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Resolving Southcentral power puzzle Alaska Energy Authority conference seeks options for managing the power grid, while MEA petitions for unified operation Alan Bailey Petroleum News
Few of us when we switch on an electric light worry too much about where the electrons that pass through the light bulb originate. But, in Southcentral Alaska, with escalating natural gas prices, question marks over future Cook Inlet gas supplies and a growing portfolio of new electric power plants proposals hitting the desks of the Federal Energy Regulatory Commission, determining how to generate and manage that flow of electrons around the Alaska Railbelt is becoming a pressing issue.
Potential future power generation plants include a new 100-megawatt clean coal plant proposed by Matanuska Electric Association, a proposal by Homer Electric Association to restart the mothballed Healy clean-coal power plant and Chugach Electric Association’s plans for a new gas-fired power station. Possible renewable energy projects include a wind farm on Fire Island next to Anchorage and a hydro power station at Lake Chakachamna.
The Alaska Natural Gas Development Authority is pursuing the question of bringing gas by pipeline from the North Slope into Southcentral Alaska and some of that gas, presumably, would be used for power generation. Enstar, the main Southcentral gas utility, has been investigating a potential gas pipeline from the Nenana basin and possibly connecting that to a future North Slope gas line.
Questions such as whether to use gas, coal or renewable energy for power generation and whether to try for economies of scale for the whole of the Railbelt have direct relevance to the cost of electricity that consumers purchase.
“It’s going to affect everybody’s pocket book,” Jim Strandberg, project manager at the Alaska Energy Authority, told Petroleum News Sept. 27. “This issue is a pocket book related issue, as well as whether or not your fingers get cold.”
And to help address the issue AEA is organizing a new study into the potential formation of a Railbelt Electrical Grid Authority. The study, slated for completion in early May, is funded under an $800,000 appropriation by the Alaska Legislature and is kicking off with a public technical conference in Anchorage on Nov. 26 and 27 (AEA has yet to announce the exact venue).
Five utilities Currently, five independent electric utilities and AEA own the electricity generation facilities and power transmission lines that constitute the Railbelt grid. Each utility operates as a monopoly electricity supplier within its own service area and is regulated by the Regulatory Commission of Alaska. The power transmission grid extends all the way from Seldovia in the south more than 500 miles to Delta Junction in the north; major regions in the network are connected by interties (a sixth Southcentral Alaska electric utility, the Copper Valley Electric Association, is not currently connected to the Railbelt grid).
The fact that the Railbelt grid is interconnected brings significant advantages in terms of the flexibility of supply. For example, Matanuska Electric Association, the utility for the Wasilla-Palmer area, currently purchases electricity from Chugach Electric Association, a major utility for Anchorage.
But that interconnectivity also brings complications, in that decisions about future power generation facilities made by one independent utility can impact the economics of power generation decisions made by another independent utility — the availability of new generation capacity inevitably changes the equation of who supplies whom with how much electricity.
As long as electricity originated primarily from cheap Cook Inlet natural gas, this interdependence didn’t pose much of a problem. But the evolving Southcentral gas market is moving the playing field.
“The network has really been based on natural gas generation and there are concerns expressed that this particular fuel that we’ve been burning and has been stable and low priced for the last 30 years may suddenly become price volatile,” Strandberg said. “The cost of power from gas turbine generation could really affect the economics of the region. … We could have considerably larger power generating units that aren’t fueled on gas, which would impact the way the grid is operated.”
And, especially where large power station projects are involved, economies of scale and efficiency may benefit from a regional approach to power supply planning, Strandberg said.
Look at all options The AEA study that kicks off in November will assess a wide range of options for unifying the operation of the Railbelt network, Strandberg explained.
“There are many different ways to approach that,” Strandberg said. “For example, we could put together a voluntary structure that basically continues business as usual for the future, where utilities under their present service areas are free to do as they choose and they informally get together and create informal rules on the way they relate.”
Another option might be to create an authority that has the ability to shoulder debt and buy new power generation — under new RCA rules that could change the way people obtain access to the grid and pull power over the grid, Strandberg said.
AEA has published a request for proposal for a consultant to work on the study.
“AEA doesn’t know what is the best approach,” Strandberg said. “Our job here is to get an expert to take a look at the different approaches and then look at what … results in the lowest rate for our consumers in the Railbelt. … It’s like a 25-year hard look at the network.”
The study will identify possible scenarios for operating the grid but will not engage in an analysis of the resource mix for powering the grid. However, AEA does anticipate that the contractor will recommend an approach to resource planning, to help answer questions such as whether the mix of power generation energy resources should be planned by individual service area or for the grid as a whole.
Public forum The November conference that starts the study will provide a forum for public discussion of the Railbelt grid issues and some initial information gathering for the consultant. Sessions will involve experts in different aspects of power network operations.
“They’ll address pertinent issues and questions that we think are on people’s minds,” Strandberg said.
A general discussion for conference participants will follow.
