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2003 Annual Report
2003 Annual Report - PDF (830KB)A Message from the President & CEO
"Improving on a Classic"
 GVEA President & CEO Steve Haagenson |
Like a classic car, Golden Valley Electric Association has been running smoothly for 57 years, and in today's changing energy environment, we're simply improving in a classic. We're not changing the successful classic structure; the outward appearance isn't changing and we're still committed to providing members with the reliable service and value they expect and deserve. We're just making some modifications under the hood.
The view along Alaska's energy highway is changing. In past decades, we saw substantial funding from the state for electric infrastructure projects along the Railbelt. These included the Willow to Healy Intertie in the 1984 and the Bradley Lake Hydroelectric Project in 1992. The state also helped fund the Northern Intertie from Healy to Fairbanks which was just completed in fall 2003. On a smaller scale, GVEA members also benefited from substantial state and federal funding for line extensions to unserved areas such as Haystack/Hilltop and most recently in the areas of Chatanika, Rock Creek/Ferry and Parks Highway Mile 328.
We thank our legislators, without whom many of these infrastructure projects would not be in place today. This level of state funding is over and we need to respond with strategies that ensure a sustainable GVEA in the future.
One way we're responding to this new environment, is by forming a new cooperative within GVEA. It's called the Interior Alaska Generation and Transmission Electric Cooperative, Inc., or G&T for short. The G&T will allow us to separate out the costs for power plants and other major construction projects from operating costs. The G&T is one strategy that allows GVEA as a whole to be more responsive in today's changing business environment. It's a common financial strategy in the electric industry and a smart way to protect the financial interests of our members.
Another strategy we're pursing is the formation of a Joint Action Agency (JAA). It's a collaborative effort among Railbelt utilities to manage power generation assets and future power needs.
There are several potential advantages to the JAA. First, it gathers the Railbelt utilities on the same page as we plan for future power needs. Second, the State may divest itself of its energy assets, namely the Alaska Intertie between Willow and Healy and the Bradley Lake Hydroelectric Project. By forming the JAA, Railbelt utilities are creating a vessel that could accept these assets. Finally, it creates the possibility of gaining tax exempt status for financing for new infrastructure.
This changing electrical industry landscape presents us with challenges as well as opportunities. We're taking steps to make sure we stay on the opportunity side of the road. We see them as opportunities for improving on what we already do well - provide reliable service and value. We're simply improving on a classic.
Working for YouGVEA's Year in Review
Golden Valley happily reports the completion of two major projects in 2003: the Northern Intertie and the Battery Energy Storage System (BESS).
A decade in the making, GVEA energized the 97-mile Northern Intertie from Healy to Fairbanks in September 2003. Benefits to GVEA's members were immediate in the form of increased reliability, increased energy and cost savings over the life of the line due to line losses - energy lost during transmission over long distances.
The BESS is another success story. With all four strings of batteries in place, the BESS passed two critical benchmarking tests. The system produced 27 megawatts (MW) for 24 minutes which exceeds the guarantee of 27 MW for 15 minutes. We tested the upper limits of the system when it produced 46 MW for 5 minutes. We expect the BESS to avoid 60 percent of power supply-type outages as it will be used primarily to carry 27 MW of load for 15 minutes. That is enough time for GVEA to bring backup generation online. The BESS began averting outages while still in testing mode, proving that the process is so seamless, members don't even know it's working.
We also made positive steps on two major generation projects: North Pole Expansion project and the Healy Clean Coal Project (HCCP).
With the prospect of adding several new commercial loads to our system over the next few years, we continue to look at ways to meet the growing energy needs of the Interior. The North Pole Expansion project is one option we're moving forward on which would locate a new power plant adjacent to our existing facility in North Pole. In 2003, GVEA secured the required air permit and signed a fuel contract with Flint Hills (formerly Williams Alaska Petroleum). This new power plant will be good for the environment. It will burn a fuel called Naphtha, which has one tenth the sulfur emissions as the fuel we currently burn at our North Pole facility.
At the end of first quarter 2004, we're evaluating a few scenarios for the North Pole Expansion project in terms of plant capacity. The project went out to bid in March 2004. We expect to evaluate the bids in May, break ground later in 2004 and have the plant online sometime in 2005.
Throughout 2003, GVEA's Board of Directors and the Alaska Industrial Development and Export Authority (AIDEA) Board met to discuss the fate of the mothballed HCCP. After a long period of disagreement regarding the operability and commercial viability of the plant, this joint movement forward signified a very positive turning point.
In March 2004, at AIDEA's request, GVEA made an offer to purchase HCCP from the state agency. The offer calls for GVEA to pay AIDEA a fixed amount per kilowatt-hour once the plant is operational. Payment could amount to approximately $70 million over 40 years, depending on financing options and fuel prices. GVEA plans to make the plant operational by removing the experimental boiler technology and replacing it with proven technology, such as we currently use in our existing Healy Power Plant, adjacent to HCCP. As of press time, AIDEA was evaluating the offer.
