Comments before the Regulatory Commission of Alaska by former RCA Chairman Dave Harbour - The intent of these remarks today is to alert the commission to the fact that one organization in the City of Anchorage, the Anchorage Economic Development Corporation, has made certain assurances to the people of Anchorage that appear to involve the Regulatory Commission of Alaska... 

The intent of AEDC seemed to be to give confidence to the people of Anchorage that if they voted yes on that proposition, the RCA would save the day by making sure that all the promises uttered during that campaign would be promises kept... 

... the mayor of Anchorage will not be opposing it; nor will the Assembly of Anchorage; nor will the board of Chugach Electric Association; nor will the board and extensive list of advisers to the Anchorage Economic Development Corporation. Therefore, it will appear to be, by the time it reaches this body, a done deal.

All the promises about lower rates, and yet we won't fire anybody, and on and on and on, will be subject to future rate determinations and cost of service adjudication. So this is the time to be thinking about it.

And I do urge the Commissioners to be thinking about how they would assure that the consumers, the ratepayers of Southcentral Alaska, are protected as a result of this extremely important process...

I'm deeply disturbed that it's gotten this far without -- and people voting on things. They have no idea what the impact is, and accepting promises as though those promises would weather the storms of future rate cases when rate cases are supposed to be based on cost of service and just and reasonable decisions. No. 

When the political process is over, forget the promises. It's going to depend on the regulatory process on professional representation before this body, the record that's developed, and the wise decisions that the commissioners make. 

Another Reader’s Reaction To Our Commentary:  Dave, I love the way Chugach management explains that the purpose is to avoid duplication then quickly add that nobody will be laid off. They will keep all of the employees of both organizations on the payroll. -t

The Municipality also asked other potential buyers what they might pay...If those moves had been made in the open, opposition to the sale would be weaker. But the city released the documents only after public records requests from ADN.  Businesses commonly demand non-disclosure agreements before talking. Municipal Manager Bill Falsey agreed to those terms because he thought doing so would yield more information. But he told the companies that open records law would require release of the documents on request.  I think Falsey made the wrong call. Transparency should be a condition of working with the Municipality. 

Reader comments:

Pete Brown - A merger with CEA makes some sense but not as structured or priced. What this is is simply a stealth tax in the form of future utility rate increases to fund a cash injection to the Muni, mortgaging us as the rate payers instead of as taxpayers. Only CEA will be going to the bond markets instead of the Muni.

It’s favorable to the Muni and the ML&P customers (who are worried about looming MLP rate increases) at the expense of CEA members.

The problem is that cost of the purchase, regardless of the buyer, is going to end up being paid by local electric consumers. It can’t be any other way. CEA is overpaying and the entire CEA service area will be burdened by cost of this deal. CEA directors are bailing out the Muni at the expense of the ratepayers and are again breaching their fiduciary obligation to their members.

Its financial sleight of hand by the Mayor and CEA to give the Muni a temporary cash injection to defer the day of reckoning for our expensive municipal government.

As proposed by the Mayor and CEA, departments will be merged and there will only be personnel reductions through attrition and normal employee turnover and retirements.

That’s precisely the problem. The redundant employees, be they at CEA or ML&P, will be sleeping at their desks collecting paychecks for years until they die or collect their generous retirement.

During normal corporate mergers, layoffs usually occur relatively quickly and economies of scale are achieved in part because the new single entity no longer needs two accounting depts, two billing depts, two purchasing depts, two HR depts, two data processing depts, etc, etc, etc. Redundant employees are usually terminated quickly and given some modest termination package.

But not here. The Mayor has guaranteed his labor supporters that these efficiencies can not be achieved in any reasonable period of time.

The rate payers should not be stuck with this featherbedding.

Linda Shore - Unless both utilities already have redundant employees, that doesn't make sense. The service area will increase and the existing employees will still be at their tasks. It will also take time to integrate the administrative and other functions, so by the time attrition starts to take effect, it won't be noticeable. No one is saying that they will continue with two accounting, billing, etc, departments.

Pete Brown - Linda, we will probably need most of the existing lineman and generator operators. We won’t need all the soon to be redundant administration. Utilities don’t need two computers and two dp depts for billing when either of the existing ones should be able to handle the additional load. The same is true for existing regulatory staff, etc.

I believe a dedicated board of directors is better able to operate a multibillion-dollar utility than the Anchorage Assembly that actually dedicates very little time to any issue. It comes down to the head of ML&P or the Mayor saying, "Just trust me." Sometimes the Assembly should not show or have that trust but they don't have the time or the tools to do anything else... we have seven electrical utilities in the railbelt. We have seven utilities serving a small population with all of the overhead required to run those seven businesses. It has long been talked about, to save money, provide efficiencies and to provide better service these seven should be one. I think this step to combine ML&P and Chugach is just the first step in the future of combining the electrical utilities from Homer to Fairbanks. I look forward to that day when a professional Board of Directors overseen by the RCA will make decisions they are qualified to make.

“While the Assembly made it clear, if the public voted ‘yes’ to approve the sale, there would be several months of continued negotiation, “my concern is that these negotiations would continue to be in executive session. I am also concerned the only information available to the public will be from a Chugach PowerPoint which only cites their benefits.”

It's inefficient to have all the small utilities operating small power plants. A study looking into operating them together as a single company found savings of around $50 million a year (although I was told a new estimate using today's lower cost of oil, due out soon, reduces that figure to "tens of millions.")