36 Alaska Business Monthly | May 2015 www.akbizmag.com
Reinventing Electricity in Alaska’s Railbelt
Alaska’s Railbelt communities form a patched grid of six sepa- rate owners when it comes to
electricity. The Matanuska Electric Association (MEA) supplies electricity for
lights and heat in an area sprawling from
Eagle River to Denali National Park. The
northern-most cooperative, Golden Valley Electric Association (GVEA), takes
over from MEA at the park’s borders
for coverage centered in Fairbanks that
supplies heat and light with 3,177 miles
of power lines in a 5,973 square mile
service territory that includes North
Pole, Chena Hot Springs, Delta Junction,
Healy, Nenana, and Cantwell.
The most populous segment of the
state, Anchorage, comes under one or
the other of two electrical utilities’ coverage: Chugach Electric Association
(Chugach) or Municipal Light and Power
(ML&P). Chugach, an Anchorage co-op
formed in 1948, serves an area extending its transmission lines to from Hope
and Moose Pass in the South to Eagle
River in the north and, more recently, to
Fire Island in Cook Inlet. ML&P’s twenty square miles includes Anchorage’s
oldest neighborhoods, Downtown and
Midtown business districts, and the industrial loads at the Port of Anchorage.
This utility, formed in 1932, also serves
Joint Base Elmendorf-Richardson and
powers 3,911 street lights.
What isn’t covered by Chugach on the
Kenai Peninsula is handled by Homer
Electric Association (HEA) for the
larger towns of Homer, Kenai, and Soldotna, as well as smaller hamlets and
villages across Kachemak Bay. The City
of Seward operates its own power plant,
Seward Electric System, making it the
smallest of the six Railbelt utilities.
What if these six utilities joined forc-
es under one umbrella to create a uni-
fied system? That’s an idea many years
old that is now gaining better traction:
(RCA) will be issuing a recommenda-
tion in June after rounds of public tes-
timony end in May.
If the utilities do form what’s called
a Uniform System Operator, or USO,
what’s at stake? What would it take in
terms of changing the Alaska Regulatory
Commission’s statutes? The proposal, if it
proves feasible, offers to gather all of these
separately operating utilities as a joint
endeavor. The catalyst for accomplishing
this is called ARCTEC, an acronym for
Alaska Railbelt Cooperative Transmission and Electric Company. ARCTEC’s
board is made up of two members from
each Chugach, MEA, GVEA, and SES
who direct the efforts of Chairman David
Gillespie. Joe Griffith, MEA’s CEO, acts as
the chief executive of ARCTEC.
That Alaska has some of the highest
utility rates in the nation is a well-worn
problem that stymies business projects.
Even though the state produces its own
natural gas and fuel as well as hydro
and wind projects, the expenses continue because of an aging infrastructure
in need of replacement. ARCTEC estimates it will cost $900 million to launch
the Railbelt into a more energy efficient,
less expensive future. That price tag is
based on a study by the Alaska Energy
Authority commissioned in 2014.
ARCTEC Director David Gillespie puts
it this way: “Co-ops have fiduciary obligation to their members, not the region as a
whole,” he says in a round of giving Power-Point presentations to groups. Patchwork
transmission charges and little system-wide planning create competing priorities.
“The physical transmission system
cannot deliver the existing generation,
let alone new generation [power],” he
says. “The electric system is technically
complex, with issues that are sometimes
only understood by engineers. This can
create an atmosphere of mistrust.”
Transmission lines don’t always have
enough capacity to carry cheap power
from the Kenai to Anchorage or from
Anchorage to Fairbanks, Gillespie says.
Another problem: regulation. Tariffs
are structured in such a way that a wind
developer in Anchorage—such as CIRI
on its Fire Island wind power project—
needs to pay three different utilities
to use their lines to sell power to Fairbanks, Gillespie says.
The Alaska Legislature in 2014 granted the RCA a $250,000 appropriation to
hire staff and conduct public hearings.
The RCA’s task is to hear from stakeholders such as businesses and individuals and from the utilities themselves.
When their work is done, says RCA
Commissioner Bob Pickett, the RCA
will have an extensive written record
laying out how to proceed—if a decision to proceed is made by the utilities.
“We will have a record that is similar
to what we do in other proceedings, but
this will be much more detailed than
our consulting reports,” Pickett says.
He encourages readers to go to the RCA
website ( rca.alaska.gov) and read transcripts of testimony received so far to
follow the discussion.
What’s at Stake?
Gillespie worked on the first piece of
the picture during the 2015 legislative
session. He made rounds speaking with
individual legislators and at hearings
to bring lawmakers up to speed on the
concept—its pros and cons.
“We’re creating an awareness in the
Legislature of a system operator solution,
so we can pass legislation for the RCA
in terms of what statutory authority do
they need,” Gillespie says. “If we need to
change Statute A, B, or C, then they will
be ready with the legislators who under-
stand and can get a bill introduced.”
Meanwhile, Gillespie also works on a
grassroots effort to help the public under-
stand how a USO would work. The con-
cept is that by organizing all the Railbelt
utilities under one entity, a number of the
utilities’ mutual problems can be solved.
One major issue is financing. How can
these independents replace an aging infra-
structure and make upgrades that cost an
estimated $900 million—while keeping
electric bills reasonable for consumers?
soon to come
By Naomi Klouda