Sunday, December 14, 2014

GVEA Capital Budget for 2015

The board is meeting today in executive session to discuss and then (coming out of executive session) to approve the 2015 Capital Budget.     The proposed budget is documented on GVEA's site in the member book packet but is roughly $107 million, including $80 million for Healy Unit 2 restart.

GVEA projects $21 million principal payment on debt and additional loans and other financing of $94 million.

Big chunk of change.   You can read the details starting on page 18 of the member book located here.

Thursday, December 04, 2014

Rate history

I was just looking at my electric bill history and thought it might be interesting to see how rates have changed from past years.  I went back to 2010 and below are the rates.

There are two major components to consumption:  Utility charge and energy charge.  

The utility charge is everything not related to the cost of energy, such as operations, administration, legal, interest, depreciation and payment on loans, distribution and transmission costs.

Energy charge is everything that is related to the cost of energy.  It was formerly known as COPA - the cost of power adjustment and meant to allow a utility to change their rates based upon the fluctuating cost of energy (oil, gas, coal, etc.)  What is allowed to be included is set by the Regulatory Commission of Alaska.  For example, some years ago GVEA asked that the cost of ash disposal from the Healy coal fired power plant be allowed to be included in the COPA (the RCA said yes).    More recently, GVEA had asked to include the cost of building Eva Creek wind farm in COPA, as there is no energy charge from wind.   GVEA withdrew that request after realizing that the RCA wouldn't rule on it in time for it to be of financial advantage to GVEA.

Both rates are initially set after a rate study, which GVEA only does when there is a major shift in the numbers, such as inclusion of a new power plant.   Such studies cost over a million dollars so not to be done lightly.  

The utility charge is allowed to be changed in the interim every 6 months through a SRF (simplified rate filing) to the RCA, but not more than 8% in a year.    The energy charge can be changed quarterly and is subject to this complex formula.

In addition to these two charges, there is a fixed customer charge for the  cost of having a meter, regardless of whether you use electricity or not and then a very minor regulatory charge to compensate the RCA for overseeing the public interest of utilities,

If you are a large commercial or industrial customer, you will have a lower utility rate, but then also have a demand charge, based upon your peak consumption for the past 12 months.   GVEA talks about all these charges on their website.   They do have a handy bill calculator as well.  It would be interesting to have a table like below that would go back further.

So here is the last 4 years of rates by month.

