Legislature(2019 - 2020)SENATE FINANCE 532


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Audio Topic
03:30:48 PM Start
03:31:54 PM HB151|| SB123
05:00:58 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Please Note Location Change --
- Joint with House Energy Committee -
Heard & Held
-- Testimony <Invitation Only> --
           HB 151-ELECTRIC RELIABILITY ORGANIZATIONS                                                                        
           SB 123-ELECTRIC RELIABILITY ORGANIZATIONS                                                                        
3:31:54 PM                                                                                                                    
CHAIR COGHILL announced that the  only order of business would be                                                               
SENATE  BILL NO.  123,  "An  Act relating  to  the regulation  of                                                               
electric  utilities and  electric reliability  organizations; and                                                               
providing for  an effective  date." and HOUSE  BILL NO.  151, "An                                                               
Act  relating  to  the  regulation   of  electric  utilities  and                                                               
electric   reliability  organizations;   and  providing   for  an                                                               
effective  date."    [Before  the  committees  was  the  original                                                               
version of  SB 123 and  a proposed committee substitute  (CS) for                                                               
HB  151, Version  31-LS0870\U,  Klein/Fisher, 12/20/19  ("Version                                                               
U"),  adopted by  the  House  Special Committee  on  Energy as  a                                                               
working document during its meeting on 1/23/20.]                                                                                
CHAIR COGHILL  explained that, prior  to this meeting,  the House                                                               
Special Committee on  Energy and the Senate  Special Committee on                                                               
Railbelt Electric System  had been working to  coordinate the two                                                               
proposed bills,  HB 151  and SB  123.   He acknowledged  that the                                                               
hard work  by both  the utilities and  other interest  groups had                                                               
"found its place in these  particular pieces of the legislation."                                                               
He declared  that this  hard work  by everyone  was "how  to make                                                               
Alaska work better."                                                                                                            
CHAIR COGHILL  outlined that the  committees would  hear comments                                                               
from  the  utilities on  the  structure  of the  proposed  bills,                                                               
processes aimed at improvement, and recommendations.                                                                            
3:35:22 PM                                                                                                                    
JULIE  ESTEY,  Director   External  Affairs,  Matanuska  Electric                                                               
Association  (MEA), acknowledged  that, although  there had  been                                                               
work  put into  this  for decades,  this had  to  be a  different                                                               
approach.    She  shared  that  they were  all  present  to  have                                                               
discussions  between the  utilities, the  policy makers,  and the                                                               
other stakeholders.   She  reported that,  once the  concerns had                                                               
been  shared,  solutions  were  made  available  and  substantial                                                               
progress  had  been  made  "pretty  quickly  over  the  last  few                                                               
months."  She  directed attention to the comments  which had been                                                               
forwarded  for consideration,  noting that  a response  indicated                                                               
there had been  "some overreach in our comments.   We went really                                                               
down into the details."  She  asked that the provided comments be                                                               
taken as they were intended, and  she offered her belief that the                                                               
proposed  legislation was  "very solid  as presented.   We  think                                                               
that there are  a few adjustments that we would  put on the table                                                               
for  your  consideration   to  improve  it  and   help  with  the                                                               
implementation."    She  offered a  PowerPoint  presentation  and                                                               
brought  attention  to  slide 2,  "Presentation  Outline,"  which                                                               
     ? Progress to date                                                                                                         
     ? The Railbelt Reliability Council (RRC)                                                                                   
     ? Next steps for the RRC                                                                                                   
     ? How the legislature can help                                                                                             
     ? Thoughts on SB123 and HB151                                                                                              
3:39:02 PM                                                                                                                    
BRIAN   HICKEY,  Chief   Operating   Officer,  Chugach   Electric                                                               
Association,  declared  that  the  issue  was  important  to  the                                                               
Railbelt, and shared that he had  "seen a lot of things over this                                                               
last 35 or  40 years and I  do think that we are  closer to doing                                                               
the things  in a better way  than we've ever been  in my career."                                                               
He emphasized  that it  was important to  understand that  a grid                                                               
was a  single machine operating  in perfect synchronism;  if not,                                                               
