Single 'no' vote derails AEL&P loan

Posted: Tuesday, April 29, 2008

A single "no" vote derailed a city attempt Monday to loan $3 million in emergency funds to the local electric utility.

The vote could cancel the company's plans to spread a huge rate hike over 12 months.

Assembly member Jonathan Anderson hoisted the single "no" opposing the resolution, saying Alaska Electric Light & Power planned to spread the cost of a 447 percent rate hike over 12 months instead of sending out huge bills for an expected 90-day recovery. The net effect would raise the total cost of Juneau's energy crises even higher, he said.

"For three months we can do anything," Anderson said. "Twelve months causes concern."

The long-run costs for amortization are higher for customers than if they pay for the emergency directly, AEL&P President Tim McLeod said.

Anderson's no echoed public testimony prior to the vote.

The loan was part of a city deal to get AEL&P to spread the mammoth rate hike over 12 months. Under AEL&P's plan, the per kilowatt-hour rate would be set at 17.3 cents for 12 months rather than the more than 50 cents per kilowatt-hour expected in May.

The loan is to be interest free if paid back within 12 months.

The people I've heard from are "unanimously" against it, Anderson said.

McLeod said he was surprised by the opposing testimony from the public. He expected "200 people with low incomes to cheer the lower rate."

For a moment, following a 6 to 1 vote in favor of the loan, Mayor Bruce Botelho announced the resolution had passed. Then City Attorney John Hartle halted proceedings to inform city leaders that an "emergency resolution" required a unanimous vote or, at least, a seven-member yes vote.

Assembly members Sara Chambers and David Stone were absent from the resolution vote. With a financial interest in the private utility, Stone recused himself from public discussion and Monday's vote. Chambers said she couldn't attend because of the short notice with scheduling, but she would vote today in person or via telephone.

"I'm continuing to gather information," Chambers said. "I'll make a decision when I have enough to vote."

A rush of activity following Hartle's announcement ended as Assembly member Randy Wanamaker called for a 22-hour recess to allow more members of the Assembly to come in and vote.

The resolution will appear for reconsideration at 12:30 p.m. today.

With a regulatory filing deadline looming, McLeod said he originally expected to file a new cost of power adjustment with the Regulatory Commission of Alaska on Monday.

Connie Hulbert, AEL&P chief financial officer, said the utility needed to file the new COPA Monday to enact the lower rates by May 1. "There is no guarantee they'll approve it," she said.

There might still be time, if the Assembly passes the resolution today, McLeod said. "A lawyer in Anchorage can walk it over," he said.

The cost of electricity will shoot to more than 50 cents per kilowatt-hour Thursday if AEL&P does not submit a new COPA request.

Public testimony during the meeting was overwhelmingly against the idea of spreading the short-term high cost of emergency fuel over 12 months. All agreed amortization would lead to an overall higher expense and allow the summer tourist businesses to escape paying their share of the inflated costs of diesel generation in May, June and July.

Assembly member Bob Doll said he'd received e-mail correspondence at a 9 to 1 rate against amortizing, but voted for the loan to speak for those who can't speak for themselves.

"It's a terrible idea," said Tom Hanley, a Juneau resident. The effect shifts the high cost of diesel-powered electricity used by the tourism industry in spring and summer to hydro users throughout the year, he said.

"The tourism industry will pay less," Hanley said.

Joe Rafferty, a North Douglas resident, said under AEL&P's plans the community would end up subsidizing the summer tourism industry all winter long.

"Are you willing to lose $3 million on a bad investment?" asked Brad Fluetsch, a Douglas resident and local economist.

Fluetsch warned the Assembly against loaning the money to AEL&P without a final "maturity date." The resolution declares the city manager shall set the terms of the loan and that interest will be charged if repayment exceeds 12 months, but specifies no end date.

Douglas resident Linda Snow said paying for the hike over 12 months would lead to price inflation at local stores. She favored the three-months option.

"Extraordinary circumstances call for extraordinary measures," she said.

"The city should use the money to help individuals," said Alison Elgee, a Juneau resident.

Elgee said conservation to offset the high cost is more easily done during the best weather of the year.

"You can't hang clothes out in January with any kind of positive effect," she said.

Before the public began to discredit AEL&P's amortization plans on Monday, Hulbert said, "They (the public) will welcome a proposal like this."

• Contact reporter Greg Skinner at 523-2258 or e-mail

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