HEA tries -- again -- to buy utility in Seward

Homer Electric Association made an offer to purchase Seward's city-owned electric utility last Monday, but city officials want to weigh their options before accepting or declining.

HEA put its $18 million offer to buy the utility before the Seward City Council April 22.

While the proposal was submitted to Seward in a Feb. 8 letter from HEA to Seward City Manager Scott Janke, an April workshop and council sessions with HEA General Manager Norm Story were the first formal presentations to the council, said HEA spokesperson Joe Gallagher.

Janke said city officials will need time to consider the offer before making any decisions.

"There's not much to tell," he said. "The council hasn't had a chance to analyze the offer to see if it meets (the city's) needs. At this point, they will sit down and have a workshop and look at the offer. I'm hoping we can do that in the next couple of weeks."

The proposed sale must gain the approval of at least 60 percent of Seward voters if the city decides to put it on the ballot next fall. It also must be approved by the Regulatory Commission of Alaska, which oversees utilities.

The idea for HEA to buy the Seward utility is not new. In a 510-443 vote in November 2000, Seward voters approved a sale, but the tally was 61 votes short of the required 60 percent majority.

Janke said the absence of an actual offer made the vote less urgent to voters and may have contributed to the vote shortfall.

"It wasn't about a specific offer," he said. "The ballot question was more general. 'Are you interested in selling the utility?'"

Under HEA's nonbinding offer, the association will maintain the backup generation capability now in Seward and run the electric system as a division of HEA with its own name, identity and separate assets and costs. All current and future Seward customers would be full members of HEA, with all the same rights and benefits of current HEA members.

The purchase price to Seward would be spread out over five years.

Among the positive impacts HEA predicts are a 5 percent reduction in residential electricity rates in Seward, a 10 percent commercial rate reduction, guaranteed cash flow to Seward's general fund for five years, extension of HEA's service area, access to large equipment and personnel resources and cost reductions for services, equipment and supplies.

"Consumers in Seward and the current Homer Electric service area share common political, economical and utility reliability concerns," Story said in a statement released Tuesday. "Working together as one cooperative will result in improved service and outage response, and potentially lower rates through reduced costs."

HEA officials are prepared and expect to participate in more meetings with community residents and officials to discuss the proposed purchase between now and the fall election, Gallagher said.

Janke said the council will discuss the offer in the upcoming week, after which they will either decline the offer or move to the next step.

"If feasible, they would put up a ballot question and let the voters make a decision," he said.

Marcus K. Garner is a reporter for the Peninsula Clarion. R.J. Kelly is the managing editor for the Homer News.