Month  Utility   Energy  Subtotal
Dec-14  $  0.10341  $  0.09947  $0.20288
Nov-14  $  0.10341  $  0.10378  $0.20719
Oct-14  $  0.10341  $  0.10378  $0.20719
Sep-14  $  0.10341  $  0.10378  $0.20719
Aug-14  $  0.10341  $  0.10593  $0.20934
Jul-14  $  0.10341  $  0.10593  $0.20934
Jun-14  $  0.10341  $  0.10593  $0.20934
May-14  $  0.10001  $  0.09496  $0.19497
Apr-14  $  0.10001  $  0.09496  $0.19497
Mar-14  $  0.10001  $  0.09496  $0.19497
Feb-14  $  0.10001  $  0.09631  $0.19632
Jan-14  $  0.10001  $  0.09631  $0.19632
Dec-13  $  0.09724  $  0.09631  $0.19355
Nov-13  $  0.09724  $  0.10576  $0.20300
Oct-13  $  0.09724  $  0.10576  $0.20300
Sep-13  $  0.09724  $  0.10576  $0.20300
Aug-13  $  0.09724  $  0.08774  $0.18498
Jul-13  $  0.09724  $  0.08774  $0.18498
Jun-13  $  0.09724  $  0.08774  $0.18498
May-13  $  0.09597  $  0.11078  $0.20675
Apr-13  $  0.09597  $  0.11078  $0.20675
Mar-13  $  0.09597  $  0.11078  $0.20675
Feb-13  $  0.09597  $  0.10802  $0.20399
Jan-13  $  0.09597  $  0.10802  $0.20399
Dec-12  $  0.09004  $  0.10802  $0.19806
Nov-12  $  0.09004  $  0.13768  $0.22772
Oct-12  $  0.09004  $  0.13768  $0.22772
Sep-12  $  0.09004  $  0.13768  $0.22772
Aug-12  $  0.09004  $  0.12379  $0.21383
Jul-12  $  0.09004  $  0.12379  $0.21383
Jun-12  $  0.09004  $  0.12379  $0.21383
May-12  $  0.09004  $  0.12527  $0.21531
Apr-12  $  0.09004  $  0.12527  $0.21531
Mar-12  $  0.09004  $  0.12527  $0.21531
Feb-12  $  0.09004  $  0.12737  $0.21741
Jan-12  $  0.09004  $  0.12737  $0.21741
Dec-11  $  0.08791  $  0.12737  $0.21528
Nov-11  $  0.08791  $  0.10924  $0.19715
Oct-11  $  0.08791  $  0.10924  $0.19715
Sep-11  $  0.08791  $  0.10924  $0.19715
Aug-11  $  0.08791  $  0.10943  $0.19734
Jul-11  $  0.08791  $  0.10943  $0.19734
Jun-11  $  0.08791  $  0.10943  $0.19734
May-11  $  0.08337  $  0.10051  $0.18388
Apr-11  $  0.08337  $  0.10051  $0.18388
Mar-11  $  0.08337  $  0.10051  $0.18388
Feb-11  $  0.08337  $  0.08929  $0.17266
Jan-11  $  0.08337  $  0.08929  $0.17266
Dec-10  $  0.08337  $  0.08929  $0.17266
Nov-10  $  0.08337  $  0.09137  $0.17474
Oct-10  $  0.08337  $  0.09137  $0.17474
Sep-10  $  0.08337  $  0.09137  $0.17474
Aug-10  $  0.08337  $  0.09401  $0.17738
Jul-10  $  0.08337  $  0.09401  $0.17738
Jun-10  $  0.08337  $  0.09401  $0.17738
May-10  $  0.08337  $  0.09890  $0.18227
Apr-10  $  0.08337  $  0.09890  $0.18227
Mar-10  $  0.08337  $  0.09890  $0.18227
Feb-10  $  0.08337  $  0.09886  $0.18223

Tuesday, September 16, 2014

In the meantime ... transmission improvements

With all the moderate knashing of teeth regarding the proposed regulation of carbon dioxide by the EPA (WAY past time, in my view) and giving the responsibility for reduction to the states to work out, this recent article in the Alaska Journal of Commerce caught my eye.   Maybe what the State of Alaska will kick in more money for upgrading tie lines and then require GVEA to mothball a coal fired power plant?   Or maybe, not mentioned in the article, Aurora Energy would convert to natural gas?  That would go a long way toward cleaning up downtown and still serve the core areas with district heat, but would certainly change the dynamic especially as far as steam goes.

Readers may recall reading about the various $900 million in recommended transmission improvements in a report from the Alaska Energy Authority.  It didn't include proposed trucked natural gas in its projections, but is still draft.

And with all the spare capacity in the railbelt, there doesn't appear to be any crying need for Susitna.

So many moving parts.


Monday, September 15, 2014

Notification system progress

I had a meeting with Mike Wright and Lynn Thompson at GVEA today to discuss (at long last) price signaling and member notification. Mike laid out a case where GVEA's fuel balance, especially once Healy 2 comes on line, doesn't really demonstrate a need to balance peaks most of the time. Demand varies from roughly 120 mw in the summer to 210 mw in the winter.

Our supply is: Baseload resources

  • Healy 1 - coal - 25mw capacity - .065/kwh
  • Healy 2 - coal - 50 mw capacity - price TBD once operational in 2015 or 2016 but likely about .105
  • Aurora - coal - 23 mw on a 25 year remaining take-or-pay contract, ending 2031 - about $.06/kwh

    Load following (i.e. flexible on/off and capacity adjusting)
  • South Central economy natural gas - up to 78 mw - $.095-$.115 - across the Northern Intertie
  • North Pole expansion plant (LM6000) - oil (new contract with Petro Star), 65 mw capacity - $.26 kwh, but only .16 kwh in co-generation mode
  • North Pole 1 and 2 - oil - Qty 2 60 mw - $.25/mwh - no cogeneration and older so more expensive
  • Zender 1 and 2 - oil - Qty 2 x 18 mw - $.30/mwh
  • John Brown formerly Chena 6 - $.60/mwh - located in Delta, only used in emergencies

    Renewable sources
  • Bradley Lake, hydro, 24 mw capacity, $.05/kwh - cycled base upon need
  • Eva Creek - wind - 24 mw capacity, $.00 (no cost)/kwh, sometimes can't use as other baseload resources already covering.


