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Questions raised over Railbelt transco
ART responds to RCA concerns over deficiencies in certificate application but Chugach Electric and MEA still raise issues Alan Bailey Petroleum News
In a May 20 order, the Regulatory Commission of Alaska accepted some corrections to an application from Alaska Railbelt Transmission LLC, or ART, for a certificate of public convenience and necessity as a transmission company, or transco, for the Alaska Railbelt electricity transmission system. The commission set a schedule for making a decision on the application. In an earlier order, the commission had required ART to resolve some deficiencies and defects in its application - in a dissenting statement at that time, RCA Chair Stephen McAlpine and Commissioner Daniel Sullivan had said that they would simply have rejected the application.
In a May 17 letter to the commission, Tony Izzo, CEO of MEA, questioned whether ART had adequately corrected the deficiencies in its application, as ordered by the commission. In particular, the service area map that ART has filed appears to include Chugach Electric Association transmission facilities, despite the fact that Chugach Electric is not an ART participant. ART has still not demonstrated its ability to provide the services it proposes. And there are still many unclear ambiguities in the application, Izzo wrote.
Multiyear effort The application is one outcome of a multiyear effort to achieve a more unified approach to the management and operation of the electrical system. The idea is that the transco would operate the transmission system, thus enabling the instigation of a consistent, system-wide set of fees for the use of the system. The transco would also become a vehicle for investing in upgrades to the system - investment is currently impeded by the balkanized nature of the system ownership and operation.
A critical and contentious issue underlying all of this is the governance of the system, and the extent to which this governance should be independent from the Railbelt electric utilities. The utilities have proposed the formation of a Railbelt Reliability Council, or RRC, an organization which would be governed by a stakeholder board and would have oversight of the entire Railbelt system, including the transco.
For-profit company ART has been formed as a private, for-profit company by the American Transmission Co. and four of the Railbelt utilities: Homer Electric Association, Golden Valley Electric Association, Municipal Light & Power and the City of Seward. Two utilities, Chugach Electric and Matanuska Electric, have opted not to join ART. These two utilities own portions of the transmission system - Chugach Electric, in particular, owns significant parts of the transmission grid.
Unlike ART, the Railbelt utilities either are member-owned cooperatives or are owned by municipalities.
In its certificate application ART told the commission that, by implementing uniform system-wide transmission pricing across the Railbelt and non-discriminatory access for generation facilities, the company would be able to facilitate maximum use of the most efficient power generation on the grid. The commission has been encouraging several grid unification efforts, including the formation of a transco.
Both Chugach Electric and MEA have told the commission that, while they support the idea of forming a transco for the Railbelt, they view the ART concept as problematic from a number of perspectives.
Comments from Chugach Electric In a May 16 letter to the commission, Chugach Electric CEO Lee Thibert commented on his utility’s concerns. Chugach Electric believes that ART’s filing of its application “while well intended and a step forward, was premature,” Thibert wrote. In addition, Chugach Electric’s bylaws would likely prevent it from participating in ART, he wrote.
The design of ART is “fatally flawed,” Thibert wrote. In particular, the concept would result in a for-profit, asset-owning company having exclusive control over both long- and short-term planning. ART also proposes to conduct congestion management in the grid through the re-dispatch of generation capacity, a role beyond that of a transco. And the proposal for ART’s operation of the system lacks meaningful controls over the company’s potential for manipulating the electricity market, Thibert wrote.
Instead, Chugach Electric sees the RRC as the best starting point for unified operation of the electrical system, Thibert wrote. The RRC, and not the transco, would establish and maintain the rules for operation of the grid, and is envisaged as having a 13-member board representing a variety of stakeholders in the electrical system. ART, on the other hand, would both administrate its tariff and benefit from the tariff provisions.
ML&P purchase Chugach Electric is in the process of purchasing ML&P and is concerned about the ramifications of the ART implementation on this proposed deal, given that ML&P is a participant in ART. The agreement for the purchase by Chugach Electric requires ML&P to maintain its current business organization and operations, and to refrain from activities such as investing in other entities. Moreover, ART’s certificate application should be rejected because the application includes assets that are already committed through the purchase agreement, Thibert wrote.
Thibert wrote that Chugach Electric and MEA plan to jointly propose the establishment of the RRC, as an alternative to ART. The RRC, once in operation, will provide the appropriate foundation for the establishment of a proper transco in the Railbelt, Thibert wrote.
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