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

Vol. 23, No.15 Week of April 15, 2018

The debate continues

House Energy hears further testimony on reform of Railbelt electrical system

Alan Bailey

Petroleum News

On April 5 the House Special Committee on Energy heard further testimony on issues surrounding efforts to adopt a more unified approach to the management and operation of the electricity supply system that serves consumers in the Alaska Railbelt. As reported previously in Petroleum News, the committee is considering House Bill 382, introduced by committee chair Rep. Adam Wool, D-Fairbanks, that would mandate the formation of a Railbelt Electrical System Authority for overseeing the system.

Currently the fragmented management of the system, with six independent utilities owning and operating different sectors, leads to inefficiencies in the manner in which the system operates. The belief is that, through a more unified management approach under some form of unified system operator, the cost of electricity for consumers could be reduced without sacrificing supply reliability. Proponents of renewable energy also say that the balkanized system management acts as an obstacle to the viable implementation of renewable energy generation.

The authority proposed in HB 382 would steer the system in the direction of implementing economic dispatch across the Railbelt, an arrangement in which maximum use would continuously be made of the most efficient power generation facilities. The authority would also establish a universal transmission tariff and nondiscriminatory access to the transmission system.

Three concepts

Currently there are three different concepts being floated for a system operator: the concept encapsulated in HB 382; a somewhat similar concept being put forward by the Alaska Energy Authority; and a proposal for a Railbelt Reliability Council being prepared by consultancy GDS Associates Inc. for the Alaska Railbelt Cooperative Transmission and Electric Co., or ARCTEC, an organization with membership of four of the six Railbelt utilities.

Each concept envisages a system operator organization, regulated by the Regulatory Commission of Alaska and overseen by a board of governors. The composition of the board is important in achieving a balance between the expertise of the utilities and the desire for fair representation for all stakeholders in the system.

The GDS proposal, due to be published in late April, is an outcome of voluntary efforts by the utilities to tackle the Railbelt power system issues. Proponents of HB 382 have expressed frustration at the length of time that these voluntary efforts are taking to achieve the necessary goals and have expressed skepticism over whether the goals can be achieved by voluntary means.

All three concepts for the unified system operator involve broadly similar approaches. However, the GDS proposal does not include economic dispatch: GDS has suggested that the potential for economic dispatch across the Railbelt does warrant further study.

The RCA perspective

During the April 5 meeting, RCA Commissioner Robert Pickett reviewed the long, multiyear history of failed attempts, either through voluntary efforts or through legislation, to unify the electrical system. One problem arising from the fragmentation of the system ownership and management has been the construction of more new generation capacity than is needed in an era of declining electrical loads, with around $1.5 billion spent on new facilities, Pickett said. In 2015 the RCA wrote to the Legislature, stating that the transmission and generation system needs a more unified approach. Since then the commission has been encouraging the utilities’ voluntary efforts to meet the commission’s requirements.

As part of those efforts the utilities have been working with the American Transmission Co., a transmission company that operates in the Lower 48, to develop a proposal for a single company to operate the Railbelt transmission grid, Picket said. Last fall the utilities indicated that they anticipated filing their proposal with the commission but so far that filing has not appeared. In a public meeting in May the commission is going to ask for an update, Pickett said, also commenting that many of the issues revolving around the transmission company relate to the differing economic impacts on different utilities.

Pickett said that economic dispatch is also important. In Southcentral Alaska there has been a delay in filing a commercial agreement with the commission for an economic dispatch arrangement between Chugach Electric Association, Municipal Light & Power, and Matanuska Electric Association - the commission will also be asking for an update on that in May, he said. He said that, although he understands that some people would like to see faster progress, the issues involved are very complicated and the utilities are also trying to juggle other important tariff-related questions. The commission will keep the pressure on, he said.

However, he said that his biggest concern is the lack of a single set of enforced reliability standards for the Railbelt. The utilities have been working to reconcile the two existing sets of standards for the grid and anticipate publishing a unified set in mid-April. But the existing standards have “gaping holes,” Picket said. Pickett said that it is his intention to introduce a rule-making docket in the commission in April, to enforce mandatory standards.

Pickett also commented that states that have made most progress in implementing renewable energy have renewable energy portfolio standards, something that Alaska does not have.

