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Annual Meeting: May 4, 2023 At Soldotna High School
Mission
Statement
To safely provide reliable electricity to our members and our community through superior customer service and innovative energy solutions at fair and reasonable prices.
Vision
Statement
For our members and community to benefit from Homer Electric’s leadership in the application of innovative energy solutions.
Message from Board & Management
We are pleased to provide this annual report to the Homer Electric Association, Inc. (HEA) membership summarizing our accomplishments and operations over the prior year. “We are HEA” – at the core, this phrase instills a sense of community and connection to our history and a nod to our future, as we reconnect with yesterday, today and strive to create a better tomorrow – together.
As a member of HEA, you have a voice in how your cooperative functions. As a non-profit, locally owned and operated, with leadership democratically elected, HEA is focused on its community and members’ needs. HEA exists to provide its members safe, affordable, reliable energy, which remains our number one goal. As a fiscal steward of the utility’s assets, HEA’s priorities remain focused on local opportunities, and decisions are weighed based on what is best for the communities we serve.
HEA is more than just a utility provider that you pay each month for electricity. We are committed to building stronger connections that foster economic growth and healthy communities. We stand ready to provide you with information, resources and services that are as dependable and useful as the electricity we supply. We strive to earn your respect as your trusted energy partner and your first stop whenever you have a question about any issue related to electric energy.
On behalf of the Board of Directors and staff of HEA, we thank you for your loyalty and interest, and encourage your participation in all that HEA has to offer the residents of the Kenai Peninsula.
Brad Janorschke,
General Manager
Dan Furlong,
President
Creating A Better Tomorrow
Together
In 1945, Homer Electric was founded on the promise of a brighter future: the improved quality of life and new opportunities that electricity — along with a grass-roots spirit of cooperation — could bring to our members and communities. This formula for success is just as valuable today as we continue our commitment to pursue new energy solutions and embrace innovation and technology that will better meet our needs tomorrow.
BATTERY ENERGY STORAGE SYSTEM (BESS)
The Battery Energy Storage System, or BESS, is a 93-megawatt-hour (MWh) storage system capable of delivering 46.5 megawatts (MW) over a two-hour period when fully charged. This innovative project features 37 Tesla Megapacks (battery units), which is the equivalent of 930 Tesla electric vehicles. It is the biggest battery energy storage system in Alaska! The BESS is located at HEA’s Soldotna Generation and Substation Facility and was integrated into commercial operation on January 19, 2022.
The BESS project is used to balance system demands with its greater ability to deliver or receive energy. The BESS also gives HEA the opportunity to actively pursue innovative renewable energy opportunities that have the ultimate result of energy diversification and the potential for lower generation costs.
HEA is excited about the completion of this very successful project, and we are proud to introduce this major step forward in our renewable and energy diversification goals.
Battery Energy Storage System Ribbon Cutting Event
HEA celebrated the commemorative ribbon-cutting ceremony for our newest facility, the Battery Energy Storage System (BESS), located at the Soldotna Generation and Substation Facility on November 1, 2022.
FIBER OPTIC DESIGN & CONSTRUCTION FROM KENAI TO THE NIKISKI COMBINED CYCLE PLANT
HEA proudly designed and completed construction on 16.5-miles of aerial fiber-optic communication cable between the Kenai Office and the Nikiski Combined Cycle (NCC) facility.
This cable improves reliability and communications to our NCC generation plant. Fiber-optic cable backbone connects substations, communication sites, offices, and other HEA facilities.
South Kachemak Bay Reliability Improvement Project
This ongoing reliability improvement project for the end of the Homer spit and areas across the bay included updating reclosers, an automatic high-voltage electric switch. Like a circuit breaker on household electric lines, it shuts off electric power when trouble occurs. The recloser settings were updated and coordinated amongst the Seldovia, Little Tutka, McDonald Spit and McKeon Flats reclosers. This improvement will allow the restoration of power quicker and remotely. In addition, several thousand feet of underground feeder cable was replaced.
Member Relations Highlights
October, 2022 – USDA
Community Wildfire
Defense Program
Grant
HEA and the Kenai Peninsula Borough partnered together in the submission of the United States Department of Agriculture (USDA) Community Wildfire Defense Program Grant. The proposed project would implement recommendations for clearing in high-priority and high-risk regions of our service area, as well as address a growing concern about excessive fast-growth trees in the right-of-way, and danger trees that are at risk for falling on power lines adjacent to the right-of-way. These trees create an increase in fuel source for wildfire caused by the spruce bark beetle outbreaks in three regions of the HEA service area.
