Friday, May 7, 2010

More to the Story - It's Expensive to Visit Juneau

Earlier this week we ran a small item about outrage people served by Alaska Electric Light & Power around Juneau are probably feeling because they are facing an average of about a 20% rate increase, but the company's two largest customers, one of which is Princess Cruises, are excluded.

Princess, of course, uses the power they buy from AEL&P to power their ships while they are docked in Juneau, allowing them to shut down their engines and not burn fossil fuel.

But there's more to this story. The general manager yesterday wrote in the Juneau Empire that the reason Princess and the Green Creek Mine aren't now facing a rate
increase, is because they've already HAD their rate increase last year. And it wasn't any measly 20% increase. Princess is now paying double what they used to - 100% more.

Many Alaskans would probably think that's fair because Princess is using the power, and through some sort of Alaskan logic would conclude that Princess owes it to Alaska.

But most others in the Lower 48 would step back and look at the facts and probably conclude Princess isn't getting much of a deal in Juneau.

Juneau's power is hydroelectric power, and the water is flowing through the turbines producing electricity, and if it isn't used, it's just lost. Once the plant is built, it costs virtually nothing to produce.

Princess and the mine buy just excess power that's being produced, and would otherwise just be "thrown away." This power, like the rest produced by the hydroelectric plant, costs virtually nothing to produce. Both companies can do this, because on those rare occasions where there wouldn't be enough power for them to buy, they can start their own generators and produce the power they need themselves.

In the Empire article, the AEL&P manager says that Princess (and the mine) therefore are more or less subsidizing everyone else's power bills.

Now we see a danger here for AEL&P (just like we have for all of Alaska in the way they treat the cruise industry). If Princess - one of the utility's two largest customers - were to decide they can produce their power less expensively themselves, or if the number of ships visiting Juneau were to decrease and buy less power, the citizens of Juneau would be suddenly facing a much larger increase in their electric bills than 20%.

We asked Princess how the increased electric rates compare to keeping their engines running while at the dock. CND was told that with the new rates and current fuel prices, it's about break even, and AEL&P was made aware of this when the new rate was being negotiated.

But Princess went on to tell us that they are committed to the shore power concept. They were the first cruise line to use it, and Juneau was the first port in which they did it. They said that at this point they plan to continue buying shore power in Juneau because of positive environmental impact.

As for the future, it's always a cost versus benefit decision, so if Juneau continues to raise rates, there could well be a call from the bridge to the engine room that says, "Gentlemen, start your engines." If that were to happen, AEL&P would be saying to their customers, "People, open your wallets - much wider, please."

This article appeared in the May 7, 2010, edition of Cruise News Daily.