Legislature(2013 - 2014)BARNES 124
02/01/2013 08:00 AM House ENERGY
| Audio | Topic |
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| Start | |
| Overview (s): Interior Electric Supply | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ENERGY
February 1, 2013
8:04 a.m.
MEMBERS PRESENT
Representative Doug Isaacson, Co-Chair
Representative Charisse Millett, Co-Chair
Representative Neal Foster
Representative Pete Higgins
Representative Shelley Hughes
Representative Benjamin Nageak
Representative Andrew Josephson
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
OVERVIEW (S): INTERIOR ELECTRIC SUPPLY
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
CORY BORGESON, President & CEO
Golden Valley Electric Association (GVEA)
Fairbanks, Alaska
POSITION STATEMENT: Provided a PowerPoint presentation
entitled, "Interior Energy Issues," dated 2/1/13.
DAVE GARDNER, Vice President
External Affairs and Membership Services
Golden Valley Electric Association (GVEA)
Fairbanks, Alaska
POSITION STATEMENT: Answered questions during the presentation
by Golden Valley Electric Association.
ACTION NARRATIVE
8:04:33 AM
CO-CHAIR DOUG ISAACSON called the House Special Committee on
Energy meeting to order at 8:04 a.m. Representatives Millett,
Foster, Higgins, Hughes, Josephson, Nageak, and Isaacson were
present at the call to order.
^OVERVIEW (S): INTERIOR ELECTRIC SUPPLY
OVERVIEW (S): INTERIOR ELECTRIC SUPPLY
8:05:27 AM
CO-CHAIR ISAACSON announced that the only order of business
would be a presentation on the current Interior electric supply
by Golden Valley Electric Association (GVEA).
8:05:38 AM
CORY BORGESON, President & CEO, GVEA, informed the committee
GVEA serves the electrical needs of the Interior. The
association has 34,480 members in its service territory - which
covers from the Cantwell area to Clear, Nenana, and Fairbanks,
and down to Delta Junction - and supplies about 44,000 meters.
All of the cooperatives in the Railbelt combined serve about
250,000 members. The association has developed a very good
reliability standard in spite of harsh climate conditions. Peak
demands are about 220 megawatts (MW) and occur during periods of
extreme weather conditions. Generation capacity is about 290 MW
and GVEA generates power from a variety of sources.
8:09:00 AM
CO-CHAIR ISAACSON asked for the frequency and longevity of peak
demands.
MR. BORGESON answered that in the summer the general load is
about 150 MW, and most of the peak loads are in winter from
October through the end of March. The Interior needs a lot of
energy in the winter months for space heaters, engine block
heaters, and lights, but in summer generators often sit idle so
summer is a good time for maintenance. He explained that GVEA
is an electric cooperative owned by its members and does not
make a profit; in fact, after a period of time margins are
returned to the members. This year, about $2.5 million in
capital credits collected from 1987 was returned to members.
Financing arrangements require GVEA to collect monies in excess
of its costs to ensure it can pay all of its debt. Debt at this
time is about $380 million which is necessary to support GVEA's
generation and distribution system, and holds about 22 percent
equity. Slide 2 illustrated the percentages of GVEA's fuel
supply that is generated by hydroelectric, coal, natural gas,
oil, and wind sources. The association buys as much power as
possible from Anchorage Municipal Light & Power (ML&P) and
Chugach Electric Association, Inc. (Chugach Electric). In 2011,
31 percent of GVEA's power came from the Anchorage utilities
over the electrical interties, but in 2012 the supply of natural
gas was curtailed because there was not enough gas to allow the
Anchorage utilities to sell power to GVEA. The association also
produces electricity from coal and is anticipating new
production from the Healy Clean Coal Plant (HCCP) beginning in
2015.
8:13:33 AM
REPRESENTATIVE HIGGINS asked for the reason behind the delay in
opening HCCP.
MR. BORGESON responded the permitting caused some delay,
although the consent decree for the air permits has now been
signed. In addition, financing through the Rural Utilities
Service (RUS), U.S. Department of Agriculture (USDA), requires a
National Environmental Policy Act (NEPA) review which is
expected to be completed by July 2013, and start-up will take 18
months after that. He returned attention to slide 2, noting
that GVEA has diverse sources of power which allow the utility
leverage with its suppliers, and gas from Cook Inlet increases
leverage. The association is important to industries such as the
Usibelli Coal Mine and Flint Hills Resources' North Pole
Refinery. Slide 3 listed Alaska residential electric rates as
follows: Fairbanks (GVEA), 20 cents; Minto (Alaska Village
Electric), 22 cents with Power Cost Equalization (PCE) and 61
cents without PCE; Glennallen (Copper Valley Electric), 33
cents; Homer (Homer Electric Assn.), 16 cents; Anchorage
(Chugach Electric), 13 cents.
