The Ketchikan City Council has voted to increase the city’s electric rate by 6.2%, and the water rates by 4.5%. A large portion of Feb. 15’s council meeting was dedicated to the ongoing funding and infrastructure issues facing the city’s electric and water utilities.
The rate hikes come on the heels of the failure of Ketchikan Public Utilities’ Silvis Lake hydropower plant on Feb. 9. Jeremy Bynum, KPU’s electric division manager, told the city council that the generator is out of commission indefinitely.
The loss of that generator means Ketchikan is leaning more heavily on power agreements with SEAPA, a utilities coalition serving Wrangell, Petersburg, and Ketchikan. Bynum testified that this has a compounding effect – the fifty-plus-year-old unit was not properly maintained, due to lack of funding. Now, he said, the underfunded electric utility is contending with the hefty costs of repair to that generator and another $104,000 a month to cover the gap in power needs left by its absence.
“KPU Electric has the lowest rates in the state of Alaska. And it’s not even close,” Bynum claimed. “We’ve done that at the detriment of the utility, the detriment of our infrastructure, and the detriment of our personnel. I want to make sure that we have a utility that is built from our community, within our community. And in order to do that, I need people, I need funding, and I need support.”
Bynum told the council that a repair to the generator is in the range of $700,000 and a replacement upwards of $12 million.
Some members of the council were opposed to the rate increase. Councilmember Riley Gass complained about what he called the city’s “overall spending problem” and the unfair financial burden this increase will place on citizens. He urged the council to consider new ways to reduce the city and KPU’s spending in lieu of a rate increase.
“Our budget was an abject failure,” Councilmember Jai Mahtani agreed with Gass. “We should not have passed that budget. But we decided to spend, spend, spend, and here we are. It is hard. I know our systems are failing. And failing very badly.”
Mahtani and Gass both suggested cutting costs in other municipal departments like public health or law enforcement – something that the vice mayor Janalee Gage said isn’t possible under city code. The pot of taxpayer money that funds the city’s police and fire departments, for example, is off limits to KPU. The power agency is funded entirely by customer telecom, water, and electric rates and Gage said if the city doesn’t increase those rates, Ketchikan might lose the ability to control them.
“This is the crossroads, sweethearts. The crossroad is here. And we have to make a choice. And either way is not pretty. One is we lose our infrastructure and our ability to have electrical power for community members. And the other way is somebody takes over for us, and tells us how much we’re going to pay a month,” Gage said.
Gage is referencing the city’s bond covenants. Ketchikan’s infrastructure is built, in part, on loans from the Alaska Municipal Bond Bank. Those bonds require the city to maintain a specific debt-service ratio. If they don’t, the state will demand the city completes a rate study to come into compliance. Then, on a consultant’s recommendation, the state will set the city’s electric rate.
After further discussion, the council came to a vote. The electric rate increase passed 5-2. The water rate increase of 4.5% passed in the same manner, with councilmembers Gass and Mahtani voting against both motions.
Disclosure: Jai Mahtani is a member of KRBD’s volunteer board of directors. He is not involved in the newsroom.
Get in touch with the author at jack@krbd.org.
