MEA buys generators for Eklutna plant

PALMER — If anyone doubted the seriousness of Matanuska Electric Association’s intent to build a power plant, the utility may have silenced those remaining doubters this week.

On Monday, MEA’s board of directors approved a contracted negotiated between General Manager Joe Griffith and Wartsilla Engines, a Norwegian manufacturer of giant power generators.

“This is momentous,” board member Janet Kincaid said at one point in the meeting. Later, she said, “this puts us on a path.”

The contract, according to MEA’s Chief Financial Officer Donald Zoerb, will have MEA paying Wartsilla $106,357,400. The board first approved the contract on Feb. 12 in a closed-door session but made the decision public Monday

The 355-ton generators are able to run operate using natural gas or, if natural gas supplies are interrupted, diesel fuel. MEA also is buying multiple units that can be powered up or down if a cheaper source of electricity — such as the Susitna hydroelectric dam — comes online.

The plant will produce 171 megawatts of power, enough to cover MEA’s base load but not enough to cover spikes in energy use. The utility is racing against the clock to finish the plant before its contact to buy electricity from Chugach Electric Association expires at the end of 2014.

At Monday’s meeting, votes on the contract were unanimous but board members did have a few questions.

David Glines said he was worried that the $250 million price tag for the Eklutna power plant came with a 10 percent contingency or, as he called it, a “fudge factor.”

“I am fully behind the effort to build the plant and buy the machines up front,” Glines said, but “that’s like a $25 million blank check.”

Zoerb said the fudge factor was there because MEA is still early in the process.

“We’re still working with a ballpark number,” Zoerb said.

Griffith backed him up.

“Normally at this stage of the game, people are dealing with plus or minus 20 percent,” Griffith said.

Glines asked if Griffith could keep the board aware if the price rises too much above that $250 million mark.

“If I have to have change orders of that magnitude I guarantee you will see them,” Griffith said.

Board member Larry DeVilbiss asked whether the $106 million and change to Wartsilla was going to definitely be enough to cover the generators. DeVilbiss said he was worried that since MEA will be paying Wartsilla in Euros, unstable and fluctuating currency prices might drive that cost up.

Zoerb said that MEA was currently working with its financial advisers to put in place a tool to account for those fluctuations by removing the risk while still allowing MEA to benefit if changes in currency prices wind up making the generators cheaper.

Contact Andrew Wellner at andrew.wellner@frontiersman.com or 352-2270.