8:16:39 AM
CO-CHAIR ISAACSON asked what has lowered Fairbanks' rate from
its previous rate of 23 cents per kilowatt hour (kWh).
MR. BORGESON said in November GVEA entered into a purchase power
contract with Chugach Electric until March, 2015. This meant
GVEA can rely less on diesel and drop the rates almost 3 cents
per kWh.
CO-CHAIR ISAACSON surmised there will be an increase in natural
gas [from Chugach Electric] for 2013.
MR. BORGESON said correct, the gas from Chugach Electric will be
a two-year "bridge" to the start-up of HCCP.
8:18:47 AM
REPRESENTATIVE HUGHES asked how power from HCCP will affect the
rates.
MR. BORGESON estimated the cost of power from HCCP will range
from 12 cents to 14 cents per kWh due to a significant drop in
the cost of production. In addition, coal production is steady,
and GVEA can potentially get a 5- to 10-year contract with HCCP.
In further response to Representative Hughes, he clarified that
the overall cost of power will stay in the 20 cents per kWh
range, which will be comparable to future Anchorage rates.
8:20:57 AM
REPRESENTATIVE HIGGINS asked whether a fuel surcharge is
included.
MR. BORGESON said yes. In further response to Representative
Higgins, he relayed on December 1, 2012, the rate dropped from
23 cents to 20 cents, which was an overall 11 percent reduction
in the cost to members, and is based on the projected gas-fired
generation from the Anchorage contract. The energy crisis in
the Interior is driven mostly by the cost of space heating.
Slide 4 showed in June 2012, the cost of oil in Fairbanks was $4
per gallon, and the cost of space heating in Anchorage was about
one-third of the cost in the Interior. He shared a personal
story of the cost of oil needed to heat his home. For example,
a 3,000 square foot home is estimated to cost $6,000 per year to
heat if the cost of fuel oil is $4 per gallon, and the cost of
electricity is in addition to that. Similar to the situation in
the villages, the cost of energy is causing people to leave the
Interior. Mr. Borgeson further estimated that typical
residential electrical use is 700 kWh and results in a bill of
about $150 per month per household. This is affordable for
most, but high electrical costs also raise the cost of goods and
services such as restaurants. The recent drop in rates will
save GVEA customers $34 million, which will have a positive
"cascade" effect; in fact, a community's high electric costs can
drive even a large and successful industry out of the community.
He encouraged the committee to consider the significant impact
the cost of energy can have on growth and development.
8:27:54 AM
REPRESENTATIVE JOSEPHSON recalled his time in rural Alaska where
diesel oil was used for space heating. He observed diesel
heating oil is also used in Fairbanks and asked for the cost to
retrofit Fairbanks to receive natural gas - if a gas pipeline
were built - and what GVEA's role would be.
MR. BORGESON referred to a study by the Fairbanks North Star
Borough and [Northern Economics] that estimated the cost of
putting in a gas distribution system throughout the borough area
would be $400 million to $600 million, although some disagree
with the study. About 1,000 customers in Fairbanks already have
natural gas from a small natural gas distribution system. He
advised the role of GVEA is to bring natural gas to Fairbanks,
and a borough utility has been formed to provide the natural gas
distribution system.
REPRESENTATIVE JOSEPHSON questioned whether the cost of that
investment would equal the cost of continuing to use fuel oil in
a more efficient fashion.
