The City and Borough of Yakutat has reached a deal to sell its municipal electric-power utility to the Alaska Village Electric Cooperative, but state regulators will have the final say.<\/p>\n
On Friday, the Regulatory Commission of Alaska published notice of the utility transfer from the borough to AVEC, which manages the electricity of 56 other communities in Alaska. Yakutat would be AVEC\u2019s first community in Southeast Alaska.<\/p>\n
\u201cWe\u2019re a small small village, and it\u2019s hard for a small village like Yakutat to carry the expertise and staffing with all the training \u2026 and reinvent the wheel every time to run a complex facility like a power plant,\u201d said Bob Miller, a former Yakutat borough assemblyman who was among those who spurred investigation of the sale two years ago.<\/p>\n
\u201cIt\u2019s just much more efficient to be a part of a larger organization,\u201d he said.<\/p>\n
Under the terms of the deal, the borough will receive $300,000, and AVEC will assume liability for the system \u201cas is.\u201d<\/p>\n
AVEC has offered to employ the utility\u2019s five full-time employees for at least six months after the transfer, and for each of the next five years, it will invest $250,000 to improve Yakutat\u2019s electrical lines, transformers and overall distribution network.<\/p>\n
Yakutat boasts a new $8 million state-funded power plant that opened in 2014, but its distribution system is old, some portions dating to World War II.<\/p>\n
\u201cThis past weekend, we went over a day without any power out at the airport because the system is crumbling,\u201d Miller said.<\/p>\n
In that time, AVEC will not be allowed to increase the price of electricity in Yakutat.<\/p>\n
\u201cRates will actually drop,\u201d said borough manager Jon Erickson, \u201can average of 10 percent on the non-fuel side.\u201d<\/p>\n
Because AVEC is a cooperative, Erickson said the deal should be considered \u201cmore of a merger\u201d than an outright sale.<\/p>\n
\u201cWe\u2019re going to basically own 1\/57th of AVEC,\u201d Miller said in agreement. \u201cIt\u2019s kind of actually like we\u2019re buying part of AVEC more than they\u2019re buying us.\u201d<\/p>\n
Dean Thompson, an Anchorage-based attorney for AVEC, said by phone that the company was interested in the deal for two principal reasons.<\/p>\n
\u201cNo. 1 is AVEC is set up to be able to provide service for remote locations, just the way its organization is set up,\u201d he said. \u201cNo. 2 is that the more customers and kilowatt-hours AVEC has, it reduces the overall cost for AVEC customers.\u201d<\/p>\n
Utilities rely on economies of scale to save money on operations. Fuel is cheaper in bulk than in small amounts, and in-house expertise and equipment is cheaper than hiring a contractor.<\/p>\n
In addition, the more customers a company has, the more it can spread its cost. A larger system will tend to be more efficient than a smaller one.<\/p>\n
\u201cI think financially, that is the benefit for AVEC\u2019s (existing) customers,\u201d Thompson said. \u201cIts fixed costs can be spread over a greater number of units.\u201d<\/p>\n
AVEC wasn\u2019t the only utility seeking to acquire Yakutat. According to documents from the City and Borough of Yakutat, Alaska Power and Telephone, the Inside Passage Electrical Cooperative and some independent companies also made offers to acquire the system.<\/p>\n
In a presentation dated July 1, 2015, AP&T offered $215,000 in up-front cash to Yakutat and $750,000 in investments over five years. While those figures were lower than AVEC\u2019s offer, AP&T anticipated charging less for electricity.<\/p>\n
The Yakutat sale comes amid a wave of consolidation in Alaska\u2019s local energy industry. In 2014, AP&T acquired Gustavus Electric Co., the municipal company serving that town. That same year, Juneau\u2019s Alaska Electric Light and Power was acquired by Avista, a Washington-based company.<\/p>\n
Miller admitted that the acquisition is \u201ca scary proposition\u201d for some in town, but the assembly had been faced with a rate-funded municipal system that wasn\u2019t responding well to requests from the borough manager or the assembly.<\/p>\n
\u201cThey\u2019ve been this autonomous monster that we\u2019ve been unable to control,\u201d he said of Yakutat\u2019s municipal system. \u201cI\u2019d rather have professionals I can\u2019t control.\u201d<\/p>\n
The Regulatory Commission of Alaska now has six months to approve or decline the transfer to AVEC.<\/p>\n","protected":false},"excerpt":{"rendered":"
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