Financial advisor offers insight into CBJ pursuit of AEL&P ownership

Alaska Electric Light and Power Company Lemon Creek operations center in Juneau on Wednesday, July 19, 2017. (Michael Penn | Juneau Empire File)

The City and Borough of Juneau has expressed interest in having Alaska Electric Light & Power locally owned, and a Seattle-based financial advisor offered advice in a recent report.

 

PFM Financial Advisors sent a report to the CBJ last week, detailing the factors the city would have to consider as it ponders future action. Canadian-owned power company Hydro One is working to acquire AEL&P’s parent company, Avista, and the Regulatory Commission of Alaska is currently considering that acquisition.

PFM’s list of recommendations begins with a warning of how difficult the task at hand is for the city.

“Undertaking an acquisition of an investor or privately owned utility by a municipal government (‘municipalization’) has always proven to be a complex and time-consuming process,” the first line of the report reads. “We see no reason the process CBJ would need to undertake related to an acquisition of AEL&P would be any different.”

[Businessmen look to keep AEL&P locally run, city supports idea]

After that, PFM recommends that the CBJ first outline its goals moving forward. A “critical factor,” PFM outlines in its second point, is that because that Hydro One doesn’t appear interested in selling the utility, the city should prepare for a long and costly process that might even lead to litigation.

PFM reviewed other recent municipalizations have costs cities between $2 million and $15 million, so the report says the city needs to “determine a realistic estimate and the economic impact to CBJ.”

Some of these concerns might not apply to what CBJ is attempting to do, though. During conversations at Assembly meetings, Assembly members have expressed interest in helping foster an agreement between a local buyer and Hydro One. The CBJ is not necessarily interested in running the utility.

[Read the full report here]

Proponents of local ownership assert that having the utility locally owned would keep rates down, but AEL&P Vice President and Director of Consumer Affairs Debbie Driscoll said it’s hard to predict how rates would change in the future. AEL&P currently has rates below the national average, Driscoll pointed out, and the Regulatory Commission of Alaska heavily reviews all rate changes in the state. AEL&P President and General Manager Connie Hulbert also pointed this out in an Oct. 9 My Turn in the Empire.

The PFM report was done on the Assembly’s request to further look at the pros and cons of getting involved in a local purchase of the utility. The city sent a letter to Hydro One in August about the possibility of local ownership of AEL&P, to which Hydro One’s president responded saying he was not interested in selling.

The Assembly will discuss the PFM recommendations at an upcoming meeting, possibly as soon as the Nov. 6 meeting.

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