8:30:44 AM
MR. BORGESON opined the distribution of fuel oil at this time is
about as efficient as it can be. He directed attention to
slide 7, which showed the Bradley Lake Hydroelectric project
(Bradley Lake Hydro). The association has an interest in the
Bradley Lake Hydro plant which is capable of producing 20 MW,
although constraints of the intertie restrict transmission to 15
MW of power. The facility is maintained by Homer Electric
Association, Inc. (HEA), and provides power to GVEA at about 6
cents per kWh. Line losses are associated with transmission
over the intertie, but the facility is a very good source of
energy for the Interior. Mr. Borgeson advised that there is a
project underway that would divert Battle Creek and increase the
flow into Bradley Lake. Bradley Lake Hydro is owned by the
Alaska Energy Authority (AEA), and was completed in the early
1990s through a 50 percent grant from the legislature and 50
percent financing by the utilities. Slide 8 showed two coal
plants in Healy. The 28 MW Healy Power Plant (Unit 1) was built
in 1967, the fuel costs are about 6 cents per kWh, and it is a
very reliable and well-maintained plant. Also pictured was the
Healy Clean Coal Plant (HCCP), which is a 50 MW plant that
should be running in 2015. The two plants are connected in
order for both to be run from one control center. The Alaska
Industrial Development and Export Authority (AIDEA) owns HCCP,
and GVEA has an agreement to purchase the plant from AIDEA.
Slide 9 showed the Eva Creek Wind Project which was built with
approximately $13 million from a state grant. The towers became
operational in November 2012, and the 12 turbines generate a
maximum of about [24] MW of power. During its operation in
2012, the turbines operated at a 53 percent capacity factor -
which is a phenomenal capacity for wind - and GVEA anticipated
this high generation in winter. Mr. Borgeson expressed GVEA's
pride in the project, saying it was built within its budget and
on time. The construction site on Eva Creek is located close to
HCCP, but all of the workers and materials needed to cross the
Nenana River for access. The turbine blades were delivered on
the Alaska Railroad (ARR) and were constructed in Arkansas of
balsa wood and fiberglass. The plant was constructed by an
Alaskan crew of 205 workers, and other major components were
fabricated in Korea and Germany.
A video on the construction of the Eva Creek Wind Project was
viewed from 8:35 a.m. to 8:37 a.m.
8:37:59 AM
CO-CHAIR ISAACSON asked how many generators are currently
producing.
MR. BORGESON responded all 12 have been commissioned and have
been working. In further response, to Co-Chair Isaacson, he
said each tower produces 2.2 MW; the total output anticipated is
78,000 MW hours per year.
8:38:43 AM
DAVE GARDNER, Vice President, External Affairs and Membership
Services, GVEA, said the formula used to calculate output is as
follows: 25 MW x 30 days x 24 hours x 56 percent capacity
factor.
REPRESENTATIVE ISAACSON asked whether the performance has met
the projections.
MR. BORGESON said the project is performing better than GVEA
anticipated.
CO-CHAIR ISAACSON asked whether wind generation will reduce the
use of heavy atmospheric gas oil (HAGO) plants.
MR. BORGESON stated there was a reduction of over one million
gallons of HAGO and naphtha in 2012; in fact, most of the
generation from the wind project will be used in conjunction
with the North Pole Expansion Power Plant (expansion plant)
which is operated on naphtha. In further response to Co-Chair
Isaacson, he said the GVEA wind project is much bigger than the
[Pillar Mountain Wind Farm] in Kodiak and will reduce GVEA's oil
needs "significantly."
8:40:44 AM
MR. BORGESON restated that the wind generator came online at the
very end of October and saved one million gallons [of oil]
during two months. He explained that wind generation coming
into a system requires that the system is prepared for the wind
to stop. The dispatch center monitors the power that is being
generated at any time and other sources of power must be
standing by. For GVEA, the cheapest supplemental power would
come from the expansion plant, thus there is a limit as to how
much of the total power can come from wind, because it has to be
"backed up." Slide 10 showed the Zehnder Power Plant located in
downtown Fairbanks which has two General Electric (GE) turbines
of 20 MW each. This is an older plant which generates very
expensive power at 53 cents per kWh. It also creates
environmental issues, and is only run for small amounts of
power; however, the Zehnder plant has the capacity to start if
the system is completely "blacked out." Slide 11 showed the
North Pole Power Plant which was built in the early 1970s and
has two 60 MW GE turbines. This plant supplies power to GVEA
when power is not available from the Anchorage utilities. The
turbines are very reliable, but are not the most efficient.
Also in North Pole is the 60 MW expansion plant which was built
in 2005 and is basically a jet engine that burns naphtha - a
lighter fuel that is better for the environment. The expansion
plant is the base load plant; it runs all of the time and is
used to back up wind generation. Returning to wind power, he
said GVEA expects wind generation to cost 12 cents per kWh and
federal energy bonds keep the financing costs of wind projects
low. Slide 13 showed the Delta Power Plant which was relocated
to Delta Junction in 2005. It is very expensive to run - $1 per
kWh - and is tested for reliability twice a year in case it is
needed.