  • The look above, once we have Healy 2 on line, is that except in the deep winter, we won't be taking much natural gas from Anchorage as it runs about the same price as Healy 2 is expected to.
    All this being said, there are other reasons to have a notification system.

    One of the challenges and opportunities is that GVEA's contact info on members is way out of date, especially as far as cell phones and email. This would be an opportunity to get updated. Perhaps this could be a MAC job?

    GVEA might consider an inexpensive notification system such as FNSB Air Quality Dept is now rolling out (3rd party alertmedia.com , a Nixle like service) with an in-house Google form to sign up. Notifications could be for a variety of reasons: outages, price signaling, board and annual membership meetings, RCA hearings, etc.

    I was told that GVEA is anticipating spending $300,000 in a future budget to upgrade their outage notification system with lots of bells and whistles. Maybe this is way too much? As it is now, it appears that Facebook offers more information about outages in progress than any other form of communication.

    So we will see where this goes.

    Thursday, June 12, 2014

    Ballot counting #4 - incumbents retain their seats

    It appears that the incumbents retained their seats. Still pending all the final numbers, but what I have are the winners with at least 40% of the vote. District 1 - Aren Gunderson - 471 votes District 2 - Tom DeLong - 506 votes District 3 - Rick Schikora - 363 votes (this was a 3 way race) An update on ballots that weren't countable due to deficiencies - it was 363. That's a lot, but typical, I'm told. While there are clear instructions on the process, I think that there should be a revisit of the multi-step process as it seems disrespectful to discount so many ballots where people at least made the effort to vote. Here are the more complete results.

    Ballot counting #3

    All acceptable ballots have been counted and are entered into the scanner. There are over 200 ballots that weren't on the other count due to deficiencies such as no signature on the outside or wrong signature. 10 were accepted that were delivered to GVEA offices instead of the official address. One rejection was a person whose wife had signed as the person had died some months ago. It is being held in abeyance as the signature didn't indicate she was a personal representative of her deceased husband. The computer will then be spitting out results shortly.

    Ballot counting #2

    An hour plus has past now and ballots are still be counted. 874 have been counted, roughly one third. The way it works is the ballots are removed from the envelope by the MAC in blocks of 50. They are then counted to make sure there are 50, then collected as a block and given to the person who then scans them into a portable counting machine. Because each district ballot is differennt, the machine knows the difference between districts. Unlike some previous years before the election process was outsourced, there won't be any real interim results, just a final one. Note that board members John Sloan and Chris Bunch are official observers, with candidate Tom DeLong stopping by, listening to MAC member Heidi Titchenal.

    GVEA Board of Directors counting of ballots

    GVEA is counting ballots received for the board of directors for districts 1, 2, and 3 this afternoon and evening in the board room of GVEA off Illinois St. All GVEA members are welcome to observe. Members of the MAC board will be doing the counting. You can read about the folks running on the GVEA website. Here are some opening numbers: District 1 Ballots mailed out: 6027 Ballots received: 882 Percent voting: 14.6% District 2 Ballots mailed out: 6249 Ballots received: 871 Percent voting: 13.9% District 3 Ballots mailed out: 6849 Ballots received: 811 Percent voting: 11.8%

