MEA doesn’t need to wait on Chugach

I have heard from several critics that Matanuska Electric Association should base our future on cooperating with Chugach Electric Association for providing new generation. I understand why this might seem like good advice to some; however, I do not agree. MEA needs to move forward independently without hitching our star to Chugach.

Consider these facts:

• New generation: On March 9, 2007, MEA proposed to Chugach that we could accelerate construction of the gas-powered generation plant needed in MEA’s service area. The new plant would then be operated for the benefit of both utilities until Dec. 31, 2014, when MEA’s wholesale contract with Chugach expires. This would have allowed Chugach to delay construction of a similarly sized plant required, in part, to serve MEA’s load. On March 27, 2007, Chugach rejected our offer and proposed instead that MEA participate in a power project with it. We declined, as another Anchorage power plant would not satisfy MEA’s need for local generation.

• Union: Chugach has a very poor relationship with its employee union. MEA wants no part of Chugach’s rapidly escalating battle with the IBEW. In the July 2007 Alaska Journal of Commerce (AJC), on the subject of conflict with the IBEW, Elizabeth Vazquez, Chugach’s board chairman, said the constant churning of Chugach’s board is a worry for wholesale customers. Vazquez is correct.

• Debt: Chugach has $270 million in principal payments on debt coming due between now and 2012, but nothing put aside to pay this debt. In that same July 2007 AJC article, Vazquez, was quoted asking, “Our question, as board members, is why reserves were not set aside to deal with this?” Chairman Vazquez was correct to question this. The situation is the result of Chugach having financed these sums with interest-only payment terms, then spending money collected through our rates for repayment of the principal on other things. By Jan. 1, 2015, MEA will have paid its fair share of this debt once, and we want no part of a partnership that would require us to bear any responsibility for paying this debt twice.

• Cooperative principles: Chugach is apparently in the throes of trying to reinvent itself. You can read about this in its “Blue Ribbon Panel Report” (BRPR) online. The BRPR asserts that the co-op model is broken. MEA respectfully disagrees with Chugach’s consultants. On another front, the Municipality of Anchorage and Chugach recently announced their intention to pursue the formation of a joint contracted operations organization. This organization would be an entity at least one step removed from the direct oversight of the Chugach membership, including MEA. The fact is, no one can say with certainty what kind of an organization Chugach will be a year from today.

• Rates and grants: Currently, Chugach is before the Regulatory Commission of Alaska in a costly and aggressive attempt to require MEA members to pay about $300,000 more per month on our wholesale power bill. We are vigorously opposed to this latest rate increase. In addition, for reasons of his own, Chugach’s vice chairman lobbied the administration in Juneau last session to have the Legislature’s 2007 electric utility appropriations vetoed. They were subsequently vetoed and MEA lost $26.5 million in funding for much-needed projects. MEA members will eventually be required to pay higher rates to pay for these projects.

And still some argue we should wait and follow Chugach’s lead. MEA does not need to depend upon Chugach for its future. My counsel to MEA members is that MEA should proceed with caution in any new long-term relationship with Chugach.