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Energy

Major Anchorage businesses the latest to encourage power utilities to merge

  • Author: Annie Zak
  • Updated: April 13, 2017
  • Published April 12, 2017

Leaders in the Anchorage business community on Wednesday encouraged the heads of the city's electric utilities to examine a possible merger in the interest of keeping rates affordable.

In a letter to the Chugach Electric Association and Municipal Light & Power, Anchorage Economic Development Corp. President Bill Popp said the utilities and stakeholders should have "substantive discussions" about such a merger.

He also wrote that the two should make "every effort" to improve their work together "on developing new power generation, power pooling and shared fuel supply management."

The suggestions are the product of a working group, convened by AEDC, of 10 companies and organizations that have "significant property investments in both ML&P and CEA service areas," AEDC said in a news release. Those include the Alaska Railroad Corp., GCI, JL Properties, Alaska Regional Hospital and others.

The idea of combining the two utilities, which serve different areas of Anchorage, has come up before.

For this most recent effort, Popp said conversations with leaders in the business community about rising electric utility rates started last year "when the first signals were sent that there were going to be some fairly substantial rate increases proposed from ML&P."

Last month, Alaska Dispatch News reported some ML&P customers were experiencing sticker shock at 19 percent rate spikes.

At this point, there is no merger on the horizon.

"We're happy to look at it," said Julie Hasquet, a spokesperson for Chugach Electric. "It's not a brand new topic. … Perhaps because of the fiscal challenges the state is facing right now, everybody including the business community, is looking to save money."

Mark Johnston, general manager at ML&P, said more future savings will come from a power-pooling agreement his utility recently completed with Chugach and Matanuska Electric Association, than would come from a merger. The details of that power-pooling agreement are still being worked out.

"That is where a lot of the savings you're going to get, whether you merge the utilities or not," he said. 

Popp said the working group was "very careful not to say what we think the outcome should be."

"What we felt we wanted was the ability to say, there needs to be a higher level of conversation," he said.

In the letter sent Wednesday, AEDC said the model of two electric utilities serving Anchorage resulted in "inherent inefficiencies," including separate grids, warehouses and headquarters, among other things.

Johnston said those aren't so easy to combine.

"Unless you build a bigger warehouse, you can't get rid of a warehouse. Neither of our headquarters buildings is big enough to take everybody," he said. Compared to savings from increasing fuel efficiency, "overhead is such a small percentage."

"We will have to find out where we go from here," he said when asked what the next step will be in talking about a merger.

The city previously brought up the idea of combining the utilities in 2007. Former Democratic U.S. Sen. Mark Begich was then mayor of Anchorage, and he said the discussion just fizzled out.

"Everyone agreed it made a lot of sense, but no one could figure out what the right entity or what the next step even was," he said. "Things like who would run it, what the company would look like at the end of the day. There were just more questions than answers."

He also said the alignment of stakeholders willing to work together on looking into this today "is much further along than back then."

ML&P and Chugach do not compete for the same customers because they both serve distinct, different areas of Anchorage.

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