MEA weighs future as part of unified Railbelt system

PALMER — The coming year could mark a paradigm shift for the Matanuska Electric Association and the four other utilities that own and operate various portions of the transmission grid that carries electrical power around the Alaska Railbelt from Homer to Fairbanks.

While a debate has raged for years over the issue of whether or how to improve the aging grid, a directive from the state Legislature to the Regulatory Commission of Alaska has brought the utilities to the table in recent months in a voluntary effort to explore the possibility of forming a unified management structure.

Those findings on a number of management scenarios are expected this year, according to Ed Jenkin, a senior system engineer for MEA. Jenkin said Monday that an extensive amount of modeling remains to be accomplished.

“Essentialy we are looking at how much benefit a single operator will bring to the system,” Jenkin said. “And ultimately we are looking at how this will impact our ratepayers.”

Not a done deal

MEA officials also have been quick to point out that while the co-op has signed on as a participant and is supportive of exploring the unified management idea, much more analysis lies ahead.

“The amount of collaboration among the utilities has been impressive,” said MEA spokeswoman Julie Estey. “But there still is some work to do.”

With 50,000 members, MEA is Alaska’s oldest and second-largest electric cooperative.

In June 2015, the RCA reported a significant advantage in transitioning the grid to a single operating entity. As part of its findings, the commission required the utilities to file reports in September and December on voluntary efforts toward forming a single operating company.

Five of the six Railbelt utilities own and operate different sections of the grid, with the state of Alaska owning one section. Stretching from Homer and Seward on the Kenai Peninsula to Fairbanks, the system is affected by points of failure and capacity limitations, according to the RCA. Those limitations restrict the ability to move power between generation facilities and power demand centers along the grid’s length.

Advocates of the single operator system say the process could oversee a unified “dispatch” of power on the grid with a benefit of using the lowest-cost power generation to its best extent, while also making grid upgrade decisions easier.

The December report said the utilities are working with Wisconsin-based American Transmission Co. to develop a business model under which a single “Railbelt Transco” would operate, maintain and upgrade the grid. American Transmission Co. operates a transmission grid in Wisconsin and the Upper Peninsula of Michigan.

According to the utilities’ report, the various due diligence tasks needed to reach a decision on a transco implementation or rejection are at various stages of completion, with an expected proposal going to utility governing boards and stakeholders in the fall. An application for an operating certificate to the RCA would follow, according to the report.

The ongoing working group tasks include tariff structure, design of a transco business model and evaluation of Railbelt-wide “economic dispatch,” a mechanism where lowest-cost sources of power can be prioritized within supply constraints.

MEA concerns

And while progress continues on the unified grid scenario, MEA has voiced some concerns in a few areas.

In Dec. 29 letter to the RCA, outgoing MEA General Manager Joe Griffith outlined eight points the Valley co-op felt should be addressed as the transco process moves forward, issues that could potentially add costs to the participating utilities.

Griffith’s concerns included a more realistic assessment of grid upgrade costs; a thorough cost-benefit analysis of changing the grid management structure; and more appropriate cost allocation methods.

Griffith retired in December, and Tony Izzo took the helm as general manager Jan. 1. Izzo had served as MEA’s fuel supply manager since 2012.

Griffith said in the letter that a current $900 million estimate for needed upgrades to the Railbelt grid system is too high, adding that the sum is based on reliability standards “not accepted or currently practiced by the Railbelt utilities.” The letter added that in 2013 the Alaska Railbelt Cooperative and Electric Co. — a cooperative formed by some of the utilities — estimated that it would cost $250 million to “unconstrain” the grid sufficiently to achieve economic dispatch.

The $900 million figure was generated by a 2013 Alaska Energy Authority-commissioned study. According to the AEA, it was based on a single-loss contingency standard, meaning the entire Railbelt system would be able to absorb the loss of a single substation or transmission line without issue.

Jenkin added that while the $900 million cost estimate was likely correct, it represented an analysis on a level of reliability “higher than today.”

“These are all standards issues that have to be agreed on,” Jenkin said.

Related to the cost-benefit concerns, while the utilities have agreed on the various inputs required for modeling the operation of the grid, the cost-benefit analysis has yet to be completed, Jenkin said. The completed model will provide insight into potential costs and benefits of various ways of managing the grid, including the implementation of a transco and the establishment of an independent system operator, or ISO, for grid governance. Griffith’s letter urged input and approval from all the utilities for this modeling.

On cost allocation, Griffith’s letter told the that RCA depending on how the total Railbelt transmission costs are recovered from all the Railbelt electricity consumers, MEA’s ratepayers could see a cost increase in support of other utilities’ aging infrastructure as part of the transco modeling. He also pointed out that planned utility upgrades, like those MEA has in its long-range plan, could have less priority in a transco system because they could be deemed less of a priority for the overall grid.

“The process has been valuable … the progress the Railbelt utilities have made in analyzing this issue has been noteworthy,” Griffth said in the letter. “We restate these concerns not to derail an essential and valuable process, but to ensure these important issues are addressed in the process and not overlooked in a stampede for immediate results. In the long run our ratepayers, the RCA and legislature will appreciate proper due diligence.”

Contact reporter Steven Merritt at 352-2269 or steven.merritt@frontiersman.com