Homer Electric reports $2.2 million June operating loss as purchased power costs run over budget

Homer Electric Association lost about $2.2 million on its June operations, according to the cooperative's August 2026 CEO report, which calls the gap between what the utility actually earns and what its rate filing shows regulators an ongoing challenge in managing rates while meeting its lender covenants.

HEA's July CEO report had shown May year-to-date operating margins of $3.1 million, about $600,000 ahead of budget. June's loss erased that cushion: year-to-date margins now sit at $1.0 million, roughly $1.0 million below budget, a $2.1 million reversal in a single month.

The numbers behind the loss: June operating revenue of $10.3 million against a total cost of electric service of $12.5 million. Revenue is actually running about $5.5 million ahead of budget for the year; the cost of electric service is running about $6.3 million ahead of it. The report attributes the variance primarily to purchased power, which totaled $8.9 million in June and $45.5 million year to date.

The July report, covering May, had called HEA's financial position sound, citing debt service coverage of 1.79 against 1.43 a year earlier and equity at 44.8 percent of assets. The August report offers no such assessment.

HEA is preparing an informational Simplified Rate Filing for the period ending June 30, 2026, measured on a rolling 12-month basis, projected to reflect a Regulatory Time Interest Earned Ratio of 1.98. The cooperative's actual TIER is 1.32. The ratio measures how many times over earnings cover interest payments, and lenders set floors on it. The report says the regulatory figure continues to benefit from strong fourth-quarter 2025 sales that remain inside the rolling window, and that HEA will monitor the relationship between actual performance, regulatory earnings and debt service coverage as those months roll off. The cooperative says it will keep rates "sufficient to support ongoing operations, capital investments, and lender covenant compliance."

Members' rates fell over the same period. The July report says the Cost of Power Adjustment dropped from 10.922 to 10.323 cents per kilowatt-hour on July 1, a 5.5 percent cut worth $3.30 a month to a residential customer using 550 kWh, helped by fewer islanding hours and higher-than-expected first-quarter sales.

Kenai Peninsula Borough residential rates still average roughly 29.28 cents per kWh, about 79 percent above the U.S. average, on bills near $145 a month.