Sitka Utility Director Christopher Brewton stands in front of the No. 4 diesel generator at the municipal complex on Jarvis Street this summer. The generator is running again, as Sitka tries to keep up with increased demand for electricity and low lake levels. (KCAW file photo by Ed Ronco)

Sitka | The city of Sitka fired up its diesel generator yesterday, to keep up with demand for electricity as the days get shorter and colder. The city uses diesel to supplement its hydropower, which has been a cheap source of energy, but one that’s in shorter and shorter supply.

When the diesel generator kicks in, so do the costs. In order to recover some of that money, the city imposes a surcharge on utility customers. But how that happens is about to change.

Right now, the surcharge kicks in when the City of Sitka uses more than $50,000 dollars’ worth of diesel fuel to make electricity. The amount of the surcharge is determined by taking the amount of diesel over $50,000 in a year, and dividing it by the number of kilowatt hours sold to customers in the same year.

The changes approved last night do two main things: Instead of the fuel surcharge kicking in after $50,000, it would kick in after whatever amount the city budgets for diesel. And instead of determining the surcharge based on annual usage, the city would use quarterly data.

“We’re projecting over the next six months we’re going to have to burn $1.5 million worth of diesel,” Utility Director Christopher Brewton said. “What we have done with this ordinance is we take that number, break it down on a monthly basis.”

From there, officials subtract the money already in the budget for fuel and whatever the state has chipped in to help and then look at how much power was used during the same quarter the year before.

They divide one into the other, “and that comes up with what the fuel surcharge is per kilowatt hour,” Brewton said.

All right, so this is probably the part of the story where you’re wondering, how much? What are the bills going to look like?

Remember, the surcharge will be calculated quarterly, so let’s look at January and then April.

Information presented to the Assembly last night estimates that with a surcharge of about 1 cent per kilowatt hour in January, the average residential bill will go up about $14. In April, with a surcharge of about 2 cents per kilowatt hour, the average residential bill could go up about $26.

The increases in April are higher for commercial customers – about $31 – and lower for harbor customers, at about $15. There are other variations in there, too, for the Sawmill Cove Industrial Park, where customers could see nearly a $90 jump, and for governmental users, whose bills will go up about $30 in April.

Brewton said the process is used by other utilities, and he compared it to places where the electrical systems are tied together, and utility companies can buy electricity from one another.

“You don’t have enough of your own generation, so you go out on the market and you buy it, and you pass that cost through to the customer. That’s all we’re doing here,” he said. “But we’re doing it in a way that we hope we can give the customers the price signal up front, so they know what their power’s going to cost, and they have the ability to modify their behavior and consumption to try and eliminate the impacts of the higher cost of energy.”

In other words: a little warning, rather than being slapped with a surcharge at the end of the year. While all of this is going on, Sitka is working to expand its hydropower capacity. It’s well into a project to raise the Blue Lake dam, and it’s exploring the possibility of a hydropower project at Takatz Lake.

Assembly member Mike Reif pointed to projections that show Sitka having trouble by the year 2025 keeping up with demand for electricity, even with the expanded hydropower capacity at Blue Lake and Takatz Lake.

He told Brewton that all the money spent on new hydropower needs to be supported with conservation efforts on the parts of all Sitkans.

“And the Takatz project is a $300- to $400-million project that’s scary,” Reif said. “So conservation definitely has to be part of the solution. But it just goes to show we have a future that has some major, major energy obstacles to overcome.”

Brewton agreed, adding that the city “will be in this position again in the next 10 years.”

The new fuel surcharge structure was approved unanimously by the Assembly. It takes effect in 30 days.