Utilities update RCA on Railbelt transmission collaboration

Leaders of the state’s largest electric utilities submitted a draft plan to state regulators on Tuesday outlining how they will address more than $900 million of needed infrastructure upgrades.

The early-stage business plan, developed in conjunction with Wisconsin-based American Transmission Co., is an update for the Regulatory Commission of Alaska on the utilities’ efforts to form the Alaska Railbelt Transmission Co.

A Railbelt region electric transmission company, commonly referenced as a TRANSCO, would eliminate the disparate management of the region’s aging electric transmission system and bring it under one entity.

In theory, operational savings drawn from sole control of the Railbelt’s transmission lines and substations would ultimately benefit ratepayers through lower electric rates. More important, perhaps, would be the ability to spur investment in and improve the reliability of Railbelt transmission infrastructure.

The six utilities, from Homer Electric Association to Golden Valley Electric Association in the Interior, signed a nonbinding memorandum of understanding with American Transmission Co. in December 2014 to examine the formation of a Railbelt TRANSCO.

Those six utilities provide about 80 percent of Alaskans with power.

The RCA released a report at the hest of the Legislature last June that was critical of the utilities’ collective lack of substantive action to form a TRANSCO, which is assumed to be the best path towards addressing the Railbelt’s electric transmission issues. If the utilities did not take meaningful steps to voluntarily form a TRANSCO the RCA warned it would seek legislative authority to handle the situation itself.

The latest progress report to on a Railbelt TRANSCO projects a certificate of public convenience and necessity application, essentially a utility’s business license, could be submitted to the RCA by fall 2016. That could have a TRANSCO up and running by the spring of 2017, based on the utilities’ timeline.

The utilities expect to have the potential benefits of a TRANSCO validated and a fair cost-recovery structure for transmission assets settled by next spring. A detailed, formal TRANSCO business model would be developed at the same time.

The utilities would then take the agreements to their governing bodies — director boards and local governments — sometime next fall.

Which utilities participate in the TRANSCO will largely depend on the benefits that can be identified for their individual ratepayers, the report states.

A 2013 Alaska Energy Authority study estimated $903 million worth of transmission upgrades are needed in the Railbelt to bring the entire system up to single redundancy. AEA is working with a consultant to update that study.

Transmission investments in Alaska’s Railbelt would not only improve reliability — some areas are linked with a single transmission line — but could also save consumers money through economic dispatch.

AEA has estimated that maximum use of the Railbelt’s cheapest power sources could save ratepayers between $80 million and $240 million per year.

Bottlenecks in the system prevent adequate amounts of economic power from being shipped across the lines, forcing power to be purchased from more expensive sources.

If AEA’s identified savings are actually realized will likely depend on how infrastructure investments are financed through the inner workings of a Railbelt TRANSCO.

Ownership of Railbelt transmission lines is divided amongst the utilities and their service areas. The Alaska Energy Authority also manages 173 miles of electric intertie owned by the state between Willow and Healy.

Improving transmission is a financial challenge for the individual utilities because expansive service areas and small customer bases can make projects that might benefit consumers elsewhere in the region a large cost burden to bear.

An Alaska Railbelt Transmission Co. would likely be led by ATC at the guidance of the utilities, which would sell or lease their transmission assets to the TRANSCO. That would allow the utilities to pool money for capital projects and allow ATC to invest in transmission, either directly or by attracting third-party investment.

Milwaukee-area American Transmission Co., or ATC, was the first multi-state transmission-only when it formed in 2001 to prioritize investment for the owner utilities in its service are of eastern Wisconsin and Michigan’s Upper Peninsula.

Look for an expanded version of this story in an upcoming issue of the Journal.

Elwood Brehmer can be reached at [email protected].

12/23/2015 - 2:26pm