What others say: Regulatory decision should improve untility accountability, responsiveness

  • Monday, November 30, 2015 4:42pm
  • Opinion

Any way you slice it, dealing with power consumption, generation and their related costs in Alaska is a tricky business. Especially in winter, as natural light wanes, electricity demand can change rapidly throughout the course of the day, necessitating major shifts in the sources of power supplying the grid — and therefore the cost of producing that energy. In light of that reality, the recent ruling requiring power companies to make energy purchasing decisions on a closer-to-real-time basis is a good one — it will require that the companies be nimble in sourcing their power and increase potential opportunities for independent power producers.

The decision, made last week by the Regulatory Commission of Alaska, would cause a substantial shift in the way power companies do their accounting on the cost of power. Until now, utilities have used an annual avoided cost model to determine the price they would pay potential independent energy producers for power. Over the course of an entire year, that average cost of power trends relatively low, thanks to low-cost energy sources such as coal (or, in Southcentral Alaska, natural gas) that provide a substantial percentage of the utilities’ power. That means when negotiating with potential independent power suppliers, the utilities can say that annual average is what they’re willing to pay for power.

Under the RCA’s new ruling, which will go into effect in April 2016, utilities will have to use a different metric for determining what they will pay for power — “incremental avoided cost,” which in layman’s terms means they will have to purchase power from independent producers not just if the proposed cost is cheaper than their annual average, but if it is lower than the average cost of power for the utility at the hour it is being generated. In other words, if power from a source such as the Delta Wind Farm could offset a higher-cost form of energy, such as oil being burned to satisfy a temporary spike in electric load, then a utility such as Golden Valley Electric Association would have to do so.

The potential negative from the ruling would be if utilities paying for power at any rate cheaper than their moment-to-moment average were to drive up the overall cost of power, since that moment-to-moment average might well be higher than the annual power cost average. But in practice, utilities tend to not purchase from independent power producers at all under the current arrangement, making it hard for projects such as the Delta Wind Farm or the Fire Island wind project near Anchorage to start up or expand. And under the new ruling, utilities will have to make a financial case to the RCA in the event of rate disputes with power producers, ensuring an objective look at power purchasing costs and decisions.

The regulatory commission’s ruling may yet be appealed, but if it stands it will be a step forward for independent power producers — particularly those seeking to provide electricity from alternative and renewable sources. Reducing the barriers to participating in Alaska’s energy production marketplace should be a win for the state’s renewable energy goals and cost-conscious power consumers alike.

— Fairbanks Daily News-Miner,

Nov. 29

More in Opinion

Alex Koplin. (courtesy photo)
Opinion: Public schools do much more than just teach the three Rs

Isn’t it worth spending the money to provide a quality education for each student that enters our schools?

Gov. Mike Dunleavy speaks to reporters at the Alaska State Capitol on Thursday, April 17, 2025. (Jasz Garrett / Juneau Empire file photo)
Letter to the Editor: Law enforcement officers helped ensure smooth, secure energy conference

Their visible commitment to public safety allowed attendees to focus fully on collaboration, learning, and the important conversations shaping our path forward.

Laurie Craig / Juneau Empire file photo
The present-day KTOO public broadcasting building, built in 1959 for the U.S. Army’s Alaska Communications System Signal Corps, is located on filled tidelands near Juneau’s subport. Today vehicles on Egan Drive pass by the concrete structure with satellite dishes on the roof that receive signals from NPR, PBS and other sources.
My Turn: Stand for the community radio, not culture war optics

Alaskans are different and we pride ourselves on that. If my vehicle… Continue reading

U.S. Sen. Dan Sullivan (R-Alaska) delivers his annual speech to the Alaska Legislature on Thursday, March 20, 2025. (Jasz Garrett / Juneau Empire file photo)
Opinion: Sullivan, Trump and the rule of lawlessness

In September 2023, U.S. Sen. Dan Sullivan established his own Alaska Federal… Continue reading

UAA Provost Denise Runge photographed outside the Administration and Humanities Building at the University of Alaskas Anchorage. (courtesy photo)
Opinion: UAA’s College of Health — Empowering Alaska’s future, one nurse at a time

At the University of Alaska Anchorage, we understand the health of our… Continue reading

U.S. Rep. Nick Begich III, R-Alaska, address a joint session of the Alaska Legislature on Thursday, Feb. 20, 2025. (Mark Sabbatini / Juneau Empire file photo)
Opinion: A noncongressman for Alaska?

It’s right to ask whether Nick Begich is a noncongressman for Alaska.… Continue reading

Boats return to the Homer Harbor at the end of the fishing period for the 30th annual Winter King Salmon Tournament on Saturday, March 23, 2024 in Homer, Alaska. (Delcenia Cosman/Homer News)
Opinion: Funding sustainable fisheries

Spring is always a busy season for Alaska’s fishermen and fishing communities.… Continue reading

Gov. Mike Dunleavy holds a press conference on Monday, May 19, 2025, to discuss his decision to veto an education bill. (Jasz Garrett / Juneau Empire file photo)
Opinion: On fiscal policy, Dunleavy is a governor in name only

His fiscal credibility is so close to zero that lawmakers have no reason to take him seriously.

Sen. Jesse Bjorkman, R-Nikiski, speaks in support overriding Gov. Mike Dunleavy’s veto of House Bill 69 at the Alaska Capitol in Juneau, Alaska, on Tuesday, April 22, 2025. (Mark Sabbatini/Juneau Empire)
Capitol Corner: Finishing a session that will make a lasting impact

Sen. Jesse Bjorkman reports back from Juneau.

Courtesy/Chris Arend
Opinion: Protect Alaska renewable energy projects

The recently passed House budget reconciliation bill puts important projects and jobs at risk.

Rep. Justin Ruffridge, R-Soldotna, speaks in support of debating an omnibus education bill in the Alaska House Chambers on Monday, Feb. 19, 2024 in Juneau, Alaska. (Ashlyn O’Hara/Peninsula Clarion)
Capitol Corner: Choosing our priorities wisely

Rep. Justin Ruffridge reports back from Juneau.