Utilities discuss future of Kenai intertie project

Posted: Monday, December 16, 2002

ANCHORAGE (AP) -- Representatives of six utilities are meeting in Anchorage this week to determine if the $100 million Kenai Intertie project should go forward.

Three-quarters of the cost would be paid for by the state, using most of what remains in a special energy fund created when plans for a Susitna River hydro project collapsed in 1986.

''The risk if we don't do something is that the Legislature will be looking hard for money this year,'' said Chugach Electric Association general manager Joe Griffith. ''They could pass a law and take the money back. They have an interest and they know the money's out there.''

In Alaska's new age of fiscal uncertainty, the Kenai intertie is a big project left over from the heady days of oil wealth, when the Legislature could afford to make big investments in economic infrastructure.

From its inception, the Kenai intertie has been dogged as well by suggestions that it will do more for the construction industry than for utility ratepayers. The state would do better to spend its money on roads and schools, critics said.

Utility officials say the intertie is a smart investment.

They say a second and larger intertie would save money by allowing them always to draw from the cheapest combination of generators without worrying about transmission bottlenecks. The intertie would also avoid the avalanche-prone mountains and improve reliability by reducing regional power outages, utility officials said.

''All the analyses we've done have shown it makes sense,'' said Chugach's Griffith. ''We need the infrastructure because it's what makes the economy work.''

The six utilities meeting to discuss investing in the intertie are Chugach Electric, Homer Electric Association, Seward Electrical System, Anchorage's Municipal Light & Power, Matanuska Electric Association and the Golden Valley Electric of Fairbanks.

All have expressed an interest in the Kenai project. For construction to begin next year, the utilities must now set a deadline for anyone to back out.

Skeptics continue to challenge the economic justification for spending so much state money.

The average residential electric bill for Chugach will go down 60 cents a month if the new intertie is built, analysts told the utility board last month.

''Let's spend $70 million in public funds to make your bill go down 60 cents a month? Was that supposed to be impressive?'' said Phil Kaluza, who attended the meeting for the Alaska Public Interest Research Group.

Ray Krieg, a former Chugach president who is critical of the current board, said the utilities should have to justify the cost of the entire project, not just their share.

''The utilities look on the state money as free money. It's not free money to the owners of the utility,'' said Krieg. ''The Railbelt has half the state's population. That means half of it's paid for by the ratepayers themselves out of another pocket.''

But utility officials say subsidies to keep down electric rates make sense, just like state subsidies to hold down school taxes.

''Relative to other regions of the state and other sectors of public infrastructure, we're probably the least subsidized here in the Railbelt,'' said Mike Scott, general manager of Anchorage's ML&P. ''That's what the Railbelt Energy Fund was about. From this point on, we're on our own.''

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