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However, two other utilities and the Alaska Energy Authority, a state agency, disagree with the joint approach being taken by Chugach Electric Association, Anchorage's municipally owned Municipal Light and Power and Golden Valley Electric Association of Fairbanks.
The Matanuska Electric and Homer Electric associations prefer an alternative plan for a jointly owned Railbelt-operating entity developed by the AEA.
A key part of the proposal by the Chugach-led group involves a transfer of $1.3 billion in state-owned assets to the new entity, as well as exemption of the sale of wholesale power from review by the Regulatory Commission of Alaska.
The state Legislature rejected a similar proposal to exempt wholesale power sales from RCA review last year. This year, the Legislature would have to approve a transfer of state assets to the new entity.
The state assets being discussed include the Bradley Lake hydro dam on Kachemak Bay near Homer and a long-distance electric transmission system connecting Anchorage and Fairbanks, both owned by the AEA. Also on the list is the Healy Clean Coal Project, a 50-megawatt coal-fired power plant at Healy, owned by a sister-agency to the AEA, the Alaska Industrial Development and Export Authority. The Healy coal plant is not currently operating and one objective of the current effort is to get the plant restarted.
ML&P's general manager Jim Posey told the AEA board Jan. 21 that his utility, Chugach and GVEA want a new entity to be formed that can finance and own the new generating plants needed to replace the old plants, most of which are 30 years old.
Posey told the AEA board that many of the turbines now used in generation plants operated by the three utilities will need replacing in the next 10 years, and that the costs could run up to several billion dollars.
If the proposed operating group - which Chugach, ML&P and GVEA call the joint action agency - is to operate efficiently it must also own and operate the state-owned hydro dam, the intertie connecting Interior and Southcentral Alaska, as well as the re-opened coal plant at Healy.
AEA and AIDEA say they would be receptive to pooling state facilities under a new Railbelt operating entity if Chugach, ML&P and GVEA would likewise turn over operation of their own generating assets to the new entity. Posey and Joe Griffith, Chugach's general manager, told the AEA board that their utilities weren't receptive to that idea.
Tuckerman Babcock, spokesman for MEA, said the crux of the issue is that the joint action agency proposal doesn't actually require the utilities to pool their resources and act jointly. "What they are proposing doesn't fundamentally change anything," Babcock said.
Under the plan each utility would still be able to build and operate their own plants. "The proposal doesn't really achieve the goal of a single operating entity which would manage all generation and transmission assets for maximum efficiency," Babcock said.
The three utilities can jointly finance and build new generation facilities now, Babcock said. "This is really a sham. They're creating something that just looks like a unified system operator to go after more state and federal money."
What MEA supports is a truly unified system that functions like similar cooperatives formed by utilities in other states, Babcock said.
Attempts were unsuccessful to contact representatives from the three utilities proposing the joint agency.
Mike Barry, who chairs both the AEA and AIDEA boards, said the agencies he represents also want a true unified system operator.
"What we want to see is a Railbelt system operator that plans and operates generation and transmission for the entire grid. Ideally that entity would be comprised of members of all Railbelt utilities," Barry said. "A unified system operator could provide for generation at an optimal scale, diversify fuel sources and provide for reliable energy at the lowest cost."
The state authority also wants some kind of guarantee that the new entity, which would be owned by the three utilities, wouldn't disband some time in the future and divide the state assets among themselves.
Uniform wholesale rate debated
Another goal for MEA, Homer and the state agencies is a uniform wholesale rate paid by all Railbelt utilities. If generation and transmission facilities were efficiently operated by a single operating entity, the logical result would be one wholesale rate for all of its members, Babcock said.
But Chugach's Griffith said his cooperative couldn't go along with a uniform postage-stamp rate. "It would be grossly unfair to Chugach," he told the AEA board.
Chugach is now the main seller of wholesale electric power to other Railbelt utilities, which are connected on the Southcentral-Interior power grid.
Griffith said Chugach now sells power to MEA for $5.6 cents per kilowatt hour on a guaranteed-supply basis, and to Homer Electric for $3.7 cents per kwH and to GVEA for a lesser amount on contracts that can be interrupted.
Under the Chugach, ML&P and GVEA, each member utility would still own and operate its own generating assets and be able to sell power at differing rates under different kinds of agreements.
Wayne Carmony, MEA's general manager, told the AEA Board that a uniform wholesale rate was a requirement for his utility to support and join a new operating organization.
"The Railbelt is at a point where having a single system operator would be ideal, but the public interest must be kept at the forefront," he said.
"A uniform wholesale rate for all utilities is essential," or each utility's self-interest in marketing its own power will assert itself, undermining the benefits of the single-system operator, he told the AEA.
AEA board chairman Barry proposed that the utilities and the authority spend more time attempting to work out differences before any group takes a proposal to the Legislature.
"There is unanimity that a single system operator should be formed for the Railbelt, but a lack of consensus on just how that is to be achieved," Barry said.
Having a single-system operator for the Railbelt was a key recommendation of the Alaska Energy Policy Task Force in its report presented to the Legislature last spring. Barry chaired the task force, which consisted mainly of utility managers.
A single-system operator, however it is to be organized, can more efficiently handle operations and dispatch of power, and can conduct system-wide planning for the power grid, Barry told the board. Work force training, a critical need, could also be accomplished more efficiently, he said.
Another critical need is to have a financially strong entity that can plan for diversification of fuel sources for power generation and build major new power plants, including coal plants, Barry said.
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