With efforts continuing to improve the efficiency with which the Alaska Railbelt electricity transmission grid is managed, operated and used, on March 23 the Regulatory Commission of Alaska reviewed progress toward unifying the management of the grid.
At issue are the possibilities of reducing the cost of electricity usage for Railbelt consumers through making best use of the various power transmission facilities connected to the grid; of achieving an effective mechanism for funding and executing grid upgrades; and of making the grid more easily accessible for new power providers.
Following a directive from the Alaska Legislature, the commission conducted an investigation into the relative benefits of grid management restructuring and in June 2015 issued a report on its findings. The commission determined that there would be benefit in unifying the management of the grid, which is currently owned and operated by five independent electricity utilities and the state of Alaska.
Two distinct issues
There are two distinct issues in the grid unification question: the formation of a transmission company that would conduct day-to-day operation and maintenance of the grid, and which would implement grid upgrades; and the formation of a unified system operator, responsible for setting policies for grid operation and managing the unified scheduling of power supplies across the system.
In conjunction with its 2015 findings, the commission required the utilities to report on their voluntary efforts towards grid unification. The commission mandated reports from the utilities at the end of September and the end of December on progress towards implementing a transmission company, and by the end of January to report on moves towards establishing a unified system operator.
The Alaska Legislature also has a bill in progress, aimed at creating a unified system operator as a state agency. However, the lawmakers have placed that bill on hold at present, given the utilities’ voluntary efforts to deal with the unified operator issue.
A key factor driving the interest in unified system management is the possibility of achieving what is referred to as “economic dispatch,” the optimum use of the cheapest power sources on the grid to meet electricity demand at any moment. Cost benefits would come primarily from the resulting savings in fuel usage at power stations, in particular savings in the consumption of natural gas, the main energy source in the Railbelt. The utilities have made it clear that a prime focus of their voluntary efforts at present is the computer modeling of the Railbelt electrical system, to determine what cost benefits might realistically be achieved from grid unification. The results of that modeling are anticipated in the second quarter of this year.
Utility reports
During its March 23 meeting the commission focused on the utilities’ reports on their efforts towards unified system operator formation. Commission Chairman Robert Pickett briefly reviewed the various filings that were submitted to meet the commission’s late-January reporting requirement.
The Alaska Railbelt Cooperative Transmission and Electric Co., or ARCTEC, an organization formed by several Railbelt utilities to coordinate grid upgrades, filed a report overviewing the purpose, guiding principles and functions of a unified system operator for the grid. The report summarized progress to date in moving towards unified system operator formation, and said that the utilities anticipate developing an implementation plan over the coming months while continuing to seek consensus for the governance of the organization and for the settlement process for grid usage costs, Pickett said.
Pickett said that a utility working group that is investigating the establishment of a transmission company for the Railbelt reported that it is working on the computer model for the transmission system. Apparently the modeling is evaluating and comparing the benefits of both loose power pooling and tight pooling arrangements for the grid. In a loose pool different utilities make use of each others’ power generation capabilities without operating under a centralized, grid-wide management structure. A tight pool, on the other hand, involves central management of the dispatch of power from different generation facilities along the grid.
Loose pool success
Both Matanuska Electric Association and Homer Electric Association described success that they have experienced in conducting voluntary loose pool arrangements. MEA, for example, commented that there tend to be a large number of significant power transactions between utilities. During 2015 MEA itself had been involved in more than 3,800 megawatt hours of inter-utility transactions for the interchange of reserve power capacity, and in more than 41,000 megawatt hours of transactions involving power sales, MEA reported. These types of transaction bring economic benefits with no incremental cost to ratepayers, the utility said.
HEA reported that a combination of loose pooling arrangements and the implementation of new, more efficient power plant capacity had resulted in significant reductions in the cost of power generation in 2015. The utility presented data on the fuel efficiency of various power generation facilities connected to the transmission grid. While commenting that the modeling of the cost and benefits of grid unification has yet to be completed, HEA also said that additional benefits from centralized power dispatch would have to come from further increases in the average efficiency of the mix of Railbelt power generation facilities in use.
HEA commented that there will be fuel savings when two new power generation facilities come on line: Municipal Light & Power’s Plant 2A in Anchorage, and Golden Valley Electric Association’s second coal-fired power station at Healy, on the north side of the Alaska Range. MEA also mentioned the potential for further pooling benefits once the Plant 2A starts up.
ML&P’s Plant 2A is a high-efficiency combined-cycle, gas-fired plant. ML&P and Chugach Electric Association jointly own a very similar combined-cycle plant that is already in operation in south Anchorage. Mark Johnston, general manager of ML&P, told the commissioners that ML&P anticipates Plant 2A going online in late July or early August.
The Anchorage Pool
In a joint report to the commission, ML&P and Chugach Electric commented that they are engaged in an initiative to form a two-utility power pool called the Anchorage Pool. The idea is to achieve savings of as much as $10 million per year through the coordinated scheduling, dispatch and cost settlement arrangements for power supplies, the utilities reported.
Asked by Commissioner Rebecca Pauli why the pooling initiative did not extend to other utilities, Lee Thibert, Chugach Electric senior vice president for strategic development and regulatory affairs, said that trying to form a pool, all at once, with multiple utilities is very difficult and that Chugach Electric and ML&P have very specific requirements in figuring out how to best manage their high-efficiency power plants in south Anchorage and at Plant 2A. However, the two utilities view the Anchorage Pool as a first step towards a broader pool - both MEA and HEA have expressed an interest in joining the pool. One complication in expanding the pool would be establishing an appropriate governance structure, Thibert said.
Johnston told the commissioners that he understands that the pooling model that Chugach Electric and ML&P are developing would be transferrable to other utilities, especially since ML&P is already the largest seller of power in the Railbelt, having sold more than $20 million worth of power to other utilities in 2015.
Comments by CIRI
Pickett also summarized some comments on grid unification that Cook Inlet Region Inc. had filed. CIRI, while not an electric utility, owns and operates a wind farm on Fire Island, offshore Anchorage. CIRI, as an independent power producer, has experienced considerable difficulty in trying to sell Fire Island wind power to the Railbelt utilities.
CIRI commented that some important stakeholders did not appear to be involved in the grid unification efforts and that an independent system operator for the grid should be formed in parallel with the formation of a transmission company. Ownership of equity in the transmission system should be available to entities other than just the utilities and the transmission company itself. The estimated costs of system wide improvements need re-evaluation. The financial, reliability and benefit analysis for grid unification should be updated and, meanwhile, utilities should be encouraged to use voluntary, value-adding arrangements, CIRI said.
