Discussion

GVEA is proposing to transfer all generation and transmission assets owned by GVEA member-owners to a new company called for short, GVEA G&T. This company is structured as a cooperative with only one member, GVEA, as represented by the GVEA Board. Approval of this proposal only requires 10% of the membership to vote and a majority of those voting to approve. You will see ballots in the mail after November 20, 2006. If approved, GVEA G&T could sell these assets, our power plants, tie-lines, and substations, whenever they want to any entity without any say by GVEA members. This proposal is complex, so let me try my best at an analogy.

As members of a condominium association, every condo owner gives title to their condo to the building manager for which they get a non-binding promise that the new owner will keep their rent down by being able to pay less interest on loans. The Condo Association directs the building manager, the condos can be sold without the residents’ approval. Complicated, yes. Does it make economic sense? Perhaps. GVEA says residential members might save $40-50/year each with this proposal. Is it worth giving away control of our assets? Personally, I think not.

IF GVEA members approve this transfer, it is the last vote GVEA members will have on anything to do with these assets. GVEA board members are not assured of a majority on the GVEA G&T. In fact the draft GVEA G&T bylaws only require 40% representation.

If approved, this will substantively reduce the capital credits program, as the margins now required and later rebated to the members will not be collected. This amount constitutes what GVEA calls a $30 million savings, but is not actual savings as this amount is now paid back through capital credits.

The model proposed for the G&T is unusual in that it is a co-op of only one member, something that occurs with only one or two other electric coops in the United States. It is possible that the G&T could choose to remove themselves from the regulation by the Regulatory Commission of Alaska (RCA) which examines utility actions in the public’s interest. This could further reduce members’ ability to decide on matters that affect our rates.

GVEA has other ways to save money, such as reducing administrative, travel, and legal expenses, equipment purchases, and less ambitious large projects. GVEA is known by the business community as always wanting things to be first class, but in lean times (GVEA lost money last year), businesses try to conserve.

While your cost of electricity has gone up dramatically partly because of increased fuel costs, GVEA has taken on a large number of expensive projects. GVEA members will have even less input into the G&T, though we will pay the cost of these projects by having to purchase power from the G&T. GVEA has actively solicited large power users such as Ft. Knox and Pogo Mines to buy from GVEA, requiring ever larger power needs. These all have been approved by your GVEA Board of Directors.

There is very little communication between GVEA members and their district representative. Some argue that GVEA members aren’t interested in their co-op except when $1000 prizes and free light bulbs are offered at the annual meeting. I’d suggest that, for all the talk about member-owners being represented by their board, the GVEA board could do more to engage the membership. All the communication you get are GVEA staff generated, such as the Ruralite, bill inserts, website, and other mailings. District meetings were abolished in favor of voting by mail for board. Why can’t board members be encouraged to meet with those they represent? While there is a Membership Advisory Committee, GVEA members have no contact information for these members and the MAC has no means to communicate with members in their district except one-one.

Ultimately, the choice on whether to give away the generation and transmission assets belongs to GVEA member-owners. GVEA must have the members’ vote – it is required by GVEA bylaws. But there is no turning back. If the members approve, these assets are out of GVEA members’ control forever. I intend to vote NO on Item 1 on the ballot.

Please note: Item 2 on the mailout ballot is to allow all but board members and their spouses to participate in GVEA’s alternative energy program. Since we want as many people as possible to participate, I recommend approval on this item only.