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A study exploring the feasibility of unifying systems operation of Alaska's Railbelt electrical utilities is the next chapter in a story stretching back to 1969 when a citizens' advisory vote recommended one utility for the region.
Alaska Energy Authority Executive Director Ron Miller said the decades since have seen various pushes to unify Alaska's utilities under a single system of operation.
Most recently, in 2003, the legislatively created Energy Policy Task Force concluded that to efficiently energize Alaska's economic development, the Railbelt utilities should develop a unified system operation. See www.akenergyauthority.org/ EnergyPolicyTaskForce/EPTFreportPrintPerfect.pdf)
The purpose of the current study is to build on the work of the Energy Policy Task Force, Miller said.
"Someone has to answer the question 'Is it in the best interest of the ratepayers to have six individual utilities?' Someone has to answer the question 'Does it make sense to have six individual utilities and one power provider?'" he said.
A 1998 study for the Alaska Public Utilities Commission by Black and Veatch International indicates the Railbelt utilities might reduce production and capital costs by 3.36 percent through unifying systems operations.
Special assistant to the governor on energy issues, Joe Balash, said unified systems operation models have worked well for utilities in the Lower 48.
"It's not about who did what in what year to whom," he said. "It's about how do we deliver power to the Railbelt grid in the most efficient way possible."
Balash said the administration is pushing to move the conversation beyond regional politics and begin working together to tackle challenges identified in the 2004 Railbelt Energy Study by consultant R.W. Beck.
That study estimates Alaska will need more than $5 billion in investment and operation and maintenance expenses in the next 25 years.
Tony Izzo is an Alaska energy consultant, and was the chief executive at Enstar Natural Gas Co. for 5 1/2 years, with more than a passing interest in the efficient delivery of reliable, affordable power.
"We don't have any type of coordinated planning with the consumers' best interest as the focus," he said. "We need an energy plan for the same reason we need a long-term fiscal plan."
CONFERENCE, STUDY TO EXPLORE UNIFICATION'S COSTS, BENEFITS
Alaska Energy Authority chief Ron Miller said the feasibility study is one of a list of recommendations from the Energy Policy Task Force.
The energy authority, a subdivision of Alaska Industrial Development and Export Authority, is overseeing the study of the Railbelt Electrical Grid Authority concept, he said.
Miller said the 25th Legislature appropriated $800,000 to fund the review.
At the end of August, a request for proposals hit the streets seeking a contractor to study what is feasible for the Railbelt and to assist AEA in coordinating a technical conference in late fall.
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"We will bring in experts to talk about how electrical systems operate in the restof the country," Miller said. He said the October conference--date and location to be announced--will be open to anyone with an interest in affordable, reliable energy for the Railbelt.
Following the conference, the consultant will prepare a report that considers the current regulatory regime, the existing business structures in the Railbelt Grid, and the types of unified network operation available, he said.
Miller said the plan is to have a draft report ready for the governor and Legislature during the 2008 legislative session.
The overarching goal of the feasibility study is to determine if a collective process is viable and economically attractive to the Railbelt as a whole and how that process may be implemented, he said.
THE STATUS QUO
Today, the Railbelt's six utilities are interconnected in a grid that runs from Homer to Fairbanks. Key parts of this grid include AEA-owned infrastructure in the form of the Alaska Intertie which runs from Willow to Healy and the Bradley Lake Hydroelectric Project.
But various contracts between utilities are coming due, demand is increasing, generation units are aging and cheap supplies of natural gas are running out.
Balash said the time has come to explore any efficiencies that could be passed on to consumers in the form of lower rates.
"Our supply of natural gas made for cheap power for a long time, he said. "Those days of surplus natural gas are over."
Prices were so low in the Cook Inlet region that it was cheaper to build and operate natural gas-fired power plants than hydropower facilities, Balash said.
When the 129 MW Bradley Lakes Hydro Plant near Homer came online in 1991, oil and gas prices were low and the project didn't look that attractive.
"It's turning out to be a wonderful resource," he said. "There are very long-range benefits when you don't have to pay for your fuel supply."
But hydro projects are expensive and likely beyond the scope of what any one of Alaska's six small utilities could accomplish on its own, Balash said.
"A big project on the scale of Lake Chakachamna isn't around the corner for any of the utilities individually," he said, referring to a 330-megawatt hydro system that the Alaska Energy Authority and others are exploring on the west side of Cook Inlet.
Miller said it may makes sense to explore the economics of building one large power project rather than a series of smaller projects.
Plus, Balash said the EPA's Clean Air Mercury Rule restricts Alaska as far as state allowable levels of mercury emissions from coal-fired power plants. Alaska's limit beginning in 2010 will be 20 pounds per year.
"We can live with that at current operations, but if we start adding coal plants--we go over that very quickly," Balash said.
Also of regulatory concern is the policy direction Congress seems to be taking with regard to carbon emissions, he said. "What does that do to the economics of delivering power?"
In order to continue growing economically, Balash said Alaska must be able to say "Yes, we can" when it comes to supplying new businesses with the natural gas and electric resources they need to do business in Alaska.
Izzo recalled one stymied opportunity for economic growth that crossed his desk during his days heading Enstar.
One day he said his phone rang with a call from AEDC saying that they'd been contacted by a large company that liked the quality of life in Alaska, and wanted to confirm a supply of 25 billion cubic feet of natural gas a year.
"Can they get it?" the man on Izzo's phone asked.
"No way," Izzo said. "That's almost an entire year's worth of gas for all of Enstar. The annual demand is only 27 billion cubic feet. And we're wondering where we are going to get the gas we need for those customers."
Alaska never got a serious look because it couldn't provide the needed energy, he said.
For more information on the unified systems operation study, visit http:// www.akenergyauthority.org/USOHomePage.html.
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