Legislature(2019 - 2020)BUTROVICH 205
02/03/2020 03:30 PM Senate RAILBELT ELECTRIC SYSTEM
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| Audio | Topic |
|---|---|
| Start | |
| SB123 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 123 | TELECONFERENCED | |
SB 123-ELECTRIC RELIABILITY ORGANIZATIONS
3:33:24 PM
CHAIR COGHILL announced the consideration of SENATE BILL NO.
123, "An Act relating to the regulation of electric utilities
and electric reliability organizations; and providing for an
effective date."
He asked Ms. Miller to review the questions and suggested
changes to the bill that will affect the policy calls.
3:36:09 PM
RENA MILLER, Staff, Senator Cathy Giessel, Alaska State
Legislature, Juneau, Alaska, stated that she is on loan to the
committee for the purposes of SB 123. She agreed with the chair
that it has been a collaborative process to incorporate the
testimony to the committee and the conversations she has had
with the stakeholders to address the questions and concerns that
were voiced. She advised that she would walk through the bill
highlighting the potential changes so the members could make
notes in the relevant areas.
MS. MILLER advised that the term "bulk-power system" that is
defined in the bill and referenced throughout will change to
"interconnected bulk electric system." The utilities prefer the
word "electric" over "power" and the RCA feels it is important
to clarify that it is an interconnected system.
She directed attention to the dates and timelines in version M
that clearly need to be changed because they were based on the
original, May 2019, draft of the bill.
MS. MILLER stated that the two effective dates on page 8 will
change to July 1, 2021. This reflects that the bill takes effect
one year after it passes and the RCA has that year to write the
regulations to implement the bill. Assuming the bill passes on
July 2020, the effective date would be July 1, 2021.
The date on page 7, line 28, would also change to July 1, 2021.
She said those dates are tied to subsection (c) near the bottom
of page 2 that tells the RCA that if nobody has applied for
certification to be an ERO within 3 months of the RCA adopting
regulations and being ready to take applications, the commission
shall create an ERO on its own. Thus the date on page 2, line
29, would change to October 1, 2021.
MS. MILLER said she and the chair realized the need to
incorporate another date. The RCA has explained that the
application to be an ERO would be treated like a certificate of
public convenience and necessity (CPCN) application. Once an
application has been received and deemed properly filed, the RCA
would have 6 months to accept it, or not. She pointed out that
somebody may have applied in that timeframe but they haven't
been certificated, and the RCA is instructed to form an ERO if
nobody has applied within three months. But if somebody has
applied and after some time it was pulled or deemed
insufficient, there is no date for the RCA to stand up an ERO.
The solution is to extend another three months. Therefore, if
nobody files the RCA will form an ERO in three months; if
somebody has filed but hasn't received certification, the RCA
will stand up an ERO six months after the filing.
3:39:38 PM
CHAIR COGHILL added that the application process could go on
forever without this additional clarification.
MS. MILLER agreed and cited the situation the RCA encountered
last year when a couple of utilities and a private company
applied to the RCA for certification as a TRANSCO. The
application was deemed insufficient and the applicant pulled it.
She said that is an example of someone who applied but nobody
had been certificated.
CHAIR COGHILL noted that House Energy Committee Chair Hopkins
was listening online.
3:40:40 PM
SENATOR MICCICHE referenced the date on page 2, line 29, and
asked Ms. Miller to repeat the explanation of the deadline after
October 1, 2021 for someone who has submitted an application.
MS. MILLER explained that if someone has applied but has not
been certified as an ERO, the RCA will wait six months before it
forms an ERO on its own. The new date will be January 1, 2022.
CHAIR COGHILL added that those instructions were sent to the
drafters.
MS. MILLER, responding to a further query, explained that it is
six months from July 2021 when the RCA is open to applications.
Three months after that is October 2021 and three months after
that is January 2022. .
CHAIR COGHILL advised that the RCA brought the issue forward.
3:42:07 PM
MS. MILLER continued to discuss the proposed changes. She said
no changes have been proposed for the sections on pages 1 and 2
that talk about the application process for the ERO and what an
applicant must demonstrate regarding governance and internal
rules.
She directed attention to the dates on the bottom of page 2 and
advised that Chair Coghill was interested in adding a backstop
provision to authorize the RCA to waive the requirement for an
interconnected network to have an ERO in certain circumstances.
The reasoning is that in five or ten years rural areas may have
interconnected utilities and it may or may not be appropriate to
have an ERO in that network. The language that's contemplated is
that the utilities would need to agree to petition the RCA for
the waiver.
CHAIR COGHILL clarified that the RCA retains its authority; this
just contemplates the potential of a different organization.
MS. MILLER agreed that in the future there may be instances
where an ERO isn't appropriate for certain interconnected
utilities.
