Providing coverage of Alaska and northern Canada's oil and gas industry
July 2020

Vol. 25, No.27 Week of July 05, 2020

RCA’s initial focus certification for ERO; 3 dockets established

Alan Bailey

for Petroleum News

During its June 24 public meeting the Regulatory Commission of Alaska commissioners formally agreed to split the docket for establishing regulations for an electricity reliability organization, or ERO, into three separate dockets. The new regulations are needed to support new statutes enacted this year through the passage of Senate Bill 123, a bill mandating the formation of an ERO for the electrical system in the Alaska Railbelt, to achieve a more coordinated approach to managing the system. The system is owned and operated by six independent utilities and the state of Alaska.

In December 2019 the six utilities signed a memorandum of understanding for the formation of the Railbelt Reliability Council, or RRC, an ERO for the Railbelt. The utilities are in the process of forming the RRC, which would apply to the commission for certification as the Railbelt ERO. One worry is that the regulatory process could delay the RRC formation.

Technical workshops

The commission has already held a technical workshop to gather initial input to the regulatory requirements and plans to hold a series of further workshops. A concern is that, once the commission starts publicly noticing regulations from a docket, no further workshops will be allowed within that docket. So, in the interests of enabling all necessary technical workshops to be held, public noticing of regulations from a single docket would need to be delayed until the complete workshop sequence has been completed.

Instead, the first of three separate dockets will address the certification, competency requirements and board composition of an ERO, thus enabling the establishment of an ERO to proceed. A second docket will deal with ERO responsibilities for integrated resource planning and the pre-approval of large electrical system projects. The third docket will address regulations dealing with ERO tariff filing, the assessment and imposition of penalties, and conflict resolution procedures.

Independent or balanced board

A source of contention in that first docket revolves around the extent to which the ERO board should be independent from the utilities, or whether, rather than being fully independent, the board composition should be balanced, with representation from both the utilities and other stakeholders in the electrical system. Stakeholders such as independent power producers tend to argue for a fully independent board, while the utilities say that they require board involvement, in particular because of utility expertise in how the electrical system operates. SB 123 allows considerable flexibility, requiring a board “formed as an independent board; a balanced stakeholder board; or a combination independent and balanced stakeholder board.”

The planned RRC board targets the balanced approach, with six board members representing the six utilities and six members representing non-utility stakeholders. The 13th board member would be the RRC CEO.

The utilities are close to completing the formation of an implementation committee for the RRC. The idea is then to develop the various foundational documents for the organization. The committee would subsequently transition into the initial board for the organization, based on the proposed board structure.

Concerns about potential delay

During the June 24 meeting utility executives expressed concern that the RCA regulatory process might delay the RRC formation, in particular if the technical conferences result in a board specification that conflicts with that of the planned RRC.

Brian Hickey, chief operating officer of Chugach Electric Association, requested that the new regulations should not be too prescriptive, allowing flexibility in how an ERO can be established.

“I would urge the commission to remain with regulations at a high level that allows us the flexibility to continue the positive process that brought forth the RRC MOU as wells as Senate Bill 123,” Hickey said.

John Burns, president and CEO of Golden Valley Electric Association, commented on a perception that the commission is inviting the specification of an ERO governance structure that differs from that spelled out in the RRC MOU. That would undermine a process undertaken by the utilities for well over a year at the direction of the commission, Burns said. The commission should just set broad standards for an ERO, consistent with SB 123, with broad representation of stakeholders within the ERO governance structure, he said.

RCA staff member Christina Hunter said that during the initial technical conference there had been discussion over whether the ERO board membership needed to include people with appropriate technical expertise, to enable effective decision making, or whether that expertise could be provided through a technical committee or consultant. Another concept discussed involved the possibility of starting with a balanced board and then transitioning to a fully independent board at a later date, Hunter said.

Utility views

In a June 18 filing with the commission, Lee Thibert, CEO of Chugach Electric Association, commented that the RRC concept had been developed over a period of several years by a diverse group of stakeholders, with the proposed governance structure reflecting “the fundamental needs of a viable ERO for the Railbelt interconnection.” And the RRC model is consistent with the requirements of SB 123, he said. The RRC board needs to include utility representation, to provide the necessary expertise for conducting system planning, and linking that planning with system reliability standards. Moreover, the utilities are non-profit cooperatives, answerable to their customers in the Railbelt and not to corporate shareholders, Thibert commented.

In a June 16 filing, Tony Izzo, CEO of Matanuska Electric Association, commented that, while the board structures of Lower 48 EROs have tended to evolve over time, the governance structures of these organizations, in complex electricity markets, are a mismatch for the situation in the Alaska Railbelt.

“The governance structure in the RRC MOU is a sound structure that is aligned with best practices metrics from structures in similar phases of development and adjusted to Alaska’s unique context,” Izzo wrote.

Under the RRC MOU specification, no single utility or group of utilities can dominate the RRC’s decision making, he wrote.

REAP wants board independence

Independent power producers, including independent renewable energy producers, want to ensure that they will have fair access to the Railbelt electrical system.

In a June 1 commission filing Chris Rose, executive director of the Renewable Energy Alaska Project, said that REAP thinks that an independent ERO board, rather than a balanced board, is necessary to eliminate conflicts of interest between the ERO and the owners and operators of the electricity grid. Rose also commented that REAP does not agree that the governance structure specified in the RRC MOU meets the definition of a balanced stakeholder board. The fact that half of the board would consist of utility representatives would overweight the board in favor of the utilities, with the RRC CEO, the 13th member, able to cast a tie-breaking vote, Rose wrote.

REAP wants the RCA to provide guidance on the definition of an independent or a balanced stakeholder board for an ERO.


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