The new entity would be called the Greater Railbelt Energy and Transmission Corp.
"We need a comprehensive approach to energizing Alaska's homes and businesses," Palin said in a statement. "Instead of numerous different utilities heading in numerous different directions, costing consumers untold millions of dollars in the future, I've asked energy experts to find a way to sensibly and economically address Railbelt energy challenges."
The six Railbelt utilities are small by Lower 48 standards and together generate a peak load of 875 megawatts, less than some single coal or nuclear plants elsewhere.
Nearly half the existing Railbelt generation capability is scheduled to be retired in 15 years and Cook Inlet natural gas, which has helped keep rates low, is expected to either run low or jump in price. That means substantial investment will be needed for new plants, but energy experts say single utilities do not have the resources to build large projects that could give consumers the best rates.
The call for a centralized power authority follows the recommendation of an $800,000 state study overseen by the Alaska Energy Authority. The Railbelt Energy Grid Authority study, released in September, studied management options and concluded that whether new power is generated by natural gas, coal or a hydroelectric project, a united entity with streamlined management and combined assets could save rate-payers $40 million annually over management by the six utilities.
The six utilities affected are Golden Valley Electric Association in Fairbanks, Matanuska Electric Association, Chugach Electric Association, Anchorage Municipal Light & Power, the City of Seward and Homer Electric Association.
The utilities worked on the development of Palin's proposal but support remains mixed.
Chugach Electric spokesman Phil Steyer said his cooperative supports the concept and the bill itself. Brian Newton, head of Golden Valley Electric Association, told the Fairbanks Daily News-Miner that he was disappointed that the bill carried more stick than carrot as incentive for utilities to join.
The utilities historically have enjoyed state grants to help pay for new power plants or interties but state officials have said that support is less likely in the future unless the utilities work together.
Palin's bill would set up the corporation to operate on a nonprofit basis. Its stated purpose would be to provide adequate and reliable wholesale power to the utilities at the lowest cost, procure a fuel supply and ensure adequate transmission.
The corporation's board would be made up of two representatives from each utility and one member appointed by the governor.
The bill calls for the corporation to adopt a plan for selecting new generation and transmission projects.
The bill calls for the corporation, with the Alaska Energy Authority, to develop a transition and finance plan before Jan. 19 — no small task given that the utilities operate under a variety of state and federal rules, depending on their makeup. They all have long-term obligations for purchasing fuel and paying off debt.
"There may need to be a transition plan for each utility," Steyer said.
Palin's energy adviser, Joe Balash, said the plan envisions the corporation acquiring the power plants of the utilities unless they're near the end of their useful lives or covenants on debts would make them more expensive to acquire than what they're worth. In any case, he said, power they generate would be sold to the new corporation to be dispatched most economically as part of an overall portfolio.
Utilities would have until July 2010 to decide whether to be part of the corporation or continue to operate independently.
The bill calls for a report by Jan. 19 regarding the scope of regulation by the Regulatory Commission of Alaska.
"We need to have somebody keeping an eye on and overseeing this corporation," Balash said. "We want to make sure that the touch is right — not to heavy but not too light."