Opinions are divided as rail belt operating companies under the power transmission group aim to unite

JUNEAU — Railbelt power companies are at odds over a plan to create an organization to manage power transmission along the southcentral Alaska power grid.

Senate Bill 217 and House Bill 307 were introduced by Gov. Mike Dunleavy in February. This bill had two main goals for him. One is to ensure the lowest cost power is available across the grid between Homer and Fairbanks, and the other is to integrate renewable energy into the system.

The measure would eliminate wheeling fees, which are fees charged by power companies to transmit electricity to parts of the grid. Renewable power producers will also be exempt from local property taxes and sales taxes on new projects. Similar exemptions now apply to electric utilities that overwhelmingly generate electricity from natural gas.

Members of the transmission organization include utility company directors and the executive director of the Alaska Energy Agency, which owns and operates the Bradley Lake hydroelectric project.

Proponents argue that integrated transmission systems reduce electricity costs for ratepayers in the long run. However, the abolition of wheeling charges is expected to initially create winners and losers. Power rates are expected to increase slightly in Anchorage and decrease in Fairbanks.

Matanuska Electric Association and Golden Valley Electric Association both support the new rail transmission organization. Recently, both the Chugach Electric Association and the Homer Electric Association have publicly opposed elements of the plan.

Discussions are taking place behind closed doors to develop a model that can win enough votes to pass Congress and be accepted by utilities.

“It's like having a flock of chickens,” said Rep. George Rauscher, R-Sutton. “Because for every time he solves one problem, he creates two other problems.”

Industry experts say utility consolidation has proven difficult because utilities are inevitably tempted to prioritize the interests of their own members over the interests of the system as a whole. There is. Tony Izzo, CEO of the Matanuska Electric Power Association, said without a unified transmission organization, utilities will continue to make the same “short-sighted” decisions.

Sharp rifts between power companies are nothing new. For 50 years, there have been attempts to consolidate electric utilities under a single umbrella organization. None of those attempts were successful. The most recent attempt failed in 2019.

The latest effort comes after the Alaska Regulatory Commission sent a candid letter to Congress in 2015 saying the railbelt's power system was “fragmented” and “fragmented.” The committee recommended that electric power companies voluntarily strengthen cooperation.

Congress passed a bill in 2020 that allows five railbelt power companies to establish electric reliability organizations. This organization was established to oversee the implementation of system-wide reliability standards and coordinate long-term planning among utilities. However, the role of electrical reliability organizations is limited.

The new independent power transmission organization is seen as a further step forward and a step towards “economic transmission”. This model allows independent operators to choose which power plants to use to provide the cheapest energy source along the grid.

Part of the interest in the new transmission organization is that significant investments are planned to modernize the grid's infrastructure.

Last year, Alaska invested in an undersea power cable connecting the Kenai Peninsula to Chugach Electric's Beluga power plant on the west side of Cook Inlet to build redundancy and enable lower-cost power delivery. received a $206 million federal grant. Power is distributed throughout the grid. The state hopes to secure a second federal grant to build a new power line between South Central and Healy.

Senate Bill and Iceland

In October, executives from the four major power companies in the railway belt and 12 parliamentarians visited Iceland. This small European country was seen as a potential model for the rail belt. Iceland operated a publicly owned electricity company that operated on state-owned transmission lines until European Union regulations forced market deregulation in the early 2000s.

Gwen Holdman, founding director of the Alaska Energy and Power Center, organized the trip to Iceland. Iceland is considered a world leader in integrating renewable energy into integrated electricity grids.

“I think we were very successful in demonstrating the potential of this system,” Holdman said.

Despite a long history of disagreements and failed attempts, Railbelt's four utility managers have signed a preliminary agreement on a napkin to form an integrated electricity transmission organization in Iceland. Since then, disagreements have arisen again.

The Senate bill uses Iceland as a model to create a more ambitious power grid plan than Dunleavy originally planned. SB 217 would transfer responsibility for transmission planning and utility asset management to a new transmission organization.

Arthur Miller, CEO of the Chugach Electric Power Association, said utilities support eliminating wheeling fees and instead supporting cost recovery through a unified rate structure. But Miller said the utility has “serious concerns” about the transmission organization, including the Senate plan's core plan.

“Chugach is adamantly opposed to the transfer of management or operational control of our transmission system. This will not lower costs or rates and will not provide any benefit to our members,” Miller told lawmakers last week. Told.

