City Assembly mulls $3 million loan to AEL&P

Posted: Monday, April 28, 2008

A series of questions are expected to lead the Juneau Assembly's vote authorizing a $3 million city loan to Alaska Electric Light & Power Co. at noon today.

The money comes from a city budget reserve holding an estimated $4 million. Before announcing the loan last week, the city alluded to using the money to avoid city layoffs in response to budget shortfalls, to create a tax break on inflated electricity costs and perhaps direct assistance to AEL&P customers having trouble with an overnight 447 percent rate hike.

Details of the loan were thin when presented to the Assembly Finance Committee on Thursday. A draft resolution detailed two requirements of the private utility: Spread the cost of "power adjustment payments" over one year, and repay the loan in 12 months.

The loan resolution also contains a separate $250,000 appropriation to City Manager Rod Swope for "city energy conservation measures."

Mayor Bruce Botelho said he hoped the utility would work with those who have trouble paying the amortized amount on their monthly bill.

On Thursday, committee member Jeff Bush wanted to know if people and businesses with the resources could fully pay the inflated bill each month rather than spread the bill into next year.

Bush's reasoning allowed the company to get more money faster and hopefully reduce the total amount borrowed to fuel the companies generators, and in doing so lower the long run costs to Juneau.

Bush asked the mayor and city manager to see if customers could opt out of the amortization program and avoid paying interest on their bill.

"Why force them to take out a loan for a year?" Bush said.

For more than a week, AEL&P representatives have estimated the rate hike will last three months.

On Friday, Scott Willis, generation engineer, said AEL&P had a deal with an Anchorage firm to complete line repairs by mid-July.

In June rates will drop from the present spike of more than 50 cents per kilowatt-hour to between 38 and 42 cents, said spokeswoman Gail Wood.

According to AEL&P President Tim McLeod, no fees or additional interest would be applied to the amount of money ratepayers carry on their bill for the 12-month period. However, interest charged on money borrowed by the utility to cover diesel expenses will be passed through, he said.

A member of the Assembly with knowledge about the Regulatory Commission of Alaska said there could be a problem with amortizing some bills and not others, Bush said. It could be that all rate payers need to be treated the same, he said.

Ann Wilde, spokeswoman for the RCA, said that as of Friday evening the commission had not received paperwork from AEL&P requesting permission to amortize power bills. Without a filing the commission cannot comment, she said.

No customers will be allowed to opt out of the program, McLeod said.

How the proposed amortization will work is not known. Before voting today, Assembly members expect AEL&P leaders to testify.

"The way we amortize will make a big difference," Assembly member Bob Doll said.

If the "cost of power adjustment," all moneys charged above the previously set rate of 11 cents per kilowatt-hour, is amortized, it's one thing, Doll said. If the whole bill is amortized, it's another. One way will cost more than the other in the long run, he said.

Doll wants to know more about AEL&P's use of the loan, including any fees that may be charged or passed on through billing.

"There are all kinds of ways of using it," Doll said.

Assembly Member Merrill Sanford said he had no questions about the loan as defined in the resolution.

"I'm fine with it," he said.

Sanford does have questions about the $250,000 appropriation tucked into the resolution for city conservation. His vote on the overall resolution rides on the answer. It's about fiscal responsibility, he said.

On Friday, Sanford expressed dismay over the lack of communication from city management on developing emergency response plans.

"We're going to put a quarter-million on the table and let city staff spend it where they feel appropriate," he said.

As the city proceeds with whatever plans they might have for the money, Sanford wants Swope to explain use of the money and reserve final approval for Assembly.

"It's a basic philosophy of how we spend our dollars," he said.

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