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City to borrow up to $45M for Blue Lake, rates could go up

Blue Lake overflows its spillway in September. The city plans to borrow up to $45 million to help fund a project that will raise the dam’s height by 83 feet. Construction is already happening. (Photo: Ted Laufenberg)

Electric bills in Sitka could go up this summer. The Assembly advanced a plan last night to raise electric rates for all customers by 15-percent. The boost is to help the city pay for the millions it’s borrowing to fund the Blue Lake dam.

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It will take another meeting before the July 1 rate increase is set in stone. But the Assembly is unlikely to back down.

Click here to see the new rate structure (PDF file).

That’s because the preliminary vote on the new rates came just a few agenda items after another big financial decision. And this one is final: Assembly members unanimously agreed to borrow up to $45 million in bonds to fund the Blue Lake project.

“This is sort of like the part of the wedding where they say, ‘Speak now or forever hold your peace,’” said Matt Donahoe, a Sitka resident who testified before the vote. “If there was any way to hold off on this, and just survive with surcharges until a couple years until additional funding climate is better, then God I wish you guys would do that, because I don’t see any money coming out of this legislature.”

The city has asked state lawmakers for a $43 million grant separate from what it plans to borrow. The request was made shortly after the city learned construction of the Blue Lake dam expansion would cost nearly twice what outside engineers had estimated.

But with Sitka’s senator no longer seated on the finance committee, there’s not a lot of optimism that the Legislature will write the big check.

Officially, the decision to borrow more money and the decision to advance the electric rate hikes were two separate agenda items. But the two are woven together. When Sitka resident Valerie Nelson got up to testify about the additional bonds, her primary concern was with residents’ electric bills.

“People are hurting now, especially the ones that can’t control the amount of electricity they consume,” Nelson said. “You’ve already generated an extra $600,000 a year by adding that $15 surcharge on. People that can’t afford to stay will make exit plans.”

Still, there were members of the public to support the bond issuance. Resident Andrew Thoms says it’s a trade-off.

“I think it’s very unfortunate that the rates are going to go up, but if we think about the issue long-term, if we didn’t build this project and didn’t expand our hydroelectric facility, our rates would go up much more because we would have to pay for electricity using diesel generation,” he said.

Thoms is also executive director of the Sitka Conservation Society. The organization has been a big proponent of Sitka’s two hydro projects, and has long promoted them as an environmentally safe form of hydro power. That’s in contrast to some projects in the lower 48, which harmed salmon runs on major rivers in the Pacific Northwest. Federal policy doesn’t consider hydro power a renewable resource. Thoms suggested that the energy focused on protesting higher electric rates might be better aimed at federal and state lawmakers.

“Along with the rate increase we need to be advocating to our elected officials that they give the support for these types of projects, and that we continue to advocate to the state government not to cut corporate oil taxes, but that they invest in renewable energy facilities in our community, like this Blue Lake hydro project,” he said.

Electric Department superintendent Chris Brewton expressed the same frustration with Washington, D.C.

“The Department of Energy budget last year budgeted $3.8 billion for renewable energy projects for this country,” Brewton said, adding that “$25 million was identified for hydro. That’s a travesty.”

Brewton says he hears the concerns of people who are worried about increasing bills. But he also repeatedly told the Assembly that in his opinion the Blue Lake dam expansion was a worthwhile investment – one that would cost a lot up front, but save on expensive diesel fuel into the future.

The city burned more than a million gallons of diesel last year to supplement Blue Lake and Green Lake’s hydro project.

An extra charge was tacked onto bills to help pay down the cost of the fuel. Which brings us back to Matt Donahoe’s statement from the beginning of the story. Remember, he said Sitka should hold off and let residents pay a diesel surcharge, at least until it seems likelier that Sitka will get more funding for the project? Brewton said his staff explored the idea.

“We are looking at everything we can do to reduce costs in the project,” Brewton said. “We have no reason to believe that by delaying it, we’d do anything other than increase the overall cost of the project.”

Assembly members acknowledged they have little choice but to move forward. The Blue Lake project has been in the works for the better part of a decade now. The city has spent millions of dollars already. Every day, crews travel up Blue Lake Road to dig and blast and build.

It’s not going to get any cheaper, city officials say, and so for now it is full speed ahead, toward either a big check from the state, millions more in borrowed dollars, or a combination of both.

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