Chugach Consumers

2018 APRIL MOA ELECTION - PROP 10 - Authorize sale of ML&P to Chugach Electric www
Background documents assembled by Chugach Consumers

NOTE: Inclusion here does not necessarily indicate agreement with the content or views expressed in the documents.

Websites:   Chugach Electric (nothing on it)   ML&P (nothing on it)   Plant 2A  
Chugach Electric Vote "Yes" Political Website: 
Chugach Consumers recommends a NO vote on Prop. 10

Ballot Prop:  AO 2018-1(S)  It changes the MOA Charter super majority to pass but does not reveal that to the voters.  Rate Case at the RCA that reportedly denied ML&P's New Power Plant Rate Schedule: Docket: U-17-008

Questions Noted   


3/16/18 - Alaska Policy Forum - Prop. 10 - ML&P sale to Chugach Electric is a poison pill that will block REAL customer savings for years - Ray Kreig, Former President, Chugach Electric Association

1/23/18 - NERA Economic Consulting (9 p.) - Proposed Sale by the Municipality of Anchorage of Municipal Light & Power to Chugach Electric Association - Executive Summary

8/9/17 - Goldman Sachs Report (23 p.) - ML&P valued between $707 million and $1 billion.

11/5/07 Navigant Report -- Cost Savings from Combination of ML & P and Chugach ElectricPeculiar and Inconvenient (?) Finding:  Rates will be $213 million higher if Chugach absorbs ML&P than the other way around!  Alternatives Comparison


4/3/18 MOA Election Day
3/16/18 ADN - ML&P sale benefits business community, all of Anchorage - Leonard Steinberg - 
3/16/18   Alaska Policy Forum - Prop. 10 - ML&P sale to Chugach Electric is a poison pill that will block REAL customer savings for years - Ray Kreig, Former President, Chugach Electric Association - He recommends a NO vote on Prop 10.
3/15/18 Alaska Policy Forum - The ML&P Buyout by Chugach Electric Will Shock Anchorage Wallets - With Proposition 10: Buyer Beware
3/13/18 MOA Election Ballots Mailed - Questions 
3/11/18 ADN - Manufactured doubts obscure a no-brainer on ML&P sale - Charles Wohlforth - In a city the size of Anchorage, it makes no sense to build power plants a few miles apart. Experts say a recent building spree in our region may have wasted $300 million in extra electrical capacity. Power users will be paying for that for a long time....

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.

3/9/18 Anchorage Daily Planet - A couple of points [Editorial] - Voters are being asked to approve the sale of the city’s Municipal Light & Power utility to the Chugach Electric Association... The secrecy surrounding the proposed deal is stirring pushback.

A couple of things stand out. During this week’s Town Hall on the issue, Lee Thibert, the chief executive of Chugach, promised efficiency, eschewed any notion of a monopoly being created and assured everybody the sale is only one step in a lengthy public process.  Then he said: “It’s not about selling the utility to get the highest value. It’s about creating one utility.”

Huh? The anticipated sale is one of the, perhaps the, largest single sales in Alaska history and we are not about getting the “highest value?”
ADN - Combining utilities is laudable, but ML&P ballot measure manipulates city charter - Dan Sullivan - Chugach proposes to continue to pay the annual property tax currently paid to the municipality by ML&P and adds that amount to the total sales price. Since the muni is already receiving these funds and would receive them if the sale was to a for-profit company rather than a co-op like Chugach, this provision does not add any value not already received by the municipality...   

This deal was negotiated behind closed doors with minimal public involvement and without the advice and consent of the ML&P Advisory Commission, who learned of the deal the day before it was delivered to the Assembly. Judy Brady, one of Anchorage's finest civic leaders, resigned as chair of the commission over how this backroom deal was handled.

