Utilities question cost of Kenai intertie

Posted: Sunday, January 05, 2003

ANCHORAGE (AP) -- Railbelt utilities have decided to take another look at the cost of building a second Anchorage-Kenai power intertie.

Utilities also voted Thursday to seek more state funds for the project before making a final decision in July on whether to go ahead.

The utilities remained generally upbeat about the long-planned power line, for which $70 million in state funds is already earmarked. The exception was Matanuska Electric Association, which said it wants more time to study the possible costs and benefits to its customers.

However, the utilities agreed Thursday to seek a new independent estimate of the cost of the power line, which had been pegged at around $100 million. Allowing for inflation since the last studies, MEA argued, the project might cost $142 million.

The cost, beyond whatever the state contributes, would be borne by ratepayers in Southcentral Alaska.

The utilities have argued that lower generation costs and slightly lower electric bills would result from more efficient power distribution made possible by the second line to Kenai. But studies have said the benefit to consumers could vanish if the project's price is significantly higher than $100 million.

The utilities' 5-1 vote Thursday included an agreement to seek an additional $30 million this year from the Legislature for the so-called southern intertie, the Anchorage Daily News reported.

Such an appropriation would drain the last money from the Railbelt Energy Fund. The fund was created after planning for an expensive two-dam hydroelectric project on the Susitna River collapsed in 1986.

The request might also revive the debate of a decade ago about the value of investing state money in Alaska's electric infrastructure.

''We could build a second highway to the Kenai Peninsula, and there'd likely be a benefit to that too. But you have to ask what's the value compared to other things we could do with the same money,'' said Mike Pauley, a spokesman for MEA, which voted against the resolution.

The southern intertie has been planned since the mid-1980s. The Legislature appropriated $46.8 million for the project in 1993. With interest, that money has grown to $70 million.

Some utility officials have expressed fear that the cash-strapped Legislature may take the money back.

But Chugach Electric Association, the lead utility on the project, said Thursday the $70 million commitment is secure. ''That decision was made 10 years ago, and we're moving forward,'' Chugach spokesman Phil Steyer said.

The resolution calls for obtaining an updated cost estimate by April 15.

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