MEA supports voluntary efforts

Julie Estey, director of external affairs for Matanuska Electric Association, said that MEA opposes HB 382 and would prefer to continue with the utilities’ voluntary efforts that, she said, are making progress.

Estey said that the Railbelt electrical system differs from systems in the Lower 48. It covers a large area but has a relatively low load and is very isolated - it is necessary to balance the cost of the infrastructure against the relatively few people that it serves. However, the reliability of the system is very high.

The transmission intertie between Southcentral and the Interior represents a single point of failure for the interchange of power between the two regions. That has necessitated additional generation and a battery system in Fairbanks. Fuel for power generation is also expensive relative to fuel in the Lower 48, Estey said. She also commented that the Railbelt system can only handle relatively small variations in the frequency of the alternating current power supply, a factor that impacts the practicalities of handling fluctuating loads or generation, and that also results in a need for higher levels than normal of reserve power on the system.

A new era

Although the utilities could have cooperated better with each other in the past, there is now a new era, with new people involved in leadership positions, making decisions under new circumstances: The utilities are now moving forward in working together, Estey said. And 70 percent of MEA’s customers want to see more use of renewable energy, she said. The utilities have been taking steps to meet the requirement of the RCA’s 2015 directive and they are succeeding, she said. The utilities are going to put some proposals before the RCA. In the next legislative session it will be possible to figure out whether any changes to statutes will then be required, Estey said.

With the issues involved being complex and several initiatives proceeding concurrently, and with the necessity to ensure that solutions do not have unintended consequences, progress is perhaps slower than some would like, Estey said. All the utilities have worked with the American Transmission Co. to develop an economic model of the Railbelt electrical system, to gain a better understanding of the economic impacts of changes to the system. That modeling indicated the possibility of gaining $15 million to $25 million annually across the Railbelt from economic dispatch, with about 80 percent of those savings coming just from the pooling of power and transmission for MEA, ML&P and Chugach Electric, the Southcentral utilities. Most of the remaining benefit would come from Golden Valley Electric Association joining the economic dispatch arrangements.

Moving forward

In terms of the timeline to meet the RCA’s requirements, 2015 saw a power trading agreement between the utilities, 2016 saw the development of the model of the electrical system, and 2017 saw a memorandum of understanding between the Southcentral utilities to implement economic dispatch through a tight power pool, with testing of the tight pool arrangements taking place since then. The utilities are obtaining computer systems to replace the spreadsheet-based arrangements used for the testing of the pool. The other utilities are evaluating the benefits of joining the tight pool arrangements. Upcoming activities for this year include the filing of the Railbelt Reliability Council structure with the RCA, an RCA filing for the Southcentral tight power pool, the transmission company decision, and improved communications about what is happening, Estey said.

GDS has received indications that all the utilities will ultimately support the Railbelt Reliability Council, the system operator organization that would oversee the complete electrical system, Estey said. MEA supports the board structure that GDS is proposing for the RRC, with the utilities having three of the nine seats on the board, she said.

MEA wants to see an organization, regulated by the RCA, that is transparent, is independent from conflicts of interest, is inclusive of many voices, ensures that everyone understands the consequences of decisions, and is rooted in technical excellence, Estey said.

She also commented on the new generation facilities that the utilities have built in recent years, saying that new facilities are efficient and replace old, inefficient plant. The overall objective of the utilities is to minimize the amount of fuel that they use, she said. And all the utilities want a clear path for renewables on their system. The RRC and its board, if implemented, would be in control of the system, making the necessary decisions, Estey said.

An independent power produce perspective

Mike Craft, owner and operator of a wind farm at Delta Junction, spoke to the committee about the challenges for an independent power producer in gaining access to the Railbelt electrical system under the current system management arrangements. Craft wants to expand his wind farm but has not succeeded in forming a commercial agreement with Golden Valley Electric Association, the local utility. GVEA has said that the expansion is not commercially viable.

Craft said that the Railbelt utilities provide a good service. However, the utilities appear to have a self-build bias in the development of new facilities - three major renewable energy projects have become “dead on arrival” at the RCA, mostly because of integration and transmission issues, he said. He commented that he had sited his wind farm at a particularly favorable location and that the use of wind energy can provide a means of tackling air quality problems that plague the Fairbanks region.

It is particularly important to have an unbiased system operator to oversee the electrical system, along the lines of what is proposed in HB 382 - a local utility cannot by itself address the big issues that the electrical system faces, Craft said.

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