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Legislative roundtable looks at options for reducing Railbelt power costs

In a crowded downtown Anchorage conference room on Friday, six Alaska legislators met to hear a proposal to unify electric power transmission throughout much of the road-connected areas of the state.

According to a study by the Alaska Energy Authority, if the electric utilities serving Railbelt communities unified under one entity, the savings in transmission costs and future repairs and upgrades could exceed $140 million for the utilities' customers. But to make it happen, the Legislature would have to find a way to persuade the utilities to form a separate entity to manage and control electrical transmission -- a difficult prospect.

The Railbelt region, which mostly follows the Alaska Railroad tracks from Seward north to Fairbanks and east toward Delta Junction, and also includes Kenai and Homer, is home to most of the state's largest electrical utilities. In all, six electrical utilities operate in the Railbelt area and all have different interests, debt loads, generation capacities and fuel agreements.

There is already a voluntary group of Railbelt electric utilities that work together to manage power transmission: the Alaska Railbelt Cooperative Transmission and Electric Company. It includes Fairbanks-based Golden Valley Electric Association, Anchorage's Chugach Electric Association, Matanuska Electric Association and Seward's city-owned electric utility, but it lacks two important members needed to make the unified transmission savings work: Homer Electric Association and Anchorage Municipal Light & Power. ARCTEC said that to make the idea of transmission savings work across the Railbelt, a separate transmission company, or "transco," might be needed as well as a potential individual service operator that would oversee and regulate the transco. But either way, membership in any transmission collective in Alaska's Railbelt must be mandatory, not voluntary, or the plan won't work, according to ARCTEC.

"There are approximately zero examples where utilities implemented comprehensive restructuring voluntarily," said ARCTEC Chair David Gillespie.

To illustrate his point, Gillespie showed a picture of a young kitten, front paws in the air, with a gun pointed at it. Gillespie said the utilities, like cats, don't always get along and often have different interests and ideas on how to best operate the electrical transmission system.

"If you don't hold a gun to their heads, you won't be able to get all the cats in the room," Gillespie said.

American Transmission Company, which serves Wisconsin and Michigan's Upper Peninsula, presented its take on the idea at the Friday roundtable. ATC said the Wisconsin Legislature passed a bill in 1999 requiring the state's electric utilities to work with a transco, and ATC came on-line in 2001, taking over the Wisconsin electric utilities' transmission grid. ATC claimed that the move increased Wisconsin's electrical transmission reliability and lowered costs across the grid, allowing individual utilities to buy the cheapest power generated in the state instead of relying on their own sources of power.

But, as with most things, Alaska's needs and capabilities are far different than those of its Lower 48 counterparts. Unlike other states, Alaska is not connected to a national power grid. And the Interior, including Fairbanks and Delta Junction, doesn't have guaranteed access to cheaper and cleaner-burning natural gas, relying instead on diesel and coal power plants. GVEA can buy natural gas-generated power through ARCTEC, but it has to pay a premium for the power, unlike what would happen if a transco proposal become reality.

To make things even more complex, proposed emissions standards changes to the Clean Air Act for power production and transmission, known as Section 111(d), will make building any new coal or diesel-powered electrical plant difficult or even impossible in Alaska, according to AEA deputy director and former Fairbanks legislator Gene Therriault.

"It's scary," Therriault said. "I urge Alaskans to advocate against a cookie-cutter approach. Environmental protections are important. Keeping the lights on deserves just as much attention."

According to ARCTEC, because every utility has different amounts of transmission lines, different contract agreements with fuel suppliers and a different debt load, the initial creation of a transco or ISO would create short-term "winners and losers" among the Railbelt's utilities. And while ARCTEC's member utilities support the creation of a transco and possibly an individual service operator, ML&P is against the idea.

ML&P General Manager Jim Trent said the Anchorage utility prefers a less formal, nonmandatory option: voluntary power pooling and central dispatching of power. It's an idea that would not spread the cost of the transmission system, or unitize rates, across the Railbelt.

"It could be independent and transparent without forcing people to join," Trent said.

At least two lawmakers attending Friday's roundtable think the transco/ISO idea might not go far enough. Reps. Charisse Millett and Craig Johnson, both Anchorage Republicans, have another option: combine all Railbelt utilities into one company.

But it won't be an easy sell in the halls of the Legislature or in the utilities' boardrooms.

"It might be the most difficult thing we have ever done since the pipeline," Millett said.

The Friday roundtable was just an informational meeting. Roundtable Chair Rep. Doug Isaacson, R-North Pole, said the issue of combining transmission lines throughout the Railbelt will be taken up during the next legislative session, which begins Jan. 20.