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Utilities report transco progress
In response to an order from the Regulatory Commission of Alaska, the electricity utilities that operate the Alaska Railbelt power transmission grid have reported on progress in voluntary efforts towards developing an independent Railbelt power transmission entity. Following a directive from the Alaska Legislature to investigate whether there would be benefit in transferring management of the grid to some form of independent operator, at the end of June the commission reported that there would indeed be significant advantage in a transition to a single operating company. And, as part of its findings, the commission required the utilities to file the report that has now been published.
Fragmented model Five independent utilities currently own and operate different sections of the grid, with the state of Alaska also owning one section. The aging grid, which stretches from Homer and Seward on the southern Kenai Peninsula to the Fairbanks region in the Alaska Interior, suffers from single points of failure and capacity constraints which limit the ability to flexibly ship power between power generation facilities and the various power demand centers along the grid’s length.
As a consequence of its study, the commission found that adequate future investment in grid upgrades would require unified grid management. The commission also found that, with the grid’s fragmented operational management, and despite energy transactions between the utilities, it is not currently possible to make most efficient use of the various power generation facilities that are hooked into the grid. Moreover, the grid has seen a substantial history of meetings, hearings and reports relating to the way in which the grid is managed. There is a history of mistrust among stakeholders in the grid, a dependence on state funding for grid initiatives and a lack of universal reliability standards for the grid, the commission found.
Utilities working together In their report, filed Sept. 30, the five utilities told the commission that in 2014 they had worked together and with American Transmission Co. LLC to establish and endorse the principles for the voluntary formation of a Railbelt transmission company, or transco. American Transmission Co., or ATC, operates a transmission grid in Wisconsin and the Upper Peninsula of Michigan, as a consequence of a similar transition in grid management to what is envisaged for the Railbelt, the utilities told the commission. ATC’s experience has formed a starting point for figuring out what to do in Alaska, the utilities said.
Since the end of 2014 a working group consisting of senior utility managers has met monthly and has engaged groups of experts to work on various aspects of the issue, the utilities reported. Work is progressing under a plan designed to address the various aspects of a new transco-style grid governance structure, including topics such as how to efficiently dispatch power on the grid; financing structures; transco governance; transco operations and management; real estate rights and permitting; and dealing with existing Railbelt grid agreements.
The utilities anticipate delivering a design for a business model for a Railbelt transco, with a potential tariff structure for use of the grid and a validation of the benefits of Railbelt economic dispatch, the utilities’ report says. Economic dispatch refers to the ability to dispatch power across a transmission grid in a manner that makes best use of the most economic sources of power.
And the utilities continue to work with ATC on delineating the necessary steps for a transition from the current grid management structure to a single Railbelt transco.
“In other regions of the country, this model has provided increased efficiencies through economies of scale in transmission operations, leading to increased reliability and economically efficient generation,” the utilities report says. “A preliminary step is to determine whether this model will provide sufficient reliability and efficiency improvements in Alaska to warrant the cost of creating a transco.”
The transco model In general, a transco manages a power transmission system but does not own any power generation assets. It must balance the effective operation of the transmission grid and investment in the grid with the obligations that each utility has to its customers and stakeholders, the report says. The transco would operate under a common and publicly transparent set of reliability standards and tariff arrangements, with transmission costs equitably allocated to electricity consumers.
And a significant purpose of the transco would be an improved operational, financial and technical capacity for transmission grid maintenance and upgrades, the report says.
Individual utility commitments Individually, the Railbelt utilities are also committed to identifying and evaluating business models and business approaches that may benefit electricity consumers through improved power transmission efficiency and reliability, the report says.
“Each of the parties will need to determine for itself whether becoming part of a transco would be beneficial for its ratepayers and other stakeholders,” the report says. “The parties recognize that this determination will not be possible until the transco’s business model is clearly defined.”
If implemented, the transco would be certificated and regulated by the Regulatory Commission of Alaska, and would be accountable to its owners, to the commission and to other stakeholders, the report says.
As required from the commission’s June findings, the utilities will file a second report on their voluntary efforts by Dec. 31.
- ALAN BAILEY
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