|
Deal nearing completion
Chugach Electric now expects its purchase of ML&P to close on Oct. 30 Alan Bailey for Petroleum News
On Aug.24 the Municipality of Anchorage and Chugach Electric Association announced that they anticipate closing the purchase of electric utility Municipal Light & Power by Chugach Electric on Oct. 30. The purchase will consolidate the two Anchorage based utilities into a single entity, with the objective of achieving improved operational efficiencies and economies of scale. ML&P is currently owned by the municipality. Both utilities are based in Anchorage.
Following closure of the purchase, existing ML&P customers will begin receiving electric services from Chugach Electric.
Lengthy process The process of negotiating the purchase deal and obtaining regulatory approval for the utility consolidation has proven lengthy and complex - the municipality originally proposed the sale of ML&P to Chugach Electric in December 2017.
“This is a time to reflect on the journey we’ve been on and to express appreciation and gratitude to those who made it possible. I want to thank the ML&P employees who’ve gone above and beyond to provide service with competitive, safe and reliable energy,” said Anchorage Mayor Ethan Berkowitz in an Aug. 24 release announcing the anticipated closure date. “Thank you to the teams that worked incredibly hard for such a long period of time to sew up the details of this complex deal.”
“After more than two years of working on this important transaction, we are very pleased to see the end is in sight,” said Chugach Electric CEO Lee Thibert. “At a time when many are facing financial challenges brought by the COVID-19 pandemic, having one Anchorage electric utility will help bring lower long-term energy costs for our community.”
The deal, with a total cost to Chugach Electric of around $972 million, contains four major components: an upfront payment to close the purchase; payments in lieu of tax to the Municipality of Anchorage over a period of 50 years, as compensation to the municipality for the loss of tax revenue from ML&P as a municipality-owned entity; a commitment to purchase electricity from the Eklutna hydroelectric power facility for 35 years; and an agreement to reserve for ratepayers in ML&P’s service area benefits associated with ML&P’s part ownership of the Beluga River gas field in Cook Inlet.
Conditional approval in May In May of this year the Regulatory Commission of Alaska approved the purchase, provided that certain conditions would be met. As one of these conditions, the commission required the removal from the deal of a commitment to make no immediate change to customers’ electricity rates as a consequence of the purchase. And the commission mandated three new conditions: the use of a single cost adjustment for all ratepayers for power generated from gas from the Beluga gas field; the implementation of a single rate structure for all ratepayers in the consolidated utility; and a requirement that, prior to closure of the deal, Chugach Electric and Matanuska Electric Association must form an agreement for the implementation of security constrained merit order economic dispatch across their service areas.
The mandate for economic dispatch then triggered several RCA filings. On July 16 Chugach Electric filed a tariff advice specifying an economic dispatch agreement with MEA. However, on July 31 the commission rejected the terms of the agreement, saying that three components of the agreement were inconsistent with the requirements that the commission had specified in its May order. The three components related to the timeframe for the agreement, the need for a balancing authority for oversight of the load balancing area, and commission concerns about the utilities’ potential ability to terminate the agreement without necessarily obtaining commission approval.
Finalizing the purchase On Aug. 7 Chugach Electric filed an amended pooling agreement that it said met the commission’s requirements. And, in an Aug. 20 order, the commission accepted the revised agreement. The commission requires MEA to file a matching tariff advice by Aug. 28, as a consequence of which the purchase of ML&P can presumably proceed.
In an Aug. 24 letter to the commission Thibert confirmed that the purchase transaction is moving forward, with a target closing date of Oct. 30. To accomplish this, Chugach Electric anticipates making several RCA filings relating to the Beluga River gas field and the pricing of gas from the field, Thibert wrote.
| 