Valley was involved to the hilt with Healy plant
December 25, 2005
Rick Schikora, chairman of Golden Valley Electric Association, and Rep. Mike Kelly, former president and CEO of the utility, recently wrote opinion articles in the News-Miner lambasting the Alaska Industrial Development and Export Authority and held Golden Valley up to be a shining example of good faith and blamelessness for the construction of the experimental coal plant in Healy. This is disingenuous at best.
Usibelli, trying to find a way to sell its waste coal, found out about a federal program and obtained the involvement of Golden Valley, which saw a way for a free power plant. Golden Valley took the lead to make the project a reality, promising lots of jobs for Interior Alaska.
By conspicuous omission, Mike Kelly fails to mention Golden Valley's active role in lobbying for the $140 million of federal funding for the experimental plant, getting the Legislature to give $25 million, playing an active role before the public utility regulators and committing Golden Valley to spending $75 million by buying power from the plant (though the utility never did). Kelly, as Golden Valley's general manager, likely spent more time on this project during its heyday than anything else.
I've got boxes of documentation on this project, much of which demonstrates Golden Valley's active involvement. I'm sure there are records of Kelly's testimony before legislative committees, meetings with our congressional delegation and their staff, regulatory bodies and other Alaska utilities management.
AIDEA was logically assigned to be the state's agent in building the project. AIDEA also provided about $100 million more to pay the remaining cost of construction. It isn't AIDEA's skill set to build power plants. Why didn't the more experienced Golden Valley accept that responsibility since it was such a good deal for the utility?
Golden Valley authorities later blasted the poor construction even though they oversaw the construction and were intimately involved in the design. Not being privy to the legal issues of Golden Valley's current dispute with AIDEA, it does seem odd that Golden Valley, not wanting ownership at anything more than free, wants to prevent AIDEA from operating the plant.
While both Schikora and Kelly said AIDEA is warring against Golden Valley ratepayers, this project to date has spent $300 million of U.S. and state of Alaska funds, and substantially distracted Golden Valley board and management from other activities during the efforts to get this plant funded and constructed. Golden Valley never met its $75 million commitment toward the project--talk about good faith.
Is it just a twist of fate that Golden Valley seems to have so many legal issues? A ratepayer attending any board meeting will always be escorted out during lengthy executive sessions for "legal matters." I would note that ratepayers are not allowed at all at meetings of subsidiaries of Golden Valley, such as Alasconnect or G&T, but that is a subject for another day.
I also suggest that it is a conflict of interest for my state representative, Mike Kelly, to be involved in any official capacity with the experimental plant or the Golden Valley-AIDEA dispute, unless legally subpoenaed to do so.
Though he may still be allowed in executive Golden Valley meetings while "ordinary" members are excluded, he shouldn't be representing Golden Valley anymore. And actively sitting on the budget subcommittee that reviews AIDEA's funding is totally inappropriate. With his retirement from Golden Valley, he also has obvious personal issues with AIDEA.
As one who begged--without success-- for the Golden Valley board not to promote this project, I do hold the board responsible for wasting taxpayers' money. Golden Valley should have the integrity to fess up for at least a tiny share of the responsibility. I'm absolutely disgusted with these two active participants in the project, both then and now, for being so high and mighty as they try to rewrite its history.
As to Golden Valley standing up for its ratepayers, why does the Regulatory Commission of Alaska have to beat it into Golden Valley to reimburse us ratepayers when we have been charged the interim 8 percent increase since 2004 and the final approved rate increase is 2.5 percent less? Is that good faith?
Let's give the news media the charge to provide some investigative and balanced reporting and keep Golden Valley and AIDEA from trying their legal spat through Community Perspective columns.
A side note: Rick Schikora is also Mike Kelly's campaign treasurer. That wasn't disclosed in their columns.
Gary Newman is a 34-year resident of Fairbanks.
November 16, 2005
On Nov. 7, the Alaska Industrial Development and Export Authority, a corporation of the state of Alaska, filed suit against Golden Valley Electric Association for breach of contract, lack of good faith and fair dealing and unjust enrichment over the Healy Clean Coal Project.
AIDEA has been forced to sue the utility in order to prevail in its legal rights as the owner, because Golden Valley has blocked our efforts to restart the state-owned clean coal plant. The Healy plant sits on Golden Valley land, but Golden Valley will give us a lease for the site only if we agree not to operate--or if we allow them control of plant development and operation.
For some two and a half years, AIDEA's board and management have tried working with Golden Valley's board and management to get the Healy plant operational and producing power for the Railbelt. Golden Valley has shown a lack of good faith in its dealings with us, breaching our settlement agreement.
AIDEA did not instigate the Healy Clean Coal Project. Golden Valley, on the other hand, was an early and ardent advocate of the project. But AIDEA owns the plant, so we have a responsibility to Railbelt power consumers who will directly benefit.
AIDEA has authority to sell wholesale power from the plant, but it must be price-competitive. In 1999, when the plant was last operated, it delivered electricity at a cost slightly higher than alternatives. Today, the plant may deliver electricity at less than one-half the cost of alternatives like Golden Valley's new North Pole plant.
The Railbelt faces escalating costs and dwindling supplies of natural gas and must diversify sources of fuel for power. Recent studies show Southcentral Alaska may face shortages of natural gas by 2009, with gas prices expected to rise approximately 20 percent this winter. If the Healy plant was in operation today, it would displace about 9 percent of the natural gas being used for power generation in the Railbelt.