Combining utilities and striving to create efficiencies is a laudable goal. However, this goal should not be achieved at the expense of a truly open and transparent process. I would advise the Assembly to go back to the drawing board, pass an ordinance approving the sale, and begin a true competitive bid process. This way, if a sale is to occur, Anchorage residents will receive the maximum value for our utility, which could be many millions more than currently being offered.
3/7/18 KENI AM 650 - Former Chugach Electric board president Ray Kreig comments 5:22 min - Limited information being released.  Electric utilities good at absorbing most of the cost saving benefits and leaving little for customer rate reductions.  He does not think there will be effective oversight by the RCA or others after the vote. 
3/7/18 ADN - City, Chugach Electric promote Anchorage utility sale while trying to soothe concerns - Devin Kelly - As Anchorage voters prepare to decide whether to OK the sale of city-owned Municipal Light & Power, the proposed buyer, Chugach Electric Association, has launched a $245,000 advertising campaign in hopes of convincing people it's a good idea.  But at public meetings and in editorials, a growing number of voters and community leaders say they're worried about understanding a complicated deal they think is moving too fast. City officials at these meetings are increasingly needing to address murmuring suspicions and complaints the deal hasn't been transparent enough...But the way the deal unfolded has sparked transparency concerns. Earlier this year, Judy Brady, the chair of the ML&P advisory commission, resigned from the commission. She wrote in a Jan. 25 letter to Berkowitz that she was disquieted by the secrecy surrounding documents and meetings up to that point, noting the deal had only been announced a month earlier...

Begich's role in the deal has drawn some chatter. His consulting firm, Northern Compass Group, has advised Chugach Electric Association since early 2015 on a variety of issues, including the acquisition of a Cook Inlet gas field.  Begich said he's advised ways to manage public perception around the Chugach deal, but has not been involved in financial details. He declined to state the amount of his firm's contract with Chugach Electric but said he's paid a flat sum for his involvement.

