MEA withdraws from Intertie project, maybe

PALMER -- Matanuska Electric Association's board of directors agreed unanimously to issue a letter to the Southern Intertie Participant's Group stating they'd like to opt out of the intertie project -- sort of.

The letter states MEA would like to opt out if July 15 is found to be the "decision date," but would like to have a continued say in matters if it's found group members acted within the contract when they postponed the decision date to Nov. 21.

The intertie project, a nearly $119-million project at last estimate, would have run a second transmission line from the state's hydroelectric plant at Bradley Lake along the north coast of the Kenai Peninsula, past Point Possession and crossing under the Turnagain Arm at Point Woronzoff. It would have been built by Chugach Electric, one of six Southcentral utilities who are part of the Southern Intertie Participant's Group.

The project relied heavily on state funding, through a $40-million grant from the Alaska Industrial Development and Export Authority that was set aside years ago by the state Legislature, about $27 million in interest collected from that grant during the past several years, and about $25 million left over from another intertie project currently under construction. In building his budget this year, Gov. Frank Murkowski used the interest earnings and leftover funds elsewhere, shrinking IPG's funds back to the $40 million and, for some utilities, calling into question whether the benefits of the project warranted its potential expense.

The IPG contract states the participants must set a decision date. That date was set earlier this year, for July 15. As the date approached, however, Chugach Electric Association requested a teleconference between IPG members to discuss moving the date back to Nov. 21.

"It was offered up by one of the participants that we need to take a look at the cost estimates again," MEA General Manager Wayne Carmony told the board of directors Monday. "Some of the members believe if they delay this project, they might be able to parlay the administration and state to return the $27 million of interest."

Carmony said four other members of the IPG agreed to set the decision date back to Nov. 21. One member, Homer Electric Association, had already made its decision known, with a July 11 written decision requesting to withdraw from the project.

He did not vote in favor of doing so, he said, and has some doubts as to whether it's possible to move the date at all, without approval by all six IPG members.

"It's our belief that date can not be amended in the fashion it was amended today," Carmony said. "As we read the contract, it seems very clear to us that you need a unanimous vote to allow the contract date to slip."

Carmony said that opinion is backed by legal advice MEA obtained about the matter and, as a result, he did not recommend waiting for the Nov. 21 date to issue a decision. Instead, he said, he recommended taking action that appeared to benefit MEA either way.

"It is our recommendation for the board that we withdraw from the contract," Carmony said. "But if Nov. 21 is held as the new date, recognize that our withdrawal will be conditional and we will be required to give notice at or before [Nov. 21]."

That way, Carmony said, if matters substantially change before that date -- cost estimates or project parameters are changed substantially, for example -- MEA is still able to act as a member.

"As long as we have that condition there, if we ever want back in, I'm sure they'll jump at the chance to take a few million out of our pockets," Board member Bill Folsom said.

But MEA spokesman Mike Pauley said Wednesday he's unsure whether changing the decision date will keep IPG's ties to the $40 million now set aside for the project open.

"AIDEA can decide there is insufficient progress on the Southern Intertie project," Pauley said, a decision that may result in the state taking back the money. Although IPG's decision date was moved to allow consideration of other ways to spend those funds, Pauley said AIDEA won't be able to approve or disapprove of new uses for the money.

"If the $40 million is not going to be used for the Southern Intertie, it will go back to the state," Pauley said. The state Legislature, he said, would be responsible for authorizing the money be spent in new ways -- whether simply to offset the state budget or through new projects selected by the IPG utilities. "Any which way you slice it, it's a problem."