Legislature(2011 - 2012)BARNES 124

03/15/2011 03:00 PM ENERGY


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HB 36 SMALL BUSINESS ENERGY EFFICIENCY GRANTS TELECONFERENCED
Heard & Held
*+ HB 37 NET ENERGY METERING TELECONFERENCED
Heard & Held
                   HB  37-NET ENERGY METERING                                                                               
                                                                                                                              
                                                                                                                              
3:30:41 PM                                                                                                                    
                                                                                                                                
CO-CHAIR PRUITT announced that the  final order of business would                                                               
be HOUSE  BILL NO. 37,  "An Act relating  to the net  metering of                                                               
electric  energy  for  electric  utilities  subject  to  economic                                                               
regulation  by the  Regulatory  Commission of  Alaska  and for  a                                                               
utility's  retail  consumers;  and  providing  for  an  effective                                                               
date."                                                                                                                          
                                                                                                                                
3:30:51 PM                                                                                                                    
                                                                                                                                
JENNIFER SENETTE, Staff, Representative  Kurt Olson, Alaska State                                                               
Legislature,  stated  that  HB   37  incorporates  the  work  the                                                               
Regulatory  Commission of  Alaska  (RCA) has  done regarding  net                                                               
metering.    In  2009,  the  RCA  opened  a  docket  to  consider                                                               
implementing  regulations  for  an Alaska-specific  net  metering                                                               
standard.   Later in the year,  the RCA heard public  comment and                                                               
adopted net  metering regulations.   House  Bill 37  codifies the                                                               
regulations adopted  by the  RCA.  Ms.  Senette provided  a brief                                                               
description  of the  net metering  process.   She then  began the                                                               
sectional  analysis at  page 1,  subsections (a),  (b), (c),  and                                                               
(d),  of the  bill, which  address the  applicability of  the net                                                               
metering requirement and the possibility  of waivers.  Generally,                                                               
the net  metering requirement applies  to all  electric utilities                                                               
subject to  regulation by the RCA,  but for two exceptions.   The                                                               
exceptions  are  described  on  page  2,  subparagraph  (A),  for                                                               
utilities that  get 100 percent  of their power from  an eligible                                                               
facility, and  subparagraph (B),  for an independent  system with                                                               
retail sales of less than  5 million kilowatt hours (kWhs) during                                                               
the  previous fiscal  year.    In addition,  a  utility that  can                                                               
demonstrate   that  limiting   net   metering  installations   is                                                               
necessary due to  its operational system is also  exempt, and the                                                               
RCA  can waive  requirements.   On  page  2, subsections  (e)-(i)                                                               
relate  to  net  metering  of  electricity  and  set  an  overall                                                               
capacity limit on net metering.   Subsection (f) allows a utility                                                               
to opt  out of  net metering service  when the  overall nameplate                                                               
capacity of all  of the net metering  systems interconnected with                                                               
the utility exceeds  1.5 percent of the  utility's average retail                                                               
demand.   On page 3, subsection  (i) allows a utility  to request                                                               
an increase to  the 1.5 percent capacity limit.   Further on page                                                               
3,  subsection   (g)  precludes  a  utility   from  disconnecting                                                               
existing net metering customers,  should the cumulative nameplate                                                               
capacity of net metering systems exceed  the cap as a result of a                                                               
decrease  in  demand.    Subsection (h)  requires  a  utility  to                                                               
annually  publish in  its  tariff  the number  of  kWhs that  are                                                               
equivalent  to  1.5  percent  of  the  utility's  average  retail                                                               
demand.   On page  5, subsection  (l), specifies  the eligibility                                                               
criteria  for  consumer   generation  facilities,  including  the                                                               
capacity  limit of  25  kWhs.   On  page  5, subsections  (m)-(p)                                                               
address  charges and  credits for  net  electricity, including  a                                                               
description of  net metering.   Continuing  on page  5, paragraph                                                               
(2) instructs  that compensation is  based on the  utility's non-                                                               
firm purchase power rate and  that credits can be carried forward                                                               
and do not  expire.  Subsection (n) allows utilities  to charge a                                                               
net  metering consumer  for non-generation  consumer charges,  if                                                               
authorized  by the  utility's tariff.   Subsection  (p) allows  a                                                               
utility to request  a change to its rate design  to incorporate a                                                               
net metering  customer class,  but to do  this the  utility would                                                               
have to  demonstrate an adverse  material rate impact  on non-net                                                               
metering consumers.   Ms.  Senette advised  the remainder  of the                                                               
bill is definitions.                                                                                                            
                                                                                                                                
