Proposition 1- Revenue Bond Measure for Electric Utility Improvement Projects

On October 6, 2026, the citizens of Ketchikan will be asked to approve a Revenue Bond Measure, Proposition 1, which will pay for the needed repairs and upgrades on various electric utility facilities, including Bailey #1 backup generator, community power substations, and the Electric Division service center. 

Background:

Portions of KPU Electric’s infrastructure have reached or are approaching the end of their expected service life. Proposition 1 would authorize KPU to finance repairs and/or replacement of aging infrastructure.

KPU estimates that the full program of electric infrastructure repairs and upgrades could cost up to $83 million. Proposition 1 would authorize the first $25 million of that work, covering the highest-priority projects to be financed first.

The proposed improvements address aging equipment, backup generation capacity, electrical distribution reliability, and facilities that support KPU Electric’s daily operations.

What does “end-of-life” mean when referring to our electric infrastructure?

• Mechanical and electrical equipment does not last forever, particularly in Ketchikan’s rainy, marine environment. Electrical infrastructure has an expected service life, after which equipment may become increasingly difficult and expensive to maintain and repair.
• Much of KPU Electric’s infrastructure has reached or is approaching that point.

For example:

• KPU’s four Bailey diesel generators are between 27 and 57 years old. Replacement parts for these generators must now be custom-produced. One of the original generators is now completely out of service.
• Several substations serving Ketchikan neighborhoods and commercial areas are between 33 and 44 years old.
• Decades of exposure to heavy rain, salt air, and other environmental conditions have contributed to the deterioration of electrical equipment in the network.

The proposed bond would allow KPU to finance planned replacements and repairs through long-term, low-interest borrowing.

Emergency replacement of major equipment would result in substantial unplanned expenditures which could force sudden increases in electric rates to cover emergency repairs.

Why does there need to be a Electric Revenue Bond Vote?

• KPU Electric is owned by the City of Ketchikan.
• The City Charter requires voter approval before the City can issue revenue bonds to finance utility improvements. Unlike private businesses, which can generally obtain loans without voter approval, municipally owned utilities must obtain City voter approval for revenue bond borrowing.
• Proposition 1 asks City of Ketchikan voters to authorize KPU Electric to borrow up to $25 million for the specified infrastructure projects.
• The authorization would allow the City to issue revenue bonds as the projects move forward. It would not require the City to borrow the full amount immediately.
• The City Charter’s borrowing requirements are established in Article VI, Section 6-3 of the Charter of the City of Ketchikan, AK.

How much will the Electric projects cost?

• The maximum dollar amount for the proposed projects in this bond would be $25 million. 
• KPU estimates that an overall program of complete electric infrastructure repairs and upgrades could cost up to $83 million.
• Proposition 1 would authorize a maximum of $25 million for the initial phase of projects, which are the most urgent.
• There is the possibility that full $25 million may not be needed. Individual projects would be financed separately as work progresses, rather than borrowing the entire amount at once.
• KPU is also pursuing grant funding that could reduce the amount of borrowing required.
• The current low-interest borrowing rates available to KPU and the City of Ketchikan are estimated to range from 3.30% to 4.85%.
• The actual amount borrowed would depend on project costs, available grants, and other funding sources.

How will the Electric Revenue Bond be paid?

• Revenue bond payments would come from KPU utility revenues, not taxes.

• The proposed bond would be repaid through revenues generated by KPU Electric services.
• Electric rates could increase as individual projects begin. However, potential increases could be partially offset by lower maintenance costs, grant funding, and other available resources.
• Any rate increases would not necessarily occur all at once. Because projects would be financed separately, their financial impacts would be evaluated as each project moves forward.
• According to the City’s Finance Director, if the entire $25 million authorization were eventually used, the estimated maximum rate impact would be between 1 cent and 1.25 cents per kilowatt-hour (kWh).
• The actual impact would depend on the amount borrowed, financing terms, project timing, and other available funding.

What happens if the Bailey diesel generators are not repaired or upgraded?

• Bailey Diesel Generator #1 is 57 years old and is currently out of service due to a damaged crankshaft that must be custom-produced.
• KPU’s four Bailey diesel generators are ordinarily kept idle but provide an important backup source of electricity when additional generation is needed.
• The generators serve two primary purposes:

1. Restoring power during outages. The generators provide electricity when transmission lines or other electrical infrastructure are damaged or unavailable, allowing KPU to restore and maintain service while repairs are underway.

2. Providing supplemental power during periods of high demand or limited hydroelectric generation

Ketchikan relies heavily on hydroelectric generation. During periods of low lake levels or unusually high electricity demand, additional generation may be needed to meet the community’s power requirements.

The Bailey diesel generators were used extensively during the 2019 drought to help prevent rolling blackouts throughout Ketchikan.

Without sufficient operational backup generation, KPU may not have enough locally available power to meet community demand during dry or cold conditions.

• With Bailey Generator #1 out of service, KPU cannot reliably meet its record winter peak demand using local generation alone if the Southeast Alaska Power Agency (SEAPA) transmission line becomes unavailable on a winter night.
• Proposition 1 would provide funding for an engineering study of backup generation alternatives and the repair of Bailey Diesel Generator #1.