Chugach board approves generation agreement

The board of directors of Chugach Electric Association approved a 4-year labor contract with one of its bargaining groups for employees that work at power plants and in certain other jobs. The board took the action at a meeting April 25.

Union employees had voted to approve the new contract on April 13.

The "Generation Plant Personnel Agreement" the board approved covers approximately 80 regular employees who work in a variety of technical jobs in areas like power generation, power control, communications and information technology. The contract is one of three the utility has with workers represented by the International Brotherhood of Electrical Workers Local 1547. All three expired July 1, 2006, but both the union and Chugach have continued to honor the prior contracts while negotiations have been underway on new agreements. Chugach and the union approved a new 4-year "Outside Agreement" for journeymen linemen and certain other employees in December. Negotiations are ongoing for employees covered by the "Office and Engineering Agreement."

Consistent with its position on the other labor contracts, the Chugach board wanted to be able to offer fair wage increases while achieving work rule changes that would give management greater flexibility and efficiency – thereby offsetting a significant portion of the cost of the raises. The contract agreed to by both parties does just that.

During the 4-year term of the contract employees will receive wage increases of 6 percent in the first year, 5 percent in the second and third years and a CPI increase in the fourth year. They will also receive their first pension increases in approximately 20 years, amounting to 50 cents a year in each of the first three years of the contract.

On balance, when considering the value of the work rule changes, the estimated cost of the contract is in line with nationwide annual labor wage increases in the past year.

The estimated value of the work rule changes balanced against the raises and pension benefits in the contract mean that Chugach was able to make considerable gains without significantly affecting the price of power paid by customers. After the terms of the new contract go into effect in May and costs and work rule changes begin to balance out, it is estimated that the monthly cost to the average residential customer will be about 25 cents.

As with the contract approved in December, there will be no immediate change to rates. Initially, any additional costs from the new labor agreements will be seen as reductions to margins.

Chugach does not expect to file with the Regulatory Commission of Alaska to add the costs of these contracts in rates in the near future, nor to try to amend a rate case currently at the Commission.

Last September Chugach filed paperwork asking the RCA to set rates that fairly recover the cost of both the generation &transmission and the distribution functions of the utility. If Chugach is successful, that will lead to about a 3 percent overall decrease in retail rates. Hearings on the rate case are expected to begin in August.

Chugach is the largest electric utility in Alaska, providing power for Alaskans throughout the Railbelt through retail, wholesale and economy energy sales.