In 2022, HEA was excited to host an in-person Annual Meeting of the Members, as well as our Community Meetings. It was great to connect with members in person and share cooperative updates.
Scholarships
In 2022, HEA awarded ten $1,000 scholarships to high school seniors and adults continuing their education.
YOUTH TOUR
For the first time in two years, HEA sent two local high school students to the Youth Rally in Caldwell, Idaho. The week-long summer camp is designed to develop leadership skills, foster teamwork, strengthen communication techniques while highlighting the cooperative principles, and raising awareness of important industry issues.
To help elevate electrical safety awareness starting at a young age, HEA hosts an annual Electrical Safety Poster Contest for 3rd and 4th grade students. Students are encouraged to create an electrical safety message that can be expressed through art in the form of a poster.
Best Safety MessageAva Cobbs, 4th Grade K-Beach Elementary School
Most HumorousJacob Collinson, 4th Grade Soldotna Elementary School
Most Creative Hannah Hardesty, 4th Grade Kaleidoscope School of Arts and Science
Member-Facing Technology
& Website Refresh
We are thrilled to unveil our newly redesigned website that boasts an elevated design, featuring a streamlined, responsive, and modern interface. We invite you to explore our newly launched website, which embodies our commitment to innovation and user experience.
Furthermore, we are delighted to introduce our latest addition, the energy calculator tool, now available on our website. This tool empowers our members to determine the energy consumption and cost of commonly used household items, allowing them to make informed decisions and better manage their electrical bills.
We take pride in offering innovative solutions and providing exceptional services to our members. Thank you for being a part of our community, and we look forward to continuing to serve you with excellence.
Seward Electric System
On August 30, 2022, at a Special Board of Directors’ Meeting, the Homer Electric Board decided to pursue the purchase of Seward’s electric utility. HEA submitted a proposal package, and Seward’s City Council unanimously recommended HEA for continued negotiations to purchase Seward Electric System. A special election was held on May 2, 2023, in Seward.
Operations Highlights
HEA’s Operations Department is responsible for the distribution of system construction and maintenance operations of 2,499 miles of energized power lines in HEA’s 3,166 square-mile service territory.
In 2022, the following are some of the system upgrades and maintenance highlights:
This year, HEA addressed 469 danger tree service orders, removing a total of 3,239 beetle kill trees.
HEA crews replaced 7,000 feet of wire, 80 poles, and multiple pieces of equipment along Kalifornsky Beach Road.
HEA crews replaced 3,000 feet of underground feeder cable on the Homer Spit.
Generation Highlights
In addition to the day-to-day normal operations of the generation plants, the following are a few highlights from 2022:
Soldotna Combustion Turbine Controls Update
The control system, servers, and switches were updated to the latest version, as well as a cybersecurity suite that protects the control system and meets current Critical Infrastructure Protection (CIP) standards.
The control system, servers, and switches were updated to the latest version, as well as a cybersecurity suite that protects the control system and meets current Critical Infrastructure Protection (CIP) standards.
Generation Modeling Program
An in-house modeling program was developed to forecast daily dispatch of generation units. An additional feature was developed to use actuals for a portion of the year and then re-forecast the remaining portion of the year. This innovative and exciting program has allowed us to run scenarios to understand the effect that various projects, load projections, and renewable projects would have on our system dispatch.
An in-house modeling program was developed to forecast daily dispatch of generation units. An additional feature was developed to use actuals for a portion of the year and then re-forecast the remaining portion of the year. This innovative and exciting program has allowed us to run scenarios to understand the effect that various projects, load projections, and renewable projects would have on our system dispatch.
Engineering Highlights
The Engineering Department at HEA is responsible for the distribution of planning and the design and installation of new electrical services for the membership. HEA’s growth is reflected in some of the 2022 engineering highlights including:
Completed the Underground Cable Rejuvenation Project
In 2022, HEA completed a 10-year project to rejuvenate its underground cable extending the life of the cable by rejuvenating the insulation within the conductor. This upgrade will reduce underground faults and the new warranty extends the life of the underground cable.
GRANT LAKE PROGRESS
After multiple years of consultation with the State of Alaska and the public process, the required amendments to the Kenai Area Plan and the Kenai River Special Management Area (KRSMA) Plan were adopted. A final finding and decision approving the requested easement and lease were issued, the permit to appropriate water for the Project was granted, and the regulation change associated with KRSMA Plan to allow for development of the Grant Lake Hydroelectric Project on State lands was signed by Lieutenant Governor Dahlstrom and became effective.
