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HomeMy WebLinkAbout09252018 City Council Work Session - Laydown - Alaska Railbelt Transco InformationFoq 5 �� 3t Alaska Railbelt Transco ��ar 8`"' ' Background Each utility owns and operates separate generating facilities, high - Alaska's Railbelt region is served by six electric voltage transmission lines and local distribution lines. The utilities meet utilities: the electric needs of their members or customers through local • Anchorage Municipal Light &Power generation, power from jointly owned hydroelectric plants or through • Chugach Electric Association, Inc. (Chugach) power purchases from other utilities. Many existing high -voltage • Homer Electric Association, Inc. (HEA) • Golden Valley Electric Association transmission lines were built to move electricity locally, and some lines A) • Matanuska Electric Association (MEA) move electricity among utilities to facilitate power sales. Some studies • City of Seward Electric System (SES) suggest that limitations in the amount of power these lines can carry may limit access to the lowest -cost generation to some regions (also called economic dispatch) and may also impact reliability. One way groups of utilities in other parts of the country have addressed this issue is by transitioning to a single transmission company — or Transco — that operates, maintains, and when necessary, improves the network for greater access and overall efficiency. Since 1998, the state of Alaska has conducted several studies of the region's transmission system to identify a solution for grid efficiency. In June 2015, the Regulatory Commission of Alaska called for the Railbelt utilities to voluntarily develop a Railbelt Transco organization and demonstrate the potential benefits to consumers. Utility collaboration centers on local, regional benefits To determine whether a Transco is the right model for improving transmission access to generation facilities in the Railbelt, the utilities are committed to understanding the achievable economic benefits -- both locally and regionally. In 2014, the Railbelt utilities formed a senior staff Working Group supported by collaboration among subject matter experts from their utilities as well as from American Transmission Co., a Wisconsin -based Transco. Together, they set principles for Transco formation and committed to validate the potential benefits of improving economic dispatch, and weigh the benefits and costs of shared ownership of a regional Transco. In addition, the utilities began contemplating an organizational structure that could achieve possible regional benefits while continuing to meet local needs — all with consideration for cost impacts to their members and customers. Significant progress on the analysis has been made through consistent utility collaboration, which demonstrates utility commitment to positive solutions. Why ATC? Experience, potential capital ATC is the nation's first interstate transmission -only utility, formed in 2001 by a similar desire to improve the reliability and efficiency of the grid serving portions of the Upper Midwest. ATC's experience in the formation and 15-year operation of a Transco has served as the starting point for the current Railbelt discussions and the economic analysis. ATC routinely conducts the type of modeling necessary to inform such decisions. As a transmission company owned by cooperative, municipal and investor -owned utilities, ATC has experience incorporating inputs from multiple stakeholders and building consensus. Additionally, ATC has the capacity to provide access to capital in the form of equity investment if new and upgraded transmission facilities in Alaska require funding. Historically that funding has come from the state of Alaska or self -funded by the utilities, but both may be limited in the near -term. Over the last three years many parties, including other utilities from outside Alaska, private investors and banks, have approached Railbelt utility leaders with different proposals for addressing the region's transmission needs. ATC's experience in forming and operating a Transco and willingness to invest in Alaska near -term and long-term has made this Wisconsin utility a valuable facilitator and potential long-term partner. Utilities analyzing economics, reliability Following two status reports to the RCA on voluntary and collaborative efforts, the Working Group continued the analysis and formation discussions throughout 2016 and 2017. They have validated operations and fuel cost data on each Railbelt generating unit and developed projections on savings that could be achieved if these assets were more efficiently dispatched to meet Railbelt-wide demand for electricity. The utilities also are developing common planning and reliability standards that would apply across all assets in the Railbelt. This analysis also includes determining the cost to achieve any benefits, including the cost of creating any new Railbelt-wide organization and associated rate of return, while maintaining clear accountability to the existing utilities and their members. This analysis will be compared to the existing system, which improved recently with a new collaborative power pool market resulting in savings for many Railbelt utilities. The utilities are committed to basing any decision to change how the Railbelt meets its energy needs on a clearly understood, transparent assessment of the benefits and a viable cost-effective business model. Separate discussions are underway among some utilities regarding a business model for a Unified System Operator — a separate organization to facilitate economic dispatch of all regional generation resources. These analyses are informing discussions and decisions within the utilities and their governing boards. Transco concept The goals of exploring a Transco are to: If formed, the Alaska Railbelt Transco would integrate the existing • improve electric system reliability, transmission assets from each participating Railbelt utility into a new • facilitate the economic dispatch of the Alaska -based company. The Transco would not own generating various Railbelt generation resources and assets and would provide non-discriminatory open access to the • assess future grid needs, and where transmission grid. The Transco would operate, maintain, plan and necessary, plan, finance, construct and construct electric transmission facilities in and around the service operate new transmission. territories of the participating utilities. The Transco would establish operating agreements with the existing utilities, maintaining experienced operations and best practices. Under a Transco, the Railbelt would transition to a single rate for use of the network of transmission assets. Rather than each local utility building and paying for transmission that crosses its area, or paying wheeling tariffs based on use of specific lines, the cost of the entire network would be shared. This results in a stable cost of transmission, shares the cost of new lines that benefit multiple users and creates opportunities for savings in the efficient use of generation. Another objective of the Transco is ensuring that money is available for maintaining, and when necessary, improving the grid. A Transco capital structure that includes both money borrowed from banks and direct investment by the Railbelt utilities and ATC can increase options available to meet future transmission needs. Any return on these invested dollars would be regulated by the RCA. Utility, regulatory approvals required to proceed To proceed with a Transco, the management and governance organizations of the participating utilities will make a "go, no go" decision. Any decision to proceed with Transco formation will be based on each utility's assessment of the financial and operational costs, economic dispatch benefits and impact of participation on their operations, customers and other stakeholders. If the utilities proceed, they would develop and file a Certificate of Public Convenience and Necessity with the RCA, which then reviews the CPCN and issues a decision. Transco formation would begin following an RCA approval.