End subsidies and lower Chugach member rates

In December 2005, Jeff Lipscomb and David Cottrell introduced a motion for Chugach to immediately begin preparations to file a rate case with the RCA to correct the losses on the G&T part of Chugach's business and provide rate relief for Chugach members. The motion was called premature by opponents on the Board and was defeated by a vote of 4-2 with Directors Christopherson, Vazquez, Kalenka and Kreig voting against rate relief for Chugach members!

The rates for Chugach Electric are set by the Regulatory Commission of Alaska (RCA). The RCA has determined that Chugach should have one level of cost recovery for generating and transmitting of electric power and another level of cost recovery for distributing it at lower voltages to its members, home owners, business owners and schools.

The allowable cost recovery for the generation and transmission (G&T) part of Chugach's business has been insufficient for years. In 2004 alone, the G&T lost $3.6 million! Because the G&T portion of the business is losing money it has to internally borrow this money from the distribution side of the business. As of the end of 2005, this amount, borrowed interest free from the distribution side of the business, is over $38 million!

Over half of the power generated and transmitted by Chugach is for other cooperatives like MEA and HEA. When the G&T portion of Chugach's business operates at a loss, other cooperatives like MEA benefit by receiving power at less than cost! That benefit is now over one half of the $38 million borrowed from the distribution side of Chugach's business. Plus, Chugach members receive no rate of return on their $36 million of equity in the G&T part of the business.

The Distribution side of Chugach's business serves just Chugach's member owners. Chugach member owners must cover all the cost of the cooperative business including losses on sales to MEA, HEA, SES and GVEA. If the G&T portion of Chugach's business would be allowed to recover all of its cost plus a reasonable margin, then Chugach members would not have to cover all the losses and could benefit from lower rates!

Open meetings and proper notice

As a cooperative that is operated under democratic principals, it is imperative that proper notice and openness be our standard. Members can not participate in the governance of their cooperative without proper notice. Director Kreig in voting to delete the Chairman's comments from the minutes of the September Special Board meeting has even stated, "if members really want to know what is going on they can listen to the tape (of the meeting)." In February 2006, Director Kreig voted to waive notice on excluding himself from the Confidentiality Policy. I will always work to do the Association's business in the open and with proper notice.

"Everything secret degenerates, even the administration of justice; nothing is safe that does not show how it will bear discussion and publicity.

Lord Acton, British historian 1861

Confidentiality of Association information

Chugach board members are responsible for making decisions that have multimillion-dollar impacts on our ratepayers. Important information intended to persuade the board to adopt a particular course of action is frequently provided in executive session or through other confidential channels that properly may not be appropriate for immediate public review or scrutiny such as trade secrets and attorney-client information

Due to events where former Director Ray Kreig attempted unauthorized release of confidential Attorney-Client Privileged and other sensitive information, the Chugach board adopted Board Policy 128 "Confidentiality in October 2002 after much review and discussion. Following State Statues, it requires Chugach directors and employees to keep confidential information confidential and to surrender confidential documents received and used during their board tenure even including their own notes.

Directors and employees duties and responsibilities to the Association end with their termination from employment or service on the Board. It is at that time they must surrender all confidential information belonging to the Association.

Board Policy 128 has been actively enforced as the recent retirement of the CEO required the signing of a release and every former Director since 2000 has verified in writing they have destroyed, removed or returned all Association Confidential material with the lone exception of Director Kreig.

I will conduct the Association's business openly and with proper notice while protecting the Association's trade secrets, legal position and other legitimate confidential information.

Chugach compares very favorably in benchmarks to Alaska Railbelt utilities. Chugach is the most efficient and reliable power company in Alaska.

Wind Power

Wind power should be part of Chugach Electric Association's diversified energy generation portfolio. The higher initial capital cost of wind power is offset by eliminating fuel cost over the long term. Fire Island has been determined to be the most ideal location locally for this type of renewable energy. Because of the undeveloped conditions on Fire Island, additional grant funding is required to make the Fire Island wind power a competitive generation project.

Chugach should meet with its partners and determine their interest and participation level. Chugach and other participants should then seek grant funding for infrastructure from the legislature while negotiating an Operating Agreement. If successful with grant funding and Operating Agreement negotiations, the participants can proceed with final engineering, permitting and construction.