City moves to the second

phase of Ruth Lake project

Robert Monteith

November 13, 2008.

The City of Petersburg and Petersburg Municipal Power and Light (PMPL) recently submitted a grant application for the second phase of the Ruth Lake hydroelectric project. The grant application, which asks for $2 million from a $50 million Alaska Energy Authority renewable energy grant program, covers a period of five years in which the city will apply for and maintain applications and permits from the Federal Energy Regulatory Committee (FERC). The application also shows a 20% match from the city, which would be funded from the electric utility reserves.

The application also gives some detail on the project, which has been upgraded from a lake tap to include an arch dam at the lake’s natural outlet. City Manager Rich Underkofler said the dam was added to the project after engineers decided there would otherwise be a lack of water. A lake tap is still the planned method of drawing water from the lake, however.

The rest of the grant application takes a regional perspective, showing the benefit of the project to communities beyond Petersburg. It reads, “PMPL acknowledges and agrees that the Ruth Lake Project shall be constructed, owned, and operated for the benefit of the Southern Southeast Alaska Region and will not deny any person benefit of Project facilities.”

It notes that the projected 70 million kWh of electricity could flow as far south as Metlakatla and up to Kake once three intertie projects in various stages of construction are completed. Showing a regional need for power is important as FERC requires there to be a demand before a power plant is built. With Petersburg already drawing cheap hydroelectric power from Tyee Lake, the municipality lacks an immediate need. It may also help convince AEA that the project is a benefit to Alaska.

The project does face some substantial hurdles, however, including environmental concerns. The current Tongass Forest Plan gives Ruth Lake an old growth reserve land designation, which does allow for the construction of utility sites and corridors, but only if no feasible alternatives exist. The grant application acknowledges that it will have to deal with the “feasibility” aspect some time in the future.

When asked about the designation, Underkofler seemed optimistic that it would not infringe on the project. He said that Cascade Creek, LLC, a private company also looking to develop power in Thomas Bay, had yet to have their projects questioned by the Forest Service.

“Cascade Creek is doing studies up there now. They haven’t had much of a problem with the Forest Service, but they are having problems with Fish and Game because there is fish in Swan Lake whereas there isn’t any evidence of so many fish being in Ruth Lake,” he said.

Another hurdle is the substantial cost of construction, which surpasses the $100 million mark. The application shows the City of Petersburg as responsible for 20% of that figure as well. Underkofler said that raising Petersburg’s $20 million would be up to the public as voter approval would be needed for a bond that size. It would be up to the citizens of Petersburg as to whether or not they were willing to incur such a debt for a project that may not immediately benefit them.

That brought up the question of involvement from another public entity, such as the soon to be formed Southeast Alaska Power Agency (SEAPA), a resource pool between Petersburg, Wrangell, and Ketchikan. Should SEAPA become a reality, its financial prospects are promising and reserve funds are anticipated to grow quickly. When asked whether ownership of the Ruth Lake project by SEAPA might be more beneficial, Underkofler said it was something to consider.

“That may be an option if we can convince them to take it over, but that’s a decision that has to be made a couple years from now, I think. That would mitigate some of our exposure, but of course the costs would be the same,” he said.

By cost, Underkofler meant the price of power, which, as a public entity, must be based on the cost of production. “If it’s a publicly owned project, the cost is going to be based on financial cost rather than the marketplace. That’s why we think we have a chance at competing against Cascade Creek,” he said.