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Alaska utilities sign power pooling, joint dispatch agreement

Three Alaska electric utilities signed a power pooling and joint dispatch agreement to share their generation and transmission assets for the mutual benefit of their customers.

Chugach Electric Association Inc., Anchorage Municipal Light & Power and Matanuska Electric Association Inc. signed and filed their proposed agreement with the Regulatory Commission of Alaska on Jan. 30.

By running their most efficient generating facilities first, regardless of location or ownership, the utilities estimate that they will jointly save $12 million to $16 million per year in fuel, operations and maintenance costs, and will reduce carbon dioxide emissions by 90,000 to 120,000 tons per year, according to a press release.

In the agreement, the utilities said they will continue to work out details of their settlement through this year with the aim of obtaining the commission's approval of a final long-term agreement in 2018. The parties are not requesting commission approval of the agreement at this time.

"The agreement represents a significant first step for achieving substantial efficiencies and savings for electric customers through voluntary utility action subject to supervision by the Commission," the utilities said in the joint filing.

While a formal dispatch and settlement agreement still needs to be worked out, the utilities have been informally sharing their assets in a "loose power pool" arrangement.

"We are pleased to see our recent utility cooperation expanded into a more formalized agreement that can reduce costs for our members," Matanuska Electric Association CEO Tony Izzo said in the press release.

The utilities are three of six publicly owned electricity providers that serve the mid-Alaska "Railbelt" stretch of communities linked by the Alaska Railroad from Fairbanks to the Kenai Peninsula.

In addition to the three utilities that are participating in the agreement, Golden Valley Electric Association Inc., Homer Electric Association Inc. and the Seward City Electric System have worked with the assistance of Wisconsin-headquartered American Transmission Co. LLC, or ATC, on a transmission-only utility, or transco, business model that would include all six Railbelt utilities.

Matanuska had earlier questioned whether the benefits of such an arrangement justified the costs.

Chugach Electric Association spokeswoman Julie Hasquet said by email work continues on transco and unified system operator efforts.

"The Transco and [unified system operator] efforts are still moving forward," Hasquet said. "We anticipate continuing our work into 2017, and hope to reach a Railbelt-wide final decision before year-end."

The Chugach board of directors passed a resolution in January authorizing nonbinding agreements with ATC and other Railbelt utilities to define a business and organizational structure of a USO/Transco.

"The power pooling agreement, while related, is a separate effort," Hasquet wrote. "The other three Railbelt utilities are welcome to join the power pooling agreement. [Golden Valley, Homer Electric] and Seward are already involved with the development of power pooling."

Individually, the small utilities lack economies of scale, which contributes to the high cost of electricity in the region. Alaska in 2016 had the second-highest average retail price of electricity in the residential sector in the nation at 21.02 cents/kWh, behind Hawaii at 27.54 cents/kWh, according to the U.S. Energy Information Administration.

While the joint filing for a power pool and joint dispatch arrangement is less-encompassing than a transco model, the former was filed in the same docket the Regulatory Commission opened in 2015 to address power pooling "and/or" a centralized transmission system among the Railbelt utilities.

The power pool filing said the commission has determined that economic dispatch of the Railbelt's electrical generation units will benefit ratepayers and that the commission had decided to strongly promote the utilities' efforts.

"The parties devoted extensive time and resources to cooperatively develop an agreement that complies with the commission's directions to the utilities regarding power pooling and economic dispatch," the utilities said in their latest filing.

The agreement provides for a one-year window for the parties to develop and agree upon specific dispatch procedures for generation, transmission and fuel supply, and for a settlement process. The year will also allow the parties to complete upgrades to supervisory control and data acquisition, communications and economic modeling. Most of these upgrades are already in progress, the filing said. (Docket I-15-001)