Anchorage Daily News

A group of Alaska power companies led by Chugach Electric Association is banding together to build a more than $300 million gas-fired power plant near the Anchorage airport.

A slightly different group of utilities is joining together for power generation down the road, they announced Friday.

Missing from both mixes: Matanuska Electric Association, which wants to build its own natural gas-fired plant. It now buys its power from Chugach Electric.

It's been decades since electric companies worked together on such a project.

"For years the utilities have been battling each other" in court or before state regulators, Elizabeth Vazquez, chairwoman of Chugach Electric's board, said in announcing the two initiatives.

The goal is to keep electricity rates stable for customers though they can't make any guarantees, she and others said. Virtually all electricity customers in the Railbelt from Homer to Fairbanks will be affected, Vazquez said.

"What benefits one, benefits all," Dave Carey, chairman of Homer Electric Association, said at Friday's news conference.

Chugach and Homer electric associations and Anchorage's Municipal Light & Power say they plan to build a 260-megawatt power plant on Chugach property in an industrial area on Electron Road just south of International Airport Road. That would be one of the largest power plants in Alaska.

Separately, Chugach, Homer and Fairbanks-based Golden Valley Electric Association are looking into creating a unified system to generate and transmit power. The local utilities would remain separate companies to distribute the power to homes, businesses and other customers.

Municipal Light & Power isn't part of the latter group yet, but expects to become a partner, said Jim Posey, general manager of the city-owned utility that serves downtown and Midtown. The Interior's Golden Valley isn't part of the new power plant project.

The new plant would cost an estimated $300 million to $400 million. Because it would be more efficient to operate than some old power-generation units that would be retired, it would save up to $35 million a year in fuel costs, according to Chugach. It would include two gas turbines and a third turbine that runs off the steam byproduct.

"It's like buying a more fuel-efficient car," said Phil Steyer, spokesman for Chugach, which serves South and East Anchorage and sells power to other Railbelt electric companies.

The power utilities say they expect it to open by 2012.

An analysis of the economics and an analysis of the site that included preliminary engineering have been done, said Chugach acting chief executive Bradley Evans.

The power plant will need construction permits from the city and an air-pollution permit from the state, he said.

That shouldn't be a problem because the new plant will be more efficient, he said. It won't even look like an old-style industrial power plant, he said. "It's not going to have a big tower."

But isn't there a natural gas shortage in Southcentral Alaska? Agrium shuttered its Nikiski fertilizer plant in December because it had problems getting enough natural gas.

Evans said Chugach is negotiating contracts for the gas, and said there is enough in Cook Inlet area gas fields.

Posey said ML&P is a part owner of the Beluga gas field and noted that two new wells will be drilled there to bring up supplies.

So how do the utilities intend to pay for the new power plant?

Vazquez said each partner must come up with its own financing.

What's the source of the money from Chugach?

"It will be financed," she said.

Asked to be more specific, she said "probably through bonds."

Revenue bonds?

"Some type of bond. I mean revenue bond has a very specific meaning," she said.

At this point, there's no plan to tap the state's Railbelt Energy Fund, Steyer said. There's $100 million in the fund, said Pam Green, state comptroller. That fund exists to help fund energy projects in the region.

Chugach and ML&P had been considering building separate power plants but decided to join forces, along with Homer, because it's more efficient to build one big one, Steyer said. The proposed power plant will be about the same size as ML&P's off the Glenn Highway but smaller than Chugach's Beluga plant across Cook Inlet, the biggest power plant in Alaska.

Chugach and ML&P officials also said they still are looking into renewable energy projects, including wind power from Fire Island and a hydroelectric project on the Susitna River.

There are two other electric utilities in the Railbelt, MEA and one operated by the city of Seward. Officials at Friday's briefing said they hope they'll join in.

MEA and Chugach have had especially fierce battles in recent years. Vazquez said she and Chugach vice chair Uwe Kalenka made a pitch to the MEA board just a few weeks ago to start working together.

Tuckerman Babcock, MEA assistant general manager, said if the utilities are serious about creating a single entity to generate power and transmit it to substations "that would be great." But past efforts have fizzled, he said.

MEA took a different approach and asked the Regulatory Commission of Alaska to force the utilities to work together on power pooling, he said.

Find Lisa Demer online at adn.com/contact/ldemer or call 257-4390. Daily News business editor Bill White contributed to this article.

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