficient to pay future bills and pay off the delinquent amount, which otherwise would have to be born by the other 51 cooperative members. In the past, revenue sharing was made available to rural communities through the state government, and AVEC was willing to wait for those funds to arrive. Those funds, however, are no longer available, he said.Right now, AVEC is simply following its established rules for disconnect, he said. Black said the situation is hardly unprecedented. His agency has worked with other communities with serious financial problems, although this is the first time sewer and water are at risk, he said. "I'm very happy to have RUC involved, because it does represent more than a short- term solution," he said. Gene Pelpola, president and chief executive officer of the Yukon Kuskokwim Health Corp., said his corporation has been in contact with the state and with AVEC, and feels the transfer of Chevak's electric utilities to RUC can be successfully negotiated. The health corporation, which operates a clinic at Chevak, leases its facilities from the municipality. The contract calls for the city of Chevak to provide electric power for the clinic. Shutting off Chevak's water and sewer system would create a health and safety crisis within the community, Pelpola said. Meanwhile Shaen Tarter, vice president of Yukon Fuel, said his company, which fills a portion of Chevak's annual fuel needs, has a lawsuit in progress seeking payment for 60,000 gallons of fuel purchased in 2004. "We want to sell the fuel and we want to be paid for it," he said. Tarter said his company helped Chevak apply for an Alaska Energy Authority bulk fuel loan, which requires the borrower to pay 10 percent down, but said the municipality had all kinds of excuses for not coming up with its $13,700 obligation. Tarter said he couldn't recall a similar situation where a community was approved for a loan and failed to come up with its down payment. Vaudrin said the city plans to make good on its debts. "All our creditors we are definitely going to pay off sometime in the future, but not overnight," he said. Vaudrin, meanwhile, is working to coordinate the effort to keep the lights on at Chevak. The light at the end of the tunnel "is vague and far off, but I do see it," he said. "It's going to take a few years to finally come up for air, but I do believe we will be able to get out of this." Margaret Bauman can be reached at margie.bauman@alaska journal.com. Powering down in rural Alaska: The new dark ages Alex Demarban, Anchorage Daily News Rationing electricity becomes common in the Bush as fuel costs soar ------------ When a planeload of diesel fuel touched down in the far-flung Interior village of Venetie on Friday, it meant the end, for now, to a string of dark nights and long days without electricity. The village electric company, unable to afford the diesel fuel that powers the community, stretched supplies this winter by rationing power to homes and businesses. To save fuel in February, electricity was shut off completely some evenings and during the days on weekends. For Danny Sam, the power clicked on in time to watch the NCAA basketball tournament Saturday afternoon. He curled up in front of the TV with his girlfriend and a bag of popcorn to soak in March Madness. The high price of diesel fuel this winter has hit village Alaska hard, said First Chief Eddie Frank. In the Gwich'in village of Venetie, population 203, bulk purchases of fuel cost $3.21 a gallon. To make matters worse, Venetie Village Electric is short on money bec ause many residents can't, or won't, pay their bills, he said. Cash-strapped village-government facilities also can't pay, he said. Power in Venetie costs 51 cents a kilowatt hour, more than five times what Anchorage residents pay. "It's expensive," he said. Venetie isn't alone. Villages around Alaska, faced with small customer bases and soaring costs, are struggling to keep the lights on. In some areas, diesel fuel prices have nearly doubled in two years, and some villages are paying more than $6 a gallon, said Mike Harper with the Alaska Energy Authority, the state agency that, among other things, tries to reduce electricity costs in the Bush. (4 April 2006)