She directed attention to the bottom page 2 and onto page 3 that
discusses what reliability standards should provide for. The
language on page 3, lines 10-12, says reliability standards may
provide for additions or modifications to a facility to provide
for reliable operation of the system. Then the language on lines
13-14 says the standards may not require enlargement of
facilities or construction of new transmission or generation
capacity. To avoid potential conflict, the suggestion is to
change the language on lines 13-14 to say "may not be designed
with the intent to require" so the standard doesn't require an
enlargement. If an enlargement is necessary to meet reliability
or a security need, that is potentially a different standard.
The proposed language was developed in collaboration with the
RCA.
3:45:10 PM
MS. MILLER reminded the committee that utilities will be able to
comment individually on standards that the ERO submits to the
RCA for approval. She said there has been collaborative work and
there is a backstop if a utility believes a standard may not
cover their needs.
CHAIR COGHILL added that an individual utility would have the
ability to make their case to the RCA on a particular issue that
the ERO isn't interested in.
MS. MILLER agreed. She added that an ERO applicant has to show
it created a rule that the representatives of users and
stakeholders are working independently of their specific
organization or utility when they are serving as the ERO board.
But nothing waives a utility's right to intervene independently
of the ERO.
3:46:23 PM
MS. MILLER directed attention to subsection (e) on page 3, lines
15-22, relating to the ability of the RCA to modify standards.
She said the utilities voiced concern that the RCA may, at will,
modify a standard that the ERO has put forward. Commissioner
Scott testified that it is the RCA's practice to have a back-
and-forth with the utility to talk about a modification, but
there is no rule. The suggested modification in subsection (e)
is that when the RCA receives a standard or an IRP and decides a
modification is required, the commission must return the
standard with an order and the ERO has the opportunity to modify
it. She said the RCA's ability to modify is the ultimate
backstop.
CHAIR COGHILL added that while the utilities recommended this
change, Legislative Legal Services has been asked to develop
appropriate language.
MS. MILLER agreed. The intent is to balance the utilities'
concern as well as the RCA's concern that it retain that
ultimate backstop.
3:48:20 PM
SENATOR GIESSEL directed attention to the sentence on page 3,
lines 20-21, and said she crossed it out and made the notation
"recommend remove."
CHAIR COGHILL asked Ms. Miller to respond.
MS. MILLER confirmed that the sentence should be removed. She
explained that the section that relates to standards and how the
RCA processes them relies on the existing public utility
statute, AS 42.05. The process and how it takes effect is very
clear in existing statute. That sentence creates a question as
to whether a standard or modification is meant to apply, when
they absolutely are intended to apply.
Continuing, she said pages 3 and 4 talk about penalties that
that can be assessed by both the ERO and the RCA. The language
in subsection (i) on page 4, line 8, allows the appeal of
penalties to the commission. However, it is counterintuitive to
say a commission assessed penalty can be appeal to and reviewed
by the commission. The suggestion is to delete the references to
subsection (h) on lines 9 and 10. Thus, if the ERO assesses a
penalty, it can be appealed to the RCA and the commission can
review it. If the RCA assesses a penalty, existing processes are
in place for the party to question the penalty. This process
includes taking the question outside the RCA.
3:50:19 PM
MS. MILLER directed attention to the language on page 5, lines
6-7, that states that regulations related to standards may
include a requirement that an ERO obtain a certificate of public
convenience and necessity. The suggestion is to remove that
provision because the bill already say that an ERO has to have a
CPCN.
SENATOR GRAY-JACKSON asked if the reference to subsection (h) on
page 4, line 16, should be removed since it was removed from
lines 9 and 10.
MS. MILLER answered no; that reference should stay because a
penalty that is imposed, regardless of who imposes it, must be
reasonable relative to the violation.
MS. MILLER directed attention to the language on page 5,
starting on line 15 relating to integrated resource planning.
She advised that a process should be inserted in this section
that relates to the RCA's ability to modify what's been
submitted to them. It would be a process similar to what was
discussed for standards. To that end, Sec. 42.05.293(a) and (b)
would be amended to clarify that when an IRP is submitted, and
the RCA decides it should be modified, it must first be returned
to the ERO with the suggested modification. The backstop (just
as for standards) is that the RCA retains the authority to make
the modification.
She explained that because an IRP would not be submitted as a
standard tariff provision, the language must be clear that an
IRP is to be filed with the RCA as a petition. That is a term
the RCA is familiar with and it works with their other statutes.
She said the utilities recommended inserting a time limit for
the RCA to take action whether it is to accept the petition as-
filed or to open a docket for investigation and potential
modification after the investigation. She said the parties seem
to think 45 days is reasonable and would mimic the timeline for
the standards that are filed as tariff provisions.
