By Tim Bradner
Alaska Journal of Commerce

An effort to restart a mothballed 50-megawatt clean coal power plant at Healy is still mired in lawsuits after 10 years. Meanwhile, Golden Valley Electric Association of Fairbanks says it needs power and hopes to get a complex dispute with the Alaska Industrial Development and Export Authority resolved as soon as possible.

The state agency AIDEA owns the power plant, built in the late 1990s to test new coal-burning technology.

Golden Valley wants the plant operating so it can reduce its need for oil to fire its North Pole generating plant, said utility President Brian Newton.

The utility is becoming more dependent on costly fuel oil for its generators in North Pole, partly because utilities in Southcentral Alaska have less surplus power to send north to Golden Valley over a long-distance electric intertie.

According to information provided by the utility, 45 percent of its power was fueled by oil in 2007, compared to 27 percent in 2006. The amount of power Golden Valley has purchased from Southcentral utilities has declined, from 40 percent of the utility's needs in 2006 to 21 percent in 2007. Power supplied by coal, about 15 percent to 16 percent of needs, has remained constant.

Despite the need for alternative power GVEA's board recently failed to approve an agreement reached between AIDEA and GVEA following a two-year mediation. That leaves the dispute still in court. Mark Schimscheimer, AIDEA's manager for the project, said the mediation has now been terminated.

In Fairbanks, state Superior Court Judge Robert Downes has set June 1, 2009, as a trial date, which delays the plant restart another year unless the state authority and the utility can agree on a settlement. Newton said he hopes it won't take a year, however.

“We're confident we can settle this. We don't want to litigate,” he said.

Schimscheimer said there are no negotiations currently underway but Newton said informal discussions have continued with Ted Leonard, AIDEA's new executive director.

The dispute has a long history. AIDEA and Golden Valley were in a partnership on the plant in the 1990s. The state authority constructed the facility, which was half paid for with federal energy research funds, while Golden Valley operated the plant and agreed to buy the power.

The plant was finished in 1998 and operated for a year under a U.S. Department of Energy contract to test the clean coal technology systems. DOE said the new equipment surpassed goals of reducing air pollution.

In 1999, AIDEA and Golden Valley conducted a commercial operating test and disagreed sharply over the results, with the utility claiming the plant failed to achieve the expected efficiency and safety standards and AIDEA saying the standards were reached.

Golden Valley terminated its operating and power purchase agreement and AIDEA filed suit. In a settlement, the two agreed to work on retrofits to the plant to solve operating problems. The dispute continued, however, with Golden Valley pushing for a $100 million-plus total retrofit, essentially junking the new technology systems, and AIDEA promoting a less costly limited-retrofit aimed at solving problems identified with the equipment in the plant.

Years went by, and the two sides didn't budge. Former Gov. Frank Murkowski intervened, attempting to personally facilitate an agreement, to no avail.

In 2005, AIDEA withdrew from the talks with Golden Valley and signed a contract with Homer Electric to restart and operate the plant and to buy power. But while AIDEA owned the plant Golden Valley owned the land it sat on, and Homer Electric encountered difficulty getting access to the plant.

That prompted AIDEA to file a new lawsuit. Superior Court Judge Downes ordered the parties to mediate the dispute and mediation went on for two more years until an agreement was finally reached March 24 on five issues being disputed. When the proposed settlement was presented to the Fairbanks utility's board, however, the board did not act.

Newton said the board objected to key parts of the proposed agreement, particularly a section that allows operations of the new plant to be separated from a smaller, older power plant that is adjacent to the new plant. The two plants were built to operate together by one operator, and to share key operating systems.

The fact that Homer Electric is now involved complicates the issue, Newton said. Homer has recently offered to essentially share its contract with Golden Valley.

A major concern for AIDEA, meanwhile, is that as time passes key equipment in the plant is becoming obsolete and in need of replacement even though the plant operated for only a short time after construction was finished in 1997.

Schimscheimer said that certain control systems, fans, turbine components, plumbing systems and software are now out of date after 10 years and will need replacement, although the plant's basic clean-coal operating systems are still intact and functional.

A plant restart could be done in 18 months to 24 months, but Schimscheimer said an estimated $15 million to $25 million cost for restarting the plant will undoubtedly be higher because of the equipment obsolesce and the construction cost inflation that has hit the power industry worldwide.

Newton is cautious about the startup cost as well. The $15 million to $25 million is just to fix known deficiencies. Kate Lamal, Golden Valley's vice president for power supply, said many of the problems were in the materials handling equipment that moved coal in and pulled ash out.

Newton said the big unknown is what will happen when the plant starts up after being in mothball status for a decade. How reliable the plant will be is uncertain, and how much power it will actually produce, he said. “It will run, it will break down,” and the plant operator will have to solve the problems, he said.

The most serious problem is that the plant is the only one of its kind and the lead technology provider, TRW, is no longer in the power business. “That means if something big breaks we'll have to do a custom-build,” which is costly, Newton said.

Lamal said not everything in the plant is experimental but many of its key components, such as in the boiler, are innovations and one-of-a-kind.

Newton said he hopes Golden Valley's customers don't get expectations that are too high for the plant.

“If we can operate it for 50 percent of the time we might get a penny or 2 cents a month off our members' bills,” he said.

Golden Valley's residential power rates are now about 22 cents to 23 cents per kilowatt hour.

One big change in Golden Valley's position is that the utility is no longer arguing for a total retrofit of clean coal-burning technology in the plant, and has agreed on restarting the plant with the existing systems, Schimscheimer said.

“No one in the dispute is arguing for pulling out the clean coal systems now,” he said.

Newton agreed with this. With higher prices for fuel, “the world has changed for us,” he said. Previously, Golden Valley was highly sensitive to issues of reliability. But now the utility has additional backup capabilities, mainly in a large battery unit, which gives it flexibility. The urgent need for power from alternative sources is another inducement.

“We're willing to overlook some things that we weren't willing to before,” Newton said.