City Of Unalaska Revises Geothermal Power Purchase Agreement, Pushes Back OCCP Financing Deadline

Mar 31, 2021

Due to delays caused by the COVID-19 pandemic, OCCP officials say they will be unable to get financing commitments by the original deadline of this June, and requested an extension until next year.
Credit Givey Kochanowski / U.S. Department of Energy

Ounalashka Corp./Chena Power, LLC (OCCP) will have an extra year to obtain funding for their geothermal power project at Makushin Volcano. 

The Unalaska City Council voted 4 to 1 in favor of pushing the deadline to June of next year at a special meeting Tuesday night.

"The proposed amendment shifts some of the deadlines, but really does not change the underlying agreement," said City Manager Erin Reinders.

In August of last year, the city entered into a 30-year Power Purchase Agreement with the corporation to develop the geothermal resource located about 13 miles from Unalaska's current power grid — a step OCCP required in order to move forward and obtain funding.

But due to delays caused by the COVID-19 pandemic, OCCP officials say they will be unable to get financing commitments by the original deadline of this June, and requested an extension until next year.

OCCP had initially planned to seek funding for the Makushin Geothermal Project through a U.S. Department of Energy loan. However, due to multi-million-dollar financing fees and shifts in personnel at the federal department, the company decided to seek funding elsewhere, according to a memorandum from City Attorney Brooks Chandler. OCCP is currently looking into options through the U.S. Department of Agriculture and two Alaska agencies. 

Councilor Dave Gregory said he was in favor of granting OCCP the extension and continuing with the PPA. 

"I think it's pretty important for the future of this community to get this power plant built, and provide green power to the community," Gregory said. "The purpose of the extension, as I understand it, will give OCCP the opportunity to explore different financing options."

Thom Bell was the only councilor present at Tuesday's meeting to vote against the extension. He said he's in favor of geothermal energy production at Makushin, but that he's concerned about the delay in financing commitments. 

"It's my contention that at this point, both sides need to take a step back and reevaluate the money side of this endeavor," Bell said. "Building the power plant is really the easy part of this project, getting the financing is proving to be much more difficult."

Bell continued to say he's concerned the city of about 4,500 residents is agreeing to buy more power than it currently sells. 

The PPA requires the city purchase up to 100 million kilowatt hours of electricity per year for the next 30 years. The city currently sells less than half of that and doesn't have any agreements in place for someone else to purchase that excess power.

"It is true OCCP assumes all the risk until the lights are turned on," Bell said. "Once power starts flowing, then that risk shifts to the ratepayers and the City of Unalaska to pay for that power."

Reinders agreed that unless Unalaska's fish processing plants — who currently produce their own energy — or other developers committed to relocating to the island join the city's grid, the additional cost will fall on the ratepayers. 

"It's unlikely that we'll be able to successfully market and sell significantly more power to help recoup the cost of that difference until more specifics are known about the geothermal project itself, and frankly, until it's actually been completed," she said.

One member of the public wrote a letter asking the council to not approve OCCP's request, and consider cancelling the geothermal project altogether.

OCCP anticipates starting road construction out to Makushin next month. They will continue to look for funding opportunities in the meantime.

The company estimates the project will begin operations in the final quarter of 2023.