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Oil Prices Are The Lowest In A Decade, But AVEC Customers Will Only See Small Savings In Power Bill

Apr 22, 2020

Credit Krysti Shallenberger / KYUK

With oil prices tumbling to their lowest level in over a decade, some people in rural Alaska are wondering if that will mean lower electric bills. The Alaska Village Electric Cooperative, or AVEC, says that it bought its fuel far in advance, which means that the savings will be small.

AVEC does have some good news to share: it bought fuel in February 2020 at a dollar cheaper than last year. In 2019, AVEC paid $3.75 per gallon on average for fuel. This year, it was about $2.75 per gallon

The rural co-op orders about 9 million gallons of diesel fuel each year for its generators that power 58 communities. The co-op typically barges the fuel to its generator plants in those communities, but customers who hope to see those savings reflected in their power bill may be a little disappointed. AVEC says that while they’ll see some savings, it won’t be a lot.

AVEC President and CEO Meera Kohler said in an email that the costs to barge the fuel up the river and the costs that local fuel distributors add are factored into the power bill. So for instance, if AVEC bought a gallon of fuel for $1, the costs of distributing the fuel locally may be another $3.

AVEC says that they only have two local distributors they work with in Bethel and the Southeast community of Yakutat, and they are able to negotiate those prices. That means the extra costs for distributing fuel locally don’t exist for AVEC in most of their communities.

AVEC usually buys enough fuel to keep reserves for the next year just in case the barges that ship the new fuel are delayed. The old fuel and new fuel are then mixed together, which means that AVEC calculates the cost of both and adjusts the price accordingly. The power cost equalization rate, which subsidizes some of the electrical costs to rural communities, is also a factor. Those rates are set each year in the fall.

Kohler said that it is too soon to tell if customers will see savings next year, but customers might see more savings if oil prices continue to stay low well into this year.