Bob Maier: Chugach Electric, now owning ML&P, is in trouble with revenue shortfall - Must Read Alaska
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Saturday, December 4, 2021
HomeThe 907Bob Maier: Chugach Electric, now owning ML&P, is in trouble with revenue shortfall

Bob Maier: Chugach Electric, now owning ML&P, is in trouble with revenue shortfall

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By BOB MAIER

That did not take long: 253 days after closing the sale for the purchase of Municipal Light and Power by Chugach Electric Association, Chugach has filed with the Regulatory Commission of Alaska for a … well … I am just not sure what they have filed for.

In Chugach’s July 1, 2021 submittal with the RCA – (Docket U-21-059) – Chugach requested to reopen the stipulated purchase and sales agreement with ML&P.  

Chugach’s reason was not for a rate increase but for assistance to help them address a deficiency in their ‘margin performance’. 

The only two reasons given were “(1) an economic downturn in the local economy caused, in part, by the Covid 19 pandemic and (2) customer efforts to manage energy usage more efficiently” with ‘the primary impact being seen in the North District (former ML&P service area territory)’.

During the pandemic those darn old ML&P ratepayers have not been using their toasters and washing machines as much as the ratepayers in Chugach Electric’s South District, which is the historic Chugach territory.  

On July 30, the RCA denied Chugach Electric’s request to reopen the ML&P purchase and sales agreement and instead opened a separate Docket – (U-21-059) – to address Chugach’s projected 2021 margin shortfall.

Anchorage Ordinance 2018-1(S) placed Proposition 10 on the April 3, 2018 Municipal ballot, which presented the sale of ML&P to voters.  Prop 10 passed by a 65% to 35% margin. 

Included in the Prop 10 Ballot language was the provision “No Increase in Base Rates.  Base rates for existing ML&P and Chugach Electric ratepayers would not increase as a result of the transaction.” 

So let us take a look at a few excerpts from the final 152-page RCA decision concerning the sale of ML&P to Chugach Electric dated May 28, 2020 which is attached. (Dockets U-19-020, U-19-021 and U-18-102).

Page 2 – “The transaction as conceived by ML&P and Chugach was not straightforward.”

Page 10 – “Chugach will have only 13% equity after closing the transaction”

Page 41 – “One basic premise of the transaction is that base rates for ML&P and Chugach ratepayers will not increase as a direct result of Chugach’s acquisition of most ML&P assets.  For the reasons discussed below we cannot, and do not, accept that premise as limiting our rate setting authority or obligations under law.” 

Page 44 – “We note that this transaction was approved by the MOA Assembly and voters based in part on a public representation by Chugach that base rates for ML&P and Chugach ratepayers would not increase as a result of Chugach’s acquisition of most ML&P assets.  That public representation is not expressly included in any of the documents that we have been asked to approve …”

Page 48 – “We inform Chugach, the MOA, and ML&P, that closing this transaction under the terms and conditions we require in this order is an express waiver of any claims for remedies under the language of Ballot Measure 10 or any municipal ordinances if Chugach’s base rates are increased by us as a result of the costs incurred buy Chugach to acquire most of ML&P’s assets.” 

Page 106 – “To be clear, we declare under our authority in AS 42.05.141(a)(3) that any covenant by Chugach to comply with the rate provisions of Ordinance No. 2018-1(S) or Proposition 10 quoted above is an unreasonable practice that is void and unenforceable.”

What we see here is the RCA deeming itself a higher authority over ballot language and a vote of the people. 

With their hands tied by State statute, the RCA should have sent the sale of ML&P back to Chugach, the Municipality and the Anchorage Assembly with instructions to fix the ballot language and hold another vote of the people.  For reasons only the commissioners know they decided to approve the sale instead.

Clearly many were aware that due to Chugach’s fiscal situation, Chugach would inevitably need rate increases in order to purchase ML&P.  By utilizing Covid as an excuse is Chugach utilizing the adage ‘never let a crisis go to waste’?    

Which all brings us back to Chugach’s July 1 filing, where it claimed Covid and energy efficiencies are responsible for their ‘margin performance’.  Clearly this is not the whole story.  