8:47:45 AM
MR. BORGESON advised that GVEA also purchases power from the 25
MW Aurora Energy coal plant located on the Chena River. The
Aurora plant is very reliable and has benefited from many
upgrades.
CO-CHAIR ISAACSON asked whether power is available for purchase
from U.S. Army Post Fort Wainwright (Fort Wainwright), Eielson
Air Force Base (AFB), or Clear Air Force Station.
MR. BORGESON said the system is not designed to purchase power
from Fort Wainwright or Eielson AFB; however, there is a
wheeling tariff that allows for sharing of electrical lines, and
GVEA is buying some power from Fort Wainwright at this time.
MR. GARDNER clarified that the plants at Fort Wainwright and
Eielson AFB are heat-generating plants and electricity is a
byproduct. On a cold winter day they may have some excess
power, and should their power fail GVEA could send them power,
but not heat.
CO-CHAIR ISAACSON relayed that the leadership at Eielson AFB has
recently expressed frustration that they must purchase
electricity "but are only able to sell it back at a higher
amount, so it isn't economic for them to do it, and they've been
frustrated because they insist that their costs could be lowered
and we could have lower utility rates at times ...." He asked
Mr. Borgeson to "renew that conversation with them ... maybe
they have more electricity capability - spin - than we're giving
them credit in this testimony."
MR. GARDNER said they would get back to the committee with
further information.
8:50:47 AM
REPRESENTATIVE HIGGINS commented that Clear Air Force Station
power plant has "been dumping extra juice in the ground for
years."
MR. BORGESON informed the committee that Clear Air Force Station
recently expressed interest in connecting to GVEA's grid. They
also solicited requests for proposals to lease, sell, or
transfer their approximately 20 MW coal plant because they only
need 4 MW of power. This is very inefficient and GVEA looked at
the possibility of taking over the plant, as did Doyon Utilities
and Aurora Energy; however, the plant was offered with no
environmental permits and experience shows that is a major
problem. Furthermore, the stability of the turbines is
questionable and there is also the question of how much power
"we could bring over the interties coming into Fairbanks."
After due consideration, there was no interest in the Clear Air
Force Station plant. In further response to Representative
Higgins, Mr. Borgeson said the Alaska Intertie was built in the
1980s and the Northern Intertie was built in the 1990s.
8:55:12 AM
REPRESENTATIVE HIGGINS understood there are problems with the
interties and asked if that is because of the technology at the
time.
MR. BORGESON opined the Northern Intertie was built to
accommodate HCCP and it has sufficient capacity for that. In
fact, when HCCP comes online there will be sufficient capacity
for power generation in the Interior, but much of it is based on
oil-fired generation. If oil were $10 per barrel, there would
be very cheap power. Furthermore, it is important to have the
capacity for generation within the system in case an intertie
fails. He returned attention to slide 16, emphasizing the
importance of power purchases, and reiterating the contract with
Chugach Electric will save members $32 million to $34 million in
2013, and possibly more in 2014, although future savings are
always relative to the price of oil.
CO-CHAIR ISAACSON asked for more information on the limits of
the intertie.
MR. BORGESON explained GVEA is limited to about 77 MW of power
transmission over the intertie. An additional constraint on the
Alaska Intertie is that it is operated at 138 kilovolt (KV)
which means "we [have] got a big power cord but in the middle
there is a smaller extension cord that just can't bring that
much power over it." The power from Bradley Lake Hydro to
Fairbanks is 15 MW to 20 MW, which limits the amount of power
that can be purchased from Chugach Electric/Matanuska Electric
Association, Inc. (MEA) to 60 MW, thus additional power must be
purchased from the south. Slide 16 showed the Aurora Energy
coal plant which dispatches power at 5.8 cents per kWh under
contract.
9:00:05 AM
A video on dispatching power was viewed from 9:00 a.m. to 9:04
a.m.
9:04:10 AM
MR. BORGESON pointed out dispatching power is an important part
of GVEA's responsibilities. In hindsight, building more coal
power plants and a bigger intertie may have been prudent, but
GVEA must use the facilities it has as efficiently as possible.
