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Legislature to decide fate of Blue Lake loan

Sitka’s last chance to avoid another electric rate hike is in the hands of the Alaska House of Representatives this weekend. The city wants access to a low-cost loan to finance the final portion of the Blue Lake hydroelectric project. But first it needs the approval of the state legislature.

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Sitka has to raise about $18.5 million to complete the Blue Lake dam expansion. Originally, the city had hoped to get the money as a grant from the state, but with tighter budgets this year, that didn’t happen.

So the city turned to Plan B: a low-cost loan from the Alaska Energy Authority. Such a loan requires approval from the Alaska State Legislature. And that has proven hard to get.

In a last effort, Sitka Senator Bert Stedman added language authorizing the loan to House Bill 297, which is otherwise unrelated to the Blue Lake project. That bill, with the Blue Lake language, passed the Senate unanimously on Thursday night.

It now goes back to the House, where its future is uncertain, and time is short. The 90-day legislative session is scheduled to end on Sunday.

City Administrator Mark Gorman said that whether or not the city gets the loan will have a direct impact on Sitka rate-payers. If the city doesn’t get access to the AEA loan, it will instead issue a municipal bond, which will cost more over the long term.

“The rates are more advantageous to us,” Gorman said. “If we get the AEA loan, we will probably not have to pass on another rate increase to the citizens of Sitka.”

“There is a rate increase scheduled for July of 10%,” he added. “That will have to go into effect. But if we do not get this loan from the AEA, we will probably have to do a second one.”

Even if the language authorizing the loan makes it through the legislature, the loan isn’t a sure thing. The city would then have to negotiate potential loan terms and amount with the Alaska Energy Authority.

 

 

 

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