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Providing coverage of Alaska and northern Canada's oil and gas industry
July 2018

Vol. 23, No.27 Week of July 08, 2018

Moving towards a more unified approach

The Alaska Railbelt electric utilities have made significant progress in coordinating their operations but much remains to be done

Alan Bailey

Petroleum News

Over the past month or so the Regulatory Commission of Alaska has held a series of public meetings to review progress by the Alaska Railbelt electric utilities in moving towards a more unified approach to managing and operating the Railbelt electrical system. The meetings have demonstrated significant progress towards efficiency gains though inter-utility coordination. However, some key milestones in the unification process have yet to be reached.

Fragmented system

The Railbelt electrical system, a product of the manner in which the more populous regions of the state have evolved, is owned and operated by six independent utilities. The state of Alaska also owns a sector of the electricity transmission grid. Thus, given the state’s relatively low population, the six utilities in total serve a customer base and electrical load much smaller than those of most individual utilities elsewhere in North America. The balkanized nature of the system ownership and operation leads to inefficiencies in terms of how the system as a whole operates. And that impacts the cost of electricity.

In June 2015 the RCA issued a series of recommendations for a more unified approach to the operation of the Railbelt electrical system. Essentially, those recommendations consisted of the need to implement merit-ordered economic dispatch on the system; the formation of a single transmission company, or transco, to operation the transmission grid; and the implementation of a single set of enforceable reliability standards. These unification efforts also require the formation of some form of unified operator, to oversee how the entire electrical system is managed.

The overall objective is to minimize the cost of electricity for consumers while maintaining an acceptable level of supply reliability.

Voluntary efforts

The RCA has encouraged the utilities’ voluntary efforts to meet its recommendations. The recent commission public meetings were convened to review the status of those efforts - the commission anticipates reporting to the state Legislature this year on how much progress has been made. And some stakeholders in the electrical system have expressed frustration at what they regard as slow progress. The utilities have commented on the complications involved: Each utility has its own contractual arrangements, its own assets that need to be paid for, and its own consumers to satisfy. And a change that may have a net benefit for the system as a whole, may work to the detriment of an individual utility.

Economic dispatch

Economic dispatch, the first of the issues to be addressed, involves the continuous use of the cheapest available power generation. For some years the utilities have been interchanging power through power sales to each other, but full economic dispatch involves doing this on a more continuous, minute-by-minute basis. One complication is the layout of the Railbelt transmission grid: Power demand regions on the Kenai Peninsula and in the Fairbanks area are each connected by a single transmission intertie to the major demand center in Southcentral Alaska. So, although the utilities can and do interchange power across the entire system, those single interties represent single points of failure, a factor that requires power generation self sufficiency on both the peninsula and in Fairbanks, to assure continuity of power supplies.

In January 2017 the three Southcentral utilities, Chugach Electric Association, Municipal Light & Power and Matanuska Electric Association, formed an agreement to jointly implement economic dispatch in Southcentral. Given the complications involved, that initiative is taking longer than the utilities had originally anticipated. In one of the recent RCA meetings the utilities said that they now anticipate finalizing agreements for the power pool by the end of September, with full implementation of the new arrangements in March 2019 following RCA approval.

That would lead to the possibility of Fairbanks-based Golden Valley Electric Association joining the “tight pool.” Homer Electric Association on the Kenai Peninsula, on the other hand, has indicated that it sees little benefit in joining the pool.

Transmission company

The establishment of a transco for the transmission grid could in particular address a couple of current problems: the cost of “wheeling” electricity over multiple grid sectors, each with its own transmission fees; and the difficulty of a single utility investing in grid upgrades that benefit multiple utilities, and not just itself.

American Transmission Co., a Wisconsin transco, has been assisting the six Railbelt utilities in figuring out how a transco could be implemented in the Railbelt. The idea is that the transco would operate the transmission infrastructure, set a unified tariff for transmission system usage, and act as a conduit for investment in the transmission infrastructure.

In May the utilities told the commission that they have made substantial progress in agreeing on how the transco would operate: Essentially the utilities would continue to maintain the sections of the transmission grid within their service areas but would do so under contract to the transco. And the transco would maintain a non-discriminatory tariff, allowing anyone access to the grid. However, an acceptable method of allocating operating costs between the utilities, especially given different utilities’ different ownership and usage of the system, has yet to be determined. Nor have the utilities agreed on the structure of a transco management team. The utilities told the commission that they now anticipate filing a transco decision by the end of this year.

Reliability standards

The utilities have in the past operated under two different sets of reliability standards but have recently worked on unifying those standards. In April the utilities filed a unified set of standards with the commission. However, the standards need to address cybersecurity, an issue of significant and growing concern involving the potential for malware to bring down the computer and information systems that are used to operate the electrical system. The utilities have told the commission that they have formed a cybersecurity working group and that this group is making rapid progress, anticipating the implementation of cybersecurity standards in the first quarter of next year, following regulatory approval.

System operator

The reliability standards would presumably be enforced by a system operator, overseeing the entire Railbelt system. There has been significant controversy over various ideas for the potential role of an operator, and in particular how the operator should be governed. Independent power producers, including producers of renewable energy, want to see independent governance that can assure open access to the electrical system for anyone meeting required operating standards. Utilities want to see governance decisions take adequate account of the utilities’ technical expertise.

From various operator concepts that have emerged in recent months, it appears that there has been some convergence in the governance concepts. The utilities have commissioned GDS Associates to facilitate what they are calling the Railbelt Reliability Council. The RRC, regulated by the RCA, would oversee the reliability standards, open access to the transmissions system, and the planning of expansions to the power generation and transmission arrangements. However, GDS has recommended that the RRC should not initially be responsible for the oversight of economic dispatch in the Railbelt - given the cost of implementing economic dispatch, the RRC should first conduct some modeling to assess the costs and benefits, GDS recommends.

Some stakeholders have expressed concern, saying that a Railbelt system operator must manage economic dispatch in the system. In addition to the RRC, two other operator concepts have been floated, one by the Alaska Energy Authority and one in a bill in the state Legislature.

The utilities are in the process of finalizing a memorandum of understanding for RRC formation, probably for filing with the commission in August. RCA approval of the MOU would presumably be followed by RRC formation, although the regulatory mechanism for the entity would need to be clarified.






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