Homer Electric Association's board of directors unanimously approved a motion to withdraw its support for the Southern Intertie project Tuesday, citing economic concerns and reduced need as primary reasons.
"Over the years, changes in the state, in the Kenai Peninsula and in utilities means it just doesn't make sense for the cooperative to participate in the intertie," said HEA spokesperson Joe Gallagher.
The board's decision was based on an internal cost analysis that indicated the project is not economically viable under present conditions.
In March, Gov. Frank Mur-kowski's budget pulled $27 million in interest accrued on grant money the Alaska Industrial Development and Export Authority allotted for the project in 1993. The move left HEA and the other utilities in the Intertie Participants Group (Chugach Electric, Golden Valley Electric, Matanuska Electric, Anchorage Municipal Light and Power and the city of Seward) $46.8 million in state funding to build the electronic transmission line that would run from Anchor-age across Turnagain Arm to the Kenai Peninsula.
Board President David Carey said the increasing cost of the project, estimated at $119 million, and the new state budget spurred HEA's decision. HEA has a 12-percent stake in the project, he said, and would have to contribute a significant amount to begin work.
"We've watched the cost of the intertie go up," said Carey, who also is Soldotna's mayor. "Once the interest was gone, it would mean Homer Electric would have to put out $4 million to $5 million."
He said those and future costs would result in financial burdens on cooperative members the board did not want to impose.
"It isn't reasonable for us to ask for a rate increase from our consumers over the next 10 years," Carey said.
The intertie was envisioned to deliver additional power to Railbelt communities south of Anchorage through submarine electric lines that would be less susceptible to potential energy interruption from natural disasters like avalanches. HEA already purchases 81 percent of its energy from Chugach Electric, regarded as more than enough for peninsula users, as part of a 30-year contract that ends in 2014.
However, HEA has two peninsula-based energy sources with the Bradley Lake hydroelectric plant producing 120 megawatts per year and the Nikiski Cogeneration facility, which came online in 2001, generating 39 megawatts.
Carey said the peninsula power plants suspend the cooperative's immediate needs for the power the intertie would deliver, although he admitted that if HEA was cut off from its Chugach supply, there would be some power loss. And he said developing for future needs still was an issue.
"We have a great deal more power than we need at this time," Carey said. "And if we had an avalanche or if something terrible happened, we would not be stranded. Thirty or 40 years from now, there's going to need to be more development."
Carey said he expected an official resolution to appear before the board at its July 8 meeting, in time to give notice to the Intertie Participants Group by the July 15 "drop dead" date to officially withdraw.
He said he expects the cooperatives decision to be unpopular with the other utilities involved because it could conceivably halt the project that would traverse much of HEA's service area.
"We absolutely do anticipate that HEA will catch some flak," Carey said. "But we felt it was correct for our consumers for us to withdraw our support."