3:38:53 PM                                                                                                                    
                                                                                                                                
MS.  SENETTE  noted  that  the   utilities  have  reported  mixed                                                               
responses to  the legislation, primarily because  the regulations                                                               
were adopted recently, thus it is too early to proceed further.                                                                 
                                                                                                                                
REPRESENTATIVE OLSON  added that there were  no negative comments                                                               
prior  to   yesterday  and  today;  however,   the  Alaska  Power                                                               
Association (APA)  and other interested parties  have now pointed                                                               
out that the regulations have  not been completely implemented by                                                               
the  RCA,  or approved  by  the  Department  of  Law (DOL).    He                                                               
requested  that  the co-chairs  hold  the  bill until  1/12,  but                                                               
continue with today's testimony.   Representative Olson cautioned                                                               
that  codifying  the  regulations  at this  time  could  lead  to                                                               
unintended consequences.                                                                                                        
                                                                                                                                
REPRESENTATIVE  PETERSEN  opined  it  makes  sense  to  wait  for                                                               
further changes in the regulations by the RCA.                                                                                  
                                                                                                                                
REPRESENTATIVE SADDLER  asked whether there is  a technical limit                                                               
to how much power a utility can "take back into its system."                                                                    
                                                                                                                                
3:43:14 PM                                                                                                                    
                                                                                                                                
JAMES  KEEN,  Chief/Engineer,  Regulatory  Commission  of  Alaska                                                               
(RCA), Department  of Commerce, Community &  Economic Development                                                               
(DCCED),  stated   that  the  utilities  indicated   there  is  a                                                               
limitation as  to how much  non-firm power a utility  can receive                                                               
and still  maintain stability  in its system.   The  net metering                                                               
power  addressed  in  the  regulations is  non-firm  and  is  not                                                               
controlled by the utility, therefore,  there are system stability                                                               
concerns  for  some  utilities.     He  indicated  that  for  the                                                               
regulations, this  concern was  addressed by  the insertion  of a                                                               
"low cap."   In  further response  to Representative  Saddler, he                                                               
said the utility may choose to  install a second meter to measure                                                               
net  metering  power, and  existing  regulations  state that  the                                                               
utility is  responsible for the  cost of the additional  meter so                                                               
that  costs  are equal  for  net  metering and  non-net  metering                                                               
customers, and is part of the tariff.                                                                                           
                                                                                                                                
3:45:03 PM                                                                                                                    
                                                                                                                                
MARILYN  LELAND,  Executive  Director, Alaska  Power  Association                                                               
(APA),  informed  the  committee   APA  is  the  statewide  trade                                                               
association that  represents the  electric utilities  that supply                                                               
power to more  than 500,000 Alaskans from  Barrow to Southwestern                                                               
Alaska,  through  the  Interior  and Southcentral  and  down  the                                                               
Inside  Passage.   She  paraphrased  from  the following  written                                                               
testimony [original punctuation provided]:                                                                                      
                                                                                                                                
     In the way  of background I'd first like to  give you a                                                                    
     little history  of how  we got to  where we  are today.                                                                    
     In 2006-2008  net metering was being  considered by the                                                                    
     Regulatory Commission  of Alaska  in its docket  on the                                                                    
     adoption of regulations to  implement amendments to the                                                                    
     Public Utility  Regulatory Policies Act of  1978 by the                                                                    
     Energy  Policy  Act  of  2005.   In  that  docket,  the                                                                    
     Commission  was  required  to make  a  decision  as  to                                                                    
     whether it would adopt the  federal standard for Alaska                                                                    
     for  net  metering.   The  commission  decided that  it                                                                    
     would  not adopt  the federal  standard,  but opened  a                                                                    
     docket  to  determine  whether  it  would  require  net                                                                    
     metering standards specific for Alaska.                                                                                    
                                                                                                                                
     The  docket  was opened  in  January  2009 and  several                                                                    
     workshops were  held for interested parties  to work on                                                                    
     proposed regulations.  Because  this docket was already                                                                    
     open   and   under   consideration  during   the   last                                                                    
     legislative   session,   APA   recommended   that   the                                                                    
     legislature not take action on  any of the net metering                                                                    
     bills  that were  before  it.   No  further action  was                                                                    
     taken by  the legislature  last session  on any  of the                                                                    
     bills and  the RCA  process was a  success.   There was                                                                    
     exceptionally  good  participation  in  the  workshops,                                                                    
     with  more  public  participation   than  the  RCA  has                                                                    
     experienced in any  of its dockets.   In the workshops,                                                                    
     Commission   staff,  utility   representatives  and   a                                                                    
     variety of public  participants worked through proposed                                                                    
     regulations  and   came  to  agreement  that   all  who                                                                    
     participated could live with.   I would like to commend                                                                    
     the RCA for the process it used in this docket.                                                                            
                                                                                                                                
