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Bill proposes Railbelt grid operator
HB 382 would establish a state authority for overseeing management and operation of electric generation and transmission system
Alan Bailey Petroleum News
On March 29 the House Special Committee on Energy listened to testimony regarding House Bill 382, a bill that would establish a new state authority for overseeing the management and operation of the Alaska Railbelt electricity generation and transmission system. The bill, introduced by the committee’s chair, Rep. Adam Wool, D-Fairbanks, would require the Regulatory Commission of Alaska to form the new authority, overseen by a board of directors representing the Railbelt electric utilities, independent power producers, electricity consumers and Railbelt municipalities. The commission and the Alaska Energy Authority would have non-voting membership of the board.
The authority would establish rules for the management of a unified transmission system that would optimize at lowest cost the use of power generation facilities connected to the electrical grid. Other responsibilities would include the establishment of a transparent and universal transmission tariff; nondiscriminatory open access to the transmission system; enforced interconnection standards and protocols; regional transmission and generation planning criteria and protocols; and enforced reliability standards.
The authority would also be responsible for the authorization of development projects for the transmission system, and for the development of long-range regional plans for electrical generation and transmission.
A long history The question of whether and how to unify the management and operation of the Railbelt electrical system has been the subject of debate for many years. Currently six independent utilities and the state of Alaska own and operate different sectors of the system, a system that in total supports fewer electricity consumers than most utilities in the Lower 48. This fragmented ownership leads to a number of issues, including the less-than-optimum usage of the most efficient power generation units, and the pancaking or stacking of power transmission fees for businesses wanting to transmit power across multiple transmission sectors.
The fragmented transmission system ownership renders it difficult to approve investments in projects that benefit multiple utilities. There have been many questions raised over decisions by individual utilities to independently build new generation facilities. And the balkanization of the system makes it challenging to achieve economic dispatch, the optimum dispatch of the cheapest power on the grid.
Ultimately, the desire is to minimize the cost of electricity for consumers without sacrificing the reliability of supply. There are also questions over how much of the power should be generated from renewable energy sources.
RCA opinion In 2015 the RCA issued an opinion stating that unification of the electrical grid management and operation should proceed. Since then the commission has been encouraging the utilities to proceed toward unification on a voluntary basis. The utilities have been making moves towards economic dispatch, with three utilities, Chugach Electric Association, Municipal Light & Power and Matanuska Electric Association forming an agreement for the tight pooling of their generation and transmission resources. The utilities have also been working on a plan to form a transmission company to take responsibility for the operation of the whole of the transmission system.
A difficult issue is the formation of a unified or independent system operator to oversee the operation of the entire generation and transmission system. Difficulty arises from questions over the composition of the operator entity’s board, and the extent to which the entity should be independent from the utilities. The utilities have argued that, because they have the necessary technical expertise in how the electrical system works, they need involvement in the governing entity. Independent power producers that want to sell power to the system argue for governance that is more independent from the utilities, to ensure a level playing field for all.
HB 382 is obviously an effort to mandate by law a unified operator for the system.
ARCTEC Several years ago the utilities formed the Alaska Railbelt Cooperative Transmission and Electric Co., or ARCTEC, to advance the concept of a system operator for the Railbelt grid. Currently four of the six Railbelt utilities are ARCTEC members. ARCTEC has proposed the formation of what it refers to as a Railbelt Reliability Council, an organization that would be an alternative to the system operator envisaged in HB 382. Early this year ARCTEC selected consultancy firm GDS Associates Inc. to act as facilitator for the formation of the Railbelt Reliability Council.
During the March 29 House Energy meeting Seth Brown from GDS Associates reviewed the status of the ARCTEC Railbelt Reliability Council project. Brown said that his company has consulted with a wide range of stakeholders and would complete a report and a memorandum of understanding by the end of April. The RRC, as envisaged, would have a role in enforcing reliability standards, in ensuring an open-access transmission service, and in planning generation and transmission expansion. The organization would not, as it stands, have a role in administering economic dispatch across the Railbelt grid. However, GDS does recommend that the RRC should study the economic dispatch issue, in particular to pin down the potential costs and benefits of this type of power pooling arrangement, Brown said.
The recommended board would include four transmission system owner representatives, a representative from the state attorney general’s office, two renewable energy representatives and an unaffiliated director position. The RRC staff would have opportunities to assess the practicalities of board decisions, and go to the commission with any concerns, Brown said. He told the committee that he thinks that there is a good chance that most of the utilities will agree to the RRC proposal.
AEA involvement Janet Reiser, executive director of the Alaska Energy Authority, told the committee that in AEA’s view economic dispatch by an independent entity is a key to the reform of the way in which the Railbelt grid operates. Over the years there have been several attempts at Railbelt grid unification, but no voluntary effort has yet succeeded, she said.
Reiser compared AEA’s concept for a unified system operator with the RRC model that GDS is proposing, and with the operator concept in HB 382. Both the AEA and HB 382 concepts involve economic dispatch, while the GDS concept does not. And AEA proposes that the system operator organization be housed with the AEA, with AEA providing back-office support. The GDS proposal contains many good ideas and has much alignment with AEA’s views, but it is not clear that all of the utilities will voluntarily agree with the GDS concept, Reiser said
Reiser said that AEA, with its institutional knowledge of Alaska energy issues, is anxious to have an active role in the Railbelt system operator issue. And the state and the AEA board have directed the agency to participate. However, the agency does not see itself as having any kind of enforcement role and wants to help the various stakeholders arrive at a satisfactory arrangement. Reiser pointed out that several years ago AEA had conducted an economic dispatch study for the Railbelt.
Utilities oppose Four of the Railbelt electric utilities sent a letter to House Energy opposing HB 382 on the grounds that, while the utilities are making significant voluntary progress towards economic dispatch, a common set of reliability standards, the formation of a transmissions company and a Railbelt-wide organizational model, HB 382 represents the views of one, small stakeholder group. MEA, ML&P and Chugach Electric are in the testing phase of their economic dispatch arrangements, the utilities have signed a memorandum of understanding for a transmission company and the utilities have commissioned GDS to recommend an organizational model, the utilities wrote.
REAP supports The Renewable Energy Alaska Project, on other hand, has asked that HB 382 be passed, saying that although REAP appreciates the efforts that the utilities have been making through the GDS project, REAP does not believe that voluntary efforts by the utilities will ultimately succeed in meeting grid unification goals. And the omission of economic dispatch from the RRC proposal is a serious flaw, REAP believes.
REAP sees unified operation of the grid, with non-discriminatory access to the system, as a key to successful renewable energy development in the Railbelt.
REAP Executive Director Chris Rose told House Energy that the unified management of the Railbelt grid is a consumer issue that should have been dealt with 10 or 15 years ago. There have been multiple efforts over the years to solve this problem, but none has succeeded, he said. Ultimately success will rest with the Legislature establishing something such as the authority proposed in HB 382, Rose said.
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