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Revised GRETC bill gets House hearing A more flexible approach brought the utilities to the table, but lawmakers want some concerns addressed before they sign off Eric Lidji For Petroleum News
After a year to clear its throat, an attempt to unite the Alaska Railbelt utilities is back before lawmakers in a more flexible package, creating both benefits and concerns.
A pair of bills before the Legislature — HB 182 and SB 143 — would form a private corporation tentatively named the Greater Railbelt Energy and Transmission Co. under the assumption that the whole is greater than the sum of its parts for Railbelt electricity.
GRETC, as it’s being called, would provide wholesale power to public utilities in the Railbelt region stretching from Homer to Delta Junction. It would buy or build new generation and transmission assets, buy fuel supplies and develop operating standards.
The six Railbelt utilities are regulated monopolies in an interconnected grid, most with their own generation facilities and all with their own independent distribution lines.
The idea is to create economies of scale that bring down the cost of power for consumers, while also easing the path toward building massive energy projects in the future.
Changes for a unique system The unique utility structure in Alaska grew out of necessity. To electrify isolated and relatively under-populated corners of pre-statehood Alaska, the member-owned cooperatives that sprung up in Fairbanks, Anchorage and the Mat-Su region needed to be vertically integrated, owning generation, transmission and distribution facilities.
Now, 50 years into statehood, some question whether that system should be restructured to more closely resemble the Lower 48, where local distribution companies buy power from generation facilities that serve broad regions, often crossing state lines. Alaska can’t connect to the North American grid, but it can unite its population center in the Railbelt.
This idea has gained traction over the past three years.
A 2008 study commissioned by the Alaska Energy Authority aimed to make a business case for combining generation and transmission assets in the Railbelt into one entity.
In late 2009, another AEA report called the Regional Integrated Resource Plan prioritized power generation projects under consideration, looking at various factors like fuel type, cost and complexity to guide policymakers looking to dole out limited funds in the future.
The report concluded that any major power projects, like the long-proposed Susitna Dam or a hydroelectric project at Lake Chakachamna, depended on utility cooperation because the current debt capacity of the utilities individually is, even in the best-case scenario, several billion dollars shy of the infrastructure investment needed over the next 30 years.
A Commonwealth North report on Railbelt energy released March 24 called the GRETC concept “worth pursuing in order to ensure Alaska’s long term energy stability.”
“Success will ultimately come from community support, equal representation on the Board of Directors, and an atmosphere of trust that allows the six Railbelt utilities to join and work together for the common benefit of the people of Alaska,” the report said.
Then-Gov. Sarah Palin proposed GRETC in early 2009, but too late in the legislative session for lawmakers to consider the bill until this year. In the intervening months, the utilities and the state formed a task force to air concerns and revise the bill to their liking.
The revised bill is now getting its first hearings before legislative committees.
Utilities ask for some freedom The biggest change to the bill is flexibility.
Membership in the proposed corporation is now entirely voluntary, and while the bill encourages cooperation by making the corporation the primary recipient of state energy dollars, it also allows member utilities to pursue projects independently if they want.
That flexibility extends into oversight as well, viewing the current regulatory structure governing Alaska utilities as one the corporation would ideally outgrow in stages.
Under the bill, Regulatory Commission of Alaska oversight of GRETC would sunset after five years unless lawmakers voted to extend it and GRETC would undergo comprehensive management audits every three years for its first 10 years of existence.
If all goes well, oversight then becomes even looser, relying on transparency guidelines, dispute resolution, an appeals process and the ability of consumers to protest decisions.
“The goal is to build this, put it on autopilot and expect it to work right, but we’ve built in oversights and we’ve built in requirements for public processes that the company must undertake in its day-to-day businesses,” Jim Strandberg with the Alaska Energy Authority told members of the House Special Committee on Energy on March 18.
…but freedom is not free The wiggle room is making some lawmakers cautious, though.
Rep. Chris Tuck noted that the voluntary participation makes it possible for one utility member to take on a project that competes against existing GRETC efforts. The concern is amplified in the case of potential nonvoting members like Doyon Utilities, a Native-owned private contractor that manages power plants at military bases across Alaska.
Rep. Charisse Millett, co-chair of the committee, brought up the disparity between residential and industrial customers. GRETC would establish a set “postage stamp” rate for all residential consumers in the Railbelt, but would give utilities first right of refusal to negotiate contracts with major industrial customers. These bid users can greatly impact cost of service. For instance, Golden Valley Electric Association in Fairbanks often touts that its contracts with two nearby gold mines temper residential electricity rates.
Millett and Rep. Kyle Johansen both wanted a better sense of the financial well-being of the six utilities before forming a corporation to unite them. Millet said her constituents have suggested some hard-up utilities may see membership as a “lifeline.” Strandberg said the 13-member GRETC board of directors would lead to voting blocks that naturally prevent one member from trying to get “bailed out” at the expense of the corporation.
The 22-page bill also contains many small, but curious provisions, like one that suggests GRETC could become a fuel producer in the future. Strandberg did not explain the genesis of that idea, but said the Parnell administration may ask to drop it from the bill.
Like the restructuring of the utility market in the Lower 48, GRETC would most likely evolve in phases, Strandberg said. “We look at this as a first cooperative step with the utilities to move towards a more tightly integrated network over the long run,” he said.
The House and Senate continue to examine the revised bills in committee.
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