State-owned power plant billed utilities for flights that didn’t happen, audit finds

A state-owned hydroelectric project near Homer billed utilities, including Anchorage's Municipal Light and Power, tens of thousands of dollars last year for flights that never happened, a recent audit found — but the project managers say that's just part of doing business.

Through a contract, the managers of the Bradley Lake Hydroelectric Project across Kachemak Bay from Homer paid fixed monthly payments to fly workers out to the plant, according to the city of Anchorage's internal audit department. Only about half the flight hours paid for by the contract actually were used, which auditors characterized as an ineffective use of the contract.

Situated at the base of a mountain across from Kachemak Bay, the Bradley Lake Hydroelectric Project is in a "very hostile environment" for pilots, said Brad Janorschke, the general manager of the Homer Electric Association and the chair of the statewide committee of utilities that manages the project.

Between safety issues and weather cancellations, the only way to get someone to do the flights is to pay for a contract even when flights don't happen, Janorschke said.

"I understand the concerns for someone that doesn't know the background," Janorschke said. But, he said: "It's not like we're going to go and get any aviation provider."

At the same time, Janorschke said his organization already planned to re-evaluate the contract when it expires at the end of 2018.

"We were already working on this," Janorschke said.

The Anchorage Assembly's audit committee, chaired by Assemblyman Fred Dyson, pulled out the audit for further discussion. Among other things, the audit recommended reconsidering guaranteed monthly payments to a flight operator.

The Bradley Lake Hydroelectric Project is a 120-megawatt project that transmits power to the state's electrical grid. It started operating in 1991, and includes a 125-foot-tall dam and a power tunnel. It is only accessible by boat or plane.

Six Alaska utilities and the Alaska Energy Authority make up a committee that sets the budget and oversees the maintenance, operation, production and cost of the project. The contract costs are split among the Homer Electric Association and the six other members of the committee. About $2 million was paid to the Homer Electric Association in 2016 to maintain and operate the project, of which the flights were a small fraction.

ML&P in Anchorage pays about 30 percent of the cost of the project and receives that much power in return, said Mark Johnston, the utility's general manager.

For that reason, Anchorage's internal auditors review the charges to ML&P for the project every few years, Johnston said.

In reviewing 2016 records, internal auditors for the city of Anchorage flagged the project's aviation services contract, saying it was "not effectively utilized." The contract guarantees a monthly $21,000 payment for 420 hours of flight service a year.

In 2016, only 230 hours of flights actually happened, according to the audit. Because of the guaranteed amount, the Homer Electric Association was liable for paying the un-flown hours.

The association ultimately billed the other utilities $72,540 for 121 hours of flights that were never taken, the Anchorage auditors said.

Janorschke, of the Homer Electric Association, said his organization had subsidized the flight contract for several years on its own. Then the power-sharing committee, including ML&P managers, agreed to share the cost of the unbilled flights, he said.

Johnston, of ML&P, said that when the committee was setting the budget, they agreed with Janorschke that it was difficult to find a flight company that would bid on the contract without the fixed monthly payments. In his memory, only one company bid, Johnston said.

The current contract holder is a Homer-based company, Pathfinder Aviation.

Janorschke also disputed a finding by the Anchorage auditors that at least seven flights were used solely for family members of employees. Relatives of crew members were allowed unaccompanied on flights if the flight was already scheduled, Janorschke said. In one case, a medical emergency was involved, Janorschke said.