Homer Electric Association will be “extremely busy” in 2013 finishing projects and preparing the utility for a looming shift that will place it in direct control of area power generation needs, a co-op spokesman said.

For several years HEA has been setting wheels in motion anticipating the severing of a decades-old agreement with Chugach Electric Association at the end of this year. Since the early 1960s, HEA has purchased most of the power local consumers
require — usually 58 megawatts with peaks at about 80 megawatts — from the Anchorage-based CEA.

From 2014 on, the utility will rely on two pieces of infrastructure being completed this year to continue generation — the Nikiski Combined Cycle Conversion project and the Soldotna Combustion Turbine Plant — along with the Bernice Lake power plant purchased from Chugach Electric in 2011 and its 11 megawatt share of power produced at the state-owned Bradley Lake hydroelectric facility. All told the project — labeled Independent Light — will cost about $180 million.

The Nikiski project — a turbine powered by steam produced from exhaust heat generated by an existing gas turbine — is about 85 percent complete, said HEA spokesman Joe Gallagher.

The Soldotna combustion project — a 48-megawatt LM 6000 turbine — is about 65 percent complete and will serve in a back-up capacity along with the Bernice Lake plant.

Both projects, Gallagher wrote, should be completed by late spring of this year.

The Nikiski Combined Cycle plant will be the primary source of HEA’s power starting in 2014, Gallagher said. The plant, which Gallagher said is “very efficient,” will be able to produce up to 18 more megawatts of power without any additional natural gas once completed. That facility already produces 40 megawatts and would require additional gas to gain the maximum output of 80 megawatts.

HEA has secured contracts for gas supply with Hilcorp through March 31, 2016 with two optional one-year extensions.

“The amount of gas consumed is actually less with the improvements at Nikiski,” Gallagher wrote. “HEA will use less gas to produce the (megawatts) required under (Independent Light) than CEA used to produce the required energy prior to (Independent Light), which will assist in lengthening the time until Cook Inlet gas is consumed.”

Gallagher said the utility is not currently injecting or withdrawing gas from the new Cook Inlet Natural Gas Storage Alaska facility but plans to start injecting at the facility in late 2013. The contract and CINGSA should stave off HEA’s worries about looming area natural gas shortages for the time being, Gallagher wrote.

“It does not appear that HEA’s size was a disadvantage when we negotiated that aforementioned gas fuel contract with Hilcorp; to the contrary, our smaller size may have been an advantage given current rates of production in the Cook Inlet gas field,” he wrote.

From a consumer perspective, HEA making its own generation is “a wash” with continuing a contract with Chugach Electric, Gallagher wrote. Given the costs will be about the same, any increase or decrease members will see on their bills would be driven by the price of natural gas.

One main advantage of the switch is that new jobs will be created by HEA owning its own generation sources. In all about 20 new positions will be created to run the new projects and Bernice Lake.

The utility will also be in complete control of how it meets consumer needs, giving managers added flexibility.

“HEA will be in charge of our power production options and will be able to do what is best for the co-op members on the Peninsula rather than considering what is best for Anchorage,” Gallagher wrote.

The Independent Light Project will also help the utility’s progress on adding renewable energy sources to its portfolio, Gallagher said. Renewable projects the utility is already exploring include hydroelectric power at Grant Lake and tidal energy from Cook Inlet.

“(Our previous contract) put us in a little bit of a bind because we couldn’t build and operate our own renewable projects because again we were under contract to purchase all our power with Chugach,” he said.

Brian Smith is city editor for the Peninsula Clarion.