CHUGACH CONSUMERS NOTE:   The 0.9 cents per kwh rate quoted by Mr. McCutcheon below [*] appears to be an error.  Susitna ended in the mid 1980's and prices for electricity at that time were in the 5 cent per kwh range.   


-----Original Message-----
From: jerry mccutcheon []
Sent: Monday, May 02, 2005 3:20 PM
Subject: Gas replacement,,

Susitna came up in a 60 second discussion with Mayor on gas.

Susitna Hydro Electric Project. Below was sent 2 weeks ago. It will only cost you $100,000 to play in the game. And if you jump on it now you can probably get the legislature to fund it this session out of the funds set aside for Susitna. This will save gas for home and commercial building use and avoid having to replace the gas turbines. Billions from what ML&P and CEA told the legislature. We are going to construct Susitna now or later. If we had constructed Susitna last time around Cook Inlet and the railbelt would not be in quite the gas predicament it is in today. / Jerry

Ps. Begich it you want a future cash machine for the Muni the City should consider going it alone. It is there and bond able. But once the others in the railbelt think you are going run off with prize they will howl to get in.

Chairman Kohring and members of the House Oil and Gas Committee HB 254

Since you are using railbelt energy funds, which were set-aside for the Susitna Hydroelectric Project, you may want to look at Susitna again in light of the cost of power and new construction technology. A lot has changed since Susitna was shelved. The railbelt is now facing the need for $1 billion to $2 billion in expenditures over the next 10 years to replace aging electrical generating equipment according testimony given to the legislature in the last week. Last year ML&P stated in their newsletter that the railbelt would need for $5 billion by 2030.

When Susitna was shelved electricity was $0.009* a KW, Kilowatt, that is not a misprint, that is nine tenths of a cent; we heated with electricity. Today, electricity is $0.12 KW or 13 times the cost and rising rapidly with no end in sight. Eklutna hydroelectric produces power a $0.003 KW and Bradley Lake $0.033 KW and will continue to do so for the next 400 or 500 years. Chugach Electric Association sells power to Matanuska Electric Association for $0.06 KW; that was price a year ago. Susitna was saddled with a 7% inflation rate and tax-free bond rate of 10% yet Susitna came in at $0.05 KW. However, $0.05 KW when the1980’s price was $0.009 was more than Susitna could sustain. A year ago I ran the numbers on Susitna and they came out to $0.04 KW. $0.04 vs $0.06 is Susitna is a winner; then consider all the billions that are going to have be put into replacing the gas driven generation equipment and the effect it will have on future rates there is no real comparison. ! Lastly add in the rising cost gas from less than dollar to $6 an mcf or whatever Henry Hub prices will be.

When Susitna was shelved a big truck was 20 tons, today a big truck is 150 tons, the size that Usibelli uses at the Healy River Coal mine. And even bigger trucks run 450 to 500 tons that is 9 railroad cars; it boggles the mind. It must take an elevator to get to the cab. The size of the equipment is important because the Watana Dam, the larger of the two dams, is an earth fill dam requiring 92 million yards of rock and gravel. Engineers say it probably cheaper to construct Susitna today than it was back when Susitna was shelved because of the improvement in equipment and technology despite inflation.

When Susitna was shelved all the studies had been done, all FERC’s, Federal Energy Regulatory Commission, questions had been answered and $158 million had been spent on environmental and engineering studies, some say it was only $130 million, whatever. Just one library, which held some of records, had 60 feet of shelf space devoted to Susitna. Preliminary design of the dams was underway. It would be 33 months from the time Susitna was resubmitted to FERC until the license to construct was issued by FERC and that was under Carter Administration; under a Bush Administration probably less because everything is there. Those studies are such quality that they are still in use today not only by Alaskans but also elsewhere in the world. They set an international standard for quality.

$250,000 needs to be appropriated to Legislative Council for the Alaska Corps of Engineers to restudy the finances of Susitna in light of todays and tomorrows projected costs of electricity and today’s construction costs. The CORPS did the studies on Susitna until the State took it over. The CORPS also object to the State overstating the cost of Susitna. The State’s greenies, who were in charge the Susitna studies, deliberately over stated the cost by 25%.

The cost of Bradley Lake was also over deliberately estimated by 25% but it was a small project and the legislature went ahead anyway. Bradley Lake came in 25% under budget.

These funds need to appropriated now because the railbelt generating equipment is at the end of its economic life. If Susitna were constructed the gas fired equipment could be put on standby and not replaced. We do not know if there will be gas for power generation and if there is at what cost. The mostly likely scenario is that no gasline will be found to be feasible not even a bullet line even with Enstar doing its best from North Slope down to Cook Inlet. And that the current Kenai LNG plant will be reverse to accept foreign LNG at $5 an mcf in today’s dollars. Revenue told ANGDA, last summer, that foreign LNG could be landed at $3.50 when pointing out the hopeless of a gasline to Cook Inlet. I pointed to Revenue that the same LNG could be delivered to Chicago for $3.73 and hopeless of the Alcan gasline.

The first $100,000 will buy a restudy of the costs and projected cost of power; it will not be in a form to be published. If every thing is a ‘go’ then the remaining $150,000 would be used to formalize and publish the report for FERC and restart Susitna. The sooner Susitna comes on line the more gas will be saved for home and commercial building use. With a little bit of luck there will be enough on going discoveries of gas in Cook Inlet to sustain home and commercial building use. If Cook Inlet has to go on oil it will cost Anchorage homeowners at least $1 billion dollars for conversions to oil. Sooner or later Susitna will be constructed; if constructed now Susitna will produce more revenue for the State in the long run than the Permanent Fund.

Some of you are already trying to get into the Permanent Fund when Alaska has lots of oil and at $40 to $50 a barrel. Look how easy it was to roll the Senate. What will Alaska do 25 years from now when the oil will be mostly gone? And so will the Permanent Fund if some of you have your way. After the bonds are paid off, Susitna provide the State with $400 million to $500 million, in todays dollars, a year for the next 500 years.

Jerry McCutcheon Box 101838 Anchorage, AK 99510

Ps. For those of you who are concerned about the fish. Only 1% of the fish that enter the Susitna spawn in the Susitna. Only 5% of those that spawn in tributaries of the Susitna could be affect by the rise and fall of the Susitna, as they are today by the natural fluctuation. The Susitna river flow goes from the Watana Dam to Devil Canyon Dam, a concrete shell, where the flow could be regulated so that there was no real fluctuation. Susitna is an exceptionally environmentally clean project.

PPs. The Devil Canyon Dam would create sufficient demand for cement that the limestone deposits in MatSu or the Denali Borough could be opened. There is more than enough demand with in railbelt and North Slope to sustain the cement plant once opened. If limestone from MatSu was use then coal from Wishbone Hill would be needed.

PPPs. Steel, rebar etc, for the Devil Canyon Dam could be manufactured here. Which by the way is a stand alone bankable project, dam or no dam, and has been for the last 30 years. All the studies are done. The Bankers just did not like proposer. The steel mill was bankable; the proposer was not, for very good reasons. The railbelt steel market today is far bigger than it was thirty years ago and there have been remarkable improvements in technology. So a steel mill is more bankable than ever. Then you have a 60 % increase in the price of steel in the last year. Oh well, it always amazes me how politicians run around searching for something to back to show progress and bypass the pedestrian projects for some pie in the sky project that can not make passed the ‘back of envelope’ test. This has turned into an epistle and it past time for me quit.