it would collapse and black out.   He offered his belief that the                                                               
utilities had a done a great  job of keeping reliability high and                                                               
costs low,  adding that the  electric industry was  now changing.                                                               
He opined  that the current  organizational structure would  be a                                                               
vehicle to move the grid into the  future in a better way for all                                                               
the ratepayers.                                                                                                                 
CHAIR COGHILL interjected  that all the members  of the committee                                                               
had benefited  from the hard work  of the utilities.   He pointed                                                               
out that  all manners of  getting power into the  grid, including                                                               
wind and solar, were of interest  to the committee.  He expressed                                                               
appreciation  for "the  struggle of  growing pains."   He  stated                                                               
that he would respect, as much  as possible, the results of prior                                                               
meetings among  the utilities  while still  asking what  could be                                                               
done to move forward and allowing the latitude to make it work.                                                                 
MR. HICKEY  paraphrased slide 3  of the  PowerPoint presentation,                                                               
"Progress  - Consistent  Railbelt  Reliability Standards,"  which                                                               
        In 2014 the Intertie Management Committee (IMC)                                                                         
     adopted open access rules for the Alaska Intertie                                                                          
     In  April  2018  the Railbelt  electric  utilities  and                                                                    
     Alaska Energy Authority  (AEA) filed consensus Railbelt                                                                    
     Reliability  Standards with  the Regulatory  Commission                                                                    
     of Alaska (RCA)                                                                                                            
      Compliance with reliability standards is mandated no                                                                      
       later than one year after the Electric Reliability                                                                       
     Organization   (ERO)   is   established,   until   then                                                                    
     compliance is voluntary                                                                                                    
MR. HICKEY  moved on  to slide 4,  "Progress -  Coordinated Cyber                                                               
Security Rules," which read [original punctuation provided]:                                                                    
     All   utilities   engaged   a   nationally   recognized                                                                    
     cybersecurity consultant  and developed  cyber security                                                                    
     standards  that  went  into  effect  January  1,  2020,                                                                    
     starting a 3-year compliance clock.                                                                                        
     Utilities  are  currently   conducting  internal  cyber                                                                    
     security audits  to identify  gaps between  the current                                                                    
     practices and the new standards.                                                                                           
     The  Railbelt  Cyber  Security  Working  Group  (RCWG),                                                                    
     comprising  IT  subject  matter experts  from  the  six                                                                    
     Railbelt utilities  and Doyon Utilities,  meets monthly                                                                    
     to execute standards implementation.                                                                                       
MR.  HICKEY, in  response to  Chair Coghill,  expressed agreement                                                               
that there  were national standards for  reliability, although it                                                               
was necessary  to consider the  unique nature of the  Railbelt as                                                               
it was a smaller scale, isolated  grid not connected to any other                                                               
sources.  It  was this lack for economy of  scale which brought a                                                               
focus on cost  competitiveness.  He explained  that the utilities                                                               
would take the very best parts of these standards for adoption.                                                                 
MR.  HICKEY paraphrased  from  slide 5,  "Progress  - Power  Pool                                                               
Development," which read [original punctuation provided]:                                                                       
     A  tight power  pool  is a  contractual structure  that                                                                    
     pools  generation  resources  and loads  to  facilitate                                                                    
     economic dispatch for efficiency and cost savings.                                                                         
     Chugach,  ML&P  and  MEA drafted  preliminary  dispatch                                                                    
     protocols, financial  settlement procedures,  and other                                                                    
     processes.  GVEA  and HEA  have  been  engaged in  this                                                                    
     Power pool development  process was put on  hold due to                                                                    
     the  Chugach/ML&P  acquisition,   expected  to  achieve                                                                    
     approximately 75% of anticipated pool savings.                                                                             
     Utilities will  return to power pool  discussions after                                                                    
     the   Chugach/ML&P   acquisition    docket   has   been                                                                    
3:49:02 PM                                                                                                                    
