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Rural village tussles with Native Corporation over wind power

St. Paul Island accused of holding residents hostage to diesel power

Posted: Sunday, August 03, 2008

ST. PAUL ISLAND - St. Paul Island is perfect for wind power.

The wind blows a lot on the Bering Sea island, averaging 22 mph - just about right for producing wind power energy for St. Paul residents being crushed by the rising price of diesel fuel.

While the island has three wind turbines, the island's 450 residents have no wind power. That's because the city and TDX Corp., the Native corporation that wants to bring wind power to residents through subsidiary TDX Power, Inc., have been going round and round about the issue.

The problem is that the city wants to retain ownership of the electric power plant and have TDX sell it wind-generated power. TDX prefers to buy and operate the utility.

David Fratis, 61, who pays $242 for 50 gallons of fuel, enough to heat his home for about three weeks, accuses city officials of holding residents hostage to expensive diesel power. On top of diesel, Fratis' electricity bill is over $110 a month.

"We are economically in danger," Fratis said. "We are in crisis."

Ten years ago, St. Paul - 750 air miles west of Anchorage - had nearly twice as many residents. But Fratis says young people are leaving the island because they can't afford to make St. Paul their home.

Ron Philemonoff, chairman and CEO of TDX Corp., agrees. He blames the exodus on rising costs, particularly the price of fuel and electricity. Not only are residents facing those skyrocketing costs, but a trip to the grocery store on the mostly Aleut and Eskimo island can be a shocker. A gallon of milk costs over $8. A loaf of bread is $5. Diesel sells for nearly $5.50 a gallon.

"No one could foresee oil being $140 a barrel," Philemonoff said.

About 10 years ago, TDX put up one wind turbine, a small turbine by today's standards where turbines are growing with energy needs, but the right size for providing power and heat to TDX facilities on the island, including the airport, an industrial complex and a 90-bed hotel.

The wind system was equipped with two diesel backups. It cost about $1 million. While the system was expensive, it enabled the Native corporation to sever itself from the city power grid with power to spare, Philemonoff said.

TDX chose a high-penetration hybrid system that gets maximum use out of the wind, increasing the potential for getting off diesel. When the system went in, electricity was 34 cents a kilowatt. Now it is 73 cents.

The system paid for itself in seven years, Philemonoff said.

It wasn't long before St. Paul residents, many of them TDX shareholders, were clamoring for wind power, Philemonoff said.

For two years, TDX talked with the city about wind power, he said.

The two sides hired a consultant who came up with several options. The consultant said the most beneficial and cost-savings option for residents would be a one owner/one operator system, Philemonoff said.

City manager Linda Snow said the consultant also said if there wasn't a one owner/one operator system, one option would be for the city to forge a long-term purchase agreement with TDX to buy wind power.

"The stumbling block right now is that TDX is refusing to sell the city power," Snow said.

Philemonoff said there is a reason why TDX wants to own and operate the system - the savings to customers would be far greater, about 20 cents a kilowatt versus 2 cents a kilowatt. If the savings was just 2 cents, residents would blame TDX, he said.

Snow said those figures don't mean much because the price of buying the power plant are not factored in. TDX estimates the price at between $1 million and $2 million. The city says it is at least $3 million.

Philemonoff said between loans and grants TDX would have no problem funding the rest of the project.

TDX last September put up two more wind turbines, reconditioned ones from a wind farm in Germany that cost about $300,000 each. The turbines stand 150 feet tall with blades spanning 60 feet. They don't spin even when the wind is blowing at its energy-producing best.

Snow wonders why TDX put up more turbines without first coming to an agreement with the city?

"They are spending a lot of money to have wind turbines sitting out there," she said.

She wonders how TDX can talk about buying the utility if it has yet to make the city an offer?

"There has been nothing for the city to consider," she said.

Besides, the city has outstanding loans on the power plant, including a $6 million loan for bulk fuel tanks. While some loans can be assumed, the loans for the fuel tanks can't, she said.

"Our loans wouldn't even allow us to sell that power plant," Snow said. "In order for us to make our loans payments we need to sell power."

Snow said the city makes about $300,000 a year from selling power, but she said Philemonoff's claim that the profits are used to pad the public works department with employees and pay for some city services is "unequivocally false."

She said utility profits are put in a reserve fund, now totaling about $5 million. The fund is there to support the continued operation of the plant, she said.

"We are not in it for the money. We are in it to provide electrical service to the village," Snow said.

Both sides have a common goal - to reduce the cost of power on the island.

But Snow said TDX is going about it the wrong way. She said TDX is behind a ballot initiative that is an attempt to force the city to sell the utility.

In October, voters will be asked if they favor ordering the utility to stop selling energy to residents and support renewable energy instead.

"What are we supposed to do, turn off the lights?" Snow asked.

Philemonoff expects voters will pass the initiative.

"The voters are screaming for it," he said.



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