No one knows the price of oil or natural gas in the future, but the gap is projected to widen in favor of this clean coal plant. Utilizing power from the Healy plant could lower the costs of electricity to Railbelt consumers today and far into the future.
Alaska has 50 percent of the nation's coal reserves but only one coal mine in operation at Healy and limited coal-fired power generation in the Railbelt.
The Healy Clean Coal Project represents nearly $300 million of state and federal investment in a facility that many experts have said is capable of safely, reliably, efficiently and cleanly generating 50 megawatts of electricity.
While Golden Valley has been busy stalling the restart of the clean coal plant, others have expressed interest in putting it into operation. This October, AIDEA executed a letter of agreement with Homer Electric Association to take initial steps necessary for plant operation.
Golden Valley claims the plant suffers from faulty design, but they were part of the plant's design team. If the plant is so faulty, why has Golden Valley spent hundreds of thousands of their members' money on consultants and out-of-state lawyers trying to get control of the plant?
AIDEA is not requiring any utility to make any investment in the Healy plant. If we are not requiring someone else to risk investment, or to buy electricity at a higher price than the alternatives, why is Golden Valley opposing our restart of our own plant?
Golden Valley needs to get out of the way and let AIDEA restart this power plant. It is owned by the people of Alaska and it will generate competitively priced electricity for the Railbelt, provide a new market for Alaska coal and create local jobs in Healy.
AIDEA welcomes a full understanding of the Healy Clean Coal Project and support from Railbelt consumers in its effort to restart this vital plant. Background on the plant and the complaint can be found online at www.aidea.org.
Anchorage businessman Mike Barry is chairman of the board of directors of the Alaska Industrial Development and Export Authority.
GVEA acted in good faith
By Rick Schikora
The Alaska Industrial Development and Export Authority has come out with guns blazing, filing a lawsuit against Golden Valley Electric even while we're both supposed to be acting in a spirit of cooperation. Is that in good faith?
The controversy is over the mothballed Healy Clean Coal Project. AIDEA's recent lawsuit against GVEA revolves around a settlement agreement made five years ago. This agreement between AIDEA and Golden Valley was to provide a road map to resolve outstanding issues in order to get the Healy plant operating.
In good faith, GVEA has been following this settlement agreement in attempting to get the failed plant up and running, while observing our primary goal of protecting Golden Valley's members and their existing assets that provide vital power to the Interior. On behalf of its members, GVEA has always advocated for a plant that is safe, reliable, economic and long-term viable.
The settlement agreement gave GVEA three choices: a full retrofit, a partial one, or to elect no further participation. Due to poor retrofit economics in 2003, GVEA finally decided on no further participation.
The governor asked us to continue working with AIDEA to come up with a solution. We did, including several attempts to obtain an air permit for a retrofit--once at the specific request of the governor. AIDEA opposed this application and did so on the day it was to be filed. Is that in good faith?
GVEA continued pursuing necessary congressional funding to cover the costs of retrofitting the plant. We encouraged AIDEA to start the plant but to do so without harming our members' ability to get reliable power. GVEA worked hard on both of these ideas, but AIDEA backed away. Is that in good faith?
GVEA board members and staff met with AIDEA representatives many times throughout 2003 to determine the requirements and costs of operating the Healy plant. AIDEA then requested GVEA make an offer to purchase the plant.
Golden Valley made an offer, for a value determined by a jointly hired, independent expert. That is good faith. The result: AIDEA didn't respond for months and then scoffed at the offer. That's not good faith. Good faith is having a different idea and offering it for discussion and negotiation.
The settlement agreement stipulates that GVEA will provide a ground lease for the Healy Clean Coal Project, since the plant sits on GVEA land. In 2005, AIDEA proposed ground lease terms that would have significantly impacted operations at GVEA's own Healy power plant and crippled GVEA's future growth.
GVEA offered a limited and sensible counterproposal. AIDEA responded with a baseless lawsuit that claims breach of the settlement agreement rather than coming back to the table to continue negotiating. Is that in good faith?
AIDEA claims GVEA has been moving too slowly. Golden Valley has good reason to be very, very careful with what AIDEA wants, says and does--because Golden Valley has an absolute obligation to protect its member-owners. Golden Valley has always made it clear that Interior ratepayers deserve a plant that's safe, reliable, economic and long-term viable. GVEA has consistently worked toward this goal honestly and in good faith.
For any agreement to work, both sides must work together in good faith. Good faith means applying for permits and negotiating lease proposals, working to secure retrofit funding, and even making purchase offers or proposals for AIDEA to start the plant.
GVEA did all of these, both before and after we'd notified AIDEA of no further participation. That is good faith.
Golden Valley has taken these steps to help AIDEA get this plant up and running. An operational plant would provide jobs for the Healy community and 50 megawatts of power that could be a vital component in a reliable and diversified fuel mix for the Interior's future.
AIDEA directors were appointed by the governor to represent the interest of Alaskans, not to sue them in an attempt to cover up for their own mismanaged business decisions. Golden Valley recognizes AIDEA's move for what it is--a misguided attempt to divert attention from its own failures by picking the pockets of the 90,000 men, women and children in Alaska's Interior. AIDEA's tactics amount to a $167 million attack against Alaskans who deserve better.
Golden Valley remains committed to working closely with AIDEA to meet the conditions necessary to make the Healy plant operational. But AIDEA must demonstrate it can focus on serving the interests of Alaska, the Interior and member-owners, not just protect their own political hides. For a change, that would be a show of good faith.
Rick Schikora is chairman of the Golden Valley Electric Association board of directors.