A power agency in southern Southeast is floating plans to finance a project to increase its hydro storage capacity by selling bonds.

The Southeast Alaska Power Agency, or SEAPA, sells electricity to utilities in Ketchikan, Wrangell and Petersburg. That organization wants to raise the height of a dam at Swan Lake near Ketchikan. Swan Lake is one of two hydro plants on the SEAPA system.

SEAPA CEO Trey Acteson told the Petersburg borough assembly this week that the plan is to fill in the spillway on the Swan Lake dam. That would allow SEAPA to store more water in Swan Lake and generate more hydro-electricity.

“First of all it provides more energy. It allows us to capture the spill,” he said. “We spilled for several months this year and once that spill goes over the dam that’s energy lost forever.”

Raising Swan Lake dam should cut into the amount of diesel power generated in Ketchikan when hydro power is not available.

Acteson is speaking with municipal leaders in Petersburg, Wrangell and Ketchikan this month about the Swan Lake project, and plans for how to finance the work. SEAPA has just shy of four million dollars in state grant money to fill in the spillway, and had hoped for more state funding. However, given the state’s financial outlook, SEAPA is now looking to bond for the additional seven million dollars instead.

SEAPA plans to refinance existing debt of nearly five million dollars to save money with a lower interest rate, and at the same time sell new bonds totaling around seven million dollars. Acteson said additional debt would not affect the wholesale cost of electricity to the utilities.

Assembly members in Petersburg questioned SEAPA attorney Joel Paisner about financial risk for the municipalities if SEAPA was to default on the debt. They also asked about whether the agency, created by the three municipalities, was near its debt limit.

“Obviously if we take on debt, we have to be able to pay it off,” he said. “So that’s the limitation. But there’s no legal bar to that like a mill rate that you get up against on a local municipal level.”

SEAPA is repaying more than 13 million dollars in bonds issued when the agency split off from Kodiak and Copper Valley utilities under the old Four Dam Pool Power Agency.

Elected officials in Petersburg, Wrangell and Ketchikan have to approve the additional debt before SEAPA can move forward. The agency also still has to complete design work and licensing, but Acteson says he hopes to fill in the Swan Lake spillway in 2016.

Acteson is scheduled to give a similar presentation to the Ketchikan City Council on Thursday.