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Developer pitches new plan to resurrect downtown power plant

Nathaniel Herz
The Knik Arm power plant sits adjacent to Ship Creek Wednesday, July 10, 2013, along East Whitney Road.
Erik Hill
The dam on Ship Creek attracts visitors as the Knik Arm power plant looms behind Wednesday afternoon, July 10, 2013, along East Whitney Road.
Erik Hill
The Knik Arm power plant was last operated by Chugach Electric Association in the 1980s. .
Erik Hill

Mayor Dan Sullivan is the latest in a series of Anchorage officials to try to reinvent Ship Creek, the industrial waterfront area north of downtown that's the subject of a new master plan released last week.

Part of that plan calls for the resurrection of the dilapidated Knik Arm Power Plant. Architects hired by the city see the plant as a cutting-edge, super-efficient producer of not just electricity but heat, which would be distributed as steam to local businesses like the Alaska Railroad.

The owner of the plant, Randy Hobbs, has found an interested investor, DCO Energy, which sent two representatives to Anchorage this week for meetings, including one with the city's chief financial officer.

But just as past Ship Creek designs have failed to come to fruition, the power plant has also seen several failed schemes to bring it back online that involved similar players, and city officials cautioned that they were not yet sold on the project.

Hobbs said he could only afford the renovation if the city's utility, Municipal Light and Power, agrees to purchase electricity from the rejuvenated plant. And the utility says that will only happen if Hobbs can produce the power at a competitive price, which officials say he hasn't yet proven -- and would require a big investment.

"At the end of the day, it depends on how big his pockets are," said Jim Posey, the utility's general manager. "Because in order to interconnect with us and sell us something, he has to jump through a lot of hoops and spend a lot of money."

The power plant, which was constructed in the 1950s, has been shuttered since 1986. It's now a rusting, boxy hulk that even Hobbs calls a "big eyesore."

Over the past 15 years, he and a business partner, Anchorage developer Marc Marlow, have pitched a series of plans to restart the plant, one of which would have used a fraction of the building for power generation and converted the rest of the space into an IMAX theater, shops, and art galleries.

None have panned out, however, which Hobbs blamed on the city's refusal to buy power at what he called a "reasonable" rate.

"Had we been able to get a better price for our power, this thing would be running today," he said. "But our utility just wasn't willing to do it."

Posey, meanwhile, said that federal and state laws prohibit him from buying power unless the price is cheaper than the utility's current production costs.

After failed partnerships with companies from South Dakota and Chicago, Hobbs this time has linked with DCO Energy, a New Jersey based firm.

DCO Energy has been exploring an investment in the power plant for the last six weeks, its chief business development officer, Joe Jingoli, said in an interview.

He wouldn't comment on the likelihood that the project would go ahead but said that its plan was more viable than past versions because his company was considering installing new equipment in phases, giving it more flexibility.

While the building appears run down, Jingoli said, its value lies in its foundation, which survived the 1964 earthquake.

The plant could produce as much as 32 megawatts of power, according to Hobbs, which would be a significant boost given the city utility's current peak load of around 180 megawatts.

He said that he and DCO Energy are exploring whether they could secure tax breaks for the plant. Hobbs and others pursued tax breaks in the past efforts to restart the power plant.

Sullivan, however, said in an interview that it was "way too early" for his administration to consider tax exemptions or subsidies.

The city is currently awaiting plans from Hobbs and DCO Energy that show how the revitalized plant would integrate with Anchorage's existing power grid.

Hobbs said he would like to have a deal to sell his electricity within the next month.

"That's my wishful thinking, but hopefully we can do that," he said. "Once that's agreed to, then we could move forward pretty quickly."

 

 

 

Reach Nathaniel Herz at nherz@adn.com or 257-4311.

 


By NATHANIEL HERZ
nherz@adn.com