During the Monday town hall, Uwe Kalenka, a longtime Anchorage political activist and a former vice chairman of the Chugach Electric Association board, approached the microphone. He said he wanted to know why Chugach and the city had not updated and replicated the 2007 study.
3/6/18 Anchorage Daily Planet - A good deal? Who knows? [Editorial] - 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….” concluded: “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.” “These two cases are estimated to create the highest potential for customer rate savings, $168 million and $218 million, respectively.” ... 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.
3/5/18 KTVA Channel 11 - Voters question $1B deal to sell ML&P on April ballot
3/5/18 Chugach Electric - Town Hall at Loussac Assembly Chambers - Video -   Questions:   Uwe Kalenka @ 59:30,  Ray Kreig @ 1:30:40     Anonymous sourced flyer with EXCELLENT QUESTIONS distributed to people entering the building  
3/5/18 Paul Jenkins - We may have to sell ML&P to find out if we are getting a good deal -  Anchorage Daily Planet - The process leading up to a vote on the proposed $1 billion sale of the Municipal Light & Power utility to the Chugach Electric Association gets curiouser and curiouser, setting off alarms among those who get fidgety when government seemingly greases the skids to get what it wants.  Whether such a sale would be good for Anchorage remains to be seen, but there is no reason this city should have more than one electric utility operating within its borders. What is debatable and more than a little sketchy is how the proposed sale is being handled.
3/4?/18 ADN - Letter writer was in favor of the sale but then changed his mind to NO! - David M. Schauer - 
3/1/18 Anchorage Daily Planet - ‘Trust us’ is not enough [Editorial] - There are at least two things that stand out about the proposed $1 billion sale of Anchorage’s Municipal Light & Power utility to the Chugach Electric Association: the secrecy involved in initial talks and reducing the vote required for passage from 60 percent to 50 percent.  It is unsettling that the city and Chugach were in talks for weeks, if not months or longer, while other utilities and interested buyers who signed on late were given no real attention.
3/2/18 ADN - The ML&P sale could be great for Anchorage, but the process should be more open - Paul Jenkins - 
Was city's sale of ML&P to Chugach Electric a good idea? - Tim Bradner - Anchorage Press (Progress Anchorage special section, page 10) - But Mary Ann Pease, an Anchorage- based business consultant and former ML&P finance director who attended the Dec. 21 roll-out of the deal, is not happy about the deal. She is displeased over the way it was done and that it is being rushed to Anchorage voters for approval without an independent analysis. "We can all commend the vision for bringing together the two utilities, an objective that has been looked at for decades, but it is the process I am questioning," Pease said in an interview. The acquisition is being touted as a consolidation but that is inaccurate she said. "This is a sole-source acquisition of ML&P by Chugach Electric," she said. As such the process should have been more open and transparent. "Why not offer a competitive bidding process for the sale of the municipality's greatest asset?" Done properly a consolidation would have wide benefits, "but I heard nothing (Dec. 21) to convince me that we have done anything properly, transparent or in the best interest of ML&P or residents of the community," Pease said.
2/27/18 Anchorage Daily Planet - GVEA interested in ML&P-Chugach deal
2/21/18 KTVA Channel 11 - Berkowitz defends ML&P bid process
ADN - 5 other companies expressed interest in buying Anchorage power company - Devin Kelly - The letters from other potential buyers were obtained through a public records request and shed new light on the terms and pace of the deal and the perceived value of the utility...The president of CIRI Energy LLC, Ethan Schutt, also said in an interview that his group thought the letter was the first of a two-step process. He said materials provided to the prospective buyers indicated that the city would ask the Assembly to approve a sale to the highest bidder, not specifically Chugach...Read the letters from the other companies:  
Golden Valley Electric Association; Avista Corp.; CIRI Energy; Ares EIF Management; Matanuska Electric Association. 
2/19/18 KTUU Channel 2 - Former Chair of ML&P Commission steps down over transparency concerns - The Chair of the ML&P Commission says a lack of transparency led to her resignation. Judy Brady says she stepped down in January because the Anchorage public is not being given all the information it needs to make an educated vote on a $1 billion acquisition deal between Chugach Electric and Municipal Light & Power...I had several assembly people say, 'Well if you knew what I knew, you'd be comfortable.' Well, I don't know what they know, and neither does anyone else," said Brady.  
2/18/18 ADN - Why the ML&P sale makes sense - Tom McGrath - ML&P has consumed a lot of government time that could have been spent on other issues. We have bought the Beluga Gas Fields, a portion in the 1990s and a portion recently. The first purchase took many meetings before the Anchorage Assembly to convince them that it was a good idea. The second purchase was easier because of the success of the first. Then there was the issue of ML&P, during a previous administration, trying to move its headquarters to the Glenn Square Mall. And finally there was the issue of building the new power plant on the Glenn Highway. This is/was the straw that broke the camel's back and the need to finally divest ourselves of this utility. It is my opinion that we did not need this power plant, but built it because Chugach Electric had built a new plant. A portion of the new plant Chugach built is even owned by ML&P but because they built one, we had to build one. This $300 million-plus plant has caused rates to rise. Also because we are now overextended, the Regulatory Commission of Alaska will not allow ML&P to pay municipal utility service assessment payments, to Anchorage. This puts a burden on Anchorage taxpayers. ...

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.

Anchorage Daily Planet - ML&P Commission chief resigns, cites concerns about utility sale - Judith Brady, longtime head of the city’s Municipal Light & Power Commission, has resigned, citing concerns about how officials are handling the run-up to the April election to decide whether Anchorage will negotiate a proposed $1 billion sale of the city’s electric utility to Chugach Electric.

In her Jan. 25 letter to Anchorage Mayor Ethan Berkowitz, Brady said she supports the decision to “review” the sale, but, “As you are also aware, I am also troubled by the process.

“Two nights ago the Anchorage Assembly voted to put the question on the April ballot. This vote includes a change to the Municipal Charter to lower the required public vote from 60 percent to 50 percent. This vote was taken after a series of executive sessions by the Assembly, in which the details of such a sale were discussed and decided. These discussions and information on which they were based remain confidential.

“This is the first time in a Alaska’s history a transaction of this size has been put on the ballot based on confidential information and after only one public hearing

“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 in which only cites their benefits.”

