PUBLIC TESTIMONY AT INTERTIE PARTICIPANTS GROUP MEETING -- 1/2/03 ON SOUTHERN INTERTIE POWER LINE (138kv)

RAILBELT UTILITIES SET FINAL "DECISION DATE" AS 7/15/03    

Meeting of the Intertie Participants Group (committee of all Railbelt Electric Utilities) set the "decision date" for final action by all the other utilities as July 15, 2003.  All public testimony was against the project and/or the rush to set a "decision date".  Utility vote was 5-1 (with only Matanuska Electric Association voting no).  CHUGACH CONSUMERS URGED THAT NO "DECISION DATE" BE SET BY THE IPG UNTIL THE COST-BENEFIT NUMBERS CONFLICT HAS BEEN PROPERLY RECONCILED

SUMMARIES (click on name for complete submitted testimony)     Kulawik  Kaluza  Mitchell  Ausman  Kreig

    Lee Ann Gerhart - Chugach Consumers, CPA (Texas), Business Process Analysis

• We are facing a changing state and local economy with lower revenue prospects in the future. Waste is never justified, whether it is boom time or bust, but now more than ever before, we must be more careful about major investments and expenditures.
   
• With so much doubt as to the accuracy of the project benefits publicly presented, it is paramount that an independent review be immediately conducted to assure that this is indeed not another costly boondoggle with Alaskan citizens ultimately left the victims of waste, fraud, abuse, and/or mismanagement. 
   
• We first became aware that studies had been suppressed that did not support the popular desire of certain decision makers when a secret study contracted by Chugach electric four years ago was suddenly released last month.  The circumstances appear outrageous...
   
• So it boils down to this: with DFI publicly stating that their lower estimate of benefits [is] the more accurate, there is no independent third party that has found the benefits of the Southern Intertie are anywhere near the $125 million cost of this project.
   
• Chugach Electric [has now] prepared their own economic evaluation of the Southern Intertie that identifies $56 million in benefits for the Chugach system (a subset of the Railbelt consisting of CEA, mea, HEA, Seward) against... $112 million in [total] costs... Please note: this is not an independent study and was prepared by the very same staff that suppressed the more accurate 2/98 study from the public EIS process.
   
• ...of the $124.1 million in project costs, only $56.7 million in real benefits go to consumers. The rest just goes to the few who build it.  If these lower benefits are true, then we are wasting $67.4 million.

    Gene Kulawik - Vice-President, Argetsinger & Kulawik, Inc., Construction Consultants

• Several hundred million dollars have been invested in [failed] projects with little or no return.
  This is irresponsible utilization of the State's assets.  This should not continue.  Now is the time to look at the proposed Southern Intertie Project.  Two estimates of Total Benefits to be achieved are $143.5 million or $56.7 million...made by the same company.  Chugach management has elected the higher benefit number.  If the construction cost stays in the stated range the viability of the project hinges on the accuracy of the benefits calculation...bring the consultant back...to justify the two different benefits numbers and quantify the differences...bring in a disinterested consultant to make an independent analysis.  There should not be any rush to judgment until this matter is resolved.

    Phil Kaluza - Alaska Public Interest Research Group

• Any attempt to launder the interest earning thru AIDEA back into the intertie is clearly outside the intent of the appropriation.  If it is not illegal, it is clearly unethical...AkPIRG intends to challenge the use of any interest earning from the Southern Intertie grant to be used for the design and construction of the intertie. 
   
• To ignore the $70 million of state grants in the cost/benefit analysis for the ratepayers is simply WRONG.  This attempt to ignore the value of those public dollars to fund other more cost effective utility projects...are in effect increasing your ratepayers' rates from what they could be if the funds were better spent. 
   
• The EIS approval was based upon the trumped up benefits included in the Updated 1998 Study, which made the economic benefits greater than the environmental cost.  It is unlikely any Southern Intertie route would have been approved if the more reasonable cost/benefit numbers that were used in the recently released internal study were used.  In light of the substantially lower ratepayer benefits acknowledged by the utilities, AkPIRG is investigating the legal ramifications of challenging the EIS approval for the Southern Intertie.

    Alan Mitchell - Former State Utility Consumer Advocate (1990)

• No Need for state financing of Electric Utility projects such as the Southern Intertie
  With our current state fiscal problems, we absolutely do not need to be spending state money on activities that work just fine without government involvement.  The $70 million of state money represents $420 per Railbelt Household, which could be better used to defer taxes and protect our permanent fund checks.
   
• Project is Not Cost Effective
  There has only been one study that claims that the project is cost-effective.  I reviewed that study in 1990 and showed that it was severely flawed and grossly overstated benefits.  Just recently, the consulting company that performed the study, DFI, admitted that the study was not as accurate as a newer secret study they did for Chugach Electric.  That secret study was recently released and shows benefits of the project far less than costs.
   
• Many of you may feel justified in treating the $70 million state subsidy as a done deal & not up for further discussion.
  I however believe that the money was acquired by the Railbelt Utilities actively putting forth cost/benefit figures that were grossly inaccurate.  You also passed the EIS process by using grossly inaccurate cost benefit figures.  I feel that it is your responsibility to admit that this project is not cost-effective and come up with a more beneficial use of this money, such as paying off utility debt, or you should return the money to the state to be used for normal state government services.

    Earle Ausman - Consulting registered engineer (energy field)

• The apparent approvals were achieved by the lack of disclosure of an earlier study that showed the project was uneconomical.  The fact that a new study with different conclusions followed right after and was used to get approval for the Southern Intertie is highly suspicious.
   
• ...the intertie is a loser.  The people who will lose this money are members of the Railbelt that could use this money for other important needs such as schooling.

    Ray Kreig - Chugach Consumers; former Chugach Electric Board President 

• I was extremely distressed to find out six weeks ago that Chugach Electric management had suppressed the major credible decisional document on the economic benefits of the Southern Intertie at the same time they were concealing the non-viability of the project by putting out pumped up numbers from another report that had never been made known to the board.  What on earth were they thinking?  Had we [the 1998 Chugach Board] known about that we would have been all over the differences.  And no way allowed the public to have been misled through the EIS process.
   
• The confidential 2/98 DFI Study identified $56.7 million in benefits, but I did not know until six weeks ago that at the very same time Chugach management had DFI put out another study, the 3/98 DFI, that was being released talking about $143.5 million in benefits. They didn�t tell the board about that one.
   
• The 2/98 DFI report was fine with Chugach management when they briefed it to the board in executive session on February 16, 1998.  The sliming of the report by Chugach now should be considered to be nothing more then spin and damage control until the necessary independent review has run its course. You need to allow enough time for that.
   
• I want to say something about a co-op director's fiduciary duty which Black's says is a duty to act for someone else's benefit.  It is the highest standard of duty implied by law.  When you as managers put out cost benefit analyses to your boards that claim these intertie grants are "free", in my opinion you are encouraging those directors to violate their fiduciary duty to be protective of the interests of the co-op members who elected them.
   
• The Southern Intertie will be regarded and measured in the community and by analysts as an indicator of how well/ how rationally public decision making is being done. Are we doing things smarter?  Or are we building another worthless $70 million Seward grain terminal?

Text of resolution passed by the IPG.

WHAT WAS THE BIG RUSH?  WHAT WAS THE POINT IN DOING THIS VIRTUALLY IN THE "DEAD OF NIGHT" WHILE PUBLIC WAS DISTRACTED BY HOLIDAY ACTIVITIES AND THE MURKOWSKI ADMINISTRATION WAS STILL GETTING ITS FEET ON THE GROUND???