Two urban Alaska utilities and the state’s consumer protection attorneys are warning about the risk of rolling blackouts amid an intensifying shortage of natural gas — the fuel used to generate the majority of the region’s electricity.
Such blackouts aren’t imminent, officials said, and likely would only develop in a cold snap or other scenarios that test urban Alaska’s grid.
But the risk appears to be rising, stemming from diminishing supplies of natural gas. That fuel, in 2022, generated nearly two-thirds of the electricity used on the Railbelt, the area of urban Alaska stretching from the Kenai Peninsula through Anchorage and north to Fairbanks and the Interior.
Three years ago, the region’s leading gas producer, Hilcorp, warned that it would not renew binding supply contracts with utilities when they expired — and now, with the first of those expiration dates arriving, the grid is starting to show signs of stress.
For the next year, the 25,000 members of Homer Electric Association, which is based on the Kenai Peninsula, will be depending on what’s known as an “interruptible” gas supply — meaning that the seller isn’t contractually obligated to provide it in the event of a shortage.
Executives at another Railbelt utility, fearful that Homer Electric may turn to them for backup power, are warning that they can only do so much to help. And they say that “rolling service interruptions” could be a reality for Homer’s customers in the future.
The other utility, Palmer-based Matanuska Electric Association, has a “dual-fuel” power plant that can run on diesel in the event of a gas shortage. Its leaders say they could use it to provide backup power, but only up to a point, in part because of air pollution restrictions.
“It is not MEA’s obligation to serve HEA’s members, but the decision to build (the plant) as a dual-fuel facility was purposeful,” Matanuska Electric’s chief executive, Tony Izzo, wrote in a Friday comment letter to regulators. “If necessary and to the extent possible, MEA intends to utilize (the plant) to ensure the lights stay on for HEA’s members.”
Meanwhile, another expiring gas supply agreement is contributing to an increased risk of outages in Alaska’s Interior. Fairbanks-based Golden Valley Electric Association last week warned its 36,000 members that a “worst-case scenario” could result in short-lived rolling blackouts.
“GVEA is not alone in this situation. The other Railbelt electric utilities are facing similar challenges with natural gas, requiring everyone to consider their resource adequacy and alternatives,” GVEA’s chief executive, Travis Million, said in the message to members. “This is about transparency and preparation, not alarm. It matters to me that members know what is happening, and importantly, what could happen.”
“The situation is not good”
The recent warnings about power interruptions underscore the increasing urgency of the Railbelt’s gas crunch.
For decades, the region’s big electric utilities — which also include Anchorage-based Chugach Electric Association — have depended largely on locally produced gas from Cook Inlet, an aging and increasingly depleted basin that lies offshore and beneath the Kenai Peninsula.
Experts say there’s still ample gas that exists in Cook Inlet. But it’s become more difficult and costly to produce for an urban Alaska market that, relative to other states, is small.
After Hilcorp’s 2022 announcement about expiring contracts, the electric utilities, along with natural gas utility Enstar, began studying the potential to import liquefied supplies of the fuel from outside Alaska to fill the expected gaps.
That work is still underway, with Enstar officials recently confirming that they’re advancing plans for a Kenai Peninsula import terminal.
But utility executives and others have acknowledged that they’re facing a tight timeline to begin construction if they want the facility to be ready by the time a bigger supply shortage arrives.
The two largest Railbelt utilities, Matanuska Electric and Chugach Electric, still have contracts with Hilcorp that run for three more years.
But when Homer Electric was looking for fuel to meet its needs for the next year, “we could not find any gas suppliers” that would sign binding contracts, said Larry Jorgensen, the utility’s chief power production officer.
“The situation is not good, and it’s not what any of us desire,” Jorgensen said in an interview. “But we are tasked with trying to do the very best we can given the situation at hand. If anybody has alternatives that are viable, then we’re willing to listen. Because right now, nobody’s offering us anything.”
Jorgensen said Homer Electric has been working aggressively to reduce its natural gas demand by installing more efficient equipment at its power plants, and by developing a solar farm. But, he added: “It takes time. None of this stuff can be done overnight.”