SENATOR  GRAY-JACKSON  asked  how  much  longer  until  the  sale                                                               
between Chugach Electric Association  and Municipal Light & Power                                                               
was finalized.                                                                                                                  
MR.  HICKEY offered  his belief  that,  should the  RCA issue  an                                                               
order  of approval  for  the acquisition  on  the intended  date,                                                               
February 28,  then Day  One would  be May 29.   He  reported that                                                               
there  were  14  functional  teams from  both  utilities  meeting                                                               
weekly, and  more often, to  lay out  all the necessary  items to                                                               
bring the two companies together on Day One.                                                                                    
3:49:52 PM                                                                                                                    
JOHN BURNS,  Vice President,  Golden Valley  Electric Association                                                               
(GVEA), reported that, even as  the Railbelt utilities had worked                                                               
collaboratively on  many issues  over the years,  this was  now a                                                               
movement toward  "an incredibly bright  future."  He  pointed out                                                               
that, in December 2019, all six  utilities had joined to sign the                                                               
Railbelt Reliability  Council (RRC) memorandum of  agreement.  He                                                               
declared that the  board would be balanced with  utility and non-                                                               
utility members and  focused on four tasks.   He introduced slide                                                               
6 of  the PowerPoint presentation, "Railbelt  Reliability Council                                                               
- Signed MOU" and paraphrased the four tasks, which read:                                                                       
     The RRC will  be an applicant for the role  of ERO with                                                                    
     a   balanced  utility/non-utility   board  focused   on                                                                    
     accomplishing the following tasks:                                                                                         
          1. Establish,  administer and  enforce reliability                                                                    
          2.  Develop,  adopt  and  administer  open  access                                                                    
     rules,   system   cost   allocation   procedures,   and                                                                    
     interconnection protocols                                                                                                  
          3. Develop  and adopt an Integrated  Resource Plan                                                                    
     (IRP) for the entire Railbelt electric system                                                                              
          4. Perform  a definitive cost-benefit  analysis of                                                                    
     Railbelt-wide   or    regional   security   constrained                                                                    
     economic dispatch.                                                                                                         
CHAIR  COGHILL  clarified that  the  RRC  was envisioned  in  the                                                               
proposed bill as an Electric Reliability Organization (ERO).                                                                    
MR. BURNS said that the RRC,  once formed, would be the entity to                                                               
submit  the application  with  the RCA  to become  the  ERO.   He                                                               
declared that the organization  development team (ODT) recognized                                                               
that the possibilities  for achievement by the  RRC were endless.                                                               
He  stated  that  the   envisioned  collaborative  process  would                                                               
facilitate conversations, shape relationships, and build trust.                                                                 
CHAIR  COGHILL  asked  that  Mr. Burns  remember  to  define  the                                                               
MR. BURNS declared that many  people played a significant role in                                                               
the development of  the MOU.  He stated that  the legislature and                                                               
the  RCA  recognized  the  need   for  reform,  adding  that  the                                                               
independent power  producers, rate payers, and  other non-utility                                                               
entities were  demanding a voice  in the decisions  affecting the                                                               
Railbelt.  He moved on  to slide 7, "Railbelt Reliability Council                                                               
- ODT Process," which read:                                                                                                     
     An Organizational Development  Team (ODT), comprised of                                                                    
     representatives  from the  six Railbelt  utilities, was                                                                    
     established to begin building the RRC.                                                                                     
     The  ODT's   focus  was  to  develop   consensus  among                                                                    
     utilities   and  other   stakeholders  in   forming  an                                                                    
     Implementation    Committee    that    would    develop                                                                    
     foundational documents and stand up the RRC.                                                                               
     The  ODT  representatives  met with  utility  and  non-                                                                    
     utility  stakeholders, including  the  RCA, AEA,  REAP,                                                                    
     AkPIRG, IPPs, and others.                                                                                                  
     On  December 18,  2019, six  Railbelt utilities  signed                                                                    
     the MOU for the creation of the RRC.                                                                                       
