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Vol. 15, No. 50 Week of December 12, 2010
Providing coverage of Alaska and northern Canada's oil and gas industry

Unifying the power grid

Alaska Railbelt utilities form electricity generation and transmission co-op

Alan Bailey

Petroleum News

Five of the six Alaska Railbelt electric utilities have formed a power generation and transmission cooperative, to create a regional voice for identifying upgrades to the power infrastructure and to manage the future of the Railbelt power grid, Rebecca Logan, chair of the Railbelt Utility Task Force, told Law Seminar International’s Energy in Alaska conference Dec. 7.

“We have formed a G&T cooperative. We’re there. We’re done,” Logan said.

The new co-op is called the Alaska Railbelt Cooperative Transmission and Electric Co., or ARCTEC, she said.

The one utility not to join the new co-op is Municipal Light & Power, although ML&P is continuing to participate in discussions with the other utilities, Logan said. ML&P General Manager Jim Posey told Petroleum News that, because ML&P is owned by the Municipality of Anchorage, the utility could run into significant tax and operational complications were it to join a member-owned co-op like ARCTEC. But ML&P wishes the new co-op well and has congratulated the other utilities on what they have achieved, Posey said.

“It does not prevent us joining them on projects and planning projects with them … and we intend to do that,” Posey said.

Small grid

To the average Alaskan the Railbelt power grid, extending more than 500 miles from the southern Kenai Peninsula north to Fairbanks and Delta Junction, may seem large — and in geographic size it is big. But, by U.S. standards, the power supply and demand on the grid is very small. And the inefficiencies of having six small, independent utilities maintaining, managing and operating this modest-sized system have long been recognized, especially given the inability of individual utilities to raise sufficient financing to fund upgrades to the grid infrastructure.

And given aging power plants, concerns about tightening natural gas supplies for much of the existing generation capacity and the lack of reliability-assuring redundancy in the aging transmission infrastructure, upgrades would appear to be an urgent necessity.

Following recommendations from a study by the Alaska Energy Authority into the management of the grid, the Alaska Legislature has during the past two legislative sessions considered legislation to form by statute an independent entity called the Greater Railbelt Energy and Transmission Co., or GRETC, to eventually develop, maintain and operate all of the power generation and transmission in the grid. The existing utilities would purchase power from GRETC and then distribute that power to local electricity consumers.

But the GRETC legislation has never passed into law.

Task force

When then-Gov. Sarah Palin originally proposed the GRETC legislation a couple of years ago, the six electric utilities formed the Railbelt Utility Task Force to consider the legislation, Logan explained. And the utilities had the concept of a state-owned asset, along the lines of the successful Bradley Lake hydropower facility on the Kenai Peninsula, where the state would provide financing, with the electricity ratepayers refunding the state’s costs over time; a project management committee would manage the operation of the entity.

But the deal killer in trying to arrive at a GRETC format the that both the legislators and the utilities could live with was an insistence by the lawmakers that a board of 30 to 40 people should manage the new entity, rather than a much smaller committee, with two representatives from each utility, Logan said.

So with the GRETC bill running aground by the end of the 2010 legislative session, “the utilities immediately went to plan B, which was to continue to work together for a joint entity,” she said. And the newly formed ARCTEC is the result.

Setting priorities

The members of ARCTEC have completed the organization’s bylaws and should be filing articles of incorporation by Dec. 10, Logan said. The ARCTEC board will consist of the CEO’s of the member utilities and one additional representative from each utility, she said.

Logan said that upgrades to the Railbelt’s aging and fragile transmission infrastructure will be a top ARCTEC priority and that the ARCTEC board will be assembling a list of projects for consideration during the upcoming legislative session, with a view to seeking state funding assistance.

“I envisage a list of capital projects that will be needed for the Railbelt,” Logan said.

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