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AEEC notifies RCA of dereg election Says Kenai Peninsula transmission and generation utility will send its deregulation ballot to HEA board members on Dec. 13 ALAN BAILEY Petroleum News
The Alaska Electricity and Energy Cooperative, the utility that owns and operates Homer Electric Association’s electricity generation and transmission assets on the Kenai Peninsula, has notified the Regulatory Commission of Alaska of AEEC’s pending membership election, to allow the membership to decide whether AEEC will become deregulated from the commission. In an Oct. 26 filing, AEEC told the commission that the deregulation election will take place on Dec. 13.
Under state law deregulation requires a majority decision by the utility’s membership.
A one-member cooperative But, as an affiliate of Homer Electric Association, the electricity utility for the western Kenai Peninsula, AEEC has only one member: HEA. HEA is currently conducting a ballot of its members, the HEA ratepayers, to determine if HEA should deregulate. HEA owns and operates the power distribution network in its service area.
HEA has already indicated that if becomes deregulated it will vote in the Dec. 13 election to deregulate AEEC. Thus, an HEA membership vote for deregulation will, in effect, deregulate both HEA and AEEC.
A utility, once deregulated, will still require a certificate of public convenience and necessity from the commission. However, the commission will no longer have the authority to approve or reject major decisions by the utility, such as the setting of electricity rates and the setting of fees for the use of the utility’s services. And the commission will no longer act as a conduit for complaints from the utility’s customers.
Improved efficiency HEA has said that deregulation would eliminate the lengthy, expensive and rigid RCA approval process for rate changes, thus enabling the utility to more flexibly implement or pilot new service arrangements and rate structures. Currently, under RCA regulation, all rate changes must go through a rate case process that can take up to 450 days to complete. Moreover, the utility’s board would be able to make strategic decisions on electricity rates before the costs from those decisions would be incurred, HEA has said.
Customers dissatisfied with services or rates would have the option to escalate complaints through the utility’s board and ultimately through litigation in Superior Court, HEA has said.
While HEA’s distribution network only serves HEA’s own ratepayers, the transmission and generation aspects of the western Kenai Peninsula connect to other Alaska Railbelt utilities in ways that raise interesting questions over the impact of AEEC deregulation, especially given that all of the other utilities are regulated by the commission. For example, power from the Bradley Lake hydro facility in the southern Kenai Peninsula, the cheapest power in the Railbelt, is transmitted or “wheeled” through AEEC’s transmission grid, for use by other Railbelt utilities. And the various utilities including HEA buy and sell short-term power across the grid, to assure continuity of power supplies.
Moreover, all six of the Railbelt utilities, including HEA, have been participating in discussions over the potential integration of transmission grid operation and management, with the commission strongly advocating this strategy. The idea is that through integrated grid management it will eventually be possible to minimize the cost of electricity for consumers in the Railbelt by making maximum use of the cheapest available power generation on the grid.
Also hooked into the question of achieving a better integrated transmission grid are negotiations aimed at implementing a single, consistent set of transmission reliability standards for the grid. Currently there are two sets of standards, one implemented by HEA and one by the other utilities.
Bradley Lake The issues surrounding the transmission of Bradley Lake power across the peninsula appear somewhat complex, with the contractual arrangements for the transmission tied into various Bradley Lake service agreements. Under the terms of these agreements Bradley Lake power is delivered into an AEEC transmission line in the southern Kenai Peninsula for delivery to Soldotna to the north. Another transmission line connects east from Soldotna to Chugach Electric Association’s transmission network which extends across the eastern side of the peninsula and up into Anchorage.
In answer to questions from Petroleum News about the potential impact of the AEEC deregulation, HEA has said that there is an agreement between the utilities covering how the cost of transmitting Bradley Lake power north to Soldotna through AEEC’s line is paid for. However, there is litigation in progress regarding compensation for the wheeling of Bradley Lake power through other components of AEEC’s network, HEA said.
Power transactions with other Railbelt utilities, being short term, are not currently regulated by the commission and would not, therefore, be impacted by deregulation, HEA said. HEA commented that for many years other utilities have been able to wheel power across the AEEC transmission network at no cost - the commission has yet to rule on an open access transmission tariff that HEA had proposed in 2013 to address this issue, HEA said, commenting that this matter is under appeal because of a dispute over whether the commission has jurisdiction over the wheeling of Bradley Lake power.
If AEEC deregulates, HEA would start charging other utilities fees for the use of the AEEC transmission assets, with the utilities having the option to challenge these fees through Superior Court, HEA said.
HEA also said that AEEC deregulation would have no bearing on continuing discussions relating to the future management and operation of the Railbelt transmission grid, because the commission does not have the statutory authority to compel any of the utilities to contribute their assets to any of the types of arrangements being discussed relating to the operation of power generation and the transmission grid, and to power pooling, in the Railbelt. AEEC’s board retains the sole authority for decisions over participation in grid integration, regardless of whether or not AEEC remains regulated, HEA said.
And HEA/AEEC remains committed to work with the other utilities to achieve a common set of transmission reliability standards for the Railbelt, HEA said.
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