BANGOR – Work has begun at a local hospital on a cogeneration power plant that the regional power company did not want built.

Eastern Maine Medical Center has received all of the necessary approvals to begin construction of the 4.6-megawatt facility at its State Street campus, and Bangor Hydro-Electric Co. no longer is contesting the project, officials with the two companies said separately on Thursday.

“Work has started on the cogeneration plant,” said Jeffrey Mylen, the hospital’s project manager for the power plant construction.

The plant will burn natural gas and No. 2 fuel oil to generate electricity and heat for the hospital’s exclusive use, hospital officials have said.

Pittsfield-based construction firm Cianbro has started foundation work on the 3,500-square-foot facility on the east side of the hospital complex, between State Street and the Penobscot River, according to Mylen.

Mylen said Bangor Hydro asked state officials to reconsider their decision in February to allow the hospital to go ahead with the project, but the state denied the power company’s request.

EMMC and Bangor Hydro continued to discuss the matter, but the hospital’s board of directors eventually voted to proceed with construction, he said.

“There were very cordial and businesslike discussions between Eastern Maine Medical Center and Bangor Hydro,” Mylen said.

Eastern Maine Healthcare Systems, the hospital’s parent company, will continue to rely on Bangor Hydro to supply power to its other facilities, according to Mylen. During the summer, the hospital will need supplemental electricity from Bangor Hydro to keep its air conditioning systems running, he said.

“We’re still going to be a good customer of Bangor Hydro,” Mylen said.

Bethany McKnight, communications officer for Bangor Hydro, said Thursday that the power company plans to apply to Maine Public Utilities Commission for approval to change its rate schedule.

Rather than simply increasing fees for other users to make up for the drop in revenue from the hospital, McKnight said, Bangor Hydro wants EMMC to continue paying for some infrastructure costs in exchange for staying connected to the regional power grid.

By continuing to charge the hospital some kind of connection fee, the cost increase for other electricity users, including residential and small commercial customers, should be kept to a minimum, she said.

“I think we’ve exhausted all the avenues available to us,” McKnight said of the power company’s opposition to the hospital project, which was first proposed last fall. “We still have a very nice working relationship with [EMMC].”

Bangor Hydro had argued that the loss of such a major customer would have an adverse effect on the rates paid by other electricity users in the region.

Bangor Hydro officials questioned the plant’s overall benefit to the public and the hospital’s projected economic savings of roughly $1 million a year in power costs.

The hospital, on the other hand, argued that by generating its own power, it could help keep patient care costs down and could avoid the threat of power outages, such as the one caused by the ice storm of 1998.

Mylen said the hospital, over the past year, paid Bangor Hydro $2.5 million in electric bills. The $7.5 million plant project, $3 million of which will be paid for by the U.S. Department of Energy, is expected to be completed by the fall of 2006, he said.

State law requires hospitals to acquire certificate-of-need approval from the Maine Department of Health and Human Services before expanding their facilities. The requirement is aimed at avoiding redundancy among area hospitals and at minimizing increases to health care costs.

Despite Bangor Hydro’s objections, DHHS in February granted the hospital’s request for approval to build the plant. The city of Bangor and Maine Department of Environmental Protection also have issued permits to the hospital to proceed with construction, according to Mylen.

Maine Public Utilities Commission Spokesman Phil Lindley said Wednesday that PUC approval is not required for the plant because the agency does not regulate power generation in Maine.

If the hospital were planning to offer power for retail sale, as Bangor Hydro does, it would have to receive approval from PUC to do so, he said.