Unalaska positions to walk away from geothermal agreement

a volcano
Unalaska’s Makushin Volcano (Taryn Lopez/Alaska Volcano Observatory)

Unalaska city officials are looking to walk away from the island’s Makushin Geothermal Project.

A memo released by the city’s administration on Friday advises the city council not to renew the power purchase agreement with Ounalashka Corp./Chena Power LLC, the company behind the geothermal project. That decision would effectively end the city’s four-year participation with OCCP, a joint venture between Unalaska’s Native corporation and the team behind Chena Hot Springs.

The memo from City Manager Bil Homka cites increased costs and missed deadlines among the reasons for not renewing the agreement.

“Changing timelines, an unproven resource, and a road of unknown design standards demonstrate the project is having trouble due to planning and implementation,” Homka said in the memo.

The original agreement slated the project to begin operations in 2023, but difficulties securing investors led OCCP to push the project’s opening to 2027.

Rising interest rates and costs have also pushed the project’s price tag ever higher, prompting OCCP to propose a rate increase.

The city says the new rate represents an extra $6 million a year, increasing the city’s commitment over the 30-year agreement from $480 million to $660 million.

The memo says the city’s power and distribution systems need to be updated, and that the geothermal project “was to be the vehicle to improve our electric service.”

But recent power surges, aging infrastructure and increased demand have put an undue burden on the city’s powerhouse, and the city said it can’t wait any longer to make improvements.

“Much of our equipment needs investment that we’ve put off as we believed the geothermal power solution would be imminent,” Homka said. “The power surges are ongoing … and have caused several lengthy power outages throughout our community.”

The city’s attorney said the City of Unalaska isn’t liable for pulling out of the power purchase agreement because OCCP did not meet its side of the agreement, according to the memo.

The city council is expected to vote during Tuesday’s meeting on whether or not to renew their agreement with the Ounalashka Corp./Chena Power LLC.

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