Slide 18 explained GVEA's electric bills have three components:
the fuel and purchase power charge of 10.802 cents per kWh; the
utility charge of 9.597 cents per kWh; and the customer charge
of $17.50 per month.
MR. GARDNER clarified that the major components of the customer
charge are the fixed costs of reading meters and providing
customer service that are not affected by the cost or the amount
of fuel used.
MR. BORGESON added that these charges are regulated by the
Regulatory Commission of Alaska (RCA) and utility charges are
filed for review every six months. The association seeks to
reduce the utility charge cost, but resisting reductions in
training cost ensures that GVEA follows best business practices
and maintains reliability and customer service.
REPRESENTATIVE HIGGINS asked whether the [fuel and purchased
power] cost is the cost to generate energy and the utility
charge is the cost of personnel.
MR. BORGESON clarified that the fuel and purchase power charge
is the cost of fuel, whether it is coal, fuel oil, or energy
over the intertie. The utility charge is the cost of operating
the plant, personnel, salaries, depreciation, and interest. In
further response to Representative Higgins, he said the customer
charge is applied to the cost of "being hooked to our system."
9:09:46 AM
REPRESENTATIVE HIGGINS observed these are one-time expenses.
MR. GARDNER added that the customer charge includes routine
maintenance on the line such as replacing transformers and
lines, and upgrades.
MR. BORGESON further explained that RCA looks at the rate design
and allocates the right charges. The customer charge of $17.50
is the residential charge and small businesses and large
industrial customers pay more because it is based on the concept
of "cost causer-cost payer."
CO-CHAIR MILLETT asked for the average percentage of line loss
through transmission.
MR. BORGESON estimated a 12 percent line loss, depending on the
source of the power.
9:12:38 AM
CO-CHAIR MILLETT relayed that AEA said the average loss is about
27 percent, which points out the need to upgrade transmission,
especially to accommodate sources of renewable energy such as
wind power. She then asked what GVEA has done for energy
efficiency within its commercial and residential base.
MR. BORGESON relayed that energy conservation programs are very
important to GVEA and its members. The association has spent
$300,000 to deliver energy conservation programs to its members
and available grants through AEA are used to maximize benefits.
A new campaign, "the Power to Use Less," encourages members to
be more efficient and upgrade appliances. Other programs are
"Energy$ense," "Home$ense," and "Business$ense" energy audits
which use demand-side management. He assured the committee that
GVEA does not raise rates if energy consumption goes down.
Also, GVEA has begun to track members' savings after energy
audits.
9:16:20 AM
CO-CHAIR MILLETT asked whether GVEA has recommendations to the
legislature on transmission upgrades and, if so, who should bear
the cost.
MR. BORGESON advised the Railbelt transmission lines are not
robust enough to be reliable. A study commissioned by AEA and
issued 11/12/12, known as the "Burlingame" study, estimated
upgrading the lines in order to meet the needs of the Railbelt
will cost from $800 million to $1 billion. In addition, the
current condition of the intertie constrains the amount of power
that can be transmitted from Bradley Lake Hydro. A group of the
Railbelt utilities, the Alaska Railbelt Cooperative Transmission
and Electric Company (ARCTEC) will make proposals to the
legislature on the work that is needed, however, the utilities
do not feel all of the cost can be passed on to the ratepayers.
He recalled that the state paid 50 percent of the cost of
Bradley Lake Hydro. The cost of energy will affect economic
growth in Fairbanks and Anchorage as it has been doing in the
villages for a long time, and the state must decide whether the
investment is worthy. The Railbelt utilities are now speaking
with a united voice through ARCTEC.
9:19:44 AM
CO-CHAIR MILLETT asked whether it is reasonable, or best for
consumers, to have six utilities in a small state that are each
planning different generation projects, especially if the state
is obligated to pay for the transmission power. Each of the
utilities wants support from the legislature, and she suggested
that one large cooperative utility company would better manage
generation and transmission than six independent utilities.
MR. BORGESON relayed that combining generation has been
discussed by ARCTEC, especially since AEA is now owning projects
and "acting like another utility." In fact, the number of
utilities in the Railbelt is growing. Although there are
economic models that would save money by consolidating, there
are concerns about locating all of the power generation in one
geographic area. He expressed his belief that competition will
lead to lower prices, but that the utilities should be open to
the model that best serves the Railbelt.
