COMMENTARY: Railbelt power utilities entering new era of cooperation
For 75 years, Matanuska Electric Association has provided our members with electricity as a platform for economic growth and community vitality. This year we have a new milestone to celebrate: May 1 marked one full year of producing, transmitting and distributing our own power thanks to MEA’s new Eklutna Generation Station power plant.
For MEA, moving from a small distribution-only utility to a full-scale, integrated utility so that it was seamless to our members took significant teamwork, dedication and hard work from our staff and partners. I am proud of what we accomplished together.
Similar to MEA, over the past decade, Chugach, Homer and ML&P all decided it was cheaper to build new efficient power plants than continue generating power from the older, inefficient power plants that used to provide power to almost a third of what we call “the Railbelt” stretching 500 miles from Homer to Fairbanks.
This new generation allows us to produce power more efficiently. That means every kilowatt-hour produced burns fewer fossil fuels. When the cost of fuel is 50 percent of your annual utility expenses, the ability to reduce that by 30 percent pencils out pretty quickly for our members.
The new generation mix also means the Railbelt has more options to serve our consumers. That flexibility has been the key driver of a new power market among the Railbelt utilities that is already achieving operational savings for our members.
MEA’s unique power plant design with 10 smaller engines provides a new product to the Railbelt market — small increments of power. When it is cheaper to buy our power rather than starting up a less efficient, larger generator, other utilities have bought power from MEA.
This results in direct savings to our members so much so that we reduced the Cost of Power component of our rates for the last two quarters. It also results in savings to the purchasing utility’s members. As ML&P’s new Plant 2A comes online later this year, we look forward to the potential for cheaper baseload power, which will add even more opportunity for savings to the market.
Over the past year, the collaboration has grown into an impressive number of power transactions — each one resulting in cost savings for our members. It has also ushered in a new era of transparency and trust and provides a mix of hope and certainty for future collaboration.
I’ve worked in the Alaska utility industry for over 15 years and am fortunate enough to have been handed the reins of MEA just a few months ago. From what I’ve seen first-hand, the Railbelt is moving to a new era of cooperation.
Yes, like any family we’ve had our share of disagreements in the past, but what most folks don’t get to see is that we have also been working together with our sleeves rolled up to keep the Railbelt electrical system humming for the better part of statehood with pretty impressive reliability numbers.
The improvement in technology, efficiency, and partnerships between the Railbelt utilities in just one year is simply remarkable and unexpected as the entrance of new players shifted the economics.
The Railbelt we were trying to fix a year ago is not the Railbelt that exists today — that old model of utilities working independently or against each other is now largely a product of a bygone era. I have been pleasantly surprised by the shift.
More progress is on the way. The utilities have been working together over the past year to analyze other potential solutions. The right solution will be determined by the economics and the timing must reflect the economic reality of our state.
Benefits are clear, but the question everyone is asking is “are the costs of the solution worth the benefits?” For example, the initial estimate of $900 million in transmission infrastructure upgrades is over-exaggerated and fiscally irresponsible.
It is essential to determine a more realistic number that balances the need and value of the upgrades with the capacity of our consumers who will ultimately pay the cost.
We want solutions that will benefit Railbelt consumers for decades to come so it is important to take the time to check the facts and do the numbers to ensure one group isn’t harmed to benefit another and any unintended consequences are mitigated.
Some of the best minds I’ve met in this state are currently sitting around the table with each other trying to figure this out and I have no doubt they’ll do it. While I wish the annual benefits were going to be anywhere close to the $50 million to $150 million dollars that was initially stated, we’re optimistic there are more savings out there for our members.
We look forward to working closely with our colleagues to evolve the Railbelt into something that can meet the needs of Alaska well into the future.
Tony Izzo is the general manager of Matanuska Electric Association.