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Utilities improve efficiency at a cost New Southcentral Alaska power generation will reduce long-term fuel needs while triggering price increases in the near future Alan Bailey Petroleum News
Thanks to what is termed “combined cycle” technology, Alaska’s Southcentral Power Project, a new gas-fired power generation facility undergoing commissioning tests in midtown Anchorage, will use just 70 to 75 percent of natural gas fuel per unit of generated electrical power compared with the region’s aging gas-fired power stations, power utility executives told the Anchorage Chamber of Commerce Make it Monday Forum on Nov. 26. But with the $369 million plant that is being constructed by Chugach Electric Association and Municipal Light & Power scheduled to come on line in the first quarter of 2013, electricity consumers can expect to see increases in their electricity bills, to cover the construction costs.
Phil Steyer, director of government relations and corporate communications for Chugach Electric, likened the situation to the purchase of a new fuel-efficient car, with the necessity of an up-front purchase cost in the interests of long-term fuel savings.
“Initially I expect that will cause your bills to go up,” Steyer said. “Over the long term, because we’re going to use less gas, I expect that to be a net savings.”
Rate increase Steyer said that Chugach Electric will also need to increase its rates a bit to cover the cost of responding to a severe wind and rain storm that hit the Anchorage bowl in September. Overall, consumers may expect to see a 5 to 10 percent increase in their electricity bills in 2013, Steyer said. However, thanks to improved energy efficiency, consumers are also tending to use less electricity than in the past — on average, a consumer’s usage has dropped from 700 kilowatt-hours per month to 650 kilowatt-hours per month, Steyer said.
Steyer also commented that Chugach Electric’s gas costs for 2013 are uncertain at the moment — the utility passes these costs through to its customers as a component of their electricity bills. This is the first winter in which the utility will have to withdraw gas that it has warehoused in a new gas storage facility operated on the Kenai Peninsula by Cook Inlet Natural Gas Storage Alaska, known as CINGSA — the stored gas is needed because the utility’s gas suppliers, Marathon and ConocoPhillips, can no longer meet all Chugach Electric’s power generation fuel needs during periods of high winter demand, Steyer said.
ML&P: busy year Jim Posey, general manager of Municipal Light & Power, or ML&P, characterized 2012 as having been his utility’s busiest construction season in at least 30 years. In addition to a series of construction projects aimed at addressing various customers’ needs, ML&P had to contend with the aftermath of the September storm.
The utility is forging ahead with plans to upgrade its aging facilities, including its share of the Southcentral Power Project and the construction of a new, efficient gas-fired power plant in its power station north of downtown Anchorage. The turbines for ML&P’s new plant will arrive in 2014 for installation in 2015, Posey said. ML&P has been preparing the site for the plant, he said.
ML&P is also constructing two new substations in midtown Anchorage to connect with the Southcentral Power Project when that facility comes online.
As with Chugach Electric, ML&P has contracted with CINGSA for the storage of gas for use during the winter. The utility has also contracted with ConocoPhillips for the delivery of additional gas at the rate of 5 million to 6 million cubic feet per day during the winter, with an expectation that this gas will be needed on a few occasions, Posey said.
Beluga field ML&P is a co-owner of the Beluga gas field, on the west side of the Cook Inlet, and the utility obtains much of its gas from that field. In addition to maintaining gas compression facilities, the partners in the field have recently spent $60 million drilling three new gas wells. Two of those wells proved successful, but one well produced water rather than gas, Posey said.
All told, ML&P anticipates spending some $459 million between 2012 and 2017 on its new power plant; transmission and distribution upgrades; general plant work; and projects in the Beluga field, Posey said. That expenditure will require an electricity rate increase before the end of this year, he said, adding that ML&P anticipates another rate increase after the Southcentral Power Project comes online and the final costs of that project are known.
MEA Joe Griffith, general manager of Matanuska Electric Association, or MEA, talked about the Eklutna Generation Station, or EGS, the new, modern gas-fired power station that his utility is building north of Anchorage. MEA currently purchases power from Chugach Electric: When the EGS facility comes on line in 2015 this facility will displace some of Chugach Electric’s generation capacity.
MEA has already cleared the site and purchased the massive engines for the 170 megawatt EGS project, a project that has an estimated price tag of $265 million, Griffith said. The utility has upgraded its computer control system for its facilities to synchronize with the systems used by ML&P and Chugach Electric. And the utility is engaged in a series of other projects, including the planning of a new transmission line from the EGS facility to the town of Wasilla and upgrades to the utility’s existing transmission and distribution systems, Griffith said.
Gas decline Steyer said that the utilities’ new, highly efficient power plants form one component of a series of measures addressing the continuing decline in production from Cook Inlet’s aging gas fields. Other measures taken in response to the gas supply situation include the successful construction of the CINGSA gas storage facility and the instigation of bidirectional gas flow through the Cook Inlet Gas Gathering System, a major gas pipeline under Cook Inlet. Energy efficiency and conservation are reducing gas demand, while Chugach Electric is now obtaining some power from a new wind farm on Fire Island, offshore Anchorage. A project is under way for the eventual construction of a major hydropower system at Watana on the Susitna River.
And state exploration and production incentives have encouraged much new oil and gas exploration in the Cook Inlet basin.
The utilities are moving ahead with a plan to import either liquefied or compressed natural gas into the region, to fill a projected gas supply shortfall starting in the winter of 2014-15. And there is an “Energy Watch” program in place during the winter, to alert Southcentral residents of any need to reduce energy usage, should a gas shortage occur.
So far the utilities have succeeded in working with each other and the gas producers to ensure the continuity of gas supplies when winter demand has peaked, Steyer said. A request to the public for voluntary cuts in energy use under the Energy Watch program would be an indication that the utilities have run out of options to stave off a gas shortfall — in this situation it is important that people respond, to avoid a need for power cuts, Steyer cautioned.
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