RCA Suspends GVEA’s Proposed Tariff for Delta Junction Wind Farm
(Ed. note—An update was added to the end of this article in Feburary 2024 to reflect new developments)
By Brian Kassof
On June 16 the Regulatory Commission of Alaska (RCA) announced it was suspending Golden Valley Electric Association’s (GVEA) tariff for a proposed 38.6-megawatt Delta Junction wind farm, in order to collect more information. The suspension means that the RCA will now conduct an investigation into specific aspects of the tariff, to determine whether it is fair and conforms to RCA standards. The decision followed the submission of two comments critical of the tariff, one by the wind farm’s backers, Massachusetts-based Ameresco, and another by Joel Groves on behalf of the Alaska Independent Power Producers Association (AIPPA).
Amersco and Groves raise a number of issues in their comments. Both give particular attention to GVEA’s claim that it was unable to calculate (and thus did not include) the potential value of a Battery Energy Storage System (BESS) included in the proposal. They also argue that some of the assumptions and methods used by GVEA to calculate how much it should pay for the wind farm’s power did not conform with federal regulations. And Groves questions why GVEA says that the wind farm could not easily be integrated into its system at the same time the utility is applying for funds from the Alaska Energy Authority (AEA) to study potential sites for even bigger wind generation projects.
As discussed in a previous AETP article, GVEA is legally required to file a tariff (essentially a contract) stating how much it would pay for power from the proposed wind farm, which is incorporated under the name Delta Junction Renewable Resources (DJRR). The tariff, filed in early May with the RCA, indicated that GVEA would actually require DJRR to pay it to accept its power in its first two years of operation, and would pay a relatively low rate for power in subsequent years.
In its order the RCA said it needs to evaluate the potential value of the wind farm’s BESS. The RCA also stated that it needs to verify if certain aspects of the tariff conform with its regulations. A GVEA spokesperson said that the utility is committed to cooperating with the investigation and will respond to questions and discovery requests in the appropriate manner. A preliminary hearing is scheduled for July 6. Parties interested in being recognized as intervenors in the case should petition the RCA by July 5. A final RCA decision is expected by January 2023.
Disputed Assumptions:
In comments filed with the RCA on June 1, Ameresco suggests that the tariff fails to meet the legal requirements of the 1978 federal Public Utilities Regulatory Policy Act (PURPA). Under PURPA a utility must offer to buy power from certain types of renewable generation plants (known as “Qualifying Facilities”). The rate they pay for this power is determined by a method called “cost avoidance” that requires a utility to estimate how much it would pay to buy or generate an equivalent amount of power from other sources.
Ameresco contends that GVEA’s cost-avoidance calculations are wrong for two reasons. First, they claim that GVEA failed to consider the potential value created by the project’s BESS. The second flaw with GVEA’s cost-avoidance figures, according to Ameresco, relates to the inclusion of “cost integration” in its calculations. Cost integration refers to expenses incurred in integrating variable power sources, such as wind farms, into a power system. Since wind power is intermittent, GVEA argues in the tariff that it would have to run a diesel generation plant continually to compensate for the variability of wind power (the practice of compensating for variable power production is known as “regulation”).
In its tariff GVEA claims that the only facilities available to provide regulation for the DJRR project are more expensive generation plants that usually only are operated at peak demand or during maintenance at other facilities. The tariff includes the expense of operating one of these plants as part of the cost-avoidance calculations, something that Ameresco believes is not allowed under PURPA. Ameresco further argues in its comment that GVEA has failed to account for the potential role of DJRR’s BESS in providing regulation. Ameresco also questions several additional aspects of the tariff, including GVEA’s method of estimating future fuel costs.
Accusations of Inconsistency:
Comments filed by Joel Groves of AIPPA echo some of Ameresco’s complaints about the tariff and adds several more. Groves claims that GVEA’s cost avoidance calculations are “fatally flawed” due to errors and omissions in its data and problems with its methodology. He cites the failure to consider the value of the BESS (particularly for purposes of regulation) and the claims of high integration costs as major issues. He expresses concern that, if the tariff were approved using these assumptions and methodologies, it would set a negative precedent in Alaska for future agreements between independent power producers and utilities.
One potentially important claim by Groves is his assertion that it is unfair for GVEA to assign regulation functions for its own Eva Creek Wind Farm to lower-cost generation plants, and then say that regulation for DJRR’s project would be provided by a more expensive facility. Groves argues that the integration costs for the different wind farms should be averaged, not assigned to specific generation facilities as they are in the tariff. If the RCA were to accept this argument, it could have major implications for future independent wind and solar power generation projects in Alaska.
