Nome utility manager expects fuel surcharge to rise to about 40 cents per kilowatt-hour

Nome Joint Utility System customers will likely pay a fuel surcharge of close to 40 cents per kilowatt-hour, up from 18 cents now, the utility's manager told its board Thursday. He said the final figure will be calculated for the board's next meeting.

That would raise the surcharge by about 22 cents. "So it's going to about double the kWh cost," board member Carl Knodel said. The manager agreed, saying the utility's tariff is now pretty close to 20 cents.

The increase follows the largest fuel bill in the utility's history. The utility received 2,011,808 gallons this fall. The manager said the $8.6 million fuel bond is the highest the utility has carried, topping an earlier bond that came close to $8 million, and the total owed to fuel supplier Crowley will be closer to $9 million. The utility has already paid $1.3 million from cash reserves, some of which will come back once the bond is executed.

The manager said the fuel note will be sold to Northrim next week. Crowley's bill carries no interest under 30-day terms and is due Dec. 1, but the utility plans to pay it a week early.

For residential customers, the utility's Power Cost Equalization rate will also go up. Once Crowley is paid, the utility will submit its numbers to the Alaska Energy Authority and the Regulatory Commission of Alaska. The manager said there is enough money in the endowment and in the legislative language to fully fund the program.

Knodel questioned the timing of the purchase. "I have to ask myself, how much less would we have paid for our oil if we'd done it in July?" he said. The manager said the utility had never planned to buy before September, the price was locked in under a three-year contract and the only change was a tug fuel adjustment written into that contract. Knodel replied that the fuel arrived in October but was still based on August pricing, he believed.

The surcharge passes fuel costs through separately from the base rate. At an Oct. 13 Nome Common Council meeting, the manager said the utility last raised its rates in 2005, he believed, and that the surcharge was set up when fuel cost 85 cents a gallon.

The utility hasn't finished an audit since 2021, and the manager said in September that the delay was probably raising the interest rate on its annual fuel loan. Board members pressed him Thursday to finish the audits and a budget, and Knodel urged him to hire help. The manager said an outside consultant will help with the audits in December.

The manager said the utility needs to do a rate study in 2027, likely leading to a formula that recognizes part of inflation, similar to the one the Port uses.