The regional authority that distributes hydroelectric power to Wrangell, Petersburg and Ketchikan has approved a $12 million contract with a Washington state company to build a third turbine for Tyee Lake to meet growing demand for electricity.

The total budget for the project, which includes concrete work at the power station, installation and other expenses, comes to an estimated $24 million.

The Southeast Alaska Power Agency hopes construction work at the site can start next year, with the new turbine generating electricity by mid-2027, Robert Siedman, chief executive officer, said in an interview on July 7.

The agency’s board of directors met June 25-26 in Wrangell and approved the contract with turbine manufacturer Canyon Industries, based in Deming, Washington, northeast of Bellingham. Canyon has been building hydroelectric turbines for almost 50 years.

“I think we’re getting a good deal” with Canyon, Siedman said. Though not the lowest price among three bidders, it’s a domestic company with experience and expertise, he said. The agency successfully negotiated a savings of $405,000 from Canyon’s original bid.

The third turbine will add 10 megawatts of generating capacity to the two-turbine, 20-megawatt power station that has operated since 1984 at Bradfield Canal on the mainland, across from the southern end of Wrangell Island.

The Southeast power agency also operates the Swan Lake hydro project at Ketchikan.

The agency is looking to a $5 million federal grant, an estimated $12 million in federal tax credits, a request for a $4 million state grant, and possibly borrowing the remainder to cover the Tyee project cost.

The federal grant has been approved and the money appropriated but getting the funds has been delayed by staff reductions at the U.S. Department of Energy, Siedman said. Buyouts to reduce the number of employees has left the office that is handling the grants “minimally staffed,” he said.

The Southeast Power Agency has been working with Alaska Sen. Dan Sullivan’s office to ask that the grant get transferred to another office at the department with sufficient staff to approve and send out the funds, Siedman said.

The $5 million was caught up earlier this year in the nationwide spending freeze of federal funds ordered by President Donald Trump.

Siedman said the extended federal tax credits for hydroelectric projects that were included in the massive tax cuts, budget cuts and spending bill signed by the president on July 4 are “very beneficial” for the Tyee project. Those could be worth $12 million toward construction.

The Southeast Alaska Power Agency also is waiting in line for state funds, though that will depend on what the Legislature does with the budget next year.

The agency plans to issue in December a request for proposals for construction work at Tyee next year, in preparation for installing the new turbine at an empty bay at the power house.

The agency expects approval “in the next several months” of its request to amend the federal operating license for Tyee to allow the third turbine, Siedman said.

The regional power agency has said Wrangell and Petersburg need the power-generating expansion to handle increased demand, particularly with a growing number of homes and businesses converting from diesel-fueled heating systems to electric heat pumps.