     The signed MOU  was filed with the RCA  on December 20,                                                                    
3:55:31 PM                                                                                                                    
MR.  HICKEY, in  response to  Representative Spohnholz  regarding                                                               
slide  6,  said  that  economic  dispatch was  a  term  used  for                                                               
dispatching the next, most efficient  mega-watt to meet the load.                                                               
However, given  the lengthy  nature of  the Railbelt  with single                                                               
transmission lines,  there were points of  congestion, and enough                                                               
power  could not  be moved  from  one region  to another.   In  a                                                               
security   constrained  economic   dispatch,  it   was  sometimes                                                               
necessary to start an uneconomic unit.                                                                                          
3:57:11 PM                                                                                                                    
MR. BURNS returned attention to slide  7, noting that the MOU had                                                               
been finalized  on December 18,  2019 and  filed with the  RCA on                                                               
December  20, 2019.   He  declared  that this  was a  significant                                                               
moment for the Railbelt utilities.                                                                                              
MR. BURNS,  in response to  Chair Coghill, explained that  it had                                                               
been important  for the Railbelt  utilities to come  together and                                                               
grapple  with several  difficult issues  to reach  consensus with                                                               
the MOU.   Once  there was consensus,  the utilities  had reached                                                               
out to  other stakeholders for  their insights and  concerns, and                                                               
ultimately modified the MOU.                                                                                                    
MR. BURNS  directed attention to  slide 8,  "Railbelt Reliability                                                               
Council - Governance," which read:                                                                                              
     Initially, the RRC will be governed by a twelve-member                                                                     
     Board with the CEO providing a tie-breaking vote.                                                                          
          ? 6 Railbelt utilities                                                                                                
          ? Alaska Energy Authority                                                                                             
          ? 2 Independent Power Producers                                                                                       
         1   organization   advocating   for   consumer                                                                         
          ? 2 independent, non-affiliated members                                                                               
        ? RCA and RAPA will hold non-voting, ex-officio                                                                         
     seats on the Board                                                                                                         
          ? The RRC will hire a CEO and staff                                                                                   
MR.  BURNS, in  response to  Chair Coghill,  explained that  RAPA                                                               
stood  for   Regulatory  Affairs   for  Public   Advocacy,  which                                                               
represented public  advocacy through  the Office of  the Attorney                                                               
MR. BURNS returned to slide 8, adding:                                                                                          
     the board composition may seem  expansive and there has                                                                    
     been some  criticism about the  numbers on it,  but the                                                                    
     reality  is,   it  reflects   the  broad   spectrum  of                                                                    
     different interests that either  impact or are impacted                                                                    
     by having  a reliable,  robust electric  grid.   So, it                                                                    
     was important to have an expansive and balanced board.                                                                     
4:01:46 PM                                                                                                                    
REPRESENTATIVE SPOHNHOLZ  asked about the two,  independent, non-                                                               
affiliated members.                                                                                                             
MR.  BURNS reported  that these  members could  be any  entity or                                                               
individual,  including  engineers,  with  knowledge  relative  to                                                               
electric issues.                                                                                                                
MR. HICKEY added  that these members could  also include "finance                                                               
folks, people with cyber security  experience, it would depend on                                                               
what the  board felt was required  or necessary at that  point in                                                               
time."  He pointed to the  list of requirements in the MOU, which                                                               
included preference  for Alaska  residents, as well  as knowledge                                                               
of  the  Railbelt and  the  process  that  formed  the RRC.    He                                                               
declared that  these members  could not be  working for,  or part                                                               
of, any organization  that was exchanging or  delivering power in                                                               
the Railbelt, or one of the  stakeholder groups.  The idea was to                                                               
have  two,  independent,   non-affiliated  professionals  on  the                                                               
