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Bill for Railbelt transmission changes could improve usage
Alan Bailey for Petroleum News
On March 4 the Alaska Senate Resources Committee heard testimony on Senate Bill 217, a bill introduced by Gov. Mike Dunleavy to change the way in which the electricity transmission system in the Alaska Railbelt is managed and funded. An identical bill, House Bill 307, has been introduced to the House of Representatives. As previously reported by Petroleum News, the bills would change the way in which transmission costs are recovered by the utilities that operate sections of the transmission system and would require the utilities to form an integrated transmission system association to assist in administering the arrangements for transmission system cost recovery.
Currently the use of the system is hindered by the wheeling or "pancaking" of the fees that each utility charges for the use of its individual sections of the system. This can render the transmission of power across multiple sectors of the system uneconomic, because of the manner in which the fees charged by individual utilities stack up. Instead, under the terms of the new bills, a new transmission cost recovery mechanism would involve a tax that each independent power producer and electric cooperative would pay, based on the amount of electricity that each of these entities generates. Independent power producers would also become exempt from paying local taxes, in a similar manner to nonprofit electric cooperatives.
Moving cheap power Gwen Holdman, University of Alaska Fairbanks Associate Vice Chancellor for Research, Innovation & Industry Partnerships, told the committee that the transmission issues revolve around moving cheap power to consumers, wherever they are located, from whatever sources are available. And she characterized the current Railbelt transmission system as being "kind of in the dark ages." The expectation is that future power supplies will involve much more movement of power between different regions of the Railbelt -- power generation systems benefit from economies of scale, a factor that drives the need to be able to viably ship power to wherever it is needed.
For example, were a major geothermal energy project to be constructed at Mount Augustine in Cook Inlet, Golden Valley Electric Association in Fairbanks would likely want to be able to make use of some of that power, Holdman suggested.
Transmission system upgrades needed Tony Izzo, chief executive officer of Matanuska Electric Association, told the committee that a top priority recommendation from the Railbelt subcommittee of the governor's Energy Security Task Force had been the need to upgrade and unify the Railbelt transmission system. The wheeling and pancaking of transmission fees, together with significant limitations in the capacities of transmission interties between different regions of the Railbelt, constrain the possibilities for utilities to use the lowest cost power generation in the system.
On the other hand, the utilities are cooperatives that have systems that are built under the constraints of what their members can afford, without shareholders to provide investment dollars, Izzo said.
Economic dispatch MEA and the neighboring Chugach Electric Association are operating an economic dispatch arrangement in which they minimize electricity costs through shared use of their most efficient power generation. As part of this arrangement, the utilities do not charge each other wheeling fees for use of their transmission systems, Izzo said.
If the current constraints in the use of the major transmission interties could be eliminated, the whole Railbelt could benefit from a similar arrangement, he commented. Izzo also commented that federal grants for upgrading the transmission system, together with required state matching funds, could make possible the construction of a system that could lower electricity costs by enabling the development of large-scale renewables while also improving supply reliability.
A critical point John Burns, chief executive officer of Fairbanks based Golden Valley Electric Association, told the committee that the Railbelt electrical system has reached a critical point, with a need for transformative change. The requirement to make it possible to viably move low cost electrons from relatively large scale generation sources to wherever they are needed, without constraint, will require appropriate legislation, he said.
"We should be agnostic as to where generation sources are located," Burns said.
--ALAN BAILEY
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