Alaska utility regulators are pushing electric companies within the state’s industrialized rail belt to voluntarily upgrade and reform the regional transmission network or risk new state controls.
Describing the relationship between the region’s six electric companies as "fragmented, balkanized and often contentious," the Regulatory Commission of Alaska (RCA) urged the utilities to work together to develop an independent electric transmission company and a more robust power pooling system.
The recommendations were outlined in a June 30 letter from commission Chairman Robert Pickett to state Senate President Kevin Meyer (R) and state House Speaker Mike Chenault (R).
Acknowledging that past efforts to reform and reorganize the rail-belt electric system have failed, the commission set timetables for the utilities to submit progress reports outlining their efforts to improve the transmission network.
If the voluntary efforts fail, however, the RCA plans to work with state leaders to impose stricter controls on the electricity network.
"Though history strongly indicates that the current voluntary transmission restructuring and economic dispatch efforts by the utilities may fail, the commission believes the utilities must be given the opportunity to succeed," Pickett said.
The letter estimated that the proposed overhaul of the rail belt electrical system would take up to 10 years to complete but made no estimate of how much changes would cost.
RCA’s recommendations apply to the six interconnected electricity companies that serve south-central Alaska customers located in communities around Fairbanks, Anchorage and the Kenai Peninsula. Combined, those utilities produce roughly 850 megawatts of electricity.
Two of the electric companies are owned by municipalities: the Anchorage Municipal Light and Power and the Seward Electric System. The other four are rural electric cooperatives: the Chugach Electric Association, Golden Valley Electric Association, Homer Electric Association and Matanuska Electric Association.
The rest of the state’s far-flung cities, boroughs and Native villages are served by local electricity systems that are not physically connected to the rail belt grid.
Over the last five years, the rail belt utilities have invested an unprecedented $1.5 billion in new electric generation units. But Pickett noted that the region lacks "an institutional structure to finance significant transmission assets crossing the service area of several utilities."
According to a 2014 study, the rail belt transmission system is in need of $900 million of improvements to upgrade electric service in the greater Anchorage-Fairbanks region.
The study said that once those fixes were in place, electricity users would likely save $146 million to $241 million annually from lower energy costs. The assessment was produced by the Alaska Energy Authority, an independent state corporation charged with lowering state energy costs.
Shortly after the AEA report was released, the Alaska Legislature allocated $250,000 for the RCA to conduct a separate assessment of the best way to improve the state transmission network.
The RCA’s final recommendations were unanimously approved by the commission at a June 29 special meeting.
In his letter to the legislators, Pickett noted that the state’s electricity delivery system is currently not structured to provide the cheapest electricity to Alaska’s south-central customers.
"If the rail belt electrical system were a blank slate today and the current institutional facts on the ground didn’t exist, a single utility owning and operating all of the generation, transmission and distribution assets would probably be the most efficient and effective system," he said. "That is not the situation we have today."
Cost-control measures
To lower the cost of energy for rail belt customers, the RCA called on the six utilities to help create an independent transmission company that would be charged with operating and upgrading the current rail belt transmission system and building new transmission projects.
The commission set a Sept. 20 deadline for the utilities to submit their first report on development of a transmission company.
The letter also asked the state Legislature to give the RCA legal authority to oversee resource planning and siting of new generation and transmission projects developed by the proposed transmission company.
In addition, Pickett directed the electricity companies to develop a centralized system for coordinating power shipments within the rail belt grid to ensure that the least costly electricity is sold first.
Electricity networks in the Lower 48 states rely on independent system operator (ISO) models to maximize the benefits to ratepayers. But the commission asserted that an ISO system would be "overly complex" for the rail belt’s limited number of generation units and small electricity loads.
Instead, the RCA said the utilities should move forward with their ongoing voluntary efforts to create loose power pools with the eventual goal of creating a tighter power pooling system.
The commission ordered the electricity companies to submit quarterly reports on the progress of their pooling arrangements beginning with the fourth quarter of 2015. "These reports will be analyzed and reviewed to assess the organizational and governance structure needed for an independent consolidated system operator," Pickett said in the letter.
The commission also recommended the development of enforceable and consistent operating and reliability standards for the rail belt electrical grid.
Thus far, four utilities have signed on to a set of voluntary reliability standards. The Chugach Electric Association, the Golden Valley Electric Association, the Matanuska Electric Association, and Anchorage Municipal Light and Power filed their standards with the regulatory commission in January 2014.
However, Homer Electric Association has embraced a separate set of standards. In the letter, the commission urged all six utilities to resolve their differences.
Meanwhile, the RCA said that beginning next year it will begin assessing whether to adopt mandatory reliability standards.
