MEA gassed over contract

PALMER — When Matanuska Electric Association’s new generation plant goes online on Jan. 1, 2015, it will be fueled by a steady natural gas supply.

A contract approved by the MEA board last week has secured the estimated 7 billion cubic feet of natural gas it will take annually to generate electricity for MEA members, said Kevin Brown, spokesman for the cooperative.

“We’re very pleased and we were confident we could get a good fuel supply agreement from the beginning,” Brown said. “But it’s always good when all these things come together. We’re very happy. As (General Manager) Joe (Griffith) put it last week, he can finally sleep well for the first time in many years.”

That’s because the contract with Hilcorp — the third largest privately held petroleum exploration and production company in the United States — ends years of speculation about how MEA’s electricity generation plant under construction near Eklutna would secure a gas supply. The 10 large Wartsila engines that will power the plant can also run on diesel fuel, “but it was never our intention to run on diesel long-term,” Brown said. “That was just a contingency.”

Those engines can produce up to 170 megawatts of power, Brown said, which will be more than enough to cover MEA members’ needs. At peak consumption last December, MEA ratepayers used 148 megawatts of electricity. Add another 20 megawatts available through hydro projects and MEA will have a capacity of about 190 megawatts when the plant is operational.

The contract is “very significant for a lot of reasons,” said MEA Fuel Supply Manager Tony Izzo, who is also a former president of Enstar Corp. “They all point to the same thing, and that is the market in the Cook Inlet has been very tight and difficult for a number of years.”

That MEA cut a deal that will fuel its plant through March 2018 is great news, Izzo said. That’s partly because with the tight supply of natural gas coming out of Cook Inlet in recent years, to secure a source for nearly four years is promising.

That said, Izzo added that while MEA has secured natural gas to fuel its power plant through March 2018, it’s already looking for other long-term supplies.

“This agreement is just short of four years, so that’s a very positive sign of something longer term, but in the scheme of things, that’s going to go pretty quick,” Izzo said.

MEA isn’t releasing the financial terms of the deal because it still needs approval of the contract from the Regulatory Commission of Alaska, Brown said. The co-op will file for approval of the contract in the next several weeks.

The $304 million generation project is on pace to be ready to be put through its paces in fall 2014 and to come online Jan. 1, 2015, which is when MEA’s current agreement to buy electricity from Chugach Electric Association ends, Brown said.

Brown also said that Hilcorp has natural gas holdings in various places around Alaska, including Cook Inlet and Kenai, and that all the natural gas used at the Eklutna plant will be from Alaska.

“We’re not importing,” he said. “The contract is signed and we’re rocking and rolling. I can’t tell you how good this news is.”

Contact Greg Johnson at 352-2269 or greg.johnson@frontiersman.com.