ANCHORAGE (AP) The Homer Electric Association has dropped its support for a new intertie transmission line between Kenai and Anchorage in what could be a lethal blow to the $119 million project.
The powerline is the last of the big energy projects still on the state's drawing board from the oil-rich days of the 1980s. The state-subsidized project, also known as the Southern Intertie, kept the backing of most Railbelt utilities until recently.
The project ran into fiscal trouble this spring. A state decision to take back $28.5 million in interest built up on a 1993 legislative construction grant meant more of the cost would have to be shouldered by the utilities.
Loss of the interest funds was a factor in the Homer utility's decision to withdraw from the project. The utility board voted unanimously at a meeting Tuesday, said utility spokesman Joe Gallagher.
HEA also cited escalating cost estimates, up from $100 million a few months ago, and recent power-generation improvements on the Kenai Peninsula, which reduced the local benefits of the line.
HEA provides power to Kenai, Soldotna and Homer. The co-op was expected to pay between 11 and 15 percent of the private share of the project.
Chugach Electric Association will now have to decide whether to press forward with the project, picking up some of HEA's costs, said Chugach spokesman Phil Steyer. Anchorage's Municipal Light and Power is also weighing the project, but Palmer's Matanuska Electric Association has already expressed misgivings.
If the project were killed, the $46.8 million state grant from 1993 would be returned to the state's general fund minus about $7 million spent on engineering, route selection and environmental planning.
''That would be too bad,'' said Eric Yould, executive director of the Alaska Rural Electric Co-op Association. ''That would leave quite a bit of stranded generation on the Kenai Peninsula.''
An existing electric intertie runs up through the mountains from Kenai to Anchorage. But it's not big enough to carry all the power generated by the Bradley Lake hydro project near Homer and other sources on the Kenai Peninsula.
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