FAQS
Frequently Asked Questions
Why now?
A consolidation between Chugach Electric and ML&P has been discussed for decades. Chugach and ML&P have adjacent service territories, making consolidation easier and more cost effective. With low interest rates, the time to make this transaction is now. The hundreds of millions of dollars that would be saved from combining the two utilities and reducing duplication make it a win-win for the Anchorage community.
The two utilities are already co-owners of the Southcentral Power Project and have ownership interests in the Beluga River gas field and the Eklutna Hydro Power Plant. Chugach and ML&P are also working together in power-pooling. Consolidation is the logical next step.
What will happen to my rates when there’s one electric utility in the Anchorage Bowl?
Chugach has pledged that electric rates will not go up to pay for the transaction. Combining power utilities will streamline services and resources, saving hundreds of millions of dollars over time. The savings will lead to lower long-term electric rates.
Will a sale create a monopoly?
Both Chugach and ML&P are already regulated monopolies. Anchorage residents do not choose their utility, but rather purchase their electricity based on where they live. Both utilities are regulated by the Regulatory Commission of Alaska, and that will not change if the two utilities combine. The RCA will still oversee utility activity.
Additionally, as a member-owned cooperative, Chugach members have a voice in how the utility is managed. The co-op has a seven-member board that any member can serve on through the annual election process.
Will there be layoffs?
No. Chugach Electric has pledged there will be no employee layoffs at either utility due to the consolidation. However, the number of positions will be adjusted over time through attrition.
Will my property taxes increase?
No. There will be no property tax increases to pay for this transaction.
No. There will be no property tax increases to pay for this transaction.
How is the consolidation a cost savings to customers?
A consolidation will streamline services that are now being duplicated by having two utilities. Combining technological capabilities, infrastructure, staff, and financial resources will result in reductions in costs and, eventually, lower electric rates for residents and businesses.
There are no property tax increases or rate increases associated with the sale, and there will be no layoffs of Chugach or ML&P employees. Chugach has pledged to right-size through attrition. Combining the expertise and experience of both work forces will ultimately make the single utility stronger and operations more efficient and cost-effective.
How did Chugach and ML&P arrive at deal to take to voters?
In April 2017, the Anchorage Economic Development Corporation held a series of public meetings with Anchorage business leaders, many of whom were concerned about paying high electric rates. The working group released a series of recommendations, including asking Chugach and ML&P to consider consolidation to save all Anchorage ratepayers money. Then, in June 2017, the Anchorage Assembly unanimously passed a resolution asking the two utilities to look at ways to save money, including a possible merger. Following those actions, Chugach and ML&P began discussions for how to combine the two utilities.
In April 2017, the Anchorage Economic Development Corporation held a series of public meetings with Anchorage business leaders, many of whom were concerned about paying high electric rates. The working group released a series of recommendations, including asking Chugach and ML&P to consider consolidation to save all Anchorage ratepayers money. Then, in June 2017, the Anchorage Assembly unanimously passed a resolution asking the two utilities to look at ways to save money, including a possible merger. Following those actions, Chugach and ML&P began discussions for how to combine the two utilities.
What happens next?
The Anchorage Assembly’s decision to put the sale of ML&P before the voters in April is just an authorization to sell. If approved by the voters, there will be further opportunities for the public to weigh in as the city and Chugach work out a final deal. The due diligence process is expected to take several months, and a final agreement would have to be approved by the Anchorage Assembly, the Chugach Board of Directors, and the Regulatory Commission of Alaska, all of which are open to the public.
How will Chugach Electric pay for the acquisition?
Of the $1 billion, 80 percent is already included in electric rates. $542 million will pay off ML&P’s debt and another $170 million would be paid in a lump sum, which would endow the MOA Trust Fund to help pay for city services such as police, fire, roads, and more. Interest rates are low, making it a good time to finance a consolidation. Chugach will make payments to provide an additional $170 million over 30 years. The utility will also make payments in lieu of taxes that over time would amount to $142 million.
Is $1 billion a fair price?
According to a Goldman Sachs analysis released by the Municipality of Anchorage, Chugach’s offer is consistent with the valuation of ML&P.
How can Chugach Electric afford this transaction?
Chugach has a solid financial platform, has over 25 years of experience in the capital markets, and has strong credit ratings in the A range. In addition, Chugach has proven that it can manage temporary downward trends to certain financial metrics as it did during the Southcentral Power Project construction cycle. Chugach believes its financial strength, credit profile and history of managing dynamic events support its ability to successfully manage this transaction.
Chugach has a solid financial platform, has over 25 years of experience in the capital markets, and has strong credit ratings in the A range. In addition, Chugach has proven that it can manage temporary downward trends to certain financial metrics as it did during the Southcentral Power Project construction cycle. Chugach believes its financial strength, credit profile and history of managing dynamic events support its ability to successfully manage this transaction.
What are the advantages of being part of an electric cooperative?
An electric cooperative like Chugach Electric is a not-for-profit business owned and controlled by the people who use its services. An electric cooperative has a member-elected board of directors and is operated by and for the electric customers for which it serves. The goal is to provide reliable and affordable power. Electric co-ops also pay dividends to their members in the form of capital credit payments.