CHAIR COGHILL asked if the timeline would be added to subsection
(b) or in a new subsection.
MS. MILLER replied Legislative Legal Services is working on that
right now, but she believes it would be inserted in subsection
(b).
She noted the reference to lowest cost on page 5, line 23, and
relayed that a number of stakeholders want assurance that
"lowest possible cost" is not the only consideration because
other values should sometimes factor into decisions of whether
something is in the public necessity or interest. That language
will perhaps be changed to look at the greatest value and the
RCA will be encouraged to define that in regulation.
Stakeholders have been party to this discussion, she said.
CHAIR COGHILL added that the idea has been to create a system
approach to balance cost-effective and load-serving so it is
consistent with the public interest and has a value statement.
3:55:46 PM
SENATOR GIESSEL commented that the lowest value isn't
necessarily the best consideration.
CHAIR COGHILL clarified that he said value statement.
MS. MILLER pointed out that the range of things that must be
considered in the plan have to be cost effective, but the lowest
cost may not necessarily be what the stakeholders, the ERO, or
the RCA feels is in the best interest.
SENATOR MICCICHE suggested that the parts of the sentence that
evaluate lowest cost and overall impact need to be independent,
but both should be considered.
CHAIR COGHILL said the goal is to get an organization to do
economic dispatch and the question is how to get there under
planning.
SENATOR MICCICHE suggested that the emphasis should be on the
lowest cost but the other factors should be considered as well.
CHAIR COGHILL said the language that was sent for consideration
was cost/value but if it's lowest cost there will need to be
balancing language. If the primary consideration is to be cost
effective then that has to be considered through the whole
system. For example, an IPP may not be cost effective on one end
of the line but it is somewhere else. He noted that REAP made
that point.
3:58:35 PM
SENATOR MICCICHE opined that the current wording takes that into
account.
CHAIR COGHILL said it's good to have the discussion,
particularly because the stakeholders, the RCA, the
organizational development team, and REAP came at it from
different perspectives. "If that's the way the language stays,
we'll have a public record on it, but if it does change, we'll
have to debate that change." He asked Ms. Miller to confirm that
they asked the drafters to craft a cost/value statement.
3:59:52 PM
MS. MILLER responded that they are working through that. She
said she's clearly hearing from the committee that low cost to
the ratepayers is very important, but it has to be balanced with
questions of the public good. It should not be just a monetary
equation.
CHAIR COGHILL said he believes there is balance in the
statement.
SENATOR MICCICHE suggested that lines 26 and 27 are redundant.
He added that he believes the committee discussion has been
sufficient.
4:00:58 PM
MS. MILLER said she'd look at that. She added that the ERO
stakeholders raised a different question about those same two
lines. They expressed a desire to have the RCA's decision on an
IRP include an account of the process that went into the ERO's
plan. They want some weight given to the effort to build
consensus among the ERO board and other stakeholders and
evidence to show that people had a voice. Further, the language
should reflect the need to consider the process to build the
IRP.
4:02:05 PM
MS. MILLER directed attention to page 6, line 13, relating to
project preapproval. She said this area generated a lot of
comment and recommendations from all stakeholders. She advised
that the term "the most cost-effective manner" on line 20 will
be massaged to be more representative of the range of values
used to determine whether a project is necessary. The utilities
want to understand how the RCA would treat projects between now
and when an integrated resource plan is in place in terms of
preapproval. The forthcoming CS will try to ensure that the RCA
is directed to write regulations that make it clear how projects
under development will be handled during the transition to
project preapproval.
CHAIR COGHILL summarized the intent.
MS. MILLER agreed that the idea is to give some consideration
without creating a loophole.
SENATOR MICCICHE referenced the RRC Organizational Development
Team's suggested change for preapproval that says, "Exclude from
RCA jurisdiction authority over facility location and
transmission route and to preserve local authority." and "Add
undersea transmission lines, storage and ancillary services." He
asked if the suggestion is to add to the exemptions for RCA
jurisdiction or include those in the conditions for preapproval.
MS. MILLER explained that the utilities want to make sure that
undersea and buried cables are subject to preapproval so they
are part of the large energy facilities. She said Chair Coghill
wanted the record to be clear about why the length for an
undersea line is shorter than the larger transmission lines. She
said the utilities have recommended changing the provision
(starting on page 6) in subsection (c)(2)(B) that describes the
length of a high-voltage transmission line of a large energy
facility. The utilities recommend increasing the length from 5
miles 10 miles, which would accommodate utilities that supply
power to homes and other facilities in sparsely populated areas.
It would apply to high-voltage undersea lines that are greater
than 3 miles in length. She cited the example of the line
between Beluga and Anchorage. People agree that when that needs
to be replaced, it will be put into the IRP process. She noted
that there has also been a request to add battery projects and
reactive compensation devices to the group of things that need
preapproval.
