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Vol. 23, No.19 Week of May 13, 2018
Providing coverage of Alaska and northern Canada's oil and gas industry

Released for comments

GDS draft report on Railbelt Reliability Council circulated to stakeholders

Alan Bailey

Petroleum News

GDS Associates Inc. has distributed its draft findings and recommendations on a proposed Railbelt Reliability Council for the Alaska Railbelt electricity grid - GDS is gathering comments on the draft report prior to making final revisions to the document. The Alaska Railbelt Cooperative Transmission and Electric Co., or ARCTEC, will then file the completed report with the Regulatory Commission of Alaska. ARCTEC had commissioned GDS to facilitate the development of an RRC, an organization that would adopt and enforce reliability standards for the grid, with the possibility of eventually fulfilling the role of an independent or unified system operator for the grid.

Unified management

The ARCTEC commissioned project has come as part of moves to achieve more unified management and operation of the Railbelt electrical system. The GDS draft report recommends the formation of an RRC as a nonprofit, member-based organization, governed by a board of directors and regulated by the Regulatory Commission of Alaska.

In addition to the GDS recommendation, there are currently two other concepts being floated for an operator for the electrical system: a state authority being proposed in House Bill 382, a bill being considered by the state Legislature, and a proposal being put forward by the Alaska Energy Authority.

In its draft findings GDS says that, although there is a diverse range of views on an RRC’s potential functions and effectiveness, there is near consensus among the stakeholders that the RRC should be responsible for system reliability, for open access to the transmission system, and for the wholesale market settlement for the delivery of electricity. However, there is debate over the potential role of the RRC in oversight of the Railbelt grid as a single electricity load balancing area, with the economic dispatch of power across the system. Economic dispatch refers to the continuous use of the cheapest available power generation.

Economic dispatch

In considering the economic dispatch question, the draft report references system operators in the Lower 48, in particular the Electricity Reliability Council of Texas, that oversee electrical systems massively larger than that of the Alaska Railbelt. Given the scale of the electrical systems in the Lower 48, many independent system operators, or ISOs, operate energy markets, matching bids and offers from a large numbers of electricity suppliers and transmission customers on a continuous basis, the draft report says.

But given the small scale of the Alaska Railbelt system and the lack of liquidity in the Railbelt power generation market, a coordinated energy spot market would likely be beyond what is necessary to achieve operational efficiencies in the Railbelt - achieving benefits from the optimum use of Railbelt generation facilities can be achieved through the economic stacking of generator use, based on the daily running costs of the generators, the draft report says. An ISO-managed economic dispatch system, on the other hand, tends to use energy pricing based on a bid schedule, rather than on a database of production costs, the report says.

The challenge in the Railbelt is a lack of consensus among stakeholders over what electricity cost savings might be achieved from the implementation of a single electricity load balancing area and economic dispatch across the entire Railbelt grid. To address this challenge, the RRC, once formed, should constitute a committee of its members to commission a simulation study that would conduct a cost/benefit analysis for implementing system-wide economic dispatch in the Railbelt. The ratio of the 10-year net present value of the cost benefits of economic dispatch needs to be at least 1.5 times the cost of operating the ISO, the draft report suggests. The analysis needs to take into account benefits that might be obtained from deferred transmission expenses, the reduction of reserve margins and improved reliability, the report says.

Reliability standards

The draft report recommends that the RRC should adopt, administer and enforce Railbelt electricity reliability standards. Those standards should incorporate cyber security and physical security, in compliance with a memorandum of understanding agreed between the Railbelt utilities and the Alaska Energy Authority in October 2017. The standards need to meet the requirements of the RCA. Enforcement of the standards should include the use of an appropriately experienced firm to conduct spot checks of standards compliance by transmission system owners, the draft report says.

RRC oversight of transmission system access should ensure non-discriminatory generator connection and use of the transmission service. And the organization needs to administer a consolidated tariff for the use of the system. The RRC needs to establish and administer a study process for the connection of single generators to the system, taking into account the technical, physical and financial requirements for generators, the draft report says.

In terms of planning for the modification and expansion of the Railbelt electrical system, the RRC should adopt a process that develops an integrated resource plan addressing future energy needs in the entire region, the report says. The integrated resource plan needs to take into account a range of issues including supply reliability; the efficient siting of generation facilities; the efficient, economic integration of renewable resources; the minimization of electricity production costs; and the need for local planning by individual utilities within the system. As part of its planning role, the RRC would, subject to RCA approval, issue notices for the construction of facilities specified in the integrated resource plan.

10-member board

The draft report recommends a 10-member board to govern the RRC, with eight voting members plus the RRC chief executive officer and the chair of the RCA. The voting members would consist of four representatives of Railbelt transmission system owners and four non-owners. The four owner representatives would consist of a representative from the Alaska Energy Authority, and one utility representative from each of the south, Anchorage and north regions of the grid. Non-owner board members would consist of someone from the state’s Regulatory Affairs and Public Advocacy section, two representatives of independent power and renewable energy producers, and one non-affiliated member. The RRC CEO would chair the board and cast the deciding vote in the event of a four-four split.

Full members of the RRC, with rights such as the election of directors, would have financial interests or a regulatory function in the Railbelt electricity market.

The draft report suggests that the RCC should initially have five employees, with much of organization’s work being conducted through a committee structure. The annual cost of operating the RRC is estimated at about $1.5 million. Costs would be recovered through an administration fee collected from system users. Implementation of the RRC would involve the signing of an appropriate memorandum of understanding by the Railbelt utilities. The MOU would create an initial funding obligation by the utilities and would trigger the development of articles of incorporation and the formation of the board.

The draft report says that efficiencies gained from the RRC-led integrated resource plan would lower electricity rates; that the RRC would achieve enhanced reliability for the system; and that the use and pricing of the transmission system and generator interconnection would become more transparent and consistent under RRC management.

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RCA sets meeting schedule for Railbelt grid

During its public meeting on May 9 the Regulatory Commission of Alaska set a schedule of further meetings for reviews of the status of voluntary efforts by the Alaska Railbelt electricity utilities for a more unified approach to the management and operation of the Railbelt electrical system.

Commissioner Robert Pickett announced that in a May 23 meeting the utilities would be asked to provide a status report on moves to form a single transmission company to operate the transmission grid; a June 13 meeting will review the status of efforts towards the economic dispatch on the electrical system of the cheapest available power generation; and a June 27 meeting will address the status of implementing unified and enforced reliability standards on the grid.

Since 2015, when the RCA issued an opinion stating that unification of the electrical grid management and operation should proceed, the commission has been encouraging the utilities to proceed toward unification on a voluntary basis.

Commission Chair Stephen McAlpine commented that he is concerned that the unification process is moving very slowly, and that he has heard comments from legislators and from members of the public that the process is taking too long.

Commissioner Antony Scott commented that there is a credibility issue in relation to public perceptions, given the need to see something definitive come out of what is happening. It is necessary at this point to be clear about what has been achieved, what still needs to be done, what the issues are, and what the anticipated timeline is, Scott commented.