November 11, 2013
Alaska

RCA denies wind farm complaint against Golden Valley

By Elwood Brehmer, Alaska Journal of Commerce | Published: 2013.11.07 | www.alaskajournal.com

The Regulatory Commission of Alaska has rejected an informal complaint against Interior electric utility Golden Valley Electric Association by an independent wind farm.

Alaska Environmental Power LLC owner Mike Craft said the complaint revolved around how Golden Valley decides when it will purchase power from independent producers.

The co-op utility currently uses a cost calculation that averages the cost of power produced across multiple sources, from inexpensive hydropower and coal to expensive fuel oil. Craft contends Golden Valley is shutting out independents like his Delta-area wind farm by not using an incremental cost calculation in which high-cost power sources would be replaced first.

Craft filed the complaint Aug. 22 in an attempt to bring the issue to light and get Golden Valley to change its policy, he said. A day later he filed a formal regulatory change petition, or R-docket, with the commission that would require utilities to use an incremental cost calculation.

“I’m disappointed that I’m not going to be able to move forward quicker with the project but I’m not concerned that the issues aren’t finally going to be resolved,” Craft said.

In an Oct. 17 letter to the parties, the commission wrote that Golden Valley has adequately responded to Craft’s concerns and that it has not violated any state regulations or operating tariffs.

The commission wrote that it would continue to address the R-docket, which must be ruled on by Aug. 23, 2015.

“This decision confirms that (Golden Valley) has complied with the regulations and has dealt fairly with AEP,” Golden Valley President and CEO Cory Borgeson said in a formal statement.

If allowed to expand, Craft claims his wind power could have saved Golden Valley customers approximately $12 million over the last five years.

Golden Valley has purchased all of the power AEP has produced since the wind farm came online in 2008 per state experimental power purchase regulations.

Under the agreement, Craft’s power production is capped at 2 megawatts, which he generates with two wind turbines. He has said he has funding in place to expand his operation to a 25-megawatt capacity if the cap were to be lifted and Golden Valley would agree to buy his power.

Craft has proposed selling wind power to the utility for 12.5 cents per kilowatt-hour, or kWh, an offer Golden Valley has rejected.

Over its five power generation platforms, Golden Valley’s production cost was at 10.5 cents for the third quarter, Borgeson said.

“We want more wind power, but only if it doesn’t lower our reliability or raise our members’ rates,” Borgeson said in a release.

Golden Valley operates the 25-megawatt Eva Creek wind farm near Healy, which came online in October 2012.

At peak draw the utility can be saddled with up to a 200-megawatt demand. Last year, 43 percent of its power came from fuel oil and ranged in price from 15.8 cents per kWh to 60.2 cents per kWh, according to RCA filings.

“All I’m really hoping to achieve is to get the utilities to use real numbers – be fair,” Craft said.

The same day Craft filed his complaint Cook Inlet Region Inc., owner of the Fire Island Wind project near Anchorage, filed a comment with the RCA asking the commission to decline Golden Valley’s power purchase agreement proposal. The proposal calls for quarterly rate adjustments, while CIRI has requested longer power sale terms to give independent producers a “certainty of revenue” to repay investment debt.

Another market uncertainty wind power may have to overcome is the prospect of trucked North Slope natural gas being used to produce electricity in the Interior. Golden Valley has been discussed as a possible “anchor tenant” to use gas that would make a residential and small commercial gas distribution financially viable.

“My wind farm is a hedge fund against proactive development in Alaska,” he said. “I’m betting it isn’t going to happen.”

During the R-docket public comment period, which ends Nov. 18, the Sierra Club and several Fairbanks residents have supported Craft’s position.