HIGHLY RECOMMENDED!July 23, 2009
A candid treatment of issues surrounding Anchorage ML&P and
other Southern Railbelt electric utilities. Not just the energy crisis and
new generation but all parts of the customer value chain, especially
distribution, are covered. The main chapter was authored by former
ML&P and ACS executive, Mary Ann Pease. The poor economic value
received by electric customers is specifically identified.
Note that many electric utility points were elevated right to the top and included in the 7 page Transition Team Key Issues [Executive Summary] of the massive 404 page report covering all municipal departments.
Some key quotes:
Utility service expenses are a basic component of cost of living and doing business in the Municipality of Anchorage. They are also one of the most regressive of costs in that they affect low and fixed income residents the most. In addition to directly helping MOA residents, lowering such costs will make our region more competitive in the world economy and lead to job growth. It is one of the “low hanging fruit” of economic development objectives [this one made it to the Executive Summary].
Recommend that the administration seek the best possible regulatory and public utility management advice to design a long term solution that will deliver the best possible value for utility owners and customers.
There needs to be a continued focus by the administration to restructure all aspects of the electric utility infrastructure and operation in the MOA, the Municipality’s service boundaries and eventually the entire Railbelt--- with an expanded objective of looking at all the utility functional areas (fuel purchase/type, generation, transmission, and distribution) and maximizing the value to utility customers and MOA residents of each of the functional areas as well as the sum total.
Unbundled costs and high level comparative performance benchmarking, must be done for all four parts of ML&P. ML&P has resisted doing this benchmarking which is the only way to determine the value received by customers for their utility service and properly plan for a more efficient electric utility infrastructure in the municipality.
Only benchmarking available in Anchorage is that done for Chugach Electric’s distribution system, which has identified distribution costs as much as 60% higher (2˘ per kwh) than those of utilities with similar systems. The 2˘ per kwh in excess distribution rates at Chugach Electric is about $25 million a year. It’s not known where ML&P’s costs would range. They could be even worse and be masked by low fuel costs.
No high level benchmarking has been done for transmission or generation for any Railbelt electric utility.
Consensus exists that the Railbelt has too many small electric utilities, too much duplication of administration and generation expenses. Restructuring and reform would yield universal benefits from substantial savings opportunities. However, these synergies that would yield so many positive benefits to the consumers are difficult to realize because of the historical relationship between the Utilities – fragmented systems, lack of total economic dispatch, controversial RCA proceedings and a strong institutional culture that resists reform and perpetuates a chronic lack of cooperation.
It's been assumed that only ML&P-Chugach would be allowed to build the proposed new joint generation. Many state regulatory commissions (and the province of British Columbia for example) would never allow an incumbent utility to build or operate a new generation facility without a fair and impartial third-party-administered solicitation open to all qualified providers to determine if the utility's proposal is in fact, the lowest cost alternative and the one most beneficial to utility customers. Here in the southern Railbelt, that means, without doing this, you don't really know whether another utility or independent power producer would have a better project yielding lower costs and more value to ratepayers now and in the future. It is not too late to do such for the new generation. At least then we would know what the right price would be and the incumbents (CEA and ML&P) would have to be competitive.
Finally, it might be more viable for the neighboring electric cooperatives to consider sale of electric distribution business or the subsequent aggregation of distribution. Since ML&P is in the enviable position of having combined distribution, generation and gas supply ownership for their Utility, it may make sense to look at the aggregation of consumers within the Municipality for the greater benefit under the guise of "combination should help accelerate expansion of gas into the service territory." Some of the options that could be considered between the utilities would focus on the privatization of certain components of service, joint new generation options, etc.
Better to develop a modern regulatory and organizational framework with a clear purpose, management objectives, transparency and performance reporting designed to be self executing as much as possible.
This will not be successful without also evaluating RCA regulation of AWWU. The issues are very similar to those at ML&P.
These candid and bold findings are now in Mayor Sullivan's hands. Chugach Consumers strongly urges him to take action.
THE REPORT: Complete [404 p, 21MB] for all Muni departments. A giant, hard to use file.
|We have extracted these parts into a more usable file [46 pages - 3.3 MB]:|
|PDF pages 1-11 [11 total] - Table of Contents + Transition Reports Key Points [Executive Summary]||PDF pages 12-37 [25 total] - Utilities||PDF pages 38-46 [8 total] - Energy|
This Transition Team report is a very important and significant document in the effort to reform and hold the electric utilities truly accountable to their customers and owners.
Please send comments or questions to Chugach Consumers