CHAIR COGHILL agreed with Senator Micciche that battery projects
are used to address power storage needs. He offered his
understanding that battery projects for power would be under
this definition.
4:09:04 PM
MS. MILLER suggested the committee check with one of the
utilities to get an accurate answer.
CHAIR COGHILL said a utility would go to the RCA for a specific
need, but he wasn't sure if it would fall under the large energy
facility or the reliability requirements. He said that needs to
be answered.
MS. MILLER agreed to follow up.
She advised that there have also been suggestions to exempt
refurbishments and capitalized maintenance from the requirement
to get preapproval. The RCA will also need direction to define
those terms in regulation.
MS. MILLER said suggestions have been made about ensuring that
project preapproval addresses an allowance for local government
bodies and planning commissions to have their own rules. The
thinking is that the RCA probably should not be solely involved
in deciding where to reroute local lines. She said the intent at
this point is to include an appropriate acknowledgement of the
consideration that the RCA should be given when it looks at
preapproval.
She added that there was also discussion about the desire to
have preapproval of cost. However, because preapproval has been
restricted to the concept of preapproving the need for the
project, Chair Coghill was not inclined to include cost
preapproval in that early stage of the process.
CHAIR COGHILL opined that cost will still be an issue but the
requirement is off-base.
4:12:03 PM
MS. MILLER directed attention to the definitions on page 7 that
she characterized as clean up rather than substantive. She noted
that she previously discussed the dates on page 7, [line 28] and
page 8.
4:12:30 PM
CHAIR COGHILL stated that the directions to the Regulatory
Commission of Alaska have been very clear and both the RCA and
Legislative Legal Services agree that Southeast utilities are
not included in the requirements of SB 123. He asked Ms. Miller
if any other suggested language had come forward that might be
needed.
MS. MILLER replied that Southeast utilities would like very
specific exclusionary language, but the legal drafters said that
would be redundant and not recommended.
CHAIR COGHILL commented on the misunderstandings that can arise
from redundant language in statute. He reiterated:
All the legal team and the regulatory team that we've
talked to said this has no impact on the connections
that are down here in Southeast Alaska.
4:14:18 PM
MS. MILLER offered to walk through the mechanics where that
appears in the bill.
CHAIR COGHILL requested she do so. "We've said it, now they have
to believe us," he said.
MS. MILLER directed attention to the definition of "bulk-power
system" on page 7, line 5, and reminded members that, as
discussed, the term will change to "interconnected bulk electric
system." She explained that to be one of these systems, at least
one of the interconnected utilities must be subject to the
provisions in AS 42.05.291. AS 42.05.711 exempts certain
instrumentality of state utilities from regulation by the RCA;
they are exempt from .291. She directed attention to subsection
(c) on page 2, lines 26-29, that talks about how the commission
shall form an electric reliability organization (ERO). Anybody
that is not a bulk-power system doesn't need an ERO.
4:15:48 PM
MS. MILLER articulated the disclaimer that as she and the chair
work with the legal drafters, additional small changes will be
needed. Those will be flagged in the summary of changes for the
forthcoming committee substitute (CS).
CHAIR COGHILL advised that he will entertain amendments once the
committee has the CS. He noted that public testimony will remain
open to allow comments on the CS.
SENATOR MICCICHE mentioned Bradley Lake, the Battle Creek bonds,
and the exemptions going forward. He said he believes that there
is an issue with the exemption and that may need to be addressed
in the bill. He asked the chair to look at the material he had
gathered so they could have a discussion and allow the utilities
to come together on a potential solution. He stated his
preference to have the discussion before the amendment process.
4:18:44 PM
CHAIR COGHILL asked when the rate exemption sunsets.
SENATOR MICCICHE replied the [Bradly Lake] exemption doesn't
change for awhile and if the Battle Creek bonds become part of
that agreement it could be an ongoing problem. He said the
discussion is timely and including the utilities and possibly
Bradley Lake as an IPP may help to resolve the issue.
CHAIR COGHILL indicated that he would welcome a simple solution
but not if it becomes an Achilles Heel.
SENATOR MICCICHE nodded.
CHAIR COGHILL asked Senator Micciche to help him and the
committee understand a simple solution. He noted that the
explanation may need to include some of the history and details
of the project. He added that he needed to be convinced that
this isn't a misfit for the bill.
SENATOR MICCICHE requested he review the information before
making a determination.
[SB 123 was held in committee.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 123 - REAP Comments on Version M 01-31-2020.pdf |
SRBE 2/3/2020 3:30:00 PM |
SB 123 |
| SB 123 - RRC Recommended Pillars 1.31.20.pdf |
SRBE 2/3/2020 3:30:00 PM |
SB 123 |