Midwest utlity offers proposal to shore up Railbelt grid

  • Monday, March 2, 2015 11:22pm
  • News

A Midwest utility company hopes to help Alaska fix its strained Railbelt electric transmission system.

Xcel Energy Inc. representatives presented to the House and Senate Energy committees on Feb. 19 about ways the company could facilitate private investment in new power lines for the region.

Studies commissioned by groups including the Alaska Energy Authority have estimated $900 million to $1 billion worth of upgrades to Railbelt transmission lines is needed in the coming years to increase capacity and improve reliability.

Utility leaders often point out that in some places only a single line connects the Railbelt intertie.

Major transmission infrastructure upgrades in the past have been paid for at least partially with state funds.

“There are two kinds of transmission problems and (the Railbelt) has both of them,” Alaska Railbelt Utility Cooperative Transmission and Electric Co. Executive Director David Gillespie said in an interview.

ARCTEC, as it is commonly known, is a utility consortium made of Chugach Electric Association, Matanuska Electric Association, Seward Electric System and Golden Valley Electric Association.

First among the problems, Gillespie said, is the aforementioned lack of transmission infrastructure; and second is how existing infrastructure is managed.

The six area utilities each own portions of the overall system and add a tariff to power sent through their section of lines. This leads to what is known as “rate pancaking,” when electricity sent through multiple line sections is hit with multiple tariffs.

While it is done for the right reasons — each utility is simply charging for use of its property — it can inhibit what otherwise could be an economic endeavor, Gillespie said.

Such rate pancaking is a large reason why Cook Inlet Region Inc. could not make Phase 2 of its Fire Island Wind project viable, according to company representatives. The added tariffs did not make purchasing Fire Island Wind power feasible for Golden Valley Electric Association in the Interior, where electric generation is typically more expensive than in Southcentral.

CIRI recently announced it has suspended plans to double the size of its 11-turbine wind farm off of Anchorage.

Xcel’s plan would have the Minneapolis-based utility invest as a primary transmission company, or TRANSCO, in a Railbelt upgrade. The area utilities could then invest as much as they wanted and take an equivalent percentage ownership in the infrastructure, Xcel Vice President of Transmission Teresa Mogensen said.

“We would propose that we could facilitate and lead that collaborative transmission ownership approach, but everybody maintains ownership of their own assets,” Mogensen said to the House Energy Committee.

It’s a structure the company is currently implementing with utilities in the Dakotas, Minnesota and Wisconsin as part of a long-term transmission upgrade process.

She said Xcel is willing to invest “to the extent that additional investment is desired.”

Xcel could use its experience in pulling together multiple utilities run as public, cooperative, and private entities to expedite buildout, Mogensen said.

A report on what this type of TRANSCO structure could mean for Railbelt is due to the Regulatory Commission of Alaska in late June.

Cheryl Bredenbeck, a transmission investment director for Xcel, said alignment between policymakers, utilities and regulators was essential to the company’s similar projects Lower 48.

Consensus between the three groups seems to be forming in Alaska as transmission reliability concerns continue to grow.

Bredenbeck noted that in 2005 the Minnesota Legislature provided tax incentives to utilities that invested in transmission upgrades.

Mogensen suggested Xcel would be a particularly good partner for a TRANSCO because it is a one-stop-shop for nearly every aspect of the extensive project.

“We have in-house capability that is somewhat unique for electric utilities to carry our all aspects of the transmission investment — engineering, design, construction, planning — the whole array,” she said.

Wisconsin-based American Transmission Co. has also expressed interest in developing a Railbelt TRANSCO.

Mogensen said her company also has experience managing power from multiple generation sources, which could also be beneficial in unifying the Railbelt grid.

Southcentral power is generated primarily from natural gas, but hydro, coal, oil and wind are used throughout the Railbelt. Each source has its own set of characteristics that must be melded into the grid.

“We badly need additional transmission infrastructure,” Gillespie said. “We recognize that the state’s ability to fund that infrastructure surely isn’t what it used to be and that we’re going to be needing to look for new and more creative ways to finance that infrastructure. The introduction of entities like Xcel and (American Transmission Co.) are things we need to be taking a serious look at.”

Each utility owning a percentage of the overall transmission infrastructure, rather than a defined segment, would likely require a governing body known as a unified system operator, or a USO. It would be made up of a board of industry experts.

As Mogensen described: The Legislature sets energy policy and the RCA implements that policy. The function of the USO is to have independent system control that makes the most sense for the system as a whole without the influence of dominating special interests.

The USO would dispatch the most economically viable power at any time to the extent possible. Such a system allows independent producers and utilities to live side-by-side, she said.

Independent power producers in the state have contended some utilities have refused to buy economically viable power in order to keep control of the overall system. The utilities claim integrating small amounts of seemingly cheap power can be more expensive than the producers claim, particularly if the generation source is highly variable, such as wind.

The RCA is handling a docket that proposes to change power purchase requirements for utilities and House Bill 78, currently in the House Energy Committee, would outline more a favorable regulatory framework for independent power producers.

With distinct transmission ownership boundaries gone, the USO would set a single flat tariff and the money generated would be paid proportionally to the invested utilities.

Gillespie said ARCTEC supports a unified system operator because it would eliminate rate pancaking and probably be required to successfully manage a TRANSCO.

“Even without additional infrastructure (a USO) will allow improved economics within the system,” Gillespie said.

However, keeping the board completely independent might be difficult in Alaska.

“We believe that in a perfect world that all of the (USO) board members are independent because it is the clearest and most transparent way to do things,” Gillespie said.

In the Lower 48, unified system operator boards are usually comprised of retired industry representatives from other states that have no vested interest in the participating utilities or power producers, according to Gillespie. He questioned how many such individuals are available in Alaska.

At least initially, Gillespie said, he foresees a Railbelt USO board made up of equal parts utility, independent producers, consumer and other interests to keep a level playing field.

Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.

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