Is Chugach Electric being honest with all of us? Are they not aware of their 13% equity rating since closing on the sale of ML&P as documented by the RCA?  Again, this was discussed numerous times during the 14-month process which, by the way, was pre-Covid.

Where does this leave the Chugach Electric ratepayers?  As members of a ‘membership owned cooperative,’ perhaps everyone should ask a few questions. A good place to start would be for the member owners to ask both Chugach and the RCA, in the spirit of fiscal transparency, for the release of an itemized listing of all vendors and costs incurred by Chugach concerning the purchase of ML&P.  This should include a copy of former Anchorage Mayor Mark Begich’s contract concerning the sale of ML&P to Chugach Electric. He was the one who brokered the deal, after all.

Since the start in 2017 of this advertised $1,000,000,000.00 sale of ML&P, the truth about this whole mess is beginning to emerge.  I encourage all to review the attached 152-page RCA decision allowing the sale of ML&P to Chugach Electric for further perspective on Chugach’s current request.

The Regulatory Commission’s Mission Statement mandates that they are to assure viable utility and pipeline service is provided at just and reasonable rates to consumers in Alaska.  For the RCA to have approved the sale of ML&P to an entity that will result in a 13% equity rating is neither just or reasonable.  

We should be asking if the RCA is assuring just and reasonable rates because of their actions and decisions in Dockets U-19-020, U-19-021 and U-18-102. 

These Dockets, dealing with the sale of ML&P, were decided by a three Commissioner seating rather than the full body.  Why the decision to approve the sale was made, only those three know.  Chugach’s current request is being held before all five currently seated Commissioners.  

With the final RCA decision on this due no later than July 29, 2022 this will certainly be an interesting Docket to follow.

Bob Maier is an Anchorage utility ratepayer.

Read: April fools joke is on the ratepayers

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Latest comments

  • If the sale of ML&P to Chugach Electric was approved by the current municipal assembly, then that is all I need to know about it to know that it was a bad deal.

  • Tesla.

  • Use less, pay more.
    CLOWN ELECTRIC

  • It is time for Zero Point energy.

    The old system needs to crumble.

  • I have a question for you Bob: What do you mean by 13% equity? Does that mean they are only realizing a 13% profit “margin” on their $1B purchase? That’s a pretty healthy profit for most industries. Or does this have to do with creditors holding the other 87% as collateral for loans they made to Chugach? – in which case, Chugach is barely making payroll and really does need more “margin” to remain in business. Please clarify.

  • Higher monthly bills incoming………

  • “During the pandemic those darn old ML&P ratepayers have not been using their toasters and washing machines as much as the ratepayers in Chugach Electric’s South District, which is the historic Chugach territory.”

    Because we former ML&P customers don’t have the Big Bucks that the “South Siders” have…..

  • Really…did you not see this coming. I was absolutely shocked the voters passed this sale, when was the last time you could trust any government entity. I say y’all got a snow job. I was hoping for Anchorage that the sale wouldn’t be finalized until Berky left, there needs to be an audit where the initial money was spent.

  • This debacle was predictable and here is why:

    ML&P rates were set based on usage. When the usage went down during the pandemic (restaurants, etc. were closed) revenue went down. Totally predictable! Questions to ask the Chugach Board and management: How the heck did you not see this coming? How did you purchase something with obvious declining revenue (for many months of the pandemic) and then act surprised that you need relief because the revenue is not there?

  • So follow the money. Who made out on this deal?

    • Wait a minute, who got the one billion?

    • Mark Begich’s Nothern Compass Group brokered this deal and is believed to have booked a $5 million commission.

  • Where is Freddy Dodge when you need him?

  • Obviously, we need more wind mills and surely the rates would fall?
    Or, maybe Arctic solar panels, capturing energy from the Northern Lights?
    Maybe(?), with the Green New Deal, Daddy’s Little Princess can secure obscene amounts of Federal Funds for new experimental technology, converting carbon emitting political hot-wind into useful KW’s (ie: political correct, gender neutral, diverse and anti-racist compliant kilowatts).
    Whatever decisions and.or direction, I’m certain we can all count on much lower utility bill as the organization will no doubt provide exceptional and world class service at a significantly low cost!

