Utility may withdraw from intertie project

PALMER -- Members of the Matanuska Electric Association board were expected to opt out of a more-than-$100 million Southern Intertie project Monday, a decision they likely won't be alone in making.

MEA staff briefed board members at a July 8 workshop to discuss the project. The deadline for withdrawing from the project is 5 p.m. today, and those who don't withdraw shoulder the cost of construction and maintenance to put a beefed-up transmission line from the state's hydroelectric plant at Bradley Lake across the inlet and link the Southcentral utilities. Mounting project costs, they said, along with an unexpected siphoning off of nearly half the money set aside for the project and little overall benefit to the utility mean the project has few benefits for the utility.

"I don't know how to make a silk purse out of this one, guys," MEA General Manager Wayne Carmony told the board members as the staff wrapped up their presentation about the project. Chief Financial Officer Don Zoerb told board members it was difficult to estimate any clear, financially quantifiable benefits as a result of the project. The most significant project benefits would come through increased reliability -- but Zoerb said if the projected increase in reliability comes to fruition, the cost benefit over the life of the project would likely add up to only about $1 million.

MEA is not the only company considering pulling its support of the program. Homer Electric Association was expected to make its decision to withdraw from the project Monday and, according to a statement from Seward Electric Association manager Dave Calvert to the city's general manager Phil Shealy, Seward may pull its support from the project as well.

"…The participating utilities would have to fund approximately $71 million, of which Seward's share would be at least $1 million," the statement says. "There would not be that much in benefits for the City of Seward. Further, other Railbelt Utilities have already indicated their intention to opt out of the project, which would increase Seward's share of the project and the related cost … Utilities can opt out of the project up to and including [July 15] without penalty. I recommend that Seward exercise that option."

But simply opting out, at least for MEA, may not mean it won't have to share the cost of construction and maintenance on the project. MEA purchases its power from Chugach Electric Association, the utility who would oversee the construction of the project -- and even lay the underwater portion of the transmission line -- and that cooperative has made no move to withdraw from the project. It's possible, Carmony told board members, that Chugach could request to build the project alone, and argue through the Regulatory Commission of Alaska for an increase in overall rates, or rates to its wholesale customers.

The MEA board was scheduled to make its final decision on whether or not to opt out of the project at its Monday board meeting. Although it's unlikely the board's decision will differ from staff's recommendation, Chugach had, last week, requested that the decision date be moved back and other suggestions may come forward as a result of that request.

"Now, what appears to be the driving force of the project is, we don't want to spend the money, but we don't want to lose the money," Carmony said. "I believe the utilities could probably get together and come up with a better project."