There were a few articles on the Municipal Light and Power (ML&P) sale to Chugach Electric (CEA) in October that prompted several questions. There were some oddities the appeared to need a deeper look into what was going on.
ADN wrote an article announcing that Chugach and the MOA had completed terms of the sale on Oct. 29. The Anchorage Daily Planet followed that up a few days later with a piece wondering what else was in the agreement. And for some real entertaining reading, you can find the most recent version of the agreement at the Regulatory Commission of Alaska’s web site.
These two articles, particularly the $15 million for a substance abuse treatment center and a $36 million pot of money for ML&P customers, triggered some concern. I also received a few phone calls asking other related questions.
In response, I wrote up a list of questions and sent them to my Assembly members John Weddleton and Suzanne LaFrance. Also sent them on to Chugach Electric (CEA). Mr. Weddleton was helpful and forwarded copies of the various agreements upon which the sale is dependent. While we don’t agree on a lot of things, he does pay attention to constituents and responds. Ms. LaFrance did not forward anything at all but did bring the Muni Manager into the discussion. I never heard from her again. Appears she may simply be along for the ride on this one.
CEA was very helpful and responded quickly and thoroughly. Looks like they have done their homework and from my perspective as a Chugach rate payer, it appears they struck a pretty good deal. At this point, I am impressed with their work.
My three primary questions concerned the substance abuse treatment center, the $36 million fund, and ownership and disposition of natural gas in the Beluga natural gas reservoir. CEA’s responses are as follows:
- $15 million substance abuse center. Chugach is not subsidizing the treatment center. Funds for this come from the MOA. If the MOA does not spend the $15 million within 5 years, the unfunded amount will be credited to Chugach and refunded to its members.
- $36 million. This money comes from MOA unrestricted cash fund that was not part of the sale. Chugach will receive the $36 million in a restricted cash fund that will be returned to MOA ratepayers over 3 years.
- Beluga natural gas. ML&P has a 56% ownership of Beluga natural gas, Chugach owns 10% and Hilcorp owns the remaining third. The purchase agreement locks Chugach and ML&P tightly into future use of the ML&P share. Generally, that natural gas is allocated to power legacy ML&P generation.
One of the things I came across was Providence as a party to the agreement. It turns out that they had a previous issue with rate increases due to ML&P’s new generation Plant 2A and had filed a rate case with the RCA. The $15 million ends up being a concept that got them to agree to drop their rate case against 2A and in turn the sale and promise not to appeal in the future. Chugach is quite happy with this result, as any threat of future appeal would jeopardize or increase the cost of financing the purchase.
From my perspective as a Chugach rate payer, this looks like a decent deal and it should proceed as planned.
On the other hand, from my perspective as a MOA resident I continue to sadly marvel at the ability of the Mayor and current Assembly to wring additional dollars to spend out of everything they touch. The treatment center and the Payment in Lieu of Taxes (PILT) come to mind. Sooner or later, there won’t be any blood left in the local turnip. Perhaps we ought to pay better attention to people we elect around here.
Alex Gimarc lives in Anchorage since retiring from the military in 1997. His interests include science and technology, environment, energy, economics, military affairs, fishing and disabilities policies. His weekly column “Interesting Items” is a summary of news stories with substantive Alaska-themed topics. He was a small business owner and Information Technology professional.