    Friday, June 06, 2014

    Proposed EPA rules to limit carbon dioxide emissions

    For decades, there has been attempts to limit carbon dioxide emissions at local, state, national and international levels. Since the intent is to reduce climate disruption that known no borders, getting agreement to take action has been challenging, to the say the least. The argument from those opposed to such reductions is that it will cost the economy by raising the price of energy. This might be true if one ignores the external costs of using fossil fuels (the primary source of CO2 in this case) and the cost of adapting to the wide range of effects to our world from climate disruption. Carbon credits have been used in Europe and elsewhere, while a carbon tax has been resisted successfully. The idea that we need to reduced our CO2 emissions isn't new and any responsible group or individual that is in the policy side of power plant production should be aware of this. Earlier this week, the U.S. Environmental Protection Agency issued a set of regulations that is up for comment. The regulations are intended to bring down the level of CO2 emissions from power plants overall and to do so on a statewide, not on just a per-power-plant basis. The proposed rules have already generated a lot of politicizing, which is unfortunate though predictable. I mean, does one really think that the intent of the EPA and Obama Administration is to 'destroy the economy'? The cost of mitigating CO2 is not well known because the concept of sequestering it is still pretty experimental. The cheapest way to reduce CO2 emissions is to not generate them. This is why the EPA proposed guidelines has a goal of reducing the carbon pollution emitted for each megawatt-hour of electricity generated and not necessarily eliminate coal fired power plants that can't reduce the CO2 output. GVEA is one of the few power companies in Alaska using coal for generation. With a 25 mw older coal plant in operation, GVEA recently committed nearly $200 mm to purchase, refurbish and install selective catalytic reduction (of nitrous oxide) equipment for Healy 2, a 1990's era experimental power plant. The loans GVEA is using are for 30 years, meaning that we owner-members will be paying debt in excess of the face value of the loan for that long. Coal plants typically cost twice as much as a natural gas fired power plant to construct, while the coal as a source of fuel is currently cheaper. This is what drives GVEA to use coal, because they can defer paying the piper and hope that they can not have to address cost of mitigating CO2. I have argued that is a false hope and believe it is irresponsible. GVEA seems to love new projects and in the 5 years since we members allowed the board to not be restricted in borrowing, GVEA has roughly doubled the amount they have committed to borrowing than the previous limit of $450 million book value. I find that scary for members who will be paying off these loans for decades in their utility charge. The utility charge is roughly half of your bill with energy charge from the cost of producing the energy the other half. However, with the demonstrated need to reduce our CO2 emissions worldwide, for the life of me, I don't see the need to take on more long term debt that we can't get out of. There is a surplus of natural gas fired electricity in Southcentral now. Matanuska Electric has overbuilt generation, Munipal Light and Power (Anchorage) has surplus, Homer now has their own generation. Chugach, which formerly sold power to these utilities, now has surplus to sell as a result. GVEA had considered an option to build a natural gas fired power plant in Southcentral, but then would want more tie line capacity to Healy. These discussions were in executive session, so we don't know all the considerations. We are limited to 78 mw across the 138kv Intertie from Southcentral that terminates in Healy. We have roughly double that between Healy and Fairbanks. The Intertie can be upgraded relatively easily as the towers and insulators and some equipment is already designed for double that voltage. The point here is that a more efficient transmission network could allow us to take advantage of cleaner power throughout the Railbelt. The Alaska Energy Authority has a Railbelt Transmisson Plan that details where constraints and improvement might help us further the goal of cleaner and more efficient energy. Caveat: it's a detailed study and the costs aren't insignificant. Instead of a knee-jerk objection to the EPA, we might instead work toward our long term best interest of economic and cleanly generated electricity.

    Saturday, May 10, 2014

    Board meeting upcoming Mon. May 12

    Early this month, the next GVEA Board meeting will be held May 12, 2014. The member book has just been uploaded today and has some interesting items up for discussion and approval.

  • A proposed review of Healy 1 coal fired power plant operations and GVEA organizational structure and strategy for $130,000 plus travel and per diem for a consultant.
  • An investment policy for the funds put aside in a 'sinking fund' to pay back the balloon payment for the N.P. expansion plant construction bullet loan from some years ago. GVEA only pays interest at present, but is putting aside funds annually to be adequate to pay back the principal when due.
  • Finally, there was one late addition - a resolution to approve a fuel purchase agreement from Petro Star that was prompted by the upcoming closure of the Flint Hills Refinery. This was reported in the Fairbanks Daily News Miner May 9, 2014.