     The Commission issued an  Order Adopting Regulations on                                                                    
     January  15,  2010.    However   -  and  this  is  very                                                                    
     important -  the agency has  not yet completed  work on                                                                    
     its net  metering regulations.  The  RCA is considering                                                                    
     further  revisions  to   the  currently  effective  net                                                                    
     metering   regulations,   to  address   interconnection                                                                    
     requirements for net metered  generation.  As presently                                                                    
     proposed,  the  new requirements  will  be  added as  a                                                                    
     section  within the  current net  metering regulations.                                                                    
     An RCA  order in R-09-2  is expected  by May 5,  but it                                                                    
     can  take  months  for Department  of  Law  review  and                                                                    
     certifications  before  regulations are  finalized  and                                                                    
     placed into  effect.  APA  and its members  support the                                                                    
     intent of the sponsor of HB37.                                                                                             
                                                                                                                                
     However, we  believe that codification is  at the least                                                                    
     premature, and we urge that  no action be taken at this                                                                    
     time.                                                                                                                      
                                                                                                                                
     In  fact,  we  believe   that  putting  the  RCA's  net                                                                    
     metering regulations is statute  is not necessary.  The                                                                    
     RCA  has  addressed the  issue  well  and is  the  best                                                                    
     suited  to address  any needed  changes in  the future.                                                                    
     Codifying the current regulations  will limit the RCA's                                                                    
     ability to  implement any needed changes  in the future                                                                    
     and could  well lead to unintended  consequences by not                                                                    
     allowing  the  RCA to  make  future  changes using  its                                                                    
     public   docket    process.   Current    net   metering                                                                    
     requirements, and  any future changes,  involve careful                                                                    
     balancing  of  issues  of utility  ratemaking,  utility                                                                    
     system  operations, consumer  input  and  policy.   APA                                                                    
     understands  the  good  intention  that  codifying  net                                                                    
     metering regulations guards  against precipitous future                                                                    
     changes,  but based  on the  RCA's open  and thoughtful                                                                    
     rulemaking   process   employed   thus  far,   APA   is                                                                    
     comfortable  leaving  net  metering in  the  regulatory                                                                    
     arena.   As  I  said, APA  understands  there are  good                                                                    
     arguments for  the statutory as well  as the regulatory                                                                    
     approach, but  favors the  regulatory approach  at this                                                                    
     point in time.                                                                                                             
                                                                                                                                
     The RCA  is empowered  and tasked  by statute,  and has                                                                    
     the technical  expertise and experience to  conduct the                                                                    
     research and  the balancing  of interests  necessary to                                                                    
     address net  metering.  In  addition, APA  believes the                                                                    
     RCA's well-established rulemaking  process provides the                                                                    
     necessary  opportunity for  public comment,  workshops,                                                                    
     and  analysis.   Also important  to note  is that  some                                                                    
     state legislatures  have enacted net  metering statutes                                                                    
     because  their public  utilities  commissions were  not                                                                    
     able or willing to adequately  address the issue.  That                                                                    
     is not the case in Alaska.                                                                                                 
                                                                                                                                
     The members  of APA  [are] not  opposed to  small scale                                                                    
     renewable generation, or to  purchasing power from such                                                                    
     consumer-owned  generation.   Our members  are likewise                                                                    
     not  opposed  to   consumers  reducing  their  electric                                                                    
     purchases by using their own  generation.  The issue is                                                                    
     making  sure that  a purchased-power  rate is  not just                                                                    
     fair for the seller of  that power, but is equitable to                                                                    
     all  ratepayers of  a  utility who  must  share in  any                                                                    
     subsidized rate.                                                                                                           
                                                                                                                                
     APA  believes that  the Regulatory  Commission is  best                                                                    
     equipped to make those determinations.                                                                                     
                                                                                                                                
3:51:09 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  PRUITT  noted  that  utilities   purchase  power  at  a                                                               
wholesale rate and asked how  customers who are not participating                                                               
in net metering will be affected.                                                                                               
                                                                                                                                