Beyond the specifics of the tariff, Groves also urges the RCA to investigate what he suggests may be duplicitous business practices by GVEA. He says that claims made in the tariff about the challenges of integrating a large-scale wind farm into GVEA’s system cannot be reconciled with statements that GVEA has made elsewhere. Groves points to a grant application filed in January 2022 by GVEA for funds to conduct studies for potential wind farms in the Interior. The application, made to AEA’s Renewable Energy Fund, sought funding to assess the potential of five sites for future large-scale (60-100 megawatt) projects; two of these sites are in the Delta Junction area. AEA recommended partial funding for the grant (enough money for three sites, not five). AEA’s recommendations were included in the budget approved by the Legislature, which is currently awaiting Governor Dunleavy’s signature. According to Groves, GVEA’s praise of the potential of wind power in the future and its current attitude toward the DJRR project are inconsistent, and he urges the RCA to look into this issue. In addition to calling for the tariff’s suspension, Groves also suggests that a new cost-avoidance study should be carried out by an independent consultant.
Growing Interest in Wind Power:
The DJRR proposal and GVEA’s request for a grant to study possible sites for wind farms are indicative of a renewed interest in wind power in the Railbelt this year. Several wind projects started operation in the Railbelt between 2008 and 2012 (Alaska Environmental Power’s 2-megawatt wind farm in Delta Junction in 2008, GVEA’s 24.6-megawatt Eva Creek Wind Farm in 2012, and the 17.6-megawatt installation on Fire Island near Anchorage, owned by Cook Inlet Region, Inc., also in 2012). But there have been no significant wind farms opened in the Railbelt since then. Planned expansions of the Fire Island wind farm have been put on hold and several proposed wind farms in Delta Junction have not gotten off the ground (in part because GVEA has proposed tariffs, accepted by the RCA, which would pay little or nothing for their power).
But, in addition to the DJRR project and GVEA’s grant application, there have been a number of other recent discussions/proposals of new wind projects in the Railbelt. A report by the National Research Energy Laboratory, issued in conjunction with the Renewable Portfolio Standards proposed by Governor Dunleavy in February 2022, included several scenarios that saw wind power providing a significant portion of Railbelt electric needs (over 45 percent) by 2040. Railbelt utilities are also contemplating commissioning a joint wind-prospecting survey, to identify potential sites for future wind farms. And, as recently reported by the Alaska Beacon, a Fairbanks-based company, Alaska Renewables LLC, has applied to lease state-owned land near Little Susitna Mountain for a potential wind farm.
The Investigation Process:
The RCA’s current suspension of the tariff is slated to last until December 16, 2022. By that date the RCA will have to approve the tariff, reject it, or extend the length of its investigation. By RCA rules, a final decision must be made no later than January 27, 2023. The initial pre-hearing conference for the case will be heard on July 6, 2022. DJRR, GVEA, and the Alaska Attorney General’s Office are currently recognized parties in the case (the Attorney General’s Office was invited to represent the public interest—this is a common practice for RCA investigations). Other interested parties have until July 5 to petition the RCA to be granted intervenor status in the case. The RCA Docket number for the investigation is U-22-029 (the tariff, which is now closed, was TA-353-13).
Update (added February 16, 2024):
In January 2023 DJRR and GVEA reached a stipulation agreement that ended the RCA investigation into the tariff (RCA case U-22-090). The agreement was reached after months of discovery and testimony and just weeks before the final hearings on the case were to begin. As a result of the stipulation agreement (which also involved the Alaska Attorney General’s office and Homer Electric Association, both of which had been granted intervenor status in the case) DJRR withdrew its interconnection request, allowing GVEA to withdraw the proposed tariff.
DJRR’s decision to withdraw its request (and end the RCA investigation) may have been connected to the fact that in January 2023 GVEA was preparing to issue a new Request for Proposals (RFP) for wind generation projects. The RFP, for projects between 40 and 120 megawatts, was issued in May 2023 and closed in August of that year. While neither GVEA nor Ameresco have disclosed whether the latter submitted a proposal, reliable sources have informed AETP that Ameresco did submit a proposal for a project of roughly the same size it proposed in 2022. At GVEA’s January 2024 Board meeting, a number of renewable energy advocates urged the Board to sign a power purchase agreement with Ameresco for a Delta Junction wind project.
