Fairbanks Daily News-Miner

Golden Valley Electric Association is pushing forward on a move it says will save customers more than $30 million over the next five years.

The member-owned utility is seeking to transfer its power plants and transmission lines to a separate entity to take advantage of lower revenue requirements from lenders.

“It makes sense,” said Tom Irwin, the utility’s vice president of governmental and public affairs, “and now we have the assets to do it.”

Recently added assets such as the Northern Intertie, the Battery Energy Storage System, and an expansion to the North Pole power plant, as well as increased interest rates, have made the swap a money-saver, according to the utility.

Because GVEA owns generating facilities and transmission lines and also distributes power, it is required to maintain a higher revenue surplus than utilities that do not run distribution systems.

Power plants in Fairbanks, North Pole, Healy and Delta Junction, as well as the Northern Intertie, BESS, and all transmission lines and substations rated above 38 kilovolts would be transferred from GVEA.

The assets and associated debt would be transferred to an entity incorporated in December 2003 as the Interior Alaska Generation and Transmission Electric Cooperative, Inc. GVEA is changing the name to the Golden Valley Electric Association Generation and Transmission Cooperative, Inc.

The new entity would operate under the same roof as GVEA, be managed by the GVEA board of directors, and use GVEA employees.

“GVEA employees will be doing the same things the same way,” Irwin said. The utility did not expect to need any new employees as a result of the shift, he added.

Savings from the lower revenue requirements would be passed on to customers.

In a filing to the Regulatory Commission of Alaska, the utility estimated that in 2007, it would need $180.1 million for its operations if it didn’t transfer the facilities and only $175.8 million if it did, resulting in savings to customers of $4.3 million, or 2.4 percent.

By 2009, the savings would jump to $6.9 million, or 3.5 percent. In 2011, savings would amount to $5.4 million, or 2.6 percent.

Irwin warned that savings from the transfer could be masked by rising fuel costs.

In the RCA filing, the utility projected that annual fuel costs would climb from $59 million in 2007 to $74 million in 2009 and $97 million in 2011.

In order to move forward with the transfer, the utility will need permission from the RCA and approval from its members.

GVEA G&T, the entity that would acquire the assets, applied with the RCA late last month for authority to operate in the GVEA area.

John R. Grubich, GVEA’s chief financial officer, is listed in the filing as the G&T’s president and chief executive officer.

According to the filings, GVEA plans to transfer the new North Pole power plant expansion to the G&T upon its completion. Transferring the rest of the assets requires a majority vote of at least 10 percent of GVEA membership.

Irwin said the utility plans to hold a mail ballot on the issue this fall.

In its application to the RCA, GVEA G&T requested that some information supplied to the state agency remain confidential. The utility specifically requested confidential treatment of its expected fuel purchases, fuel costs, and other production costs.

“There are certain things we need confidential as a business,” Irwin explained. A company negotiating with the utility over the price of fuel could use the projected prices against GVEA, he argued.

“We don’t want to be at a negotiating or competitive disadvantage,” he said.

Staff writer Stefan Milkowski can be reached at smilkowski@newsminer.com or 459-7577.