DEAN THOMPSON,  Attorney, disclosed  he worked  with APA  and its                                                               
members   through  the   RCA  workshops,   comments,  and   other                                                               
proceedings.   He answered that  as the regulations are  now, the                                                               
amount  by which  the  net metered  customer  is compensated  for                                                               
excess generation is determined  based upon the utility's avoided                                                               
cost.   For  example, if  the utility  burns one  less gallon  of                                                               
fuel, the cost of that fuel  is paid to the net metered customer.                                                               
Thus, this  process of  calculation does  not affect  the non-net                                                               
metering  customers.   Also, net  metering  customers can  offset                                                               
their own energy  use by a decline in use,  which will ultimately                                                               
reduce cost for  everyone; however, this impact is  very small on                                                               
the other  customers.   Mr. Thompson summarized  that as  long as                                                               
the pricing  is based  on avoided cost,  there is  no significant                                                               
impact.                                                                                                                         
                                                                                                                                
REPRESENTATIVE PETERSEN  surmised if the  price of fuel  goes up,                                                               
the compensation to the customer would also go up.                                                                              
                                                                                                                                
MR. THOMPSON said correct.                                                                                                      
                                                                                                                                
3:54:51 PM                                                                                                                    
                                                                                                                                
JOE  GALLAGHER,  Public  Relations  Coordinator,  Homer  Electric                                                               
Association,  Inc.  (HEA),  informed  the committee  HEA  is  the                                                               
member-owned  cooperative serving  the  western Kenai  Peninsula.                                                               
Mr.  Gallagher relayed  HEA  is generally  supportive  of HB  37;                                                               
however, his organization  agrees that action on  the bill should                                                               
be delayed  until 1/12.   Shortly after the RCA  regulations were                                                               
adopted, HEA incorporated the language  as part of its tariff and                                                               
has 39 members  - 28 wind projects and 11  solar projects - using                                                               
this system.   At this  point, the  program seems to  be working.                                                               
Although  pleased with  the results  so far,  HEA believes  it is                                                               
premature to codify the regulations.                                                                                            
                                                                                                                                
3:57:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SADDLER asked how many ratepayers HEA serves.                                                                    
                                                                                                                                
MR. GALLAGHER  said HEA  has approximately  28,000 meters  on its                                                               
system.                                                                                                                         
                                                                                                                                
REPRESENTATIVE  SADDLER  asked for  the  total  number of  people                                                               
involved in net metering.                                                                                                       
                                                                                                                                
MR.  KEEN  said  currently  four   utilities  have  reported  the                                                               
following:  Chugach Electric Association  has used .25 of its 1.5                                                               
percent cap; HEA  has used 12.61 percent of its  1.5 percent cap;                                                               
Matanuska Electric has used 4.36  percent of its 1.5 percent cap;                                                               
Golden Valley Electric  Association has used 1.12  percent of its                                                               
1.5 percent cap.                                                                                                                
                                                                                                                                
JAMES ADAMS said he has a  private windmill connected to the Nome                                                               
Joint  Utility System  grid.   He expressed  his support  for the                                                               
bill because  it is good  business to use renewable  resources to                                                               
reduce the consumption of diesel fuel.                                                                                          
                                                                                                                                
REPRESENTATIVE PETERSEN  asked how much electricity  Mr. Adams is                                                               
producing.                                                                                                                      
                                                                                                                                
MR. ADAMS  reported that he has  had his windmill for  two to two                                                               
and one-half years  and it has reduced his light  bill by $50 per                                                               
month.   In  response  to  Co-Chair Pruitt,  he  said  this is  a                                                               
savings of 20-25 percent.                                                                                                       
                                                                                                                                
4:01:45 PM                                                                                                                    
                                                                                                                                
MEGS  TESTARMATA  said  she is  a  renewable  energy  engineering                                                               
student.  She  noted that the previous speaker does  not have net                                                               
metering  available and  does not  get  credit for  the power  he                                                               
generates.     Ms.   Testarmata   asked   whether  net   metering                                                               
percentages are available for Nome.                                                                                             
                                                                                                                                
MR.  KEEN  advised   that  Nome  Joint  Utility   System  is  not                                                               
economically regulated by the RCA,  thus existing regulations and                                                               
the proposed legislation are not applicable.                                                                                    
                                                                                                                                
MS.  TESTARMATA  said  that  is  a  big  disappointment  to  Nome                                                               
residents.   Although the state  is supporting  renewable energy,                                                               
her experience  is that there  is a consensus that  the statewide                                                               
effort to use  sources of renewable energy is being  held back by                                                               
the utilities and their reluctance  to work with renewables.  She                                                               
opined  that it  is  possible for  rural  systems to  incorporate                                                               
renewables, as  shown by the  systems in Kanakanak and  St. Paul.                                                               
Ms. Testarmata urged passage of the  bill so that everyone in the                                                               
state can  participate in Alaska's  goal of  becoming sustainable                                                               
in its  use of energy.   She emphasized her regret  that the bill                                                               
will  not  benefit  those  in  Nome  who  which  to  participate.                                                               
Referring to  page 3, line 14,  subsection (i), of the  bill, she                                                               
suggested  that because  of the  reluctance on  the part  of some                                                               
utilities,  consumers should  also  be able  to  petition for  an                                                               
increase in the 1.5 percent cap.                                                                                                
                                                                                                                                
