Crystal Lake on southern Mitkof Island provides about one quarter of the community’s electrical demand. Voters in October approved a multi-million dollar overhaul of the power plant there. (Joe Viechnicki/KFSK)

Petersburg’s borough assembly Monday voted to move forward with purchase of the equipment needed for a multi-million dollar renovation of the Blind Slough hydroelectric project on southern Mitkof Island. The assembly also heard about the rate increases for local customers to pay for that and other generation work approved by voters last month.

Petersburg’s cheapest source of hydro power will be getting an overhaul and the assembly Monday approved a notice to proceed with purchase of the new generation gear.

The British company Gilkes Hydro bid a little over two million dollars to provide the turbine, generator and other equipment for the work. The assembly approved the award of that purchase last February but it was contingent on voter approval in October. Voters said yes to the 7.8 million dollar bond package by a large margin.

The borough and the company agreed to revisit the bid based on changes in currency value and prices for the metal need to build a new generator. An increase in the cost of copper and steel will mean $89,795.08 more, driving the cost to $2,092,191.

The borough’s utility director Karl Hagerman said that’s a 4.5 percent increase, but it’s within the contingency budgeted for, and still well below the next nearest bid.

“My recommendation is to move forward with this and get the components in process,” Hagerman told the assembly.

The new equipment could be installed in the summer of 2023. It was a 6-0 vote to approve that notice to proceed, essentially a commitment to make the purchase.

Meanwhile, a consultant presented findings of a rate study for the cost of electricity in Petersburg. It anticipates a bump in rates for Petersburg Municipal Power and Light an average of 19.7% over two years. Residential customers could see a slightly larger rate hike while large commercial users would have less of an increase under one scenario presented Monday. That would make adjustments to make sure the different customers classes are covering the cost of the electricity flowing to them.

The increases would help repay the bond issue for the Blind Slough work, along with an additional standby diesel generator. The additional revenue would also pay for an expected rise in the wholesale cost of power from Petersburg’s other hydro sources.

Consultant John Heberling of D. Hittle and Associates explained the timing to the assembly.

“The rates more or less to be at this higher level by the time a bond issue is conducted, primarily from the standpoint of being able to support the additional debt service that will be forthcoming,” Heberling said.

The assembly still needs to vote on rate hikes in three readings of an ordinance. That could be introduced as soon as their second regular meeting this month. The borough is also hiking the cost of garbage collection and could look at increases for other local utilities as well.