2/13/18 Must Read Alaska - Shadow mayor Begich behind ML&P sale to Chugach Electric? - Suzanne Downing - How did Mark Begich, representing Chugach Electric, and Mayor Ethan Berkowitz put this sale together behind closed doors? Does the IBEW stand to benefit? ...for the next 30 years, former ML&P customers would payments in lieu of taxes totaling $142 million, even though an electrical cooperative doesn’t have to pay property taxes.  Mark Begich has a contract with Chugach to ensure the sale goes smoothly, and he’s been back and forth from Chugach to his old haunt at City Hall for months, helping put the finishing touches on the deal with Mayor Berkowitz.  How much Begich and his Northern Compass Group is being paid by Chugach ratepayers and the IBEW to grease the skids is unknown; presumably he will get a handsome cut....The IBEW, already influential in politics in Alaska, has an interest in the deal going through. Chugach Electric is a cooperative whose board is highly influenced by union politics.
ADN - We need to know a lot more about ML&P sale before voting on it - Paul Jenkins - On the surface, the announced deal looks like a good one for the city, but there are a boxcar of questions and not much transparency by the city or Chugach. The whozits and whazits largely remain secret, unexamined by the public or any outside entity...Let's face it, a 23-page analysis of a billion-dollar deal seems less than adequate.
1/27/18 ML&P’s $1 billion price tag: Confidential report sheds light on deal - Anchorage Daily News - Devin Kelly - A detailed 23-page financial analysis by Goldman Sachs, sheds new light on the city's decision to sell ML&P to the member-owned Anchorage cooperative Chugach Electric — and the $1 billion purchase price. In one analysis, the report valued ML&P between $707 million and roughly $1 billion, putting the offer from Chugach Electric at the upper limit of what the company is worth.
Judith Brady - ML&P Commission Chair Resignation Letter - 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 negotiation would continue to be in executive session. I am also concerned the only information available to the public will be from a Chugach PowerPoint in which only cites their benefits....If the public votes to sell ML&P to Chugach, I hope the Municipality and Assembly will consider establishing an advisory group that investigates the challenges and benefits of the sale and debates these pros and cons at public Assembly sessions. This advisor group should include both ML&P and Chugach employees as well as business interests.
NERA Economic Consulting - Proposed Sale by the Municipality of Anchorage of Municipal Light & Power to Chugach Electric Association - Executive Summary - 
1/23/18 Anchorage Assembly Ordinance No. 2018-1(S) - Approved by a 10-1 vote on Jan. 23, 2018, this ordinance places a proposition on the 2018 municipal ballot asking voters to authorize the sale of ML&P.
1/3/18 ADN - How an expensive mistake created an opening to merge Anchorage utilities - Charles Wohlforth - The mistake that will bring down Municipal Light & Power grew from the illogic of its separate existence in the first place. Now voters will have a chance in April to end the company.  If one utility had served the Anchorage bowl, it would not have built the new power plant ML&P constructed near Muldoon Road and the Glenn Highway. The cost of Plant 2A helped balloon the company's rates, leading to a revolt among business leaders and now the sale of the utility...ML&P's electrical peak demand has steadily declined. It's down more than 9 percent over a decade.
12/31/17 Consolidated power - Anchorage mayor proposes sale of ML&P to Chugach Electric Association - Alan Bailey - Petroleum News - 
12/21/17 ADN - Anchorage mayor proposes to sell ML&P to Chugach Electric in $1 billion deal - Lisa Demer - The proposal was announced Thursday morning jointly with power company executives and will require a series of steps, including voter approval, to take effect...By consolidating services and staff with Municipal Light & Power, Chugach Electric would save hundreds of millions of dollars over a number of years and rates would eventually go down, said Lee Thibert, Chugach CEO.
8/9/17 Goldman Sachs - Independent Valuation Report of ML&P (Aug. 9, 2017) - MOA contracted with a third-party to obtain a valuation of ML&P, resulting in a 23-page report.
6/13/17 Anchorage Assembly Resolution No. 2017-235 - Urges the city, ML&P, and Chugach Electric to begin “substantive steps to explore merger opportunities.”
4/13/17 Anchorage Economic Development Corporation – Electric Utilities Working Group Press Release (April 13, 2017) - Business leaders recommend the city explore merging utilities to address rising electric rates for local businesses.
4/5/17 Anchorage utility consolidation pondered - Alaska Journal of Commerce - Elwood Brehmer - “If the two Anchorage utilities combine they would be the size of a very small utility in the Lower 48,” Strunk described. “The scale of diseconomies when you’re operating very small utilities is huge.”...In 2015, the RCA issued a blunt letter warning to Alaska’s six Railbelt utilities that the commission would seek the authority to impose collaboration amongst the utilities if they did not voluntarily start to work better together. The commissioners characterized the Railbelt utility scene as “fragmented and balkanized.”

