AVEC says it must raise revenue 10% as delivered fuel costs climb 35% to 40%

The Alaska Village Electric Cooperative needs to raise its revenue 10% to keep pace with operating costs, President and CEO Bill Stamm wrote in an August column the cooperative posted online Oct. 21.

AVEC serves more than 31,000 people in 58 communities. Stamm said communities that have received fuel this year paid 35% to 40% more for it than last year. That was less than the 50% to 60% increase the cooperative projected in March, he said.

The increase works out to $2 to $3 more per gallon of diesel, or 15 to 22 cents more per kilowatt-hour at an average generating efficiency of 13.5 kilowatt-hours per gallon, Stamm said. Fuel alone now costs more than 50 cents per kilowatt-hour in most barge-served communities, he said. "For fly-in fuel, the cost per kWh is over $1/kWh, just for fuel," Stamm said.

Stamm tied the spike to the war in Iran and intermittent closures of the Strait of Hormuz. Villages that take only one or two summer fuel deliveries are locked into this year's price for the next year, he wrote in June.

Fuel is billed separately and calculated by location. The other part of a member's bill is the energy rate, which covers 46 prime power plants, nine standby plants, 500 miles of distribution line, 590 bulk fuel tanks, 33 wind turbines, 11,500 services and 90 full-time employees. AVEC reported operating expenses of 36 cents per kilowatt-hour for most communities to the Regulatory Commission of Alaska, the state's utility regulator, at the end of 2025.

"There does not appear to be any relief on the horizon for energy rates," Stamm said, citing inflation, commodity prices, freight costs and wages.

The board approved a rate increase in February that took effect in March and was expected to raise revenue 2.75%, according to an AVEC announcement. In August, AVEC published a schedule of proposed non-fuel rate changes for Bethel, Yakutat and its other service areas that would raise electric bills about 4.75%, Alaska News reported Aug. 7.

The Alaska State Legislature raised Power Cost Equalization funding to $56 million this year, a 16% increase, Stamm wrote in June. The state subsidy lowers the rate on the first 750 kilowatt-hours a month for homes and for eligible community facilities. Regulators corrected math errors in AVEC's power subsidy calculations in September, raising the credit in 44 of AVEC's 46 village power systems and lowering it in two.