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Vol. 23, No.41 Week of October 14, 2018
Providing coverage of Alaska and northern Canada's oil and gas industry

Tight pool delayed

Utilities tell RCA that they are pausing economic dispatch for ML&P sale

Alan Bailey

Petroleum News

In an Oct. 5 letter to the Regulatory Commission of Alaska, Mark Johnson, general manager of Municipal Light & Power, and Lee Thibert, CEO of Chugach Electric Association, told the commission that they have decided to pause efforts to implement the economic dispatch of electrical power in Southcentral Alaska, pending the completion of work on the planned purchase of ML&P by Chugach Electric. The managers said that it would be difficult to determine how the ML&P acquisition might impact the power pooling arrangements required for economic dispatch until the acquisition had been completed. The best path forward is to enable the limited resources available to the organizations to focus first on the acquisition deal, they said.

During an RCA meeting held on Oct. 10 to review the status of implementation of economic dispatch Mark Fouts, Chugach Electric executive manager for fuel and corporate planning, told the commission that, assuming the ML&P purchase transaction closes in late 2019 (with board approval expected by the end of this year and the sale then going to the RCA for approval) it could be 2021 before economic dispatch is implemented. That takes into account the time taken to conduct utility integration activities following the close, the setting up of economic dispatch arrangements, and the need for an economic dispatch implementation period. Commissioner Antony Scott suggested that the pause could defer full implementation of economic dispatch until 2022.

Use of the most efficient generation

The Alaska Railbelt electrical system contains a variety of electrical generation facilities that have a wide range of generation efficiencies and are operated by several of the six Railbelt electricity utilities. The utilities try to minimize their cost of power by buying and selling power across the electrical grid from the more efficient generation units, under a protocol referred to as economy energy transactions. Merit ordered economic dispatch would take this process a step further by making continuous use of the cheapest available power though a unified power dispatch arrangement. The overall objective is to minimize the cost of electricity for consumers.

In 2015, following a directive from the state Legislature to conduct a study into the manner in which the Railbelt electrical system is operated, the RCA recommended a more unified approach to the management of the system, including the implementation of economic dispatch. Since then the commission has been encouraging voluntary efforts by the utilities to meet the commission’s recommendations.

January 2017 agreement

In January 2017 the three Southcentral utilities, Chugach Electric, ML&P and Matanuska Electric Association, signed a commitment to pool the operation of their generation and transmission assets over a 20-year period. The agreement involved a one-year period to form an agreement for the necessary processes and procedures.

In the event, given the complexities involved, the agreement took longer to formulate than originally anticipated. On June 13 of this year the three utilities told the commission that they anticipated finalizing the commercial agreement and the power dispatch procedures for the power pool by the end of September.

During the Oct. 10 RCA public meeting Fouts told the commissioners that the utilities had completed the commercial agreement for the power pool on June 30 and that since then the utilities’ legal counsels had been polishing up the wording, in preparation for a commission filing. Other work required included the development of power dispatch procedures for the power pool, and the selection and acquisition of computer software to support the pooling arrangements.

Jeff Warner, strategic administrative coordinator for ML&P, said that he believed that the draft agreement completed in June was technically sound for moving forward with economic dispatch. To be finalized, it just needed regulatory and legal review, he said.

Proposed sale of ML&P

However, on April 3 the citizens of Anchorage voted to authorize the Municipality of Anchorage to proceed with a proposed sale of ML&P to Chugach Electric, Fouts said. Since then, two teams in Chugach Electric have been working on the two initiatives: the economic dispatch power pooling and the ML&P acquisition.

But the power pooling agreement includes language stating that, if there is a material change to generation ownership or capacity, the agreement would have to be reviewed and the benefits of the pooling would need to be re-assessed, Fouts said. With the acquisition of ML&P involving a material change of generation ownership, with unclear impacts on power pooling agreements, management determined that it would make best sense to first figure out and file the acquisition agreement, and then follow up with the filing of the power pooling agreement, he said.

The other issue that has arisen revolves around the practicalities of pushing through two major business reconfigurations in parallel, given the limited resources available within the utilities to execute the required changes. Fouts said that in July, during a review of how the economic dispatch arrangements would start, Chugach Electric staff who operate the utility’s dispatch and control systems had questioned the feasibility of pushing both reconfigurations through at the same time.

Economy energy transactions

Ed Jenkin, director of power delivery for Matanuska Electric Association, reviewed the volumes of economy energy transactions on the Railbelt grid over the previous five months, commenting that, while not full economic dispatch, these transactions have significantly reduced the cost of power. The utilities say that they propose continuing their use and refinement of economy energy transactions, pending economic dispatch implementation.

Commissioner Scott questioned why, given that the integration of ML&P and Chugach Electric would appear to have features complementary to the pooling of power in economic dispatch, the two initiatives could not in fact be implemented in parallel. Moreover, Scott said, he understood that the economic dispatch agreement accommodated considerable flexibility with regard to generation ownership.

Disappointment expressed

Scott expressed his extreme disappointment with the pause in economic dispatch implementation.

“This was the low hanging fruit,” Scott said. “I can’t undersell how disappointed I am that this opportunity wasn’t grasped and seized upon.”

Tony Izzo, CEO and general manager of Matanuska Electric Association, said that he had opted not to sign the Oct. 5 letter to the commission. Izzo said he understood the complexities and workload involved in utility integration and, while supporting the decision over the economic dispatch delay, also felt disappointed. He wondered if something could have moved forward, perhaps even a two-party agreement conditional on approval of the ML&P sale.

“Although there may be tremendous uncertainty around ownership of assets, we stand ready to move forward with any party that is willing,” Izzo said.

Commissioner Robert Pickett commented that the commission is going to send a letter to the state Legislature around the turn of the year, reviewing the status of electricity grid integration efforts, including the status of economic dispatch implementation.

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