Brennan: Don’t sell ML&P to Chugach
By Tom Brennan |
Selling ML&P to Chugach Electric is a bad idea.
Anchorage’s Municipal Light and Power is a city-owned electric utility with substantial generating capability and a solid track record for customer satisfaction at a reasonable price. Chugach Electric Association is a member-owned cooperative effectively controlled by the IBEW, the International Brotherhood of Electrical Workers, a union. It also does a good job by its customers.
ML&P primarily serves Downtown Anchorage south to Tudor Road and east to Boniface Parkway. Chugach Electric serves the bulk of the Municipality, including most residential areas. ML&P and Chugach share a one-third interest in the Beluga River gas field. Chugach is owned by its ratepayers; ML&P is owned by all residents of Anchorage.
The city of Anchorage would be effectively selling its electric utility and all its interests to a union. The price being offered, more than a billion dollars, is at the upper limit of what ML&P is believed to be worth. So who will pay off that billion-plus purchase price? Why, you and me, folks. Who else? We will be paying our electric bills to Chugach Electric and Chugach will pay off the debt. And since Chugach would be paying such a steep price, it seems highly likely that the debt will be paid off by raising rates, the rates you and I will be paying.
Chugach says it won’t raise the base rate paid by ML&P customers but if Chugach gets in financial trouble because of the burden of paying for the city utility — or any other reason — it may just have to beg off from that commitment and ask ratepayers for more money. There will almost certainly be a period in which Chugach will forego raising rates, but that is unlikely to go on forever. And that’s when you will start paying for the utility you already own. Chugach says rates will eventually go down.
The $1 billion sales price will enable the municipality to pay off about $525 million in debt and invest money in a city trust fund. That’s nice provided you don’t mind having the city tap your pocketbook for those things.
One of the main reasons for concern about the proposed electric utility deal is that it was negotiated almost entirely in secret. The deal was negotiated between Chugach and the city during a series of executive sessions of the Anchorage Assembly and the Chugach Electric board of directors.
The issue was broached last year by the Anchorage Economic Development Corporation, which was concerned about rising electrical rates. AEDC held two open meetings on the subject and then went into secrecy mode. If you missed learning anything about what was going on, join the crowd. An analysis of the proposal was conducted by NERA Economic Consulting of New York and an executive summary was released to the public after the announcement in December. NERA liked the sale idea.
AEDC President and CEO Bill Popp recommended taking a cautious approach to the sale. “There is no guarantee that this will work,” Popp told KTVA last spring. “What we believe is that there is a potential that it could have benefits but we don’t know until we have a much more in-depth, high-level conversation between the utilities and the city.” Those conversations went on — in secret.
This transaction would be the largest sale of public property ever held in this state. It would be absolutely unprecedented and the public knows next to nothing about how the deal went together. The issues are certain to be complex, yet the public is being asked to decide on the sale with ballots mailed in March for the April 3 election. What could go wrong?
Most informed opinion suggests that merging the two operations would save money. But there are important differences between merging the two operations and selling ML&P to Chugach Electric. It might be better to stick with the original idea of merging the two utilities and sharing control. That’s the way it is with most union-shop organizations. (Both utilities have unions, the difference is the amount of clout the IBEW has at Chugach and would have after a merger.)
And we might also want to consider that there can be great value in having the area served by two utilities rather than just one. In most parts of the country the electric utilities are spaced fairly close together, often in adjacent communities. If one goes down, one or more of the others are able to pick up the load. But if Anchorage has only one large utility and it goes down, there would be no backup able to handle the load. One utility has the advantage of eliminating duplication, but in matters such as electric generation redundancy can be a benefit.
The resolution adopted by the Assembly for the ballot issue says Chugach Electric “would commit to not lay off any ML&P or Chugach Electric employees as a result of the transaction.” And, it adds, “Base rates for existing ML&P and Chugach Electric ratepayers would not increase as a result of the transaction.” I’m no expert on weasel wording but it seems to me that Chugach would just have to wait a couple of years and then claim that whatever they choose to do is not a result of the transaction.
Putting a deal like this together in secret is a serious breach of public trust. There is no way in the world that the average voter can be brought to anything like a good understanding of the deal before the ballots go out in March.
If possible, the Assembly vote should be rescinded and the item removed from the election ballot. If not, the public should go to the polls and, if there were such an option, check the words “Hell, no!” You might have to write in the stronger word of the two.