‘Historic’ legislation enhancing the Alaska Railbelt electrical grid moves forward

Lawmakers are moving forward with legislation culminating years of work to better align Alaska’s Railbelt electric utilities in an effort to maximize the efficiency of their interconnected system.

Senate Bill 123 was passed out of the special Senate Railbelt Electric System Committee Feb. 26, and testimony on the long-awaited bill was heard in the Finance Committee on March 3.

Similarly, House Bill 151, an identical version of the Senate legislation moved from House Energy to the Resources Committee Feb. 26 as well.

The bills seek to codify the work that the Railbelt electric utilities have done at the behest of the Regulatory Commission of Alaska to better integrate the long-term planning of the six utilities and provide a consistent path for renewable power producers to access the regional transmission system.

Matanuska Electric Association spokeswoman Julie Estey told the Senate Finance Committee that it is a “historic time” for the utilities that can’t be missed.

“There is unprecedented alignment around this solution, not only from the utilities but also with independent power producers and other stakeholders, with the RCA, with two very diverse legislative energy committees and we hope that this committee will support the passage of SB 123,” Estey said.

At a high level the bills would mandate the utilities form an electric reliability organization, or ERO, that would oversee implementation of system-wide reliability standards and coordinate long-term planning amongst the utilities. It also gives the RCA explicit authority to rule on the necessity of large infrastructure projects, such as generation plants, that utilities may pursue.

It is the result of nearly five years of work since the RCA issued a sternly-worded letter to the Legislature in 2015 that was largely critical of the utilities’ efforts to work together on broader generation and transmission planning as well as day-to-day power sales that could greatly improve the overall regional electric system efficiency.

Senate Finance co-chair Natasha von Imhof, R-Anchorage, noted the utilities are ultimately responsible to their individual members but said the legislation should help facilitate streamlined operations between the utilities and provide an avenue for sharing backup generation, known as spinning reserve, which can be a large cost to utilities.

“To me, this is a long time coming and should have significant benefit for Alaska ratepayers,” von Imhof said.

The primary end goal for many stakeholders is to achieve “economic dispatch” across the entire Railbelt — from Homer to Fairbanks — or consistently maximizing use of the most efficient power generation through near-constant power sales between the utilities.

The RCA’s 2015 letter characterized the Railbelt system as “fragmented” and “balkanized” at the time, as utilities focused on their own service territories with less concern about what was happening throughout the region.

Some critical observers of the Railbelt electric system contend the six utilities — spread over a large area but with collective demand less than many individual Lower 48 utilities — have overbuilt generation capacity in recent years while ignoring transmission investments that could make it more cost effective to move lower cost power from one end of the system to the other.

The 2015 letter notes the utilities had spent roughly $1.5 billion on new generation facilities over the previous five years.

Currently, the Railbelt utilities continuously buy and sell power to each other; however, they also each apply their own transmission, or wheeling, tariffs, when power is sent across the portion of the main transmission lines they own.

This can lead to situations where tariff “pancaking” disincentives power transactions that could otherwise maximize the efficiency of the system as a whole. Rate pancaking can also kill the economics of otherwise lower-cost independent power projects that aim to sell power to utilities across the grid.

As a result, independent power producers, or IPPs, are strong advocates for a single system wheeling tariff that allocates revenue to the participating transmission owners, usually utilities.

A memorandum of understanding signed by the utilities Dec. 18 lays out a path for them to set up the Railbelt Reliability Council, which will act as the regional ERO, and directs them to work on solving the pancaking issue.

The council will have a board composed of the six utilities and six other stakeholder members as well as the council’s CEO — in line with the directives in the legislation.

It is the broad composition of the council’s leadership, the push to simplify grid access for IPPs and the assurance that the RCA can clearly require collaboration amongst the utilities if the voluntary efforts to form the council fail that has helped garner support for the bills from renewable power advocates.

Renewable Energy Alaska Project Executive Director Chris Rose said in written testimony to Senate Finance that the Railbelt-focused legislation will help residents statewide by at a minimum stabilizing electric prices in the region that is the base for calculating the Power Cost Equalization electric rate subsidy statewide.

“More efficient and affordable electricity in the Railbelt means more PCE support for rural communities that still rely primarily on expensive, imported diesel fuel to generate electricity,” Rose wrote to the committee.

If passed, the bills would not take effect until July 2021 to give the RCA time to draft accompanying implementation regulations and give the utilities time to set up and start the Railbelt Reliability Council.

RCA Commissioner Antony Scott testified to the Senate committee that he hopes and expects the structure of the bills means the commission will need to do little to solidify the ERO structure the utilities are working to form through the reliability council.

He also clarified that the mandate to establish an ERO would be limited to the Railbelt because there are few other areas in the state that are sufficiently developed to make such an organization necessary or viable.

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Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.