CO-CHAIR MILLETT observed the situation also creates conflicts
between legislative districts when utilities are requesting
upgrades or subsidies. It is important that ARCTEC address
transmission line power loss, but generation "drives the cost of
energy in the Railbelt, and if we could get to a consensus
through the utilities on a master plan for generation ... and do
what's best for the Railbelt as a whole ...." She appealed to
ARCTEC for unity.
9:25:10 AM
REPRESENTATIVE JOSEPHSON asked Mr. Borgeson to explain why a
utility would charge more when a customer uses less energy.
MR. BORGESON said the utility charge is about 10 cents per kWh
and is spread over one billion kWh. If there are less hourly
charges, but the same overhead cost, the utility charge must go
up, thus when members use less electricity GVEA must find a way
to cut fixed costs.
REPRESENTATIVE FOSTER inquired how the cost of transmission line
upgrades would affect rates to customers.
MR. BORGESON did not know. He offered to provide an estimate at
a later time.
REPRESENTATIVE FOSTER acknowledged that would be a complex
calculation.
REPRESENTATIVE NAGEAK concurred with the suggestion that the
Railbelt utilities could be combined. He recalled residents in
Barrow at one time were members of GVEA, and utilities can reach
far if they wish to do so. There are many sources of power and
super utilities could link three or four regions of the state.
9:30:29 AM
MR. BORGESON pointed out that the Alaska Village Electric
Cooperative Inc. (AVEC) is one organization that successfully
serves 53 villages. One issue to be discussed by a combined
utility is whether there would be a postage stamp cost rate.
CO-CHAIR MILLETT understood there is a new utility in Fairbanks.
MR. BORGESON advised that the Fairbanks North Star Borough
(FNSB) formed the Interior Alaska Natural Gas Utility (IANGU) to
act as a gas distribution system only. He directed attention to
slide 19, which listed some "solutions" and to slide 20, which
was a map listing the sources of generation by region as
follows: in Southeast, hydro and fuel oil; in the Bush, fuel oil
and wind; and in the Railbelt, natural gas, hydro, fuel oil,
coal, and wind. Slide 21 was an overview of the Railbelt's six
distribution utilities, and he noted that GVEA and Chugach
Electric are unique in that they generate, transmit, and
distribute power. A few cooperatives are generation and
transmission (G&T) utilities, but most electric cooperatives are
distribution cooperatives only. The Railbelt has
interconnection from Homer to Fairbanks and three primary
generating utilities at this time; however in January 2014, HEA
will begin generation and in January 2015, MEA will begin
generation. Slide 22 was a map of the Alaska Intertie which was
built in the 1980s and connected the Interior to Southcentral by
a line 177 miles long from Willow to Healy. It is owned by AEA,
and sections are operated and maintained by GVEA and MEA. In
the 1990s Bradley Lake Hydro and the Bradley transmission lines
were added, and in the 2000s the Northern Intertie from Healy
and a battery energy storage system (BESS) were added in
Fairbanks. The storage system is the size of a football field
and is capable of providing 37 MW of power for 12 minutes, which
is enough time to take a load when a unit goes down. Although
the batteries are not designed to back up wind generation,
feasibility studies are underway to do so. Today, there is a
dual line from the Healy Unit 1 power plant which provides
reliability and is also capable of carrying future generation
from HCCP to Fairbanks. Mr. Borgeson advised the Alaska
Intertie illustrated on slide 25 needs to be upgraded. The
Burlingame study estimated building a second line will cost $200
million and is necessary to carry power from the proposed
Susitna-Watana Hydroelectric Project (Susitna-Watana Hydro),
which is projected to generate 600 MW. He cautioned, "The
problem is, there is going to have to be [a] significant amount
of intertie upgrades to make Susitna work. So, it's tied to a
big hydro project like that, and it's tied to a sharing of
utilities and resources across the Railbelt - that the interties
[must] be upgraded."
9:37:44 AM
CO-CHAIR ISAACSON asked for the location of the section of the
intertie that is the limiting factor.
MR. BORGESON said there are parts of the line near Homer and
Bradley Lake that are not robust. The largest problem section
is the Alaska Intertie, but to handle growth and generation from
Susitna-Watana Hydro, sections going south need to be upgraded
as well.
CO-CHAIR ISAACSON surmised there are 70 MW to 80 MW of
transmission capacity on the Alaska Intertie, 170 MW capacity on
the line to Fairbanks, and then to Anchorage and Kenai there is
"a mixture of 200 MW capacity down to 70 MW."
