Providing coverage of Alaska and northern Canada's oil and gas industry
February 2024

Vol. 29, No.6 Week of February 11, 2024

Dunleavy wants transmission legislation

The recovery of electricity transmission system costs would transition from tariffs on system use to a tax on power producers

Alan Bailey

for Petroleum News

Gov. Mike Dunleavy has introduced bills to the Alaska House and Senate that, if passed, would radically change the way in which large electrical transmission systems in Alaska are funded. The proposed legislation would particularly impact the Alaska Railbelt transmission system.

Currently the pancaking of electricity transmission fees across sectors of the Railbelt transmission grid owned by different entities significantly elevates long distance transmission costs. This acts as an impediment to the viable use of the entire system for the flexible shipment of electricity from power generation sites to electricity demand centers.

Dunleavy's House Bill 307 and Senate Bill 217 would replace the current tariff arrangements by a transmission cost recovery mechanism involving a tax that each independent power producer and electric cooperative would pay, based on the amount of electricity that each of these entities generates. The legislation would task the Regulatory Commission of Alaska with developing a process to transition the recovery of transmission costs from the current system to the new tax-based system.

As part of the tax changes, the legislation would make independent power producers exempt from paying local taxes, in a similar manner to nonprofit electric cooperatives.

Transmission system association

The legislation would also require all utilities that own or operate a portion of the integrated transmission system and that are overseen by an electric reliability organization to form an integrated transmission system association to assist in administering the arrangements for transmission system cost recovery. The Railbelt Reliability Council has recently been approved by the RCA as the electric reliability organization for the Railbelt.

"Currently, there are electrical tariffs on the Railbelt system that stand in the way of transmitting the lowest-cost power," Dunleavy wrote in a Feb. 2 press release. "This legislation would eliminate these tariffs and transform the system into a public highway rather than a series of toll roads. This would lower costs for ratepayers and create new opportunities for independent power producers."

One of the roles of the RRC is to administer rules for open access to the Railbelt transmission grid, with the pancaking of transmission tariffs being one component of the current challenges in the use of the grid by power generating entities. The RRC is still in the process of establishing its organization and does not currently anticipate starting work on the transmission grid issues until next year.

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