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Taking next steps
Railbelt utilities have assembled team to start process of forming RRC
Alan Bailey Petroleum News
The six Alaska Railbelt electricity utilities are taking the first steps towards the formation of a Railbelt Reliability Council, a governing body for the Railbelt electrical system. The RRC forms a critical component of moves to establish a more unified approach to the management and operation of the system, which is owned and operated by six independent utilities. During an Oct. 24 public meeting of the Regulatory Commission of Alaska utility executives said that the RRC would adopt and enforce reliability and operational standards for the system. The RRC would also adopt and enforce system-wide interconnection protocols for the grid; would conduct system-wide integrated resource planning; and would evaluate the use of security constrained economic dispatch of power generation in the system, the executives said.
RCA recommendations Tasked by the Alaska Legislature to conduct a study into the operation of the Railbelt electrical system, in 2015 the RCA recommended a more unified approach to the management of the system, including the formation of an entity that would oversee the manner in which the system operates. The commission has been conducting a series of public meetings, to determine the status of voluntary efforts by the utilities to address the unification issues. The commission plans to send a status report to the Legislature around the turn of the year.
The way in which the Railbelt electrical system is currently organized is a product of the way in which the system has evolved, based on separate utilities serving different population centers. Moving it now towards a more unified arrangement is a far from trivial task. But, connected by a common transmission network, the electrical system operates, in effect, as a single electrical mechanism. And, while encompassing a large geographic area, the Railbelt system serves a small population of consumers compared with a typical utility elsewhere in North America.
The overall objective of unification efforts is to have that Railbelt electrical mechanism operate as efficiently as possible, to minimize the cost of electricity while maintaining an acceptable level of supply reliability. There are also issues relating to the cost-effective availability of power from renewable energy sources.
Three stage process During the Oct. 24 meeting the executives outlined a three-stage process for putting the RRC into operation: the signing by the utilities of a memorandum of understanding for the formation of the RRC; the operation of an organizational development team to create an RRC implementation team; and the operation of the implementation team to establish the RRC.
At this point four of the six utilities have signed the MOU. Homer Electric Association and Municipal Light & Power have not yet signed but say that they fully support the RRC formation. The organizational development team has already moved into action, communicating with stakeholders in the electrical system. The team hopes to identify members of the implementation team in November, with a view to having an initial meeting of that team in November or December, Julie Estey, Matanuska Electric Association director of public relations, told the commission. Once the implementation team has formed, the organizational development team will disband.
“We’ve been communicating with stakeholders and trying to facilitate as much engagement as possible,” Estey said.
The implementation team, in conjunction with the RCA and the utilities, will then develop the foundational documents for the RRC, including specifications of the RRC governance, organizational structure and funding mechanism.
The utilities hope to complete this RRC development process in six months, Larry Jorgensen from Homer Electric Association, told the commission.
The MOU is a foundational document for the RRC formation, expressing an agreement between the utilities on what the organization will do and how it will be governed. The document is a stepping stone, putting into motion the voluntary formation of an RRC without placing limitations on the eventual organization, said John Foutz, utility manager, electric department, in the City of Seward.
The governance structure Perhaps the most critical (and potentially contentious) component of the RRC concept is the governance structure of the organization, in particular the composition of the organization’s governing board. While the utilities, with a duty to their ratepayers and a high level of expertise in the way in which the electrical system works, want a say in board decisions, other stakeholders in the electrical system, such as independent power producers and government entities, also want to be involved. The idea is to create a level playing field for all users of the system, in terms of access to the system, how the system operates and how it is developed.
As conceived in the MOU, the governing board will have six utility and six non-utility members, John Burns, vice president and general counsel for Golden Valley Electric Association, told the commission.
“The composition is consciously intended to be balanced,” he said.
The RRC, a not-for-profit organization, will be subject to RCA jurisdiction. Utilities will be bound by RRC decisions, but with the option to appeal to the RCA in the event of an unresolved dispute.
And the idea is that the implementation team for the RRC will have a broadly similar composition to the eventual board, thus ensuring balance between different interests in the way in which the RRC is formed.
Economic dispatch Another area of contention around the RRC formation has been the question of whether the organization should be responsible for the implementation of merit ordered economic dispatch across the Railbelt grid. Economic dispatch involves the continuous dispatch of the cheapest available power on the system. The RRC, as envisaged, would evaluate the implementation of economic dispatch, rather than enforcing or operating the use of this protocol.
This topic came up during the Oct. 24 RCA meeting.
The utilities have been operating what they call economy energy sales, a protocol whereby they reduce the cost of power by selling each other relatively cheap power. Economic dispatch would take this arrangement further, by enabling the continuous use of the cheapest power.
The three Southcentral utilities, Chugach Electric Association, Municipal Light & Power and Matanuska Electric Association, have an agreement to implement economic dispatch in Southcentral. However, on Oct. 5 Chugach Electric and ML&P, announced that they were placing economic dispatch implementation on hold, pending completion of the proposed acquisition of ML&P by Chugach Electric.
Modeling the system During the Oct. 24 meeting, in response to a question by Commissioner Jan Wilson, Brian Hickey, vice president of systems operations for Chugach Electric, commented that RRC evaluation of system-wide economic dispatch would involve engaging electricity system stakeholders in new modeling of the use of economic dispatch across the Railbelt. The idea would be to determine whether the benefits derived from economic dispatch would exceed the implementation costs. The utilities have previously conducted modeling of this type, but the idea now is to engage a broad cross-section of utility and non-utility stakeholders in agreeing on a set of assumptions that the modeling would use - different sets of assumptions generate different modeling results.
The modeling study might take six months to complete, although gaining agreement on what assumptions to use might take at least as long as that, Hickey said.
Commissioner Antony Scott questioned whether another study is needed, given that the three Southcentral utilities already appeared to have agreed that there would be a net benefit from the use of economic dispatch. Hickey responded that he sees the Southcentral pool as a stepping stone towards a wider economic dispatch implementation. And, once the utilities “undo the pause button” on the Southcentral arrangement, implementation of the Southcentral power pool will continue apace, he said.
Lee Thibert, CEO of Chugach Electric, said that, given the time needed to deal with parallel initiatives, it had appeared prudent to delay Southcentral economic dispatch until after the ML&P acquisition had been taken care of. Chugach Electric then wants to investigate, not just the power pool with Matanuska Electric, but also the extension of that pool to include GVEA and Homer Electric Association, he said.
Continuing evolution of the system And Tony Izzo, CEO and general manager of Matanuska Electric Association, commented that he continues to be excited about what has been happening in terms of the continuing evolution of the Railbelt electrical system.
“I’m seeing the evolution continue and be positive,” Izzo said.
Izzo said that GDS Associates, the consulting firm that had recommended to the utilities the formation and functions of the RRC, had raised questions over whether the cost of implementing a full-scale system operator, managing the regional electricity market, as is done in the Lower 48, could be justified, given the small size and relative simplicity of the Railbelt system. So, a foundation concept behind the RRC is to determine whether economic dispatch should be expanded to involve a full-blown unified or independent system operator. Meanwhile, the pooling concepts already in the works constitute a separate evolutionary track from that broader economic dispatch question, Izzo said.
Cory Borgeson, president and CEO of GVEA, concurred with Izzo’s comments. He said that GVEA would be willing to participate in a new economic dispatch study. However, he wondered whether, given the relative simplicity of the Railbelt electrical system, economic dispatch would create much greater benefits than the use of economy energy sales.
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