Retirements
The cooperative culture begins with our valued employees. Congratulations to the following employees who have served our membership over many years in the office, in the field, and behind the scenes:
Bob Day
Bradley Project Manager
19 Years of Service
PAUL PARSONS JR.
Foreman (Plant)
21 Years of Service
CARL RULAND
Combined Cycle Operator / Rover
5 Years of Service
LESLIE “JEANNIE” MCKINSTRY
Member Support Representative
6 Years of Service
Joseph Pedginski
Communications/SCADA Specialist
14 Years of Service
MARY “BETH” WYTHE
HR & Admin Services Manager
36 Years of Service
LIAN MCMILLAN
Meter Reader
14 Years of Service
MARK PEERY
Engineer IV
17 Years of Service
Treasurer’s Annual Report
Financials
Organized as a rural electric cooperative, Homer Electric Association, Inc. (HEA) operates as a not-for-profit entity under section 501(c)12 of the Internal Revenue Code. Established by the members to provide service at the lowest possible cost, any excess revenue (or margin) is used to fund growth and maintenance before it is eventually returned to members in the form of capital credit retirements. Ownership equity in the form of capital credits is a fundamental tenet of the cooperative model. In 2022, the Board of Directors authorized the sixth consecutive year of general retirements, retiring over $3.5 million to over 8,800 current and former members.
In 2022, the financial position of HEA remained stable with kilowatt hour (kWh) sales dropping slightly from the prior year. With diligent monitoring and expense management, we continue to meet financial obligations required by our lenders. Our number one priority is to provide safe, reliable electricity at fair and reasonable prices to you, our members.
HEA concluded the year 2022 with total consolidated operating revenues of $105.3 million. That total less consolidated costs of electric service of $103.8 million, plus non-operating margins of $0.7 million, resulted in a positive margin of $2.2 million. The following is a financial summary for the year.
Jim Duffield,
Treasurer
Energy Sales
HEA sold 457 million kWh of electricity which is a 5% decrease over the year 2021 and a 1% increase over the year 2020. Kilowatt-hours (kWh) sold decreased from the prior year for all classes except general service. Sales for resale to other utilities also decreased.
REVENUES
Revenue generated from energy sales totaled $104.4 million, a decrease of just over 1% from the previous year. Other operating revenue of $0.9 million, which includes rentals and fees, plus $0.7 million from non-operating interest income and capital credit allocations from other organizations, all contribute to net margins.
COST OF POWER ADJUSTMENT (COPA)
The variable cost of fuel and other sources of power used to generate your electricity are reflected on your bill as the COPA charge. This rate is adjusted quarterly primarily based on the cost and source of fuel used. The average COPA rate in 2022 was 7.7 cents/kWh.
AVERAGE RESIDENTIAL MEMBER MONTHLY BILL
(based on 550 kWh as of December 31 2020-2022)
EXPENSES
In 2022, total cost of electric service was $103.8 million, only 0.1% over 2021. Fuel and purchased power costs comprised 36% of total expenses, nearly the same as the prior year. Operating costs increased only $0.1 million, which is within 0.2% of the prior year.
WHERE YOUR DOLLAR WENT
$0.04 Consumer Accounts and Service
$0.09 Administrative and General
$0.23 Distribution
$0.28 Production and Transmission
$0.36
Fuel and Purchased Power
$0.04 Consumer Accounts and Service
$0.23 Distribution
$0.09 Administrative and General
$0.28 Production and Transmission
$0.36 Fuel and Purchased Power
KEY RATIOS
The equity-to-total-assets ratio measures the percentage of total assets owned by members and is one of the indicators used to monitor the Cooperative’s financial health. HEA’s equity ratio was 46% at year-end, holding the same as the prior year. The same ratio for Alaska Electric & Energy Cooperative (AEEC), HEA’s subsidiary, which owns the generation and transmission assets, was 21% in 2022. This is up from 20% in 2021 and reflects a decrease in long term debt.
FINANCIAL GOALS
In conclusion, Homer Electric Association met its financial goals with positive margins and required loan agreement ratios in 2022. The financial management and resulting financial performance allow the Cooperative to continue meeting the energy needs of our members through innovative energy solutions, while ensuring fair and reasonable rates.