Pooling the powerSouthcentral electric utilities agree to share facilities to reduce costs ALAN BAILEY Petroleum News
The three Southcentral Alaska electric utilities, Chugach Electric Association, Municipal Light & Power and Matanuska Electric Association, have signed an agreement to pool the use of their power generation and transmission assets, the utilities announced on Jan. 30.
By sharing the use of generation facilities, routing the power appropriately across the transmission grid to electricity demand centers and using coordinated arrangements for the supply of natural gas to fuel the generators, the utilities will be able to make maximum use of the newest gas-fired power stations in the Southcentral section of the Railbelt grid. The result will be savings in the amount of natural gas required to generate power. The utilities say that they anticipate saving $12 million to $16 million per year in fuel, operations and maintenance costs, savings that will translate to lower electricity bills for electricity consumers.
Mayor commends efforts Anchorage Mayor Ethan Berkowitz commended the utilities on their efforts.
“We ought to be very thankful for all the hard work that went into making this agreement possible,” Berkowitz said. “We ought to be appreciative of the efforts that were made to build this infrastructure, to maintain this infrastructure and ensure that the people of this region have affordable and available power on demand.”
“Working together to provide power to our customers in the most efficient, cost-effective manner means lower costs and improved reliability for everyone,” said Lee Thibert, CEO of Chugach Electric. “This agreement represents a lot of hard work and cooperation on behalf of thousands of Alaska electric customers, and I want to thank everyone involved for the great work done.”
“We are pleased to see our recent utility cooperation expanded into a more formalized agreement that can reduce costs for our members,” said Tony Izzo, CEO of Matanuska Electric. “The Railbelt’s new, more efficient generation suite brings significant opportunity for savings when we work together and we look forward to this new era of collaboration.”
“The work of the utilities serving Anchorage demonstrates what collaborative effort can achieve and builds on our cooperative work to provide reliable, cost-effective electric service for businesses and families,” said ML&P General Manager Mark Johnston.
Pooled use of facilities The agreement revolves around three new state-of-the-art gas-fired generation facilities that the utilities have built in recent years: the Southcentral Power Project, jointly owned by Chugach Electric and ML&P; ML&P’s Plant 2A; and Matanuska Electric’s Eklutna Generation Station. The Southcentral Power Project and Plant 2A are both highly efficient combined cycle power plants - the SPP facility is already in operation, while Plant 2A is still being commissioned. Matanuska Electric’s EGS facility uses gas-fueled reciprocating engines, an arrangement that enables the rapid ramping up and down of power output, to follow variations in power demand or in power output from other generation facilities.
The idea of the new agreement is to enable the best use of these new facilities, so that all three parties can obtain power at minimum cost. The agreement does not impact the ownership of the facilities - a settlement process will enable the facility owners to recoup the cost of the facility use. The utilities have for a long time been operating procedures whereby they interchange power though energy sales: The new agreement will enable a more continuous and efficient means of pooling power, thereby enabling higher levels of cost savings.
The agreement also requires the power dispatch procedures to include a plan for the use of available hydroelectric resources in the power pooling.
Development period The agreement now signed allows for a one-year development period, during which the utilities will complete the development of the various procedures needed for the implementation of the agreement. The development period will also allow any necessary changes to be made to the computer systems used to manage the power supply system. And the utilities have made a Regulatory Commission of Alaska filing, to formally notify the commission what is happening.
Once the necessary development work has been completed, the utilities will file the agreement and associated procedures with the RCA for commission approval. Then, upon approval, the agreement will go into effect, with an initial 20-year term. Once in effect, a participant in the agreement must give 10-years notice of any intent to withdraw from the agreement.
During a press conference announcing the agreement Thibert said that consumers may see reductions in their electricity bills, perhaps by some 2 percent, and that some cost reductions could start to appear within the next few months, as improved power pooling starts to kick in. The utilities have told the RCA that during the development period for the agreement they anticipate structuring energy transactions to replicate some aspects of the new power pooling arrangements, thereby enabling the assessment and refinement of the new procedures.
Management by committee Under the terms of the agreement, a participants committee will provide management oversight of the pooling arrangements, while an operating committee will have a technical role in developing and implementing dispatch procedures for power generation and transmission; fuel supply arrangements; and the process for the settlement of the various transactions involved in the power pooling. Each committee will have one representative and a backup from each participating utility.
The RCA has been encouraging the six utilities that operate the Railbelt electrical system to pool their resources, to the benefit of electricity consumers. This new agreement appears to be a major step in that direction. The agreement also leaves open the possibility of other utilities joining the pool - Fairbanks-based Golden Valley Electric Association has said that it has participated in work on the new pooling agreement and that it is pleased to continue working with the Southcentral utilities.
Further possibilities Discussions involving the RCA have been targeting the potential future formation of a unified system operator, for management of the Railbelt transmission grid, and a transmission company, or transco, to operate the grid. The new agreement neither precludes nor promotes either of these possibilities. The formation of a unified system operator, to provide unified oversight of how the system works, faces controversy over its governance structure, with a range of opinions over the extent to which the oversight entity would be independent from the utilities that operate the system. The transco concept, an arrangement that could potentially enable the optimization of fees charged for grid usage and provide a mechanism for the funding of grid upgrades, has been the subject of discussions between the six Railbelt utilities, with a report on the outcome of those discussions expected soon.
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