Saturday, September 21, 2013

Utilities, state say $1B needed for grid upgrades

Tim Bradner
Alaska Journal of Commerce

The $359 million, 180-megawatt Southcentral Power Project owned by Chugach Electric Association and Municipal Light and Power held its grand opening earlier this year. The project is part of more than $1 billion in upgrades either under construction or completed in the regional electric grid.

Electric utilities in the Interior-Southcentral region known as the “railbelt” are studying plans for $1 billion in necessary upgrades to the regional electrical grid. This is on top of $1 billion in new power generation plants that have been built or are under construction, state and utility officials told an energy conference Sept. 16.

“The generation system is keeping pace with growth, but the transmission system is not,” Gene Therriault, deputy director of the Alaska Energy Authority, told the World Oil and Gas Congress meeting in Anchorage.

Matanuska Electric Association General Manager Joe Griffith said there are bottlenecks in a creaky transmission system.

“We can get power through the system, but not always when it is needed,” to allow utilities to optimize and run equipment most efficiently, he said.

Therriault cited an example with Golden Valley Electric Association, in the Interior.

“GVEA owns a share of Bradley’s (hydro) power but it can’t get it when it needs it,” to offset high-cost power, he said.

About $402 million in upgrades are needed in the southern part of the railbelt power grid, from Healy to Homer, and about $481 million in improvements are needed on the northern end, from Healy to Fairbanks. Another $20.5 million in projects are also needed in the Anchorage area.

The projects, and costs, are outlined in a consultant study completed in May 2013 for the AEA.

Therriault said the energy authority is discussing a plan for the utilities to finance the upgrades with debt, possibly revenue bonds sold by AEA’s sister agency, the Alaska Industrial Development and Export Authority, or AIDEA. That agency has new authority to finance energy projects and infrastructure with long-term, low-interest debt.

Despite the costs, the benefits of improving the system will be considerable for ratepayers, ranging from estimates of $146 million per year to $241 million per year.

The estimates assume the upgrades are funded with 30-year debt at 5 percent, and no direct financial contribution from the state.

Decisions on the upgrades will likely include an agreement among the utilities for a single system operator to coordinate the dispatch of power through the grid, he said.

Hopes are the plan can be agreed on by the end of the year, Therriault said, so that legislators can be briefed when the Legislature convenes its annual session in January.

If the planned large hydro project is built at Watana, on the upper Susitna River, its power cannot be efficiently distributed until the transmission system is upgraded, Therriault said.

Griffin said the transmission upgrades are really the unfinished business of agreements by the state and railbelt utilities in 1985 to finance the Bradley Lake hydro project near Homer. The dam was built, but oil prices, and state revenues, unexpectedly plunged, so the transmission upgrade to go with Bradley Lake was never finished.

“It was left to finish later at a far higher cost,” Griffin said.

The utilities have stretched their wallets with hefty expenditures on new power plants.

“We are out of debt capacity,” he said. “The state will have to help us.”

Consumers will ultimately pay for the new generation upgrades and, if it is financed with bonds, the transmission upgrades, through higher rates to pay off the debt.

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