Alaska Dispatch

State energy planners expect a 50-year economic plan for the Railbelt's six electric utilities to help make the case for major cooperation on power generation and transmission.

Due out at the end of November, the plan -- called the Railbelt Integrated Resource Plan -- offers a roadmap for building up electric generation and transmission infrastructure through the state's most populous region. The plan pinpoints the best options for future infrastructure with minimum long-term costs to rate payers, Alaska Energy Authority project manager Jim Strandberg said.

Speaking with the International Association for Energy Economics on Monday in Anchorage, Strandberg laid out the driver for bringing the six utilities into a single corporation -- according to AEA's analysis, that's the only way to boost the utilities' borrowing capacity to fund large power generation projects and transmission upgrades that will bring ratepayers from Fairbanks to Seward reliable power at reasonable cost. Each utility would still control its own distribution network.

Cooperation for efficiency's sake

The generation and transmission infrastructure throughout the Railbelt is fragile and unlikely to meet even basic load demands in the near future, Strandberg said. He gave his own age as 61 -- the infrastructure's, he said, is closer to 70.

Meanwhile, changing fuel supplies and prices are forcing a second look at where electricity comes from, and how it gets to users. Some utilities generate electricity from natural gas, but others are heavily reliant on diesel fuel, which translated into hefty surcharges on consumer bills when oil hit its $140 per barrel high in 2008. Even those utilities with natural gas feedstock aren't safe -- Cook Inlet natural gas supplies aren't enough to meet Southcentral demand at peak usage. Some power distributors, such as the City of Seward, have been warned they may need to kick-start backup diesel units if Southcentral runs short on gas this winter.

"We've just arrived, to a certain extent, at a perfect storm," Strandberg said.

A bill former Gov. Sarah Palin introduced halfway through the last legislative session would draw all six utilities into a single corporation for generation and transmission. She said future state funding for power projects would likely be contingent on the utilities' cooperation.

Joe Balash, who works on energy issues for Gov. Sean Parnell, said the new governor also supports the utilities working together for reliable, reasonable power.

"If your cost of energy is spiking, the likelihood you're going to attract any new business is pretty low," Balash said. "If the utilities want the state to help (with new infrastructure), then from a public interest standpoint we are going to demand it be done in the most efficient manner possible."

A 2008 study suggested Railbelt ratepayers could realize up to $40 million in savings in the future if the utilities work together on new generation and transmission, using tax-exempt revenue bonds.

But legislators in charge of the House and Senate committees that caught the bill said they weren't about to force the utilities into order -- at least until the utilities had ample time to come together on their own.

Some are headed that way. Matanuska Electric Association's board of directors was expected to take up a cooperation agreement at a Monday night meeting, signaling its intent to work with Chugach Electric and the City of Seward, which imports almost 90 percent of its power from Chugach.

The holdouts

Not all the Railbelt utilities are on board. While three are willing to work toward a single corporation, another three with more unique needs aren't quite there yet.

The outliers include Anchorage's Municipal Light and Power, which as a municipal utility has access to federal bonds and other funding streams; Homer Electric Association; and the distant Golden Valley Electric Association, serving Fairbanks.

GVEA Executive Director Brian Newton said the utility has already invested in generation upgrades that, albeit with mostly diesel fuel, should see to power needs for the next 10 to 15 years. Costs to consumers do go down when the utility can offset its diesel generation with electric power made from Southcentral's natural gas, but the existing transmission line capacity caps those imports at a mere 50 megawatts.

Until new, redundant transmission lines are strung the 350-plus miles between Southcentral and Fairbanks, GVEA is unlikely to fold itself into a Railbelt corporation, Newton said.

"We do work together; we probably have never worked together better than right now," Newton said of the six. "It's just sometimes hard to work on combined projects ... Everybody's still got to look out for their own needs."

Each utility is doing just that, even as they build -- in baby steps, in some cases -- toward more official cooperation. GVEA still hopes to bring long-contested Healy Clean Coal Project online, although restart costs after nearly a decade's disuse are unknown. MEA is accepting bids on a new, natural-gas fired power plant despite the fact that it's unclear where the gas would come from as Cook Inlet supplies get tighter. Homer Electric is considering increased generation from renewables, but high infrastructure costs to serve a small population may not net the rates customers want -- and talk of a new, gas-fired plant could, likewise, be cost-prohibitive.

Spokeswoman Lorali Carter said MEA supports unifying the transmission and generation functions of Railbelt utilities, building on economies of scale that she said would benefit members. For now, at least, MEA wants to work with Chugach and Seward -- and whichever other utilities are willing -- to pursue the plan laid out by Palin for a Greater Railbelt Electric Corporation.

MEA plans to move ahead with Chugach and Seward on the existing legislation during the upcoming session, which starts in January. The GRETC proposal, already before the Legislature, is a logical starting place, Carter said. The bill phases the utilities into full cooperation within 10 years, about the same time period that Alaska is counting on rich new natural gas supplies flowing through a large-diameter pipeline from the North Slope, although proponents haven't reached the point of deciding whether the project is, in fact, commercial.

But each utility has different circumstances and needs, and the corporation as laid out in the pending bill may not fit for all six, she acknowledged.

"I think the companies are committed to cooperating and participating as much as possible, but at the end of the day, MEA is looking out for MEA first," Carter said. "It's going to be the same situation for everybody else, looking out for their own rate payers."

If the bill fails to gain momentum during the 2010 session, Carter said MEA and its partners would be interested in going back to the drawing board, without the state taking a leadership role, and redrafting a way to work together.

Planning for the future

Serious analysis of electric issues through the state's major population corridor -- the Railbelt -- started with a $2.5 million appropriation in 2008 for a Railbelt Regional Integrated Resource Plan, expected at the end of November from the Alaska Energy Authority and its contractor, Black and Veatch. The plan will lay out two possible demand scenarios through the next 50 years: base case expectations with moderate growth beyond the current 900 megawatt peak load, and a large-growth scenario that could double demand by 2025.

The Integrated Resource Plan plays into the joint corporation framework, Balash said. As written, the legislation calls for a joint utility corporation to adopt an IRP -- either the state's, or its own, with solid reasoning for disregarding the state's. The IRP requirement is designed for transparency, so the public can track where the dollars go as the corporation makes business decisions over time.

Major new projects -- whether transmission lines or power plants -- will require major capital outlays, Strandberg said. AEA calculates the combined bonding power of the Railbelt utilities at $1 billion, probably not enough to cover the costs of new power plants, a hydroelectric dam or a combination of facilities.

"We're facing a capital shortfall under the present structure to respond to the future," Strandberg warned.

Under a single corporation, the utilities would likely enjoy additional bonding authority along with state support.

"In our opinion, the more the merrier," MEA's Carter said. "We are an enormous geographic region, from Homer all the way up to Fairbanks, but we really don't have that many rate payers. Our cost for infrastructure is spread out over a smaller group of people than, say, in the Lower 48."

Contact Rena Delbridge at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

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