MR. GARDNER explained that actually there is less than 170 MW,
but the two lines were built to accommodate power from HCCP to
Fairbanks. In further response to Co-Chair Isaacson, he said
there are sections of the line from Bradley Lake that are
"robust enough, and there are certain areas that are ... in need
of some upgrading," as referenced by the Burlingame study. He
pointed out that certain sections of the second intertie between
Healy and North Pole were built to 230 KV capacity which - with
the installation of new transformers and instrumentation - can
be increased.
9:41:21 AM
REPRESENTATIVE JOSEPHSON observed the governor has recommended
tens of millions of dollars more for the Susitna-Watana Project,
the interties are insufficient, and a natural gas distribution
system in Fairbanks will cost over $1 billion. He questioned
the wisdom of constructing a dam, when the necessary
infrastructure is so costly.
MR. BORGESON opined the complexity of the situation has meant
that utilities and legislators "don't know which way to go."
Adding to that complexity is the proposed Alaska Stand Alone
Pipeline (ASAP) which could deliver power to rural areas as
well. New technology and fuel costs make the future unknown.
He has heard that Susitna-Watana Hydro is important because it
will be a resource long into the future, whereas the cost and
availability of oil and gas from the North Slope are uncertain.
Mr. Borgeson said he is unsure, but assured the committee he and
the board at GVEA are listening, planning, and strategizing, and
are making investments as best they can.
9:45:05 AM
CO-CHAIR MILLETT recalled the legislature commissioned the
Alaska Railbelt Electrical Grid (REGA) study published in 2008
that recommended four options, none of which have been
implemented by the utilities. She asked whether legislative or
gubernatorial action is needed to find solutions and force the
utilities to agree.
MR. BORGESON observed that no other state has taken on the role
of a utility, although no other state is like Alaska. He
acknowledged that this is the time for action, decision-making,
and consensus-building.
9:47:27 AM
CO-CHAIR ISAACSON recognized that capacity restraints on the
interties affect the ability to generate low-cost fuel, and
short-term, system-wide improvements are expensive. The
legislature must set priorities and decide whether to fund
projects on a regional basis or on a statewide utility basis.
MR. BORGESON turned to one of the solutions on slide 19:
trucking natural gas to Fairbanks through the LNG process. This
proposal would benefit GVEA and would save money for space
heating costs. In fact, if the cost could be kept in the range
of $13 to $14 per million cubic feet (MMcf) of natural gas, GVEA
will save $26 million per year. Although the plan is expensive
and holds many assumptions and risks, GVEA is working on the
project and has secured a gas contract and a site in North Pole
at which to locate a regasification facility in partnership with
AIDEA. He then restated GVEA's efforts to restart HCCP by
2015: entered in a negotiated settlement with EPA regarding the
air quality permit; expects to have workers in the plant in July
or August 2013; and will build a warehouse this year. The
Alaska Industrial Development and Export Authority will sell
GVEA the plant for $50 million and will loan GVEA $45 million
for the restart. The air quality permit requires the
installation of a selective catalytic reduction (SCR) system at
a cost of $40 million, and the cost of the restart is $26
million. Improvements to Unit 1 are also required, which will
result in the best environmental technology possible, and the
costs of the improvements are still cheaper than oil-fired
generation. As an aside, Mr. Borgeson relayed that HCCP was
built with $117 million in federal funds and $130 million from
AIDEA, for a total cost approaching $300 million.
9:54:29 AM
A video on HCCP was viewed from 9:54 a.m. to 9:57 a.m.
9:58:08 AM
REPRESENTATIVE HIGGINS stated Fairbanks proper has 32,000
residents and 110,000 residents live in the surrounding area.
Within that area, there are 10 power plants, which leads to the
perception that GVEA and the other utilities do not work
together toward the common goal of reducing energy costs. He
suggested that the power plant at Clear Air Force Station should
have been connected to the electrical grid 10 years ago, and he
encouraged GVEA to work with every entity that wants to put
energy on the grid to correct this public perception.
10:00:27 AM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Energy meeting was adjourned at 10:00 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Energy Committee Agenda.pdf |
HENE 2/1/2013 8:00:00 AM |
|
| InteriorEnergyIssues_Feb1GVEA.pdf |
HENE 2/1/2013 8:00:00 AM |