“At the end of those sessions we’ll then convene a round-table discussion with a facilitator, to really see if we can listen to what people have gathered from the sessions,” Strandberg said.
In addition to identifying issues and gathering information, Strandberg hopes that the conference will help people learn about the Railbelt grid issues.
“That’s one of the roles that AEA has, as much as possible to be neutral ground and to educate people about these issues,” Strandberg said. “That’s a fairly important part of this.”
MEA petition Meanwhile, on Aug. 28, Matanuska Electric Association filed a petition with RCA, asking the commission to consider developing regulations to force unitization of the Railbelt grid. MEA requested that the commission investigate potential regulations to mandate the formation of either a generation and transmission cooperative to “serve as the power supply entity for the Railbelt’s regulated electric cooperatives,” or a “mandatory power pool to serve as the single power supply entity for all regulated electric cooperatives in the Railbelt.”
The two options that MEA has proposed appear to be subsets of the complete range of options for grid unitization that the AEA study is likely to consider.
MEA cited a number of reasons for its petition, including:
• The danger of over or under construction of new power supply facilities by individual utilities;
• Disparities in wholesale power costs throughout the Railbelt; and
• An imminent need to build new power generation capacity.
“Given the current generation planning being undertaken by the Railbelt’s utilities, and the time-consuming process for the adoption of regulations, it is incumbent upon the commission to commence an immediate review of the current need for a traditional G&T cooperative, or genuine power pooling, in the Railbelt,” MEA said.
RCA subsequently scheduled a public hearing for Sept. 25. At that hearing the other Railbelt utilities expressed opposition to the MEA petition. Several utilities said that voluntary agreements had in the past proved successful in resolving issues relating to the planning of new power generation.
“The reason we don’t support the petition is because we believe that cooperation and voluntarily joint activities among Railbelt utilities offer a better option for developing new generation than a mandatory arrangement where the commission or the state’s authority is used to require a G&T,” said Don Edwards, attorney for Chugach Electric. “What the commission is being asked to do is a huge change in the current status quo, asking that the state authority be used to completely undo the corporate structures and governance structures that in many cases, in most cases, have been put in place by the cooperative members themselves.”
“In HEA’s experience a power supply relationship imposed and controlled by a third party does not provide the stability, certainty, and degree of cooperation necessary for the long-term power needs of the participants,” said Homer Electric Association in a statement filed after the hearing.
However, MEA was adamant in its view that mandatory unitization provides the only route to successfully realizing the benefits of pooling resources on the Railbelt grid. In the years that the grid has existed, several attempts at unitization have failed because one or other of the utilities disagreed with the unitization proposals, said James Walker, attorney for MEA.
“It is evident that after … 50 years of generally agreeing that a regional G&T or mandatory power pool is in the best interest of consumers the utilities are inherently incapable of voluntarily putting such an entity together,” Walker said.
RCA has yet to rule on the MEA petition. Among the issues that the commission is considering is whether it is appropriate for RCA to mandate the formation of an electricity generation and transmission entity, and whether to wait until after the completion of the AEA study before starting an investigation (under Alaska statutes an RCA regulatory investigation has to be completed within two years of its start date).
ANGDA study There is another initiative in progress that relates to the Alaska Railbelt electricity grid. That is a study that the Alaska Natural Gas Development Authority has commissioned Dunmire Consulting to carry out, to evaluate energy supply options for the Cook Inlet region. ANGDA has tasked Dunmire with identifying at least five scenarios for energy supplies in the region, including both energy for heating and energy for power generation.
Scenarios will likely involve energy sources that include natural gas, imported liquid natural gas, coal and renewables.
The idea will be to “emphasize certain types of energy sources or combinations of energy sources,” Harold Heinze, ANGDA chief executive officer, has said.
ANGDA wants to use the results of the study to better understand the economics of building a spur pipeline to bring natural gas into the Cook Inlet region from a future North Slope gas line. But a prime focus of the ANGDA study will be an understanding of the cost to energy consumers of the various energy scenarios — scenarios will be compared on the basis of average household costs.
So, with so many complex issues that can impact the future availability and cost of energy in the Railbelt, where are these various initiatives heading?
Heinze sees the ANGDA study as providing people with a better understanding of the energy options. In particular, the study report will provide the basis for utilities to go to the regulators and will help utilities understand “their individual dilemmas better.”
Similarly, Jim Strandberg views the AEA study as a means of providing people with better information.
“What this will represent is a tool for policymakers and stakeholders in the utilities themselves to determine the future for the grid,” Strandberg said.
And ultimately the future of the Railbelt grid will likely require political decisions.
“What sort of business and regulatory structures are we going to need to have in place?” Strandberg said.
But Strandberg emphasized that AEA does not want to derail the collaborative process that already exist between the utilities.
“My sincere hope is that this AEA project is going to be able to link in without a ripple into those collaborative processes,” Strandberg said. “You’ve got to maintain trust relationships between the utilities themselves and with the state agencies conducting the study. The motives here are to understand what the options are and to have some degree of understanding of the feasibility and the impact on the ratepayers that these have.”
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