Homer Alaska - Business

The purchase is conditional on the Regulatory Commission of Alaska agreeing to amortize the purchase price over several years, HEA's Joe Gallagher said in a statement. That means that the cost of the plant would get spread out over several years, so that current members aren't stuck with the full cost immediately.

If the RCA approves that request, which was filed July 21, the utility will own the 69.9 megawatt plant as of Dec. 31, 2011.

Gallagher said in an email that Homer Electric will take over operations of the plant with a superintendent and two operators, but Chugach Electric will pay HEA for the ability to continue using the capacity until December 2013. Once HEA's agreement to buy power from Chugach ends in December 2013, HEA will be able to use the plant for its own needs and could sell capacity or energy from Bernice Lake to any interested utility, Gallagher said.

The purchase is part of HEA's effort to move to producing its own power by 2013.

The association's original plan called for adding two turbines at its Soldotna facility. This purchase will replace one of those turbines.

Gallagher said the utility will save about $15 million by purchasing the plant instead, because the cost for two turbines was about $80 million, while the cost for one turbine plus the plant is about $65 million.

That turbine, which will provide about 48 megawatts of generation capacity, will come online by the end of 2013, said Gallagher.

In addition to penciling out better financially, the plant is a better option than a second turbine because it is a proven asset and comes with less risk, said Gallagher.

"It is an older plant, but it will be very well suited to meeting the needs of Homer Electric as the source of reserve capacity as it will not be run on a regular basis," Gallagher said via email. "The Bernice Lake Plant and one turbine at Soldotna is the best overall choice for providing HEA with the reserve requirements necessary."

The other components of the Independent Light effort are HEA's update to the Nikiski combined cycle conversion project and the utility's share of the Bradley Lake hydro project.