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Transitional Leadership at Chugach Electric Association

‘Seamless’ change between Evans and Thibert


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Chugach Electric Association CEO Lee Thibert at the utilty’s Southcentral Power Plant in Anchorage.

© Judy Patrick judypatrickphotography.com

In mid-July, the state’s largest electric cooperative, Chugach Electric Association, Inc., quietly handed off the leadership reins of the company from Brad Evans, who has led the cooperative since 2007, to Lee Thibert, who has held various roles at Chugach Electric for nearly thirty years.

Thibert says he has been part of the decision-making process at Chugach for many years, and shares similar goals with Evans.

“One of the advantages of the transition process was that Brad and I had very similar strategies and goals going forward. I don’t think you’ll see a significant change, and it should be seamless,” Thibert says.

Transitions can be challenging for large, board-run cooperatives, often surrounded by political intrigue. Evans and Thibert say they worked hard to make this transition a smooth one, for the benefit of Chugach members and for the company itself.

“We’ve been proactively working on succession planning since I’ve been CEO. That has multiple benefits for the organization. It promotes good will among the workforce that there is a plan, that you can rise to the top internally; and, two, it gives us a stable outlook going forward,” Evans says.

In his twenty-nine years with Chugach, Thibert has led nearly every department of the cooperative, from line operations to production, engineering, power control, safety, and more. Thibert started as manager of line operations and quickly moved to overall operations director, managing all line and substation operations. In the mid-1990s he became executive manager of the operating divisions, directing the efforts of all power control, power generation and transmission, and distribution power delivery. In the late 1990s, with the potential for deregulation on the horizon, Thibert reorganized the operating divisions, placing the power generation assets under a separate manager. In the early 2000s, he became general manager of distribution, which included distribution operations and customer service. After several years in that role, he took a brief break to work with consulting engineers Dryden and LaRue, Inc., and then returned to Chugach to become senior vice president of strategic planning.

 

Changing Times, Changing Relationships

In the last few years, Chugach’s role in the overall makeup of electric utilities in the Railbelt, between Fairbanks and Homer, has changed significantly. Formerly the wholesale power supplier for several utilities along the Railbelt, Chugach is now primarily a fully-integrated retail power supplier instead.

That change happened mostly under Evans’ leadership, and it was not always an easy process. As a vice president, Thibert took over the strategic planning and business relations with Chugach’s wholesale customers.

“We were losing them; they said they were going to be building their own generation,” he says.

Some of the Railbelt utilities, particularly Chugach and neighboring electric cooperative Matanuska Electric Association, had disagreements over tenets of the wholesale power contracts between the two companies. The power contracts and the amount of say in Chugach’s decision-making process that wholesale power buyers had were sources of rancor between the two companies for years.

“There were issues with the wholesale customers not wanting to buy power from Chugach, so there was an uncertain future,” Evans says. “We made a plan around what we thought was the safest lane to be in for the future, and that led to the construction of the Southcentral Power Project and a partnership with ML&P [Municipal Light and Power].”

The Southcentral Power Project is a $360 million new gas-fired power plant Chugach and ML&P built next to Chugach’s headquarters near Minnesota Drive and International Airport Road in Anchorage. Completed in February 2013, the 200.2 megawatt power plant includes three natural gas-fired turbines and a steam turbine, each coupled with a generator. In combined-cycle mode, Chugach says, the 850-degree exhaust from the gas turbines makes steam to power the steam turbine, producing extra electricity with no additional fuel cost.

Chugach owns 70 percent of the project, and ML&P owns 30 percent. Under the agreement terms between the two utilities, Chugach operates and dispatches power from the plant, and the two utilities pay for fuel and expenses and receive output based on their ownership percentages.

In his role as strategic planner, Thibert helped craft the agreements that resulted in the power plant partnership between Chugach and ML&P.

Other changes were afoot as well. Chugach previously had long-term natural gas contracts in place, but in the 2000s it became clear that without further investment in Cook Inlet gas production, natural gas stores were dwindling.

“It was a very tense time for Chugach. Over 80 percent of Chugach’s electric power generation comes from burning natural gas as a fuel. We were looking at all types of different options,” Thibert says.

 

Lee Thibert, CEO Chugach Electric Association

© Judy Patrick judypatrickphotography.com

 

Thibert and Evans, along with other members of a working group that included ML&P and ENSTAR Natural Gas Company, worked with now-US Senator Dan Sullivan, then the commissioner of the Alaska Department of Natural Resources, to encourage investment in Cook Inlet. Through that partnership, Hilcorp invested in Cook Inlet leases held by Marathon and Chevron and production ramped up.

ENSTAR and Chugach also worked together to develop the Cook Inlet Natural Gas Storage Alaska project, or CINGSA, a gas storage facility located in Kenai capable of holding 11 billion cubic feet of gas in a depleted natural gas reservoir. The $161.4 million facility, of which Chugach is an

anchor tenant, began service in spring 2012.

“We’ve used that to great advantage,” Evans says. “It helps offset us having to buy any peaking gas, so we can buy our gas through base contracts.”

