Report recommends realignment of Railbelt utilities

  • By ELWOOD BREHMER
  • Sunday, July 19, 2015 10:22pm
  • News

Issues of reliability and cost in Alaska’s Railbelt electric transmission system are slowly coming to a head.

The Regulatory Commission of Alaska released its recommendations on how to improve power dispatch through the region June 30 in a six-page letter signed by RCA Chairman Robert Pickett to Senate President Kevin Meyer and House Speaker Mike Chenault.

In 2014, the Legislature appropriated $250,000 to the RCA to provide its input on how to improve the Railbelt system the commission called “fragmented” and “balkanized” in its letter.

Upgrading the Railbelt system has the potential to save ratepayers between $146 million and $241 million per year, according to the RCA.

Those upgrades amount to a $900 million overhaul. More than half of the work, about $480 million worth, is in the northern portion of the intertie, according to the Alaska Energy Authority. That would improve line capacity and reliability to the Interior and regional utility Golden Valley Electric Association.

Getting power from Southcentral natural gas-fired power plants and the Bradley Lake Hydro project, located east of Homer near the end of Kachemak Bay, helps lower rates for Golden Valley ratepayers by offsetting high-cost fuel oil generation.

“Right now the utilities can get Bradley power but they don’t always have access to it at the optimum time of the day,” AEA Energy Policy Director Gene Therriault said during a presentation at the authority’s June 25 board of directors meeting.

Not being able to draw power from a relatively cheap hydro source thus kills the economic benefit of Bradley Lake, he said.

Increasing transmission capacity and efficiency would also be a must if the Susitna-Watana Hydro project were to come to fruition.

The transmission work largely involves adding transformers, substations and line capacity and redundancy. While the current intertie can handle more electricity in most places, trying to push more power through the lines increases transmission losses exponentially, Therriault said.

Additionally, redundancy in the lines could help keep the system operating smoothly in the event of a natural disaster.

By maximizing economic dispatch of power, each Railbelt consumer would save 3 cents to 6 cents per kilowatt-hour, according to AEA. Those savings would be the avoided cost increase of doing nothing, AEA Railbelt Energy Infrastructure Engineer Kirk Warren said to the authority board.

The State of Alaska owns 173 miles of transmission line between Willow and Healy, which is operated by AEA. The state authority works with the owner utilities through the Intertie Management Committee.

How the overhaul of the Railbelt system is configured and paid for are the big unknowns.

“A key weakness in the current Railbelt electrical system is the lack of an institutional structure to finance significant transmission assets crossing the service areas of several utilities,” the RCA letter states.

Along with AEA, each utility along the intertie owns at least a small portion of the transmission infrastructure. That individual ownership complicates and challenges wholesale change to the system.

To rectify the separate ownership of transmission assets, the RCA in its letter recommends an independent transmission company, or TRANSCO, be created to operate the system and execute major maintenance projects.

Alaska Railbelt Cooperative Transmission and Electric Co. CEO David Gillespie said in an interview that his member utilities are largely in support of the RCA’s findings. However, actually realizing the savings projected by the RCA is the difficult part, he said.

ARCTEC, as the member organization is known, is made up of five Railbelt utilities. Anchorage’s Municipal Light and Power and Homer Electric are not members.

The TRANSCO would be made up of transmission asset-owning utilities — each with an ownership stake equivalent to their asset value — and a separate firm, which would bring liquid capital to the table, Gillespie envisions.

The organization would be managed however the utility leaders decide, by another entity or in-house. He emphasized the utilities do not want to outsource this responsibility.

The utilities could then collectively decide which major transmission projects to tackle and use the pooled resources and added capital to fund the big work, he said.

Any outside or contracted firms would be used as sources of capital, expertise and labor, Gillespie said.

Midwest utilities Xcel Energy Inc. and American Transmission Co. have presented to the Legislature and the RCA over the past two years about their work to form TRANSCOs in that part of the country and expressed interest in entering the Alaska market.

American Transmission Co., or ATC, was established in 2001 as the country’s first multi-state, transmission-only utility.

Xcel is a generation and transmission utility.

An independent, or unified, system operator would govern the actions of the TRANSCO. This would likely include determining the proper balance between utility returns and economic dispatch, as well as setting fair transmission tariffs.

Establishing a TRANSCO would also prompt utilities to implement a “postage stamp” transmission tariff, or a single rate to wheel power along the entire Railbelt system. Currently, each utility has its own tariff, which leads to what is known as “rate pancaking.”

Stacking the tariffs has hurt the economic feasibility of some renewable energy projects, including Cook Inlet Region Inc.’s planned expansion of its Fire Island Wind project outside of Anchorage. The issue has been one of contention for small power producers in the state.

Gillespie said TRANSCO discussions are ongoing among Railbelt utilities.

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

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