Keeping the lights on won't come cheap

A new study says the state's Railbelt electric utilities need to invest at least $10 billion over the next 50 years in order to keep the lights on.

The 400-page analysis, prepared by engineering consulting company Black & Veatch, cautions that the region's six utilities will have to share new transmission and generation projects. Without cooperation, the individual utilities aren't expected to come close to securing the borrowing capacity to meet the hefty price tags.

The Railbelt utilities -- Golden Valley Electric Association in Fairbanks, Southcentral's Matanuska Electric Association, Anchorage Municipal Light and Power and Chugach Electric Association, and Kenai Peninsula utilities Homer Electric Association and the City of Seward -- need to increase energy efficiency, and will have to brace for major spending to build generation and transmission infrastructure to carry the state's population base through the next 50 years.

"Regardless of what path we follow ... we're looking at significant, substantial, staggering investments," Joe Balash, an energy assistant to Gov. Sean Parnell, said earlier this week. "These choices, unfortunately, need to be made relatively soon. This is a big risk factor our utilities and all of us face. We're going to have to move on at some point, and do something to keep the lights on."

For years, Southcentral utilities -- five of the six -- have enjoyed a stable supply of cheap natural gas from Cook Inlet, and in turn, have kept rates relatively low. Fairbanks utility Golden Valley Electric Association was even able to purchase some power from its southern neighbor, offsetting a portion of the more expensive power generated from diesel in the Interior.

The gas supplies are dwindling and the area lacks storage capacity, creating one of the major problems the Black & Veatch report suggests avoiding -- reliance on a sole fuel source.

"Regardless of the future source of additional natural gas supplies (whether new gas supplies from the Cook Inlet, gas from the North Slope, or imported LNG supplies), one reality cannot be escaped: future gas supply prices will be higher," the report says.

Commissioned by the Legislature in 2008 with a $2.5 million appropriation, the study evaluates the Railbelt's energy needs, projected growth and fuel challenges through the next 50 years, from 2011 to 2060. Black & Veatch representatives detailed their draft report at a day-long workshop on Thursday in Anchorage.

The bottom line? Major investment is needed in transmission and new generation, and the utilities should focus on diversifying the fuels used to make electricity in order to protect customers from the possible shortages expected in a few years as Cook Inlet gas supplies taper off. The state could also significantly cut electric consumption with incentives for efficiency.

A technical evaluation of four scenarios led Black & Veatch to a plan that would dramatically increase the amount of power generated from renewable resources, to nearly 50 percent. Gov. Sarah Palin unrolled that goal in January. The plan calls for significant upgrades of transmission lines in the next decade, followed by pursuit of some pretty big projects -- development of geothermal resources at Mount Spurr, and construction of a large hydroelectric dam.