Published by Chugach Electric Association, Anchorage.  Chugach is a not-for-profit member-owed electric cooperative and Alaska's largest electricity supplier.

Intertie contracting 
alternatives could save millions

In my comments last month I mentioned that the board had retained consultants to evaluate whether the understandings Chugach and other utilities signed with the International Brotherhood of Electrical Workers Union would affect the cost of intertie construction.

Their findings? Full, open and competitive bidding, which would allow other unions and open shop contractors to work on the projects, could cut the cost of intertie construction by millions of dollars.

The study estimated that it would cost $50.5 million to build the Northern Intertie between Healy and Fairbanks' if it were bid out under the National Electrical Contractors Association ? IBEW Union agreement (that governs ?over $10 million of Chugach's annual capital construction program). The study evaluated concessions already granted by the IBEW for this intertie at $2.8 million and it identified $6.7 million in additional savings that would be possible under full and open contracting. Under that scenario the Northern Intertie could be constructed for $41 million, 19 percent less than under the standard NECA?IBEW agreement.

Similar savings could be made on the proposed Southern Intertie between Anchorage and the Kenai Peninsula, and on the proposed Copper Valley Intertie between Sutton and Glennallen. Beyond the concessions already made by the IBEW, the consultants identified additional savings of over $16.8 million if all three interties are built under open bidding.

The $25,000 study was performed by Herbert R. Northrup and Armand J. Thieblot. Northrup is Professor Emeritus of The Wharton School, University of Pennsylvania; Thieblot is former Associate Professor of Management at the University of Maryland. Both are noted for their expertise in labor and manpower policy, labor economics, and labor relations.

The study only included savings from readily quantified differences in labor costs such as wages, fringe benefits, special payment requirements, crew makeups, etc. Not included were additional savings that could result from other factors such as increased competition, differences in equipment costs, supervision, insurance and bonding, as well as other items.

It is unclear what impact the study will have on the contracting process, which is overseen by a group of all seven railbelt utilities, not just Chugach alone. Your board has taken the lead in exploring cost reduction alternatives because, as the railbelt's largest utility Chugach has the largest share of intertie costs.

In a related matter, the board intends to place a bylaw change for your consideration on the spring Chugach election ballot. If passed, it would require that Chugach use full, open. and competitive bidding in future construction.