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Vol. 13, No. 29 Week of July 20, 2008
Providing coverage of Alaska and northern Canada's oil and gas industry

Begich proposes new utility structure

Plan would rearrange Chugach, ML&P operations, create new power authority, prompt construction of natural gas-fired power plant

Eric Lidji

Petroleum News

Anchorage Mayor Mark Begich and the leaders of two area electric utilities unveiled a plan on July 11 to restructure the way power is created and delivered to the residents, businesses and industries of the largest city in Alaska.

Rather than pursue a merger of the electric cooperative Chugach Electric Association and city-owned Municipal Light and Power, as had been proposed last year, the new plan would instead rearrange the responsibilities of the two utilities to take advantage of tax-exempt financing and economies of scale that Begich said should save ratepayers money.

Both companies currently provide identical services to different parts of the city.

Under the proposed plan presented to members of the Anchorage Assembly during a work session, ML&P would take over ownership and operations of all generation and transmission for the area, while Chugach would become solely a distribution cooperative.

The plan would also create an Anchorage Power Authority with a seven-member board to manage ML&P. Begich said that structure, modeled after one created to run the city-owned Anchorage Water and Wastewater Utility, would give ML&P more independence.

Finally, the plan calls for building a new, jointly owned, natural gas-fired power plant next to the Chugach headquarters to replace aging infrastructure.

Bypass traditional merger

The proposal builds on, but does not directly follow, a Navigant Consulting report commissioned by the two utilities last year. That report followed years of discussions on whether merging the two utilities would best serve a city the size of Anchorage.

“Essentially, as part of the discussion of how to streamline things, both Chugach and ML&P concluded that one of the ways to do it was not the merger concepts discussed in Navigant, not one entity taking over the other,” said Fred Boness, a city consultant, “but rather, realigning the two utilities, restructuring the two utilities in a way that would take the greatest benefit with respect to operations.”

Begich and the two utilities will use the rest of the year to present proposed ordinances to the Anchorage Assembly and hold public hearings on the various pieces of the plan.

The news was treated cautiously by the Matanuska Electric Association, the member-owned cooperative that buys most of its power from Chugach, but is currently proposing to build a new natural gas-fired power plant of its own.

“It definitely looks very interesting. We’re interested in learning more about it,” said spokeswoman Lorali Carter.

Carter said MEA has proposed a generation and transmission cooperative for regional electric utilities for decades, but also needs to take care of its own needs.

“We have to continue moving forward with our own plans, but that doesn’t preclude us from working with other utilities,” she said.

Begich said the proposal would not prevent Chugach or ML&P from taking part in any of the regional electricity plans currently in the works, like the on-going work of the Alaska Railbelt Energy Grid Authority.

“The goal of this is to always leave those doors open,” Begich said.

Although the plan grew out of discussions and meetings held over the past year by a special committee, Assemblyman Chris Birch felt the final announcement came as a surprise and lacked “competition.”

“This has been pulled together in secret and I have a real, fundamental problem with springing this on the Assembly at this late state in the game. ... I’m going to be looking at this with a very critical eye,” Birch said.

Begich disagreed, saying the committee was charged with analyzing topics “around” the issue of energy and that the proposal is the result of that analysis.



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