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My turn: Surplus energy sales benefit Juneau

Posted: Monday, November 26, 2007

Alaska Electric Light & Power Co. sells surplus energy to customers with dual fuel heating systems, to Princess Cruise Lines and to the Greens Creek Mine. These interruptible customers purchase only surplus hydroelectric energy that is projected to spill from the reservoirs. Surplus energy sales are used by AELP to manage hydro facilities to get the greatest energy output and the lowest energy costs. Revenues from these surplus energy sales directly benefit AELP's other customers. Since 2000, more than $5 million in revenue from surplus energy sales has been credited as a Power Cost Adjustment to AELP's regular, non-interruptible customers. Thanks in part to the sale of surplus energy, AELP's hydro projects are providing energy to Juneau at some of the lowest rates in the state.

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Maintaining low rates becomes a much bigger challenge when new hydro facilities are constructed. Hydro facilities are expensive projects to construct, and typically provide much more energy than is needed when they first come online. Marketing the surplus energy reduces the cost per kilowatt-hour to the non-interruptible customers. The Crater Lake addition to the Snettisham project was constructed in 1989. Firm (non-interruptible) loads at that time did not use all of the output of the project, so interruptible sales programs were initiated to dual-fuel customers. Eventually sales to Princess Cruise Lines and to the Greens Creek Mine assisted in utilizing the output of the hydro projects.

Since that time, Juneau's firm loads have grown and our hydro projects are now at full capacity with average annual precipitation. With increasing loads during the winter months it will be necessary to supplement our hydro production with diesel generators.

This year demand for energy exceeded the water supply. In order to preserve hydro energy for Juneau's firm customers, Greens Creek Mine was disconnected in early August, the cruise ships were disconnected in September and all other interruptible loads were interrupted in October. These customers will remain disconnected until surplus hydro energy is made available by above normal precipitation or until construction of our new hydro project, Lake Dorothy, is completed.

Permitting of the Lake Dorothy hydro project was initiated in 1996 and construction began in 2006. With the connection to the Greens Creek Mine, the project will be fully loaded upon completion, significantly reducing the cost per kwh to the other customers. The revenue contribution from surplus energy sales is expected to reduce costs to Juneau's firm customers by several million dollars annually. Juneau's firm customers have a priority to all hydro energy. As loads grow, less surplus energy is available for interruptible customers including Green Creek Mine, but the least cost per kwh from the project is retained as the project remains fully loaded.

Revenue contribution from surplus sales will result in a lower cost hydro resource that will continue to benefit Juneau's customers for decades.

• Tim McLeod is president and general manager of Alaska Electric Light & Power Co. He lives in Juneau.



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