Thibert was instrumental in negotiating Chugach’s CINGSA involvement. After CINGSA and the Southcentral Power Project were in place, Homer Electric and Matanuska Electric brought their own power plants online and Thibert helped the two cooperatives transition to being power producers.

“I worked with Homer and MEA … [by] providing additional services to them, making sure that when their generation units came online, that it was really seamless,” he says.

Thibert also led “a pretty intensive effort” to acquire partial ownership of the Beluga River natural gas field in Cook Inlet. The $152 million purchase took ownership of ConocoPhillips’ one-third interest in the field. As a partner with ML&P, Chugach owns 30 percent of ConocoPhillips’ ownership share, and ML&P owns 70 percent.

The two utilities expect the joint purchase to supply “a significant portion of the utilities’ gas needs over the next ten years, while saving the residents of Anchorage millions during the same period,” according to a press release about the purchase.

 

Evans’ Departure

Evans, a Fairbanks native, has been with Chugach Electric most recently since 2001, but had worked for Chugach from 1985 until the mid-1990s when he returned home to Fairbanks to work for Golden Valley Electric Association, Inc. He returned to Chugach to help the company bring a weighty re-build of three natural gas-fired generators at its Beluga plant back under budget and get the project done on the scheduled timeline. He returned as vice-president of power supply and, in late 2007, became interim CEO when outgoing CEO Bill Stewart was abruptly voted out by the Chugach Board of Directors. About five months later, he was appointed CEO permanently.

“It was a challenge—there’s always a challenge in transition,” Evans says. “I think the board’s expectations were pretty high. The challenge was to work on the major concerns for Chugach going forward, in addition to taking over as CEO.”

Evans says at the time, a lot of Chugach’s debt from past projects was coming due—roughly $270 million was due between 2011 and 2012. He restructured the debt and helped steer the company toward a more stable financial future. He said he’s pleased with the projects he’s helped Chugach tackle, from the Southcentral Power Project to CINGSA and the Beluga River gas field, to incorporating Fire Island wind power into the company’s energy profile.

“We were planning for an uncertain future with renewables. We feel like we came out with the right choice there, and the board supported that,” he says.

Now, he says, it’s time to work on some of the projects he put off for so many years. His “closet of things that you want to do but keep putting off,” as he calls it, is over-full and needs attention. He’s been involved in the community throughout his career, from coaching hockey to supporting the exchange student program of AFS-USA (formerly American Field Services), and he supports his wife’s active volunteer schedule.

“I don’t want to go out there and put myself on overload, but I certainly will entertain being more involved in all aspects of the community,” he says.

 

Focusing on the Future

Thibert, meanwhile, is adjusting to the day-to-day stream of duties of a CEO.

“On the internal side, we have a theme of really empowering our future. [We do that by] using top-notch leaders, using new technology, focusing on what we think is important—safety, reliability, service to our members, and environmental stewardship. And we maintain our core values: trust, integrity, and being a good neighbor any place we can,” Thibert says.

Externally, Thibert says his focus will be working together with other utilities on the future needs of the Railbelt.

“When all the utilities broke apart and did their own generation, you lose the economies of scale that come with doing things as one. Now we’re trying to unite and operate the system as one under a structure that is acceptable to all who choose to participate,” he says.

That might happen by operating a combined transmission system, which allows for all the utilities’ generation to be dispatched or operated in the most efficient manner possible. Power pooling, looking at economic dispatch options, and finding the best way to integrate renewable energy throughout the Railbelt are also matters that the Railbelt utilities need to address, he says.

And while other utilities might have bristled when Chugach suggested plans to work together in the past, Thibert says he believes a new spirit of cooperation may be on the horizon.

“Now, we really have an even playing field. Everyone is a vertically integrated facility, with generation, transmission, and distribution,” he says. “Everybody has the same leverage, the same influence, so I think they will start to see that it makes sense to work together. We’re seeing it already in bilateral transactions, and I think you will see it even more in power pooling and transmission integration.”

He hopes the cooperative spirit will result in ironing out a few details, like setting a universal transmission rate, so renewable energy can more easily be purchased throughout the Railbelt.

“If Golden Valley wanted to buy Fire Island power and get it to Fairbanks, they would have to pay a tariff on our transmission system, another tariff to the Intertie, and another tariff to get it to their transmission system. If there was a universal transmission rate where everyone paid based on a load, on a postage-stamp basis, then it’s not based on transactions,” he says.

Power pooling would also make using renewables easier, Thibert says.

“If you’re in a [power] pool, then it doesn’t really matter whose wind it is, it will flow into the system when it’s needed. That’s the beauty of the power pool—you bring it in when you need it and settle the economics by predetermined protocols after the fact. Right now, we end up curtailing some of our wind because it’s not needed [at the time it’s produced].”

The largest issue facing Chugach, however, is the state’s economy.

“The biggest challenge Chugach and the other utilities face is the Alaska economy,” he says. “It’s hard to manage an organization that has a shrinking load profile. Ten years ago, each consumer used about 750 kWh a month and today it’s down to about 600 kWh. We do have concerns with a shrinking economy and what that would do to rates. We’re trying to make efficiencies in our system and make improvements.”

 

 

This article first appeared in the September 2016 print edition of Alaska Business Monthly.

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