A good deal? Who knows?
Watching the Town Hall last evening on the proposed $1 billion sale of Anchorage’s Municipal Light & Power utility to the Chugach Electric Association, it seemed we had heard most of the information previously.
While it largely was redundant, calling the meeting a dog-and-pony show would be unfair. There was a good amount of much-needed information given out.
What was missing: Will the deal reduce taxes? How? By how much? Why did the city abandon a bid process to settle on Chugach? Why were there no Requests for Proposals sent out? After all, at least five other entities sent letters of interest. And why end-run the city charter to reduce the vote percentage needed to approve the sale – from 60 percent to 50 percent? The city’s telephone utility sale, after all, was held to the higher standard.
Yes, yes, we get the idea of local control. And we get that a sale is being rushed because of rising interest rates. We get the idea of keeping local money local. The rest of it? Not so much. The sale, perhaps the largest single sale in state history, was negotiated, so far, largely in secret. The few details available were pried loose by the Anchorage Daily News.
There are other questions, too. While the city and Chugach vow increased efficiency, Chugach promises not to lay off any of either utility’s union workers, depending, instead, on attrition to reduce the labor force. The union, the International Brotherhood of Electrical Workers, has been remarkable silent during this process.
If a simple majority votes “yes,” in next month’s election, the sale will be approved, with more negotiations after the election, along with due diligence and another trip to the Assembly for final approval before the Regulatory Commission of Alaska can wade in. We suspect those negotiations also will be carried out in secret. A majority “yes” vote also – and at the same time – would amend the charter to allow that to happen.
Ten years ago, Navigant Consulting, at the behest of ML&P and Chugach performed an evaluation of “alternative approaches to the combination of their respective utilities….” Using several approaches, it considered seven possible combinations, from ML&P buying Chugach to a governmental entity buying both to joint contracted operations. It carried its evaluation out to 2020.
In a letter to then-Mayor Mark Begich and Elizabeth Vazquez, chairman of Chugach at the time, Navigant said:
“The more promising combination alternative include acquisition options where ML&P acquires Chugach and where a third-party governmental entity acquires both ML&P and Chugach to create a new utility.”
In its study, it concluded: “These two cases are estimated to create the highest potential for customer rate savings ‐ $168 million and $218 million, respectively.”
Would Navigant’s conclusions be the same today? You can read them here.
No matter how you couch it, the lack of a procurement process, the lack of a detailed answer on property taxes and the skirting of the city charter all are bothersome.
Is the sale a good deal? We wish we knew.