GVEA Finds Alternative to Flint Hills for Powerplant Fuel; Small Rate Hike Likely

May 12, 2014

Officials with Golden Valley Electric Association have reached a deal with the parent company of Petro Star refinery in North Pole to buy fuel for a North Pole power plant that won’t be available from the Flint Hills Resources refinery when it shuts down in two weeks. GVEA ratepayers may see the impact of that deal on their monthly bills sometime after July 1st.


GVEA's North Pole Extension power plant.
Credit GVEA

GVEA President and CEO Cory Borgeson says the deal with Petro Star parent company Arctic Slope Regional Corporation will translate into about a 3 percent increase in the utility’s fuel bills. And Borgeson says ratepayers could see a hike of about that amount on the fuel allowance portion of their monthly bills after GVEA conducts its next quarterly fuel-cost adjustment, which takes effect July 1st.

Or maybe not, he says, if other factors cancel out the fuel-price hike.

“If oil prices drop, it could potentially go down,” Borgeson said. “If we’re able to get more hydro power, or we get power from the Anchorage area, and it’s less expensive, then it adjusts.”

The fuel that GVEA wants to buy from Petro Star is a variation of the naphtha that the utility was buying from the Flint Hills Resources. Borgeson says the naphtha blend that GVEA will be buying from PetroStar will cost a bit more. And because the blend packs a bit less of a punch than regular naphtha, in terms of its BTUs per unit, GVEA will have to use a bit more of the blend to generate the same amount of electricity.

The co-op uses the naphtha for its 60-megawatt North Pole Expansion plant. It burned about 23 million gallons of the stuff last year, at a cost of about $61 million, about a third of GVEA’s annual fuel bill.

Borgeson says the Expansion plant plays two important roles for GVEA.

“It’s a very efficient unit, and it’s also important to us because it allows us to follow the wind,” he said.

The expansion-plant generator is turned by a jet engine, so it can be rapidly accelerated and decelerated. That’s essential for backing up the intermittent wind power the utility gets from its 25-megawatt Eva Creek wind farm and a privately owned 2-megawatt wind farm in Delta Junction.

“We can respond to the wind with this turbine,” Borgeson said. “When the wind picks up, and all of a sudden the wind turbines are producing 25 megawatts of power, we can pull back the throttle and bring ’er down 25 megawatts and save fuel in the meantime.”

Borgeson says the GVEA board will review the contract in its Monday meeting. He’s optimistic the co-op board and Petro Star board both will approve the deal, and that the naphtha purchases will begin sometime soon after July 1st.