Group hashes out railbelt power plan
Six electric utilities in the railbelt regions of Southcentral and Interior Alaska spent two days Nov. 26 and 27 wrestling with how they can cooperate to fund badly needed replacements of aging power generation plants, and deal with a continued decline of natural gas from Cook Inlet region gas fields now used to generate electricity.
Gov. Sarah Palin told the group the state is ready to help, up to a point. Palin has asked state agencies to draft a comprehensive energy policy that includes regional goals for different parts of the state, but state funding should go only for projects that are practical and sustainable, she told the Railbelt Grid Technical Conference.
“Our policy has one goal - affordable, reliable energy for all of Alaska now and in the future,” Palin told the utilities.
The Alaska Energy Authority, a state agency, sponsored the conference to consider ways of making the Southcentral and Interior Alaska railbelt power grid more reliable and efficient.
JoEllen Hanranhan, a management analyst in the state Office of Management and Budget, told the conference that the governor has asked three agencies - the Alaska Energy Authority and the departments of Natural Resources and Environmental Conservation - to develop guidelines for new state energy policy.
More information will be available when Palin rolls out her proposed fiscal year 2009 state budget proposal Dec. 15, Hanranhan said.
Consolidations and cooperative agreements among utilities were a major topic of discussion at the conference. Liz Vazquez, chair of Chugach Electric Association’s board, gave the conference an update on talks now underway between Chugach and Anchorage’s city-owned Municipal Power and Light on possible consolidation to gain efficiencies.
A consultant study showed the greatest savings in either the acquisition of Chugach Electric by ML&P or the acquisition of both utilities by a new yet-to-be-formed public authority. Other options, such as Chugach acquiring ML&P or both utilities being sold to private companies, would result in losses, Vazquez said.
Chugach Electric is still analyzing the consultant report and asking questions of the consultants, she said.
The energy conference followed the release a week earlier of a set of recommendations on energy issues by the Anchorage Chamber of Commerce.
Two former utility managers, Tony Izzo and Joe Griffith, headed a task force of Anchorage business leaders who prepared the recommendations.
Izzo is a former manager of Enstar Natural Gas Co., the Southcentral Alaska gas utility. Griffith headed Chugach Electric Association, the state’s largest electric utility, which also serves Southcentral.
Among its recommendations, the task force asked the governor to develop a state plan to deal with energy issues and appoint a cabinet-level official to insure it gets carried out.
The chamber suggested that BC Hydro, British Columbia’s public energy authority, could serve as a possible model for Alaska in planning and managing energy resources in a large geographic region.
The most serious problem, Izzo and Griffith said in a briefing, is Southcentral natural gas supplies are being depleted and it will be years before new gas supplies can be made available from a spur pipeline bringing North Slope gas south, or a facility to import gas as LNG.
“The problem is how we get from here to there,” Izzo said.
The chamber reports said, “Cook Inlet natural gas supplies have fallen below what is a comfortable capacity upon which to base the railbelt economy. Supply and deliverability have become a challenge for energy managers.”
Izzo said the situation is actually more serious than the report indicates. A combination of circumstances, such as extended cold winter weather, low pressures in producing gas wells and a mechanical mishap in the gas distribution system could severely disrupt the delivery of gas for power generation and space heating if no backup supply of gas were available.
Having the ConocoPhillips-Marathon Oil liquefied natural gas plant in Kenai available to supply gas is essential in preventing emergencies in the future, Izzo said.
However, the plant will close in 2009 unless an extension is granted for its export permit by the U.S. Department of Energy. ConocoPhillips and Marathon have asked for a two-year extension of the permits.
Griffith said Alaska needs to tackle energy policy in a way it did 20 years ago, when the Alaska Power Authority built hydroelectric dams around the state, which today provide low-cost electricity to the communities they serve. One of these was the Bradley Lake dam, on the Kenai Peninsula, which supplies power to the railbelt grid today.
On another issue, the Anchorage Chamber recommended that the Palin administration and Legislature have the Regulatory Commission of Alaska act more quickly and give guidance on gas sales contracts submitted for approval by gas producers and utilities.
“The regulatory environment is inconsistent and reactive, thus increasing business risks and reducing reliability and consistency,” the report said.
In the briefing, Izzo said the RCA spent a year in 2006 considering a proposed gas sales contract between Marathon and Enstar before turning it down. The commission also gave no guidance on what terms a new gas sales contract should have to be approved, which creates problems for Enstar and gas producers in developing new contracts.
The chamber report also recommended that the Power Cost Equalization program for rural communities be continued until better ways of meeting rural energy needs are developed.