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Transco in offing
Railbelt electricity transmission company applies to RCA for certificate
Alan Bailey Petroleum News
Some of the Alaska Railbelt electric utilities and the American Transmission Co. have formed the Alaska Railbelt Transmission LLC, or ART, an electricity transmission company that would plan, operate, maintain, upgrade and finance the electricity transmission network that spans the Railbelt region. ART has filed an application for a certificate of public convenience and necessity with the Regulatory Commission of Alaska. The transmission network is owned by six separate Railbelt electric utilities and the state of Alaska: Currently each utility manages and operates its own sector of the system.
ART told the RCA that the company’s implementation of uniform system-wide transmission pricing across the Railbelt and a unified transmission system with non-discriminatory access for generation facilities would facilitate maximum use of the most efficient power generation on the grid, and the integration of hydropower and intermittent renewables such as wind and solar.
Companies involved Homer Electric Association, Municipal Light & Power, Golden Valley Electric Association, the City of Seward and ATC have formed the company. Chugach Electric Association and Matanuska Electric Association have also been involved in the process leading to the certificate application. Chugach Electric is still conducting due diligence prior to seeking board approval for its participation in the new company. Matanuska Electric Association told the commission that it is conducting its due diligence of the ART concept and that it has some “significant areas of concern.”
The formation of ART comes as part of a multiyear effort, encouraged by the RCA, for the utilities to take a more unified approach to the management and operation of the Railbelt electrical system.
The company would charge standard fees for the point-to-point delivery of electricity from generation units to local distribution networks, thus avoiding the stacking or pancaking of separate fees by different owners of different network sectors, as happens at present. ART’s tariff also includes procedures and a fee structure for connecting new generation facilities to the transmission grid.
The member utilities would pool their transmission system costs, with those costs being initially split between the utilities based on agreed percentage allocations. However, the concept is that, over time, costs will be allocated based on the utilities’ shares of the transmission load. The calculation of the revenue requirement from capital assets will be based on a capital structure of 60 percent debt and 40 percent equity, with a return on equity of 10 percent.
Ownership retained The individual utilities would retain their current ownerships of their individual components of the transmission system, with ART operating their assets on their behalf. The company hopes to also take over the control of the transmission assets associated with the Bradley Lake hydropower facility on the Kenai Peninsula, and the Alaska Intertie segment of the transmission system between Southcentral Alaska and the Interior. However, this would depend on a review of the relevant agreements for these sectors of the grid.
The participating utilities would continue the maintenance and repair of the components of the transmission grid that they own, but would do so under the terms of service agreements with ART. On the other hand, ART would determine how to delegate operations and maintenance responsibilities for transmission assets that it constructs or that cross multiple utility service areas. Specific utilities have also agreed to execute service agreements with ART for specific services that would be required for the entire system, such as finance, human resources and transmission dispatch.
ART would plan, finance and manage upgrades to the transmission system, using its funding resources, recovering the upgrade costs through the rates that it charges transmission customers. Currently the fragmented operation of the system inhibits upgrades, because an individual utility may be faced with funding an upgrade that provides benefits to other utilities. ART told the commission that any new construction for the transmission system would be based on a regional integrated resource plan.
ART would be governed by a board with one representative from each of the participating companies and at least one independent director.
MEA’s concerns In a letter to the utilities that have formed the new transmission company, Tony Izzo, CEO of Matanuska Electric Association, expressed his utility’s concerns. Izzo emphasized MEA’s commitment to working with the other utilities on the transmission company concept. But, after reviewing the draft certificate application for the new company, Izzo had proposed a joint due diligence effort by the utilities for the proposal. And, having received no responses to this suggestion, MEA had decided to proceed with its own due diligence effort - the due diligence analysis should be complete by the first half of April, Izzo said.
Based on a preliminary analysis, MEA has concerns about a number of issues including the tax implications of the new organization; requirements for return on equity; required expenditures by each utility; the re-allocation of the costs of shipping power through the network; compliance with utility bylaws; and the lack of an independent, stakeholder-involved planning and project approval process.
“This is a major decision for the future of our state and each of our utilities,” Izzo wrote. “We are being asked to form a long-term business arrangement with, and convey ownership of our system to a sophisticated, Outside, for-profit entity and we should apply the same level of sophistication to a thorough analysis.”
Other initiatives Also as part of the multiyear effort towards more unified operation of the Railbelt electrical system the utilities have been proposing to form a Railbelt Reliability Council to oversee the operation of the entire system. The utilities have also developed a uniform set of reliability standards for the transmission system and are working towards incorporating cybersecurity standards. There is a continuing debate over the mechanism whereby the standards would be enforced. The RCA has also been pushing for the implementation of economic dispatch, involving the continuous use of the most efficient available power generation across the grid. Chugach Electric, ML&P and MEA had been moving forward with a plan to implement economic dispatch across their service areas. However, that initiative is currently on hold, pending the planned purchase of ML&P by Chugach Electric.
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