Somewhat before, but more drastically since the RCA scolding, Railbelt utility leaders have been investigating ways to pool resources for expensive improvements to the region’s aging and overloaded transmission lines and other infrastructure.  Industry experts have said the Railbelt utilities from Fairbanks to Homer have about as many customers as an average Lower 48 utility, albeit over a comparatively vast geographical region.
3/22/17 ADN - Spike in ML&P electricity bills draws complaints - Alex DeMarban - Some Anchorage utility customers have been expressing shock after getting their latest electric bill from city-owned Municipal Light and Power, with average customers seeing a 19 percent spike as the utility seeks to pay off a new plant in East Anchorage.  "I said, 'Oh my God,' " said Nancy Harbour, president of the Alaska Center for the Performing Arts, upon seeing the center's recent power bill. "This increase is a killer for us."...

Bob Maier, a property manager in Anchorage who has protested the proposed rate increase before the RCA, said the utility should not have partnered with Chugach Electric Association in the new Southcentral Power Project near International Airport Road in Anchorage, commissioned in 2013.  He believes ML&P and its owner, the municipality, should be responsible for repaying the Plant 2A costs.  "They didn't need two plants, they just needed one," he said Tuesday.
7/1/16 ADN - Railbelt utilities' rivalries are wasting millions of dollars - Charles Wohlforth - 
Alaska's Southcentral power utilities built at least one power plant over the past few years that we don't need, and maybe more. But there is a solution to make the best of it and prevent similar mistakes.  Electric loads in Anchorage have dropped for several years and will probably continue to drop. A flurry of power plant construction that is nearly completed was based on projections that electric use would rise. And something else contributed to the overbuilding: Everyone wants their very own power plant.

Six electric utilities serve Alaska's Railbelt from the Kenai Peninsula to Fairbanks. Combined, they would add up to a small utility in the Lower 48. The system developed that way when our communities were truly rural. Repeated efforts to unify the companies have failed...

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.")

Summer 2016  
5/1/15 MEA Eklutna Generation Station first day of operation - 
8/20/14 Alaska Business - ML&P’s New Plant Under Construction - Efficient energy for Anchorage’s oldest neighborhoods - Russ Slaten - Five years ago, Municipal Light and Power (ML&P) began the process of considering, evaluating, and deciding whether or not they should build a new power plant...About two years from now, on June 16, 2016 at exactly 12:01 a.m., ML&P General Manager Jim Trent says the utility will fire up the engines and commission the George M. Sullivan Plant 2A expansion project into service.
4/23/14 Groundbreaking for George M. Sullivan Plant 2A expansion project—a highly efficient, 120MW, combined-cycle thermal generation plant
1/1/14 HEA Nikiski Combined Cycle Plant begins operation 
1/31/13 Chugach Electric and ML&P - Southcentral Power Project, begins commercial operations 
Phase 1 -- Draft Report on Cost Savings from Alternative Combination of Municipal Light & Power and Chugach Electric Association by Navigant Consulting.  Peculiar and Inconvenient (?) Finding:  Rates will be $213 million higher if Chugach absorbs ML&P than the other way around!  Alternatives Comparison

= KEY DOCUMENT (Most Important)

Please send comments or questions to Chugach Consumers