Calif. power crunch hits AK outfits

Permanent fund suffers small loss

Posted: Tuesday, April 17, 2001

More state and local agencies are feeling a pinch from California's power troubles, although managers say the long-term ramifications are small.

The Alaska Permanent Fund has a small portion of its $25.5 billion portfolio in Pacific Gas & Electric and Southern California Edison, the two California utilities at the middle of the state's power crisis.

One of the permanent fund's external bond managers has $3.5 million invested in Southern California Edison now worth $2.8 million, as well as $2.9 million in PG&E bonds now worth $2.2 million, said Alaska Permanent Fund Director of Communications Jim Kelly.

The state's oil-wealth savings account also has investments in the companies through two S&P 500 index accounts. The stocks cost $4.3 million and are now worth $2.7 million, Kelly said.

"On the stock side it's just an unrealized loss," he said. Since the stocks are part of an S&P 500 index account, the permanent fund probably won't sell unless the stocks fall out of the account, he said.

As far as permanent fund dividends are concerned, Kelly said Alaska residents won't see any impact.

"This is not even a blip on the radar screen in terms of the dividend," he said.

The state's retirement system last week sold a $120,000 bond with PG&E it purchased last fall. The system also has $550,000 in S&P 500 index funds in PG&E's holding company and $470,000 in Southern California Edison's holding company, Chief Investment Officer John Jenks said.

"It will have absolutely no effect of retirees' benefits because the benefits are guaranteed and the investment was very small," he said.

Jenks said the $12 billion state retirement system portfolio includes a diversified mix of stocks, bonds, real estate and other investments.

"We have eggs in lots of baskets and we're careful about those baskets to make sure retirees are served for the long term," he said.

Other Juneau organizations are feeling a bigger pinch from the power crisis. St. Ann's Care Center in Juneau purchased a $725,000 bond with Southern California Edison in August 1999 for a $15 million construction project, according to board member Larry Persily.

The center's new building behind Bartlett Regional Hospital still will open on time, and the investment default won't affect services to residents, he said. The board found in February that the bond had defaulted.

"It may cost us interest money on a temporary bank loan. There will be no effect on services or construction," he said. "When we invested it was high-rated. Utilities are normally a safe, boring investment."

St. Ann's is scheduled to move from its building downtown to the new facility - called Wildflower Court - at the end of May.

Center Administrator Kathy Kloster said construction is on budget. She said St. Ann's was able to use interest from other bonds to make up the money missing from Southern California Edison.

Last week, city Finance Director Craig Duncan said Juneau has a $2 million utility bond with Pacific Gas & Electric Co. He said the default likely will bring a 2.5 percent decrease in the city's investment earnings.

Joanna Markell can be reached at

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