  • As a previous ML&P employee, now CEA employee, we knew years ago when this was proposed that it was never a going to be beneficial situation for the public or the ML&P employees. CEA was scrapping by as is. The reason they sustain is that they are a non profit coop and in a no competitive market. What else is out there? It’s a small market here in AK and no one drives the economy but the bigger employer, not efficient one. Ultimately, combining the two utilities within the same area, provides a larger entity, investor owned – shareholder driven corporation, the ability to purchase just as one utility, and not have to work through two different purchase agreements if there were separate utilities. I believe this was conceived from the start, not 100% sure, but it just seemed that way.

    • ML&P was the only consistent cash cow the MOA ever owned. The MOA raided the cash coffers of ML&P over and over again. When the leftist Marxist morons on the assembly sold it, they sold their golden goose.
      And now CEA goes back to the RCA for financial relief because their BS deal isn’t panning out. DUH!! A fourth grader looking at this deal could have told you that.
      Now you pay and pay you will. Quit whining!! If you don’t like it, go back to the ones who approved this crap deal and VOTE THEM OUT!!9

      • I am man enough to layer up.

  • Let’s assume stunning, unprecedented, horrific, unconstitutional, and civil disobedience okay… next!

  • My suggestion is we use Begich with his multiple post graduate degrees and powers of persuasion to renogiate all Chugach’s labor contracts. His contract should be contingency based. The wages, benefits and retirement plans are ridiculously high and the work rules are a rubik cube. Begich owes the ratepayers as he was the prime mover behind this I’ll conceived merger. Come on man, step up!

  • But he knew that something was definitely being triggered

  • Somewhere in these documents, must be a timeline when rates can and will go up for electricity. It sure protected the workers for both entities that not one worker would lose their job due to being duplicative and redundant after the merger of ML&P with Chugach.

    * Chugach agreed that rates would not be raised as a result of this sale
    * Chugach agreed there would be no layoffs as a result of this sale

    “We believe this is good news for all of Anchorage. Rates will not go up, jobs are secure, and hundreds of millions of dollars will be saved in the coming years,” said Chugach CEO Lee Thibert.

    “With one Anchorage electric utility, it strengthens our position to address the underlying structural changes in our industry brought on by new technologies and distributed generation. Additionally, we reduce duplication on many fronts, take advantage of efficiencies, and all ratepayers become part of the Chugach member-owned cooperative.”

    The sale of ML&P would allow the Municipality of Anchorage to pay off approximately $525 million in debt, invest additional money into the MOA trust fund, and preserve existing utility contributions under the tax cap.

    per MUNI press release: “https://www.muni.org/Departments/Mayor/PressReleases/Pages/MayorasksvoterstoauthorizesaleofMunicipalLightPoweronApril2018Ballot.aspx”

    • “Member owned?” Chugach Electric, like ML&P, is the IBEW’s chattel property; the rest of us just pay their wages.

  • Then there were the pick-up-the-garbage-bag-next-to-the-container rate hikes … where were our… politicians?

  • The reason the ML&P ratepayers are using less power, is the service area represents downtown, a mostly commercial area that has almost closed downt during the pandemic. We all went home to work, office buildings, the mall, the railroad, the port… Downtown is statting to open up, but still limited hours (like the mall diesnt even ooen till 11)…
    We are using less energy.
    … maybe CEA should have applied for some of that commie PPP money to keep the lights on
    Or the RCA shouldve done what we MLP employees proposed, DONT SELL ML&P
    Reap what you sow CEA

    • What a catch 22.

      Using less energy “saves the planet”.
      Oh no, we used so little energy, now we need to save their company.

      What a damn joke.

  • Maybe this is why Chugach CEO Lee Thibert is “retiring”

  • Anyone else notice who the Chugach Public Relations manager is?

    None other than Begich’s former right-hand woman Julie Hasquet. Was her job-for-life part of the Begich consulting deal?

  • Clearly this was a tax through eletrical rates. The Democrats lie. Democrsts are lawless liars and hypocrits. The city needs to rebate Chugach as much as they need to keep rates steady or this is fraud based on lies.

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