Giesel, an Anchorage Republican and author of the Senate bill, argued there is a simple reason the state's largest electric utility opposes the new transmission organization. He said that's because “the Chugach have a tremendous amount of infrastructure that they've built, and they're bonded.”

Chugach Electric is heavily in debt after acquiring Municipal Light & Power in 2019. Miller told Congress last week that the utility spent $41 million rebuilding its transmission lines and plans to invest more than $85 million more in upgrades by 2030.

The Anchorage-based utility submitted a rate increase proposal to the Alaska Regulatory Commission in July. The Regulatory Commission is a state commission tasked with setting “fair and reasonable rates” for railbelt ratepayers. In its application, Chugach requested an increase in wheeling rates, which would increase costs for other utilities. Matanuska Electric Association, Golden Valley Electric Association and Homer Electric Association all filed motions arguing Chugach's proposal would significantly increase costs for their members.

The Senate proposal regarding transmitting organizations is far-reaching, while the House bill is more limited. Andrew Jensen, an energy policy adviser at Dunleavy, said that instead of transferring control of utilities' assets, transmission organizations under the House bill would be “solely tasked with eliminating wheeling fees for now.”

Lawmakers say the House bill alleviates some of Chugach Electric's concerns, but others remain.

[Energy bills intended to address Cook Inlet gas shortage in doubt as end of legislative session approaches]

Lawmakers say Homer Electric Power Association operates largely in isolation from other utilities and has recently shown reluctance to join a unified transmission organization.

Kellyanne Baker, Homer Electric's chief strategy officer, told lawmakers last week that the proposed changes in the Senate bill are too many for a single year.

“We think we need to understand the legislation that will probably be passed before we pass it. That's exactly our position,” she said.

Baker told lawmakers that before joining a transmission organization, utilities want to upgrade their power grids and remove bottlenecks that impede power delivery.

Other stakeholders have also expressed concerns about surveillance. The Renewable Energy Alaska Project (REAP) supports the House version of the bill. Chris Rose, executive director of REAP, is a member of the existing Electrical Reliability Organization. He wants to keep the transmission plan in place.

“It makes much more sense to build a transmission system using existing laws and institutions than to create a new transmission organization that is not subject to pre-approval powers for RCA projects,” he told lawmakers last week. I'm thinking about it.''

The Alaska Public Interest Research Group, a consumer advocacy group, is also concerned about the transfer of planning authority for the railbelt grid to a new transmission organization. The group suggested that oversight by state regulators may be insufficient.

cleaner power

Integrating more renewable power into the railbelt power grid is a key priority in the House and Senate bills. The National Renewable Energy Laboratory said in a recent report that if 80% of the grid's electricity came from renewable energy, ratepayers could save well over $1 billion by 2040. .

Jenn Miller, CEO of Renewable Independent PowerProducers, said eliminating local taxes on new clean energy projects “creates a level playing field and lowers energy costs for ratepayers.”

In testimony to senators last week, Matanuska Electric CEO Izzo praised Miller's work in developing the state's largest solar farm in Houston. Exempting new renewable power generation projects from local taxes is “key,” Izzo said, as railbelt utilities face an impending shortage of natural gas in Cook Inlet.

“We need to move to other energy sources as soon as possible,” he said.

Supporters argue that eliminating wheeling fees that utilities charge to transmit power across the grid would be another important step in increasing clean energy.

Holdman cited the proposed Shovel Creek wind project in Fairbanks as an example. She said the wind farm could produce 150 megawatts of electricity, which would be far more than Fairbanks needs. The city's peak demand is approximately 220 megawatts.

Holdman said eliminating wheeling fees charged for sending power onto the grid could make the project more attractive to utilities south of Fairbanks. She said wheeling fees were why plans to build additional wind turbines on Fire Island were scrapped in 2015.

“We were no longer cost-competitive,” she says.

With one week left in the Alaska State Legislature's regular session, time is running out to approve the Railbelt's integrated transmission system. Rauscher said it would be a “major task” to legislate the transmission organization this year, along with several other measures aimed at addressing the Cook Inlet gas shortage.

HB 307 advanced to the House floor before being considered in the Senate. The Senate bill is before the Senate Finance Committee. The constitution requires that the regular session of the Diet be adjourned by midnight on May 15th.

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