Council postpones $4 million energy grant, rejects Fire Island Wind 

The City Council has decided not to accept Chugach Electric Association’s offer to purchase a small percentage of wind power produced by the new Fire Island Wind Energy Project. They made the decision at Monday’s May 14, 2012 regular council meeting. Council members said little, but apparently agreed with City Manager James Hunt, who said he was “very uncomfortable” with the proposal, and recommended that the council not do so. “We literally would be asking the citizens of Seward to write a blank check for participating in this project. I can’t do that,” Hunt said, adding, “It would increase our rate two fold, three fold, we have no idea.”

The Chugach executives who visited the council recently, said that if Seward purchased one-percent of its total from wind power, it would result in .2% increase in a typical customer’s bill, or 28 more cents on a monthly residential bill of $141, according to their estimated price, and average power allocation to Seward Electric of 67,000 MWh, With a 4% wind- power allocation, the maximum allowed, a customer’s typical monthly bill would increase by .8% or $1.12 if their bill today is $141, Chugach officials said. The association expected to break-even in about seven years, and any cost overruns would be absorbed by Fire Island, said Chugach’s Chief Executive Officer Bradley Evans.

The project would move the utility toward its goal of producing 50-percent of its power through renewable energy, and would help Chugach diversify its finances, provide a hedge against price volatility in the gas markets, and take it away from an unhealthy dependence on fuel, he told the council earlier.

But Chugach had not provided enough concrete information about its true costs to ratepayers or its benefits, Hunt argued. Seward’s own minuscule role in the project’s overall power production would be negligible, he said.

In an unscientific, on-line recent poll on the city’s website, resulting in 299 votes, and worded by the City administration, 27.4 percent (or 82 people) voted against the city participating in the project, while another 12.7 percent (38) said they were against participation but would like to city explore other renewable energy options. Meanwhile, 30.4 percent said they would like the city to participate in the project if it resulted in a lower cost on their utility bill, and 8.4 percent said they were all for the project if their utility bill stayed pretty much the same. Surprisingly, another 21.1 percent (63 votes) said they did want the city to participate even if it resulted in a higher utility bill. While the administration believed the results show that the majority of residents were against the idea, Assistant City Manager Ron Long added, “I think we can judge that a significant percentage is interested in pursuing wind if it can be purchased at a reasonable cost. They may be interested in other wind projects, so it’s incumbent on us to continue the search.”

On another electrical issue however, the council did indicate that several of them, and also the general public had a number of important questions about the city accepting a grant worth nearly four million dollars from the Alaska Energy Authority to upgrade and update generation facilities at the Fort Raymond diesel generation plant. They voted to postpone acceptance of the grant until after holding an in-depth work session on the matter May 21st, at 7:00 p.m.. The part that council members Marianna Keil, Vanta Shafer, and Christy Terry apparently took issue with is that the former city management and electric department had added to an existing grant proposal for the facility without their knowledge, calling for a new warehouse and an office for electrical workers on the site.

During Citizens Comments, Seward businessman Tom Tougas went even further. The $4 million grant may seem like free money now, but that is never the case, he said. That money could be better spent making city buildings more energy- efficient, or preventing line-loss in the electrical grid, he said. Going back in history, Tougas said city officials had originally told the public the city had received a $2 million grant for “new generators,” and that the city would match that amount with existing electric department reserves, he said. However, former manager Phillip Oates chose a sole source contract with UNIT Construction that dramatically increased the size of the project, and subsequently informed the council that the cost had risen to $8 million, and that the city would have to sell $5 million of that in revenue bonds to pay for it. At an open house at the site, the public realized that the city had actually purchased 30-year-old rebuilt diesel generators at a discount because they were unwanted as they failed to meet current environmental standards, he said. Calling the now $12 million project “grossly mismanaged,” since its inception, Tougas called for a review of the money already spent on the project, and a community consensus on a long-range plan for the electric department. The backup diesel generation project has caused dramatic increases in the cost of electrical power to the community, and had not improved the reliability of backup power, he said. There have been 49 power outages, and five alone since last council meeting two weeks earlier, according to John Foutz, the City’s Electric Department Head.