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Golden Valley accepts compromise on state plan for utility collaboration

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Posted: Thursday, January 28, 2010 3:54 am | Updated: 1:10 pm, Wed Dec 26, 2012.

The Golden Valley Electric Association board signed off on a revised draft plan for the Railbelt utility merger effort Monday, though it is now more collaboration than consolidation.

The new proposal would allow the six Railbelt utilities to remain independent, while setting up a structure so they can work together on future projects and planning, said GVEA President Brian Newton.

It removes some of the more contentious issues, which include how costs for projects already built by GVEA and other utilities would be considered and the proposal that all electric rates be uniform. The new bill states that rates may be uniform in some cases, but the corporation could adopt rates and charges for service from specific projects that reflect differences in the cost of providing power.

As compared to the earlier version of the bill, it removes the carrot or stick, depending upon your point of view, that former Gov. Sarah Palin and then Gov. Sean Parnell had proposed, which was that the Bradley Lake Hydro project and the 170-mile Intertie would have been given to the corporation.

GVEA gets about 17 percent of the power from Bradley Lake and has been the major beneficiary of the Intertie, which provides power from Southcentral. Power can be shipped in either direction, however.

The draft bill states that power sales agreements would not be subject to review by the Regulatory Commission of Alaska until long-term debt is retired and grants are repaid, if required.

•••

PIPELINE VOTE: Legislators are getting way ahead of themselves with the proposal to ask voters if they like the idea of using Permanent Fund earnings to subsidize an in-state gas pipeline.

Put that question on an advisory ballot and we’ll be asking voters the wrong question. And if the results are negative, which is probable, then we’ll have people offering at least two explanations of the answer, adding to the confusion.

Some will say that people don’t want to spend state money to build an in-state gas pipeline. Others will say that people don’t want to use Permanent Fund earnings to do the same. The 1999 advisory measure on spending Permanent Fund earnings was soundly rejected by the voters, with results that were subject to conflicting interpretations.

Advisory votes are usually a bad idea. This one is a bad idea. As with the others dreamed up by legislators in recent years, it oversimplifies a complicated issue that deserves more than a simple “yes” or “no.”

If Republican Reps. Mike Chenault and Jay Ramras want to use state funds to build an in-state gas pipeline, they should make the case why and try to get the Legislature and the residents of Alaska to go along with it.

The challenge of how to pay for it is secondary. There are several options, ranging from the Constitutional Budget Reserve to a state bond. The question to be answered first and foremost is whether the state should subsidize a gas pipeline and why.

Chenault said the state is taking a scattershot approach on energy, considering too many options and not focusing on the most likely prospects. He’s correct about that problem, but it will only get worse if we put this measure on the ballot.

Let’s not worry about the financing options for a subsidized instate gas pipeline until we decide on the merits of a subsidized instate gas pipeline.

One additional problem deals with the notion that after paying dividends with some earnings and using an additional percentage to offset inflation, the balance of the earnings would be sufficient for a gas pipeline subsidy.

That’s not necessarily the case, as demonstrated by the cash crunch in the earnings reserve right now that might make it impossible for the fund to pay the full dividend in the fall. This is not because of a lack of paper earnings, but because not enough of those earnings have been turned into realized earnings.

It’s easy to imagine a situation where the short-term cash needs for a gas pipeline subsidy would lead to undue influence on fund managers to give up a chance long-term gains for immediate results, which is not how a permanent fund should be run.

The Chenault/Ramras measure is House Bill 312.

•••

TV TIME: Former UAF anthropologist Jim Dixon, now director of the Maxwell Museum at the University of New Mexico, is among those featured on “Surviving Ancient Alaska” tonight on the National Geographic Channel at 9.

Dermot Cole can be reached at cole@newsminer.com or 459-7530.

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