    People around town have commented on the lack of quorum for the recent annual meeting. I don't see this on the agenda, but perhaps it will be discussed under board member comments.

  • Thursday, May 01, 2014

    Annual meeting lightly attended, thus no quorum

    GVEA's annual meeting at the Carlson Center only had 395 members registered, less than the required quorum of 650, so it became an informational meeting with approval of 2013 minutes held over until the 2015 annual meeting. It was reported in the Fairbanks Daily News Miner

    It seems to many that the elimination of the registration bonus $15 in 2013 was the most likely culprit. It was also an attempt to save money on the production of the meeting, costing about $18,000 last year. GVEA wisely announced this in advance to avoid unhappy people in the line and it would appear that their marketing effort was successful in a perverse way. Even with reduced number of cookies and no fruit-vegetable platters, there were trays full of cookies left over. Here's board Chairman Bill Nordmark at the leftover table following the meeting.

    If reduced attendance is expected to continue, it might be considered to have it in a smaller and more affordable venue next year. The meeting used to be held at Hering Auditorium.

    In a positive vein, the reduced attendance meant that the odds of winning the 9 drawings for $250, $500, and $1,000 were up. Two next-door-neighbors on Chena Hot Springs Road each won one.

    The meeting was not video'd this year as in the past few years, but meeting audio and the Powerpoint presentation was promised to be on line soon.

    A final thought is that it is important for members to be involved in their co-op, thus show up. Member feedback in the past couple years was to do away with the frills of the annual meeting production and concentrate on business. I think this goal was accomplished. That being said, it appears that carrots are still needed to garner a quorum.

    Monday, April 28, 2014

    GVEA commits to $143 million for Healy 2 restart and updates to Healy 1

    With a 6-1 vote, the GVEA board approved a contract to Black and Veatch in the amount of $92.75 million to provide environmental controls to both of GVEA's coal fired power plants in Healy.   In addition, they also approved $50,372,131 for making Healy 2 functional.   It has been mothballed since 1997.

    With investments of over $320 million prior to this, I believe this might be the most expensive coal fired power plant for the 50 mw it is intended to produce. Here is No comments:

    Sunday, April 27, 2014

    Alaska Energy Authority Railbelt Transmission Study March 2014

    Available in draft form dated March 17, 2014, the Alaska Energy Authority has released the Pre/Post - Watana Transmission Study.   Whether or not Susitna gets funded, the pre- aspect of the report is helpful to understand the current status of the Railbelt utilities and what should be done to address the current status. It is quite detailed.   In some respects, this study is an update of the 2009-2010 study mentioned in my last blog.    It offers projects for $900 million with $2.7 billion in benefits.   This is of course much more debt than utilities can take on themselves, so substantive state funding would be requested, some of which included perhaps in the construction cost of Susitna-Watana if we get that far.

    The summary of the report says:
     

    The recommended transmission system improves reliability, mitigates future cost increases to Railbelt rate payers, allows unconstrained energy transfers and the use of peaking capacity from the Bradley Lake hydroelectric project, provides improved and increased energy transfers between all areas of the Railbelt, and facilitates the addition of the Watana large hydro project. 
     
    The benefit of the projects as a whole results in a net present value savings of over $2,678,425,000 over the 50-year life of the projects in power production simulations when compared to projected 2015 operating conditions.The economic benefit of improved reliability as measured by unserved energy, capacity deferral of individual utilities, reservoir optimization of the Bradley and Cooper Lake hydro plants, the use of excess energy during high water years,construction savings during the required rebuild of existing facilities and the amount of capacity deferral saving further increase the benefit of the projects by an estimated $30-40,000,000 per year although these additional savings were not evaluated in detail.
     
    The benefit of the improvements with increased energy from Bradley’s Battle Creek project or the ability to contract for increased base load gas supplies are not considered in the analysis. With a total construction cost of $903,200,000, this results in a simplified benefit/cost ratio of 3.4 utilizing only the production cost savings, which is an extremely high ratio for electrical transmission projects. The inclusion of additional benefits would push this number even higher. There are few projects that can be evaluated individually, since the benefits to the Railbelt consumers are derived from a combination of individual projects; however the projects can be evaluated by how they improve reliability and economics for the Anchorage–Kenai area, Southcentral Alaska and the Anchorage to Fairbanks (Northern) connection. These system improvements must be constructed and operational prior to commercial operation of the Watana Hydro Project or any other large energy project in
    the Railbelt. Although all of these projects are also required to support a large energy project, improvements that are specifically required to support a large hydro project or any other large energy project are addressed in a follow-up study to this report.

