Utilities consider court case for power line money

Posted: Monday, June 02, 2003

ANCHORAGE (AP) Railbelt utilities say they are weighing a lawsuit against the state to recover $28.5 million yanked back from a major power line project planned to link Anchorage and the Kenai Peninsula.

The $28.5 million represents interest accumulated since 1993 on a state construction grant to build the so-called southern intertie. The transmission line, many years in the planning, is the last of the big power projects funded back when Alaska was flush with oil money and looking for investments in industrial infrastructure.

The Legislature, pushed by Gov. Frank Murkowski, this year decided the interest should be used instead to help balance the state budget.

Utilities say the extra state subsidy is important to the 62-mile intertie. They say the project would improve efficiency and reliability and help hold down electric bills. Critics say those benefits have been exaggerated and state money would be better spent elsewhere.

The latest estimate pegs the intertie's cost at $119 million, up from around $100 million last winter.

Including the interest, the state would have paid about $75 million of the total. Consumers would pay the rest.

''We're disappointed that the money was taken from the project,'' said Joe Gallagher, a spokesman for Homer Electric Association, the co-op chairing the six-utility organization planning the intertie.

Earlier this spring, the utilities agreed to prepare a lawsuit in case lobbying efforts failed to hold on to the interest. They contend that the Hickel administration signed a binding agreement in 1993 with utilities to let them bank the $46.8 million construction grant with the Alaska Industrial Development and Export Authority and keep the interest.

No decision has been made about going forward with the lawsuit, utility spokesmen said last week. They are also exploring other possibilities, such as federal aid.

The utilities have not decided whether they would continue with the project if they have to pay more of the cost.

''If it would actually raise rates, is the increase in reliability worth it?'' said Chugach Electric Association spokesman Phil Steyer. ''Each one of the boards will have to determine that.''

Murkowski spokesman John Manly said he is not aware of any plan to provide additional state money to the power line.

''It's pretty clear the state's not going to be able to provide money for these projects indiscriminately anymore,'' he said.

Both Chugach and HEA said a July 15 deadline for utilities to make a decision about participating is likely to slip.

An existing electric intertie runs through the mountains from Kenai to Anchorage. A second transmission line, built up the Cook Inlet coast and across Turnagain Arm by submarine cable, would make it more efficient to transfer power among generating sources and improve reliability, the utilities say.

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