RCA: state needs major power transmission improvements
Alaska has an adequate power supply but an insufficient transmission system, which together could be strained by new Environmental Protection Agency requirements, according to Regulatory Commission of Alaska members.
RCA Chair Bob Pickett told a legislative energy roundtable Sept. 5 that utilities have invested about $1.2 billion in new power generation infrastructure in recent years. However the state still needs roughly $900 million in upgrades to its transmission lines to fully realize the benefit of that new generation.
The generation investment includes projects that are recently online such as the Chugach Electric Association-operated $360 million Southcentral Power Project, as well as facilities in the works — Municipal Light and Power’s $275 million, 120-megawatt George Sullivan Plant 2 and Matanuska Electric Association’s 171-megawatt Eklutna plant, among others.
North Pole Rep. Doug Isaacson and other Fairbanks-area legislators led the discussion held in Anchorage.
Pickett said the utilities and the commission are working to resolve what impact the massive generation investments will ultimately have on electrical rates, particularly in the Railbelt.
The $160 million bill for the Cook Inlet Natural Gas Storage Alaska facility completed in November 2013, known as CINGSA, can be tacked on to the overall total sum of plant projects, Pickett noted.
If reliable service is going to trump price when utilities develop their business models, their customers will have to pay for the new plants, he said.
“The public will not stand for any kind of extended rolling blackouts and unnecessary outages,” Pickett said. “This generation is much better than the legacy generation (the utilities) were working with.”
While some customers may not like increased bills to finance new power plants, there is little the RCA can do. The commission works under the directive of the Legislature, which has not explicitly given it “siting authority” Pickett said, or the expressed power to rule over which power projects are necessary.
As a result, the RCA can only try to mitigate the impact of a project’s cost to ratepayers while meeting the owner’s revenue requirements as the utilities — which have their own, often public processes for making capital decisions — make the final decisions on what money gets spent.
“We respond to the filings from the utilities at the point and time when they’re trying to put a new capital expenditure into the rate base,” he said.
There have been exceptions to that process, however. Chugach Electric, which is majority owner along with ML&P of the Southcentral Power Project, asked the commission for preapproval of the project, which likely helped it refinance other debt and present the best plan possible when looking to finance the plant itself, Pickett said.
The RCA has withheld from ruling on utilities’ capital plans to keep itself out of the business of regulatory overreach, he added.
Isaacson said the Legislature needs to understand its role as the ultimate regulator, given that it has oversight of the commission, and give clear guidance to it.
While the latest round of natural gas-fired power plants are often more than 30 percent more efficient than their predecessors, those benefits won’t be fully realized without better Railbelt transmission infrastructure, according to Pickett.
For most of the state’s history, Chugach Electric has acted as the de facto ISO, or independent service operator, of Southcentral transmission lines because it is the largest power producer, commissioner Norman Rokeberg said. As a result, it is difficult to calculate how transmission rates exactly impact power cost for each utility because the buying and selling of power and subsequent transmission cost is in flux.
If the state were to form an ISO it would set the tariff rates and could manage transmission rebuilds.
The state-owned Bradley Lake hydro project near Homer, is managed under contract thus it is very inexpensive to transmit its power, Rokeberg noted. He said total transmission cost from Bradley Lake in state fiscal year 2013 was about $895,000.
Since 1995 the project has averaged a power output of about 380,00 megawatt hours per year.
The Railbelt power grid limits the ability of utilities to sell power between them because it lacks carrying capacity in several “neck down” areas. In some remote places the grid is connected by a single set of power lines.
Rokeberg said the state is limited as to the amount of Bradley Lake power it can sell to points north because of transmission constraints near Soldotna. Similarly, the scope of Chugach Electric’s Cooper Lake hydro near Cooper Landing is essentially capped because of transmission limitations between Kenai Lake and Anchorage.
“Homer (Electric Association) has a lot of power they could be selling,” Rokeberg said.
Improved transmission could help the state’s utilities meet the EPA’s latest carbon pollution guidelines released in June if lower-emission power generated from Southcentral natural gas could be sold to Golden Valley Electric Association in Fairbanks, which uses coal and naphtha.
Rokeberg said the Obama administration’s goal to ultimately eliminate coal-fired power plants has created a cap and trade system.
“What the administration has done is create a national energy policy and by default a state energy policy,” he said.
The Alaska Department of Environmental Conservation could be backdoored into administering the federal rules by regulating the nature of the state’s power generating facilities, he said.
Rokeberg is the RCA’s designated lead on a state interagency task force responsible for submitting the state’s recommendation to the EPA on how it will meet the new Clean Air Act Section 111 guidelines.
Along with the RCA, the task force includes representatives from Gov. Sean Parnell’s office, the Alaska Energy Authority and the Department of Environmental Conservation.
“The strangest thing about this regulation is you can’t go in and build a natural gas combined cycle plant in Fairbanks, were we to have a new pipeline,” Rokeberg described. “We couldn’t build a new natural gas plant there and have it fit the parameters of (subsection) 111(d).”
That stems from more restrictive regulations on new power plants as opposed to existing facilities, he explained.
State recommendations are due by October, he said, but Alaska will likely request for a 60-day extension — more time to muddle through the finer points of the regulations.
From there, the EPA will issue its final rulemaking sometime next year and Alaska will have a year to come up with a plan to comply with the carbon emission restrictions.
This is all happening as Golden Valley works to bring online a 50-megawatt clean coal power plant in Healy, an attempt to lower its power costs that are double what some of the Southcentral utilities can charge.
Rokeberg said states that have grids connected to one another will have the option of a second year extension to work out complexities between each other. He added that he has been in touch with regulatory officials in Hawaii and along with Alaska, the “grid island” states might ask for their own regulatory extensions to deal with their unique isolation challenges.
Elwood Brehmer can be reached at [email protected].