May 16, 2013
Thursday PM

The Southeast Alaska Power Agency (SEAPA) is a nonprofit wholesale power provider, not a monopoly as recently alleged. As a nonprofit, revenues are invested back into the Agency's operations and maintenance, and most years, rebates are given back to the member communities, all of which benefit our communities. Revenues are not pocketed by owners or stockholders. Working through contracts with the member communities, including the Power Sales Agreement, is a standard part of a sound business plan, which is evidenced by the Agency’s delivery of reliable wholesale power to the communities of Ketchikan, Petersburg, and Wrangell at the low rate of 6.8 cents/kWh for over 15 years. Our stable wholesale power rate is the lowest in the State of Alaska and has significantly benefited this region. This is "unique" considering costs for almost everything else have gone up significantly over the same period of time.

SEAPA provides an essential bundle of services and shelters Ketchikan, Petersburg, and Wrangell from significant financial risk. It is responsible, not our communities, for the debt service associated with the Swan and Tyee hydro projects, self-insurance of expensive transmission lines (including multiple submarine cable crossings), facility insurance premiums, renewable and replacement projects (over $11 million currently in progress), grant administration (currently $8 million in progress), power scheduling, system voltage stability, telecommunications, water resource management, regional hydro site analysis, project management, major maintenance at Swan and Tyee, transmission line operations and maintenance, load growth analysis and forecasting, system stability analysis, new project integration, regional planning, regulatory permitting, and FERC hydro license compliance. All of these items are proactively managed to maintain a reliable, robust power system, delivering power where it’s needed, when it’s needed.

A recent letter published locally alleges there is a “critical shortage” of hydropower available to Ketchikan because diesel generation had to be utilized this past winter. The fact is - every utility in Southeast Alaska experienced a low hydro year because October 2012 was one of the driest on record. October's precipitation was light (totaling 8.73", or just 45% of the long-term mean of 19.22" as reported by Sitnews 1/10/13). That was compounded by cooler weather this spring that delayed inflows from snow melt. Another factor to consider is that Ketchikan chose to draw off of their own reservoirs last fall while Swan Lake was spilling water over the dam. This was a discretionary risk that had the potential to save Ketchikan ratepayers some dollars. However, the plan fell short when the October rains failed to arrive, resulting in Ketchikan's reservoir levels being lower than normal going into winter. These are the contributing factors for Ketchikan’s use of diesel generation this past winter. Allegations that ratepayers will have to pay an extra $200 every month per household for diesel generation from now on is not fact based. While the public is well served by robust public argument, the best interest of the ratepayers is served when facts are presented and not distorted rhetoric.

SEAPA is currently working on three project enhancements that will help displace diesel generation in the near term. The Swan Lake Reservoir Expansion will increase reservoir storage capacity by 25% and save up to 800,000 gallons of diesel annually. The Tyee Weir project will provide an additional 4000 MWhr’s of energy and the Tyee cooling water modification will add another 1000 MWhr’s of energy annually. Ketchikan's Whitman project, although lacking extensive storage, will also help reduce future diesel generation.

Hydro development is a very costly endeavor that requires a multi-year planning, permitting, design, and construction effort. The ratepayers are the ones that ultimately shoulder the financial burden. Just ask the residents and business owners in Sitka whose rates are anticipated to permanently increase over 65% to cover the cost of the Blue Lake hydro project. It is essential that the next large increment of hydro in our region be carefully selected and methodically developed. SEAPA has been funded by the State to perform detailed hydro site analysis for potential projects throughout our region. This is an essential process that will enable the Agency to make an informed decision when funds are committed to a large capital hydro project. As a community and region, we want to make sure that the project developed is the one that provides the maximum benefit to the ratepayers.

On a parallel path, SEAPA is also engaging potential developers through a Request for Offers (RFO) process that will consider options that may contribute to fuel diversification and meeting anticipated load growth. It is important to note that SEAPA’s RFO process is not restricted to just hydro, and may include other technologies such as wind, geothermal, tidal, liquefied natural gas, etc. Additionally, the RFO process includes a mechanism to bring forward a larger project that could serve future industrial loads. Since other people have indicated differently, they may not understand the full intent of the RFO. There is nothing that prevents issuing an additional RFO down the road if it is needed. Ketchikan, Petersburg, and Wrangell are free to use their technical and financial resources to undertake these types of development activities. However, the reality is that SEAPA is organizing and moving these regional initiatives forward at this time. If SEAPA divests, current project feasibility efforts would stall and new energy development will likely be delayed.

With regard to State funding of new hydro projects, it is naive to think that isolationism is a stronger position than a unified regional approach. Undertaking a study to divest SEAPA sends the wrong message to the Alaska Legislature and the Alaska Energy Authority. Anyone that has followed the State’s budget woes and capital funding forecasts realizes that the money is drying up overnight. The Whitman project, which is a relatively small simple project, has taken over a decade to come to fruition. It required a combination of grants, bonds, and even a last- minute bailout by the Borough, which was very much appreciated, to meet the construction start deadline. This is a good illustration of the funding challenges that must be overcome to successfully develop new hydro projects. Senator Stedman and Representative Wilson have both emphasized the value of speaking with a unified regional voice specifically regarding SEAPA when it comes to funding future projects. Their legislative insight should not be ignored.

It has been stated that Ketchikan will no longer receive power over the Swan-Tyee Intertie (STI) in a few years. This statement is not true and lacks understanding of how our interconnected system and hydro resources work together to benefit all three member utilities. The STI transmission line was commissioned in 2009 and Ketchikan enjoys the benefit of surplus hydro generated at Tyee. The STI will continue to benefit Ketchikan, Petersburg, and Wrangell into the foreseeable future. Additionally, the intertie opens up access to several energy development options to the north. Some of these projects will eventually be developed and the STI is an essential link to transport that power down to Ketchikan. As an example, the Tyee Lake hydroelectric project was constructed to accommodate a third turbine for future expansion. This is a project that will be considered by SEAPA during relicensing and would provide additional hydro resources for Ketchikan, Petersburg, and Wrangell. It is important to realize that SEAPA enhances Ketchikan’s ability to capitalize on potential hydro resources outside of our area. It is much more difficult to develop a project in another utility’s service area. SEAPA helps bridge that gap.

In closing, the group of people pushing for a study to divest SEAPA is very small. Their efforts are misguided and not in the best interest of the ratepayer. SEAPA provides a broad range of essential services that significantly benefit the three member utility communities of Ketchikan, Petersburg, and Wrangell. In order to conduct a thorough and credible assessment, all of the services currently provided by SEAPA would require expert analysis and legal opinion that could cost hundreds of thousands of dollars of “your” money. At the end of the study, any action to divest SEAPA still requires a “unanimous” vote by SEAPA’s board of directors. The votes are not there. We have all experienced studies. Committing funds to costly studies unlikely to reap any benefits is a waste of ratepayers’ money.

Bob Sivertsen
Ketchikan City Council Member & SEAPA Chairman
Ketchikan, Alaska

Representations of fact and opinions in letters are solely those of the author.
The opinions of the author do not represent the opinions of Sitnews.