4:06:35 PM                                                                                                                    
                                                                                                                                
GENE   THERRIAULT,  Vice   President,   Golden  Valley   Electric                                                               
Association,  Inc.   (GVEA),  stated   that  GVEA   is  generally                                                               
supportive  of  HB  37;  however,  his  company  understands  the                                                               
concerns  of  the  smaller  utilities   because  they  have  more                                                               
difficulty integrating  net meter power into  their systems which                                                               
are not as large and robust as that  of GVEA.    He noted that at                                                               
1.12 percent, GVEA is approaching its  limit set out in the bill,                                                               
but  can  accommodate  those  participating  in  the  Sustainable                                                               
Natural  Alternative  Power  (SNAP)   program.    Mr.  Therriault                                                               
supported  holding the  bill from  final passage  until 1/12,  in                                                               
order to see  how the regulations are implemented.   Referring to                                                               
the   previous  speaker's   suggestion,  he   pointed  out   that                                                               
ratepayers can  petition for an  increase to the 1.5  percent cap                                                               
through  their elected  officials.     Mr. Therriault  encouraged                                                               
legislators to ensure that the language  in the bill, as it moves                                                               
through committees,  continues to be  closely related to  the RCA                                                               
regulations.                                                                                                                    
                                                                                                                                
4:09:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  OLSON opined  if  the bill  moved  away from  its                                                               
original intent, it would not pass.                                                                                             
                                                                                                                                
4:11:17 PM                                                                                                                    
                                                                                                                                
[HB 37 was heard and held.]                                                                                                     

Document Name Date/Time Subjects
HB 36 - 2 Sponsor Statement.pdf HENE 3/15/2011 3:00:00 PM
HB 36
HB 36 - 3 Sectional Analysis.pdf HENE 3/15/2011 3:00:00 PM
HB 36
HB 36 - 1 Version A.pdf HENE 3/15/2011 3:00:00 PM
HB 36
HB 36 - 4 AHFC Home Energy Rebate Frequently Asked Questions.pdf HENE 3/15/2011 3:00:00 PM
HB 36
HB 36 - 6 Letter of Support from NFIB.pdf HENE 3/15/2011 3:00:00 PM
HB 36
HB 36 - 5 AHFC Home Energy Rebate Program Guidelines.pdf HENE 3/15/2011 3:00:00 PM
HB 36
HB 36 - 7 AHFC Fiscal Note HB36-DOR-AHFC-03-15-11.pdf HENE 3/15/2011 3:00:00 PM
HB 36
HB 37 - 01 Version A.pdf HENE 3/15/2011 3:00:00 PM
HB 37
HB 37 - 02 Sponsor Statement.pdf HENE 3/15/2011 3:00:00 PM
HB 37
HB 37 - 03 Sectional Analysis.pdf HENE 3/15/2011 3:00:00 PM
HB 37
HB 37 - 05 Net Metering Map by NC State University, February 2009.pdf HENE 3/15/2011 3:00:00 PM
HB 37
HB 37 - 04 RCA Fiscal Note CCED-RCA-03-11-11.pdf HENE 3/15/2011 3:00:00 PM
HB 37
HB 37 - 08 RCA Net Metering Order R-09-1(3), Appendix B, 15 January 2010.pdf HENE 3/15/2011 3:00:00 PM
HB 37
HB 37 - 06 RCA Net Metering Order R-09-1(3), 15 January 2010.pdf HENE 3/15/2011 3:00:00 PM
HB 37
HB 37 - 07 Catching wind of alternative energy by the Peninsula Clarion, 11 March 2011.pdf HENE 3/15/2011 3:00:00 PM
HB 37
HB 37 - 10 RCA Net Metering Order R-09-1(4), Appendix, 26 April 2010.pdf HENE 3/15/2011 3:00:00 PM
HB 37
HB 37 - 09 RCA Net Metering Order R-09-1(4), 26 April 2010.pdf HENE 3/15/2011 3:00:00 PM
HB 37
HB 37 - 11 Testimony by Marilyn Leland, Alaska Power Association.pdf HENE 3/15/2011 3:00:00 PM
HB 37