Asked about the likelihood that Homer Electric’s interruptible gas supply could result in inadequate power or rolling blackouts for its members, Jorgensen said the question was “incredibly speculative.”
But Izzo, the Matanuska Electric chief executive, explicitly warned of that risk in his comments filed with regulators last week.
It’s “entirely possible,” Izzo said, that Homer Electric may not receive enough gas to meet its demand over the next year.
The comments are addressed to the Regulatory Commission of Alaska, which has not yet approved Homer Electric’s interruptible supply agreement. Izzo told the commission that the Railbelt utilities should develop a “letter of agreement” framework that would guide how backup power could be sold from one to another in the event of shortages.
While it’s common for utilities to save money by sharing and selling power from the cheapest plants available, it is unusual for one to provide guaranteed power to another utility that’s “unable to meet its own demand,” Izzo said.
For Golden Valley Electric, the situation is slightly different.
The Fairbanks utility owns an array of power plants that use non-gas fuels, including coal, diesel and naphtha.
Supplies of those fuels aren’t as limited. But Golden Valley also often relies on cheaper, gas-fired power generated on its behalf by and purchased from Chugach Electric — and it uses hydroelectric power from a dam on the Kenai Peninsula that’s transmitted toward Fairbanks.
But Golden Valley’s contract for the gas that’s fueled Chugach Electric’s generators expires this week. And “there was really no opportunity to secure any more,” said Million, Golden Valley Electric’s chief executive.
“Any gas we would secure would just take away from the Anchorage Bowl,” he said in an interview.
Making matters worse, construction this winter is temporarily interrupting a transmission line that ships Golden Valley Electric’s hydroelectric power from the Kenai Peninsula toward the Interior.
Between the lost access to that electricity along with the gas-fired power, Golden Valley Electric is less likely to have a fallback if there are outages at its own plants.
In a “worst-case scenario,” like multiple power plants malfunctioning at once, power demand could outstrip supply and require a “controlled load shed program,” the utility said in its recent message to members.
“This program, if ever needed, would consist of relatively short power disruptions that rotate throughout the communities we serve to reduce demand to match supply and maintain grid reliability,” the message said. “Disruptions would be between 30 minutes and one hour in duration. The program would be implemented carefully to prioritize safety and minimize inconvenience, and it is important to note that critical services, such as 911 and the hospital will not be impacted.”
Public protections for blackouts
Consumer protection attorneys from the Alaska Department of Law say they’re increasingly worried about the potential for such rolling blackouts.
And they recently filed a petition with the Regulatory Commission of Alaska, which oversees utilities, to set standards for how such blackouts would be handled.
The standards, the department said in its petition, could address advanced notice of blackouts, utility communication plans, and how homes, hospitals, infrastructure and public safety customers would be prioritized.
“The public needs to have information, somewhere, where they can go and say, ‘What’s going to happen to me?’” said Jeff Waller, who leads the department’s Regulatory Affairs and Public Advocacy section, in an interview last week. “The utilities have some information. Often, they want a lot of flexibility, and I understand their point — they’ve got a utility to run.”
But in a situation with such potential to disrupt daily life, he said, “The public needs to know how they’re protected, and what their risks are.”
At a meeting last week, the regulatory commissioners rejected the consumer-protection petition.
But they did vote unanimously to open an “informational” proceeding to collect information from electric and gas utilities on their contingency plans. And they suggested that they could revisit the rulemaking proposal later.
“They’ve indicated they might still do it,” Waller said. But he noted that the timeline for developing standards like the ones his office is requesting can run as long as two years, which, he added, “is too late.”
“My concern is the average person, the public — if there’s going to be curtailments, do you need to take you and your loved ones and your dog and cat and live with someone else for a while? Is it going to be a few hours? Is it going to be a few days? Don’t know,” he said. “That level of uncertainty isn’t a good thing here.”
Nathaniel Herz welcomes tips at natherz@gmail.com or (907) 793-0312. This article was originally published in Northern Journal, a newsletter from Herz. Subscribe at this link.