    GVEA Board discusses generation and transmission strategies

    The GVEA board held a special meeting on April 23, 2014 to discuss generation and transmission issues and short, medium, and long term strategic goals.   Mike Wright, VP responsible for these, gave a presentation about GVEA's current situation and how it got there.  Some of the information was extracted from a 2009-2010 Regional Integrated Resource Plan  performed by contractor Black and Veatch for the Alaska Energy Authority.  

    It was originally scheduled as an executive session except for member comments at the beginning.  However, when I showed up as a member to make a comment at the beginning, the board chair kindly opened the meeting for the educational session, closing it a few hours later when it came time for the board to discuss what to do moving into the future with a new Integrated Resource Plan for GVEA, proposed to be contracted to Black and Veatch.    The latter is scheduled to come up at the executive session for the regular board meeting on April 28, 2014.   The Integrated Resource Study typically precedes a Rate Study that will be required once Healy 2 in on line for a year or so.  That will be a subject of other blogs in the future.

    High points were:
    • Anticipated growth (flat*).
    • Age and condition of current generation facilities.
    • Age and condition of current transmission facilities, including substations
    • Challenges in dispatch and balancing generation with demand, optimizing efficiencies with cost of various sources of power (I have great respect for dispatchers).
    • Some discussion about what Ft. Knox and Pogo's commitments were and likely future.  In the mix: Flint Hills substantially reduced, Ft. Knox reduced, Pogo expanded, Clear AFB added.
    • Other large customers and generation folks in the Fairbanks area:   Pump 9 in Delta, Ft. Wainwright, Eielson.
    • Other generation and transmission in the Railbelt
      • Homer Electric (HEA) now on its own generation instead of buying from Chugach.
      • Matanuska Electric (MEA) now on its own generation instead of buying from Chugach, and with surplus power available for sale to other utilities.
      • Anchorage Munipal Light and Power new generation.
      • Opportunities and limitations for GVEA buying natural gas generated electricity from Chugach and in the future from MEA across the intertie.
      • Challenges in the Kenai with transmission costs for getting electricity from Bradley Lake.
    Looking forward, I would imagine the GVEA board, in executive session, discussed what generation they might look to retire.  For example, GVEA committed to either installing $35 million emissions reduction equipment (SCR) on Healy 1 by 2022 or shutting it down by 2024. 

    Some of my observations:
    • GVEA has the most diverse fuel-mix generation facilities of any utility in the Railbelt - coal, oil, natural gas from Southcentral, wind, and future trucked natural gas by 2015-16.
    • We will have way more generation available to us than needed - out peak load in 2013 was 211 mw with about double that inf capacity. 
    • We are still paying on quite a bit of this generation facilities - principal, interest and depreciation.
    • GVEA still has more debt to be taken on with the restart of Healy 2 - over $190 million that has not impacted our utility charges yet.
    • * growth is expected to be flat  (except if large projects come on line, such as Tower Hill Gold Mine in Livengood  for to 100 mw).   GVEA expanded their territory to include up to Livengood in 2013, but I hope that any generation needed is built on-site as, for this large load, it doesn't make sense to incur line loss.  Actually, I hope that Tower Hill builds their own generation.  Tom Irwin, former GVEA VP, is the local guy in charge of Tower Hill development so he should be aware of the impacts.
    • There is a long term objective to see if utilities can pool their interconnecting transmission facilities to provide for a more efficient system for all.    A couple of attempts have already been made without bearing fruit.   See the Regional Integrated Resource Plan mentioned above.   Also, reference the tariff arguments now in progress before the RCA between HEA and other utilities with HEA now generating their own.
    There are more details, of course.   One thing that always impressed me with this business is how many moving parts there are to provide electricity to consumers.  It's more than just electrons!