FAIRBANKS — Golden Valley Electric Association expects to finish the purchase of a dormant Healy power plant today, a step that puts the Interior utility on pace to restart the coal-fired plant by early 2015.
GVEA President Cory Borgeson, who spoke at the Greater Fairbanks Chamber of Commerce weekly luncheon on Tuesday, said the utility will acquire the Healy No. 2 coal-fired plant from the Alaska Industrial Development and Export Authority for about $44 million. The deal doesn’t include rising costs to restart the 50-megawatt plant and add federally mandated pollution controls.
Borgeson said GVEA is still estimating expenses for retrofitting and restarting the facility, which was formerly known as the Healy Clean Coal Plant. But discussions with vendors working on the project have left utility officials resigned to a big cost hike.
Borgeson said estimates are as high as $88 million to install pollution controls for the project, which would be roughly double the amount that was estimated a year ago. In addition, about $20 million more will be needed to restart the plant, which hasn’t operated since 2000.
GVEA plans to finance both the acquisition of Healy No. 2 and the funds needed to upgrade it. Borgeson said he didn’t believe the added expenses will have a significant increase in customer rates, since those funds will be repaid over the course of several decades.
The anti-pollution equipment being installed at the power plant was required as part of a deal negotiated with the Environmental Protection Agency in October 2012. The EPA demanded additional pollution controls, in part, because of the plant’s proximity to Denali National Park and Preserve.
“It’s going to make it expensive, but it’s going to make it as clean as coal can be,” Borgeson said.
Borgeson said the cost of building a similar plant would be at least $300 million — about twice GVEA’s anticipated overall costs — if it were built today.
“Put in that perspective, we believe we’re in pretty good shape,” he said.
Purchasing the plant from AIDEA, a state-owned economic-development corporation, is the latest step in a long saga for the Healy facility. It was built by the state in the mid-1990s, using an experimental process to burn low-grade coal, but operated only intermittently in 1998 and 1999 before being shuttered due to safety and reliability concerns.
Addressing those problems became worth the expense when the price of oil spiked nearly a decade ago. GVEA’s efforts to upgrade the plant will allow it to replace some of its expensive oil generation with much cheaper coal power.
With an new contract to purchase gas-generated electricity from Southcentral, the new plant won’t necessarily result in a huge savings. It will, however, provide a transition when that contract expires in 2015.
“That will certainly stabilize our rates,” Borgeson said.
Contact staff writer Jeff Richardson at 459-7518. Follow him on Twitter: @FDNMbusiness.