AIDEA, Golden Valley take next step in Healy plant sale
The Alaska Industrial Development and Export Authority’s board approved a draft agreement Feb. 13 to sell the mothballed Healy Clean Coal Project to Golden Valley Electric Association in Fairbanks. Golden Valley and AIDEA staff have worked for several weeks to flesh out the sales agreement, the authority’s executive director, Ted Leonard, told the board.
The deal was announced in general terms on Jan. 9. Golden Valley would purchase the plant from AIDEA for $50 million, an amount the authority would finance, and have the plant operating no later than 2014. Homer Electric Association will buy half of the electricity produced by the plant.
Critics of the sale showed up at the Feb. 13 board meeting to voice concerns, including a ratepayers group in the Matanuska-Susitna Borough and the Alaska Center for the Environment.
Pat Galvin, the state revenue commissioner and AIDEA’s board chair, said the draft agreement includes more details on what was generally agreed on earlier, and sets the stage for future steps.
"This is a sequential deal. We refine the steps as we go forward," Galvin said at the meeting. "What we have accomplished in this step is Golden Valley’s unconditional obligation to make payments regardless of the operations of the plant," whether it is running or not.
"We also establish when commercial operations begin - it is in 2014 - and we establish a definition of what constitutes commercial operations," he said.
Galvin said there are still a number of issues to be worked out, including the approval by the Regulatory Commission of Alaska of the power sales agreements for Golden Valley and Homer Electric to buy power from the plant.
Excluding the RCA approval, which is outside the control of the parties involved, the "drop-dead" deadline for agreement on all parts of the deal by AIDEA, Golden Valley and Homer Electric, is Aug. 1, Galvin said.
Leonard said items still being worked on include the actual purchase agreement, the schedule for the transfer of assets from the authority to Golden Valley, the agreement for AIDEA to loan Golden Valley $50 million to buy the plant, and a $45 million line of credit for Golden Valley to pay startup costs, which AIDEA will also back.
Golden Valley has established a subsidiary company to own and operate the plant, Tri-Valley Electric Cooperative.
At the authority’s board meeting, Tim Leach of the MEA Ratepayers Alliance, a Matanuska-Susitna region utility watchdog group, said members of the group were concerned that costs for the plant restart could be high and could affect rates for electricity among several utilities, including the Matanuska Electric Association service area.
"There are a number of questions about this plan that have not been answered, including the risks mentioned by Golden Valley Chairman Nordmark during the January press conference on the agreement," Leach said. "Nordmark mentioned that the risks would be shared between Golden Valley and HEA but he didn’t describe what the risks were. There are also questions about the validity of permits for the plant that were issued in the 1990s."
In response, Galvin acknowledged that there were complex issues yet to be worked out.
Alli Harvey, representing the Alaska Center for the Environment, asked AIDEA to retain a third-party consultant to assess the startup costs.
"There are many ratepayers who consider the Healy plant a bad deal because costs get passed down to ratepayers," Harvey told the authority’s board.
The issue of permits held by the plant that were secured by AIDEA in the 1990s is a sensitive one, particularly the air quality permit. If new permits are required, it could substantially delay the restart and raise costs.
Kate Lamal, vice president for power supply for Golden Valley, has said the utility believes all permits for the plant are valid. Environmental groups are checking into this, however, according to Chris Hall, of the Sierra Club’s Alaska chapter, who also attended the Jan. 13 meeting.
The question of the plant’s permits may turn on the degree to which the plant has to be modified after the restart. The plant was built in 1996 and 1997, and started operations in 1998 for a year to test new-technology coal combustion and air pollution control equipment for the U.S. Department of Energy, which had paid for a good share of construction of the plant.
When the equipment tests for the DOE were completed in 1999, the plant went into a 90-day commercial operations test during which plant operator Golden Valley noted problems, mainly in the system that feeds coal to the plant.
A dispute developed between Golden Valley and AIDEA that has dragged on for a decade, until the agreement announced Jan. 9.
Golden Valley said last month that it intends to stick with the new-technology systems in the plant when the facility is restarted rather than attempting a major retrofit with more conventional equipment.
The utility now operates a smaller 25-megawatt coal power plant that is adjacent to the larger 50-megawatt facility.