By Margaret Bauman
Alaska Journal of Commerce

Fifteen years after establishing its first hydroelectric facility, the city of King Cove is on a mission to bring a companion hydro facility online by 2011 in an effort to hold down power costs and sell energy to a fish processing plant critical to the local economy.

More than half of the 4 million kilowatt hours needed to power King Cove, located on the south side of the Alaska Peninsula, comes from the Delta Creek hydroelectric facility, and now the community wants another one, said city administrator Gary Hennigh.

Recently completed feasibility studies indicate that Waterfall Creek, a parallel but separate water source, has the potential to add another 1.4 million kilowatt hours a year to the city's renewable energy output, he said.

"Our mandate," Hennigh said in a written release announcing the plan, "is to be the exception to conventional wisdom, which says that power costs can only go up from here. King Cove is always interested in whatever it can do to improve the quality of life for its citizens and accumulating some carbon credits along the way."

The savings King Cove, population 750, has experienced from using hydroelectric power in place of diesel fuel have been significant, Hennigh said. The yearly fuel savings, in fact, pay the annual debt service on the remaining $1.4 million debt the city has for the $5.7 million Delta Creek facility.

In addition, the city's new diesel power plant, which came on line in 2008, financed mainly by grants, has a waste heat component has saved the Aleutians East Borough 19,439 gallons of diesel fuel in one year, a cost savings of $63,452 for operation of its King Cove school.

The city's old diesel power plant, built in the early 1980s, was upgraded once in the early 1990s, but once a decision was made to build a new power plant, city officials decided to locate the new facility near the location where the city's new school would be built.

In 2008, the first year the new school was in operation, the borough spent $107,154 on 31,439 gallons of diesel fuel to heat the building. Then the city began piping waste heat from the diesel plant into the school building, reducing the school's diesel fuel consumption.

The new King Cove health clinic, operated by the Agdaagux Tribe of King Cove, is about a football field away from the new school location, so the city is evaluating the prospect of piping over to it waste heat from a new diesel waste heat facility, should one be developed, Hennigh said.

Meanwhile, the Aleutians East Borough School District is happy and the city is also eying the possibility of a future community swimming pool on nearby land, heated by waste energy, Hennigh said.

King Cove's current 24 cents per kilowatt-hour of power cost makes the community the cheapest, single-site utility, per kilowatt hour cost, out of the more than 160 communities that receive power cost equalization subsidies, he said.

"This does not provide any special bragging rights in our opinion, but it does show a focus and set of accomplishments, which we are proud of and encourage other communities to use us as a model," Hennigh said.

The new Waterfall Creek hydro facility would share the same five-mile transmission line into downtown King Cove that was constructed for the Delta Creek facility. The same powerhouse would be used too, but expanded to include an additional turbine and generator, Hennigh said.

This additional hydro facility should give King Cove the ability to produce more than 3.5 million kilowatt hours annually from both hydro plants, or 80 percent to 85 percent of the community's annual power needs.

And from April through October, when high water flows produce a surplus of power, the city plans to sell the surplus power to Peter Pan Seafoods, a major, year-round cannery that contributes to the local economy. Officials with Peter Pan Seafoods confirmed that talks have progressed to the point where the fish processor has asked for a business proposal on purchasing that power.

"I have not had the time to get together yet with the economic advisors I need to talk to lay out a business proposal, but the pieces are coming together," Hennigh said, whose goal is to start construction on the new project in 2010.

The estimated cost of the new Waterfall Creek hydroelectric facility is $3.7 million. The city of King Cove is advocating a funding partnership with the Denali Commission, the state of Alaska and the Rural Development sector of the U.S. Department of Agriculture. The city's goal is to receive up to $2.6 million of the costs from these agencies, with the city being responsible for $1.1 million of the cost.

"Our experience, as a leading small-town, Bush community, clearly indicates that funding agencies like working with communities that actively participate, thus there is real 'ownership' and long-term maintenance and operation commitments that preserve the value of the infrastructure," Hennigh said.

The Alaska Energy Authority recently committed to funding the preliminary engineering design and permitting for the second hydro facility. Hennigh said the city feels the project could go into construction as early as 2010 and be completed in 2011.

While King Cove has no firm commitments to date for capital constructions costs, city officials are counting on their past success in working with federal and state agencies to get the funding.

"If we can get one-third of it from the AEA and one-third from the other agencies, the city will come up with the other third," said King Cove Mayor Ernest Weiss. "Borrowing money for another hydro project is a good investment. It will more than pay for the debt service."

The potential power sales agreement with Peter Pan Seafoods would also be a significant additional revenue stream, he said.

"If we can convince Peter Pan that we can enter into a business proposal with them and sell them up to 200 kilowatt hours a day, year-round, that will make the financial ability of this new hydro project fall into place very nicely."

Margaret Bauman can be reached at margie.bauman.@alaskajournal.com.