One year done: A look back at the Chugach acquisition of Municipal Light & Power
It’s hard to believe that it has been one year since the acquisition of Municipal Light & Power, or ML&P, by Chugach became final. On Oct. 30, 2020, the papers were officially signed, closing on an idea that had been discussed in Anchorage for decades.
Combining the infrastructure and workforces of two established and well-run electric utilities in Alaska’s largest city is no small feat. It took nearly two years of planning and preparation to get to what we internally called “Day 1” the first day we became a combined utility. We are proud to say the integration occurred with minimal impact on the community and the members we serve. Overnight, we went from serving roughly 69,000 members to serving nearly 93,000 members. All of this occurred, in the middle of the COVID-19 pandemic, without an interruption in electric service.
When we joined the Municipality of Anchorage in the spring of 2018 asking voters to approve the sale of ML&P to Chugach, we made commitments. Among those were that rates would not go up as a result of the transaction; significant savings would be achieved by combining many functions; and it would be good for the community as sale proceeds would pay down municipal debt and help pay for city services.
While the integration continues, rates and costs are lower than they otherwise would have been without the acquisition. We are already seeing savings and know they will continue to materialize over the next several years as integration efforts are completed. We will have the final numbers on our first year in the first quarter of 2022, but we do know this:
In January 2021, Chugach’s electric rates decreased for all customer classes.
Payments of $712 million have gone to the MOA in the first year; of the sale proceeds, $229 million went into the Municipal Trust Fund, eligible to pay for city services.
Savings of about $21 million have been realized from fuel, labor, and the elimination of inter-governmental charges. We are saving roughly $1 million a month in fuel alone.
What we didn’t know when the ML&P acquisition was being finalized for regulatory approval, was that 2020 would bring a worldwide pandemic. Anchorage joined cities across the globe in closing businesses which caused an unprecedented economic downturn.
For several months we did not collect delinquent accounts while the local and state emergency orders were in place, and we are working with members allowing them to catch up with their billing. To date, we have applied roughly $3.2 million from the federal CARES Act, Alaska Housing Finance Corp. assistance, and the state’s heating assistance program to eligible member accounts.
Besides our members, the utility itself is also feeling the impacts of the pandemic. Demand for power from commercial members is down about 8% compared to pre-pandemic times. That decline, coupled with inflation, labor costs, and energy efficiency measures by members has hit the bottom line. In response, we are managing costs and have asked the Regulatory Commission of Alaska to allow us to modify one of the agreements accepted when we bought ML&P by getting a reprieve on the treatment of expenses while we allow revenues to recover. As a member-owned, not-for-profit cooperative, we recognize the economic hardship many of our members are facing during the pandemic, and we don’t want to add to that hardship by asking for a rate increase.
In the meantime, as we continue to navigate the pandemic and other challenges together, we remain steadfast in our belief that Anchorage’s decision to combine two utilities remains the right one. There’s still a lot of work to do as we continue to integrate systems and programs. What we know for certain is ratepayers are better off as a result of the acquisition with significant savings being realized and still more to be achieved in the years ahead.
The future is full of opportunities. By powering Anchorage together, we can better meet future challenges and opportunities. Reducing carbon emissions, adapting to new technologies such as electric vehicles and battery storage, and continuing to improve efficiency will make our cooperative and the communities we serve a better place to live, work and play. Most of all, we must meet our primary mission of providing safe, reliable, and affordable power to our member-owners.
Rachel Morse is the board chair and Lee Thibert is the CEO of Chugach Electric Association.