Power-Pooling by Railbelt Utilities to Save Ratepayers Millions

A trio of Alaska’s largest electric utilities announced an agreement Monday to start operating more as one. Matanuska Electric Association, Anchorage’s Municipal Light & Power, and Chugach Electric Association submitted a new power pooling and joint dispatch agreement (Docket No.: I-15-001) to the Regulatory Commission of Alaska on January 30 that could cumulatively save between $12 million and $16 million annually, according to utility leaders, the Alaska Journal of Commerce reported.

The utilities are based in the Railbelt electric grid. The term “Railbelt” refers to either the broad geographical area serviced by the Alaska Railroad, or the electrical grid that covers that area. The Railbelt extends from Fairbanks through the Kenai Peninsula.  It encompasses the most populous areas of Alaska, including Anchorage and the Matanuska-Susitna Valley.  The Railbelt is home to around 70% percent of Alaska’s population and consumes 80 percent of its electricity.

In 2007 the state legislature commissioned an $800,000 study into the feasibility of creating a single-utility.   called the Alaska Railbelt Electrical Grid Authority (REGA) Study, looked at a number of possibilities for condensing these utilities. The study, conducted by Black & Veatch,  also examined a variety of alterative power generation mixes for the next 50 years.

“This is really good for the consumer,” Chugach Electric CEO Lee Thibert told the local news outlet. “It’s going to lower rates; it’s good for the environment with reduced fuel [use].”

The agreement should save Chugach, alone, about $4 million in annual fuel costs, which would translate to about a 2 percent rate reduction for the utility’s customers, according to Thibert.

He also noted that reducing fuel consumption by burning less natural gas means emitting up to 120,000 fewer tons of carbon each year.

The cost and environmental benefits of the power pooling agreement will be realized by relying on the strengths of each utility’s power plants to collectively maximize fuel efficiencies, the Journal said..

“Our focus really is all about increasing reliability while decreasing cost, especially in these challenging economic times,” Matanuska Electric General Manager Tony Izzo said.

Since early 2013, each of the utilities in the pooling partnership has built new, higher efficiency natural gas-fired power plants. Chugach and ML&P are partners in the 200.2-MW gas and steam Southcentral Power Project; MEA brought its 171-MW natural gas-powered Eklutna Generation Station online in 2015; and ML&P is currently in the final stages of commissioning its 120-WW thermal George M. Sullivan Plant 2A.

While the plants are individually more efficient than the generation they replaced, jointly orchestrating how they are used can take that efficiency further, according to utility officials.

The Chugach and ML&P plants are generally best suited to be base load generators; they’re most efficient when run at maximum capacity, according to the report by the Journal.

By contrast, MEA’s Eklutna Station, built with ten smaller generators, is more nimble and can be throttled up or down to meet peak demands more efficiently than the other two.

Once the pooling partnership is established, the utilities will buy and sell power among themselves based on the most efficient means of meeting demand on a given day — or given hour.

Further, the pooling agreement will allow the utilities to pool their shares of clean and stable-cost hydropower from the state-owned Bradley Lake hydro project near Homer.

The next year will be spent fine-tuning operations under the 20-year partnership, which is subject to approval by the RCA.

Finally, the three utilities have said they are open to other Railbelt participants in the pool, notably Golden Valley Electric Association in Fairbanks and Homer Electric Association on the Kenai Peninsula. However, higher cost generation and transmission line capacity limitations could restrict the benefits of pooling for those utilities outside the Anchorage-Palmer-Wasilla network.

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