|
Further grid progress Utilities report to RCA on progress forming single Railbelt transmission company ALAN BAILEY Petroleum News
The Alaska Railbelt electric utilities have filed a joint report with the Regulatory Commission of Alaska, notifying the commission of progress towards the voluntary formation of a transmission company, or transco, to operate the Railbelt power transmission grid.
Five of the six Railbelt utilities independently 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.
Reports required 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 RCA 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 reports in September and December on voluntary efforts towards forming a single operating company for the grid.
The six Railbelt utilities reported, as required, in September and have now filed their December report.
The December report says that the utilities are working with American Transmission Co. to develop a business model whereby a single transco would operate, maintain and upgrade the grid - a draft version of a business plan for the transco is attached to the report. 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 various components of the due diligence tasks needed to reach a decision point for transco implementation are at various stages of completion, with a current expectation of a proposal going to utility governing boards and stakeholders in the third quarter of 2016. That would lead to an application for an operating certificate going to the RCA in that same quarter, the report says.
Started December 2014 The work program dates back to December 2014, when the managers of the utilities and ATC endorsed a set of guiding principles for an Alaska Railbelt transco and established a working group to move the transco concept forward. A work plan is focusing on due diligence by each utility, the formation of a Railbelt transco business model, the validation of the benefits to be gained from transco formation and the submission of an application to the RCA for a certificate of convenience and public necessity, the report says. And in November 2015 the utility managers also tasked the working group with developing methods for conducting the Railbelt-wide economic dispatch of power and developing a means of settling between the utilities the economic-dispatch-related transactions.
The term “economic dispatch” refers to meeting power loads across the grid through the optimum use of the most economically favorable power generation units on the grid. Achievement of economic dispatch is anticipated to be a key benefit to be gained from grid unification. However, given the need to make flexible use of different generating facilities owned by different entities along the grid, to achieve overall benefits, it is necessary to have some equable formula for distributing the income and costs associated with power sales.
Transco mission The utilities’ report says that the mission of the Railbelt transco is to “operate, maintain, plan and provide reliable economic service through prudent capital investment and associated construction (of) the Railbelt’s transmission assets,” operating, maintaining planning and constructing transmission lines in and around the utilities’ existing service territories. The transco would recover its costs through non-discriminatory, open-access transmission rates. And, through not owning any power generating capacity, the transco would be able to operate under transparent and non-discriminatory planning and reliability standards.
An open access transmission tariff would allow equal access to the grid for load serving entities and independent power producers, the report says.
Eight subgroups Subgroups within the overall working group are working on eight distinct components of the transco proposal: transco governance; organizational structure; regulatory strategy; operations and maintenance; grid reliability standards; economic dispatch; real estate and land rights; and finances. Due diligence work under these subgroups is about 75 percent complete, with full completion anticipated in the first or second quarters of 2016, the report says.
Based on work conducted to date, the concept is that income from the transco’s tariff would fund the operation of the transmission grid, while capital projects for grid upgrades would depend on the issuance of debt and capital calls to transco members.
The economic dispatch subgroup has been guiding the efforts of two modeling teams, to develop a computer-based model of the Railbelt grid that can simulate the benefits to be gained from various sensitivity cases for grid unification and the pooling of generation resources. The model will be benchmarked against an existing data set for the grid, the report says.
In parallel with the work of the subgroups, a validation of the benefits of Railbelt-wide economic dispatch is 60 percent complete; the design of a tariff for the transco is 25 percent complete; and the design of a transco business model is 65 percent complete, the report says. An overall evaluation of the transco proposal by the parties involved is ongoing, as the work proceeds, with that evaluation anticipated to be complete in the second or third quarter of 2016, the report says.
Voluntary solution One of the guiding principles for the transco working group emphasizes the voluntary nature of what emerges from the working group’s efforts.
“Transco formation will result from a commercial transaction between the Railbelt utilities and American Transmission Company,” the guiding principal says. “While each entity’s participation in the Transco is important to its success, each entity will voluntarily enter into this transaction.”
Ultimately each party in the utilities’ voluntary project will need to make its own decision on whether to proceed with transco formation, based on factors such as the economic impacts to electricity consumers, regulatory certainty and the transco’s governance structure, the report says.
|