MS. ESTEY added that those  members would be initially chosen for                                                               
the  implementation committee.    She explained  the process,  as                                                               
written  in  the MOU,  to  include:  receipt of  applications  by                                                               
February  17,  with   the  decision  made  by   a  sub  committee                                                               
consisting  of  one  of the  IPP  representatives,  the  consumer                                                               
advocate position, and the Alaska Energy Authority (AEA).                                                                       
4:03:18 PM                                                                                                                    
REPRESENTATIVE HOPKINS,  referencing slide  7, asked what  was to                                                               
be gained having  the MOU filed with  the RCA, as the  RCA had no                                                               
statutory authority to regulate an ERO.                                                                                         
MR. BURNS  explained that  this provided notice  to the  RCA that                                                               
there had been success with the MOU.                                                                                            
MS. ESTEY  added that  this was  an informational  filing, noting                                                               
that  the  RCA  had  been  engaged in  the  process  since  2015,                                                               
although there was no adjudicatory request.                                                                                     
4:04:23 PM                                                                                                                    
CHAIR COGHILL clarified that the RRC  had "put the meat and bones                                                               
onto a  question that we put  into statute," although it  had not                                                               
been  designated exactly  in this  manner.   He  added that  this                                                               
action complimented the statute.                                                                                                
MS. ESTEY shared that the goal had  been for a parallel path to a                                                               
cohesive  solution  with  the legislation,  while  including  the                                                               
desires  from stakeholders  and  the  RCA.   She  noted that  the                                                               
utilities had  been "trying  to keep  the lines  of communication                                                               
open as  we move  forward so  that the  goals and  the components                                                               
were aligned."  She acknowledged  that it was recognized that per                                                               
current legislation, all they could  do was apply.  She expressed                                                               
hope that once  this was passed into law, the  RCA would have the                                                               
authority to accept  applications and choose them  from the field                                                               
of applicants.                                                                                                                  
4:05:54 PM                                                                                                                    
MR. BURNS  addressed slide  9, "Why  is the  Railbelt Reliability                                                               
Council  Important?" and  emphasized  that the  RRC  was "not  an                                                               
artifice,  intended  to  deflect  the legislature  or  the  RCA's                                                               
attention away  from necessary Railbelt  reform."  He  added that                                                               
the  RRC reflected  a series  of  commitments being  made by  the                                                               
Railbelt   utilities   to   propose   and   embrace   meaningful,                                                               
deliberative changes  on the Railbelt  electric grid.   He stated                                                               
that  the RRC  represented  a regulatory  compact, a  contractual                                                               
commitment, with  the State of  Alaska and a commitment  that the                                                               
utilities  would be  bound  by  the decisions  of  the  RRC.   He                                                               
declared that this represented a  commitment to support statutory                                                               
language  to provide  the RCA  authority to  regulate the  RRC as                                                               
described in the MOU.  He  pointed out that this was a commitment                                                               
of the utilities to be inclusive  of a variety of perspectives in                                                               
decisions  related to  a Railbelt  bulk electric  system, with  a                                                               
commitment by the  utilities to participate with  one another and                                                               
with  non-utility  stakeholders  to  achieve  benefits  for  rate                                                               
payers throughout the state.                                                                                                    
4:07:34 PM                                                                                                                    
MS.  ESTEY shared  that the  utilities had  evolved through  this                                                               
process  to readiness  to work  together, a  big change  from the                                                               
current  control   by  each  utility  of   its  specific  service                                                               
territory.   She pointed  out that the  utilities were  now being                                                               
inclusive  in the  decision making,  as well  as the  operational                                                               
aspect.   She moved  on to slide  10, "Next Steps  for the  RRC -                                                               
Timeline," which read:                                                                                                          
   bracerighttp January 2-Feb 1  Thirty-day public notice for                                                                   
     applications to fill the non-utility seats                                                                                 
 bracerighttp January 17  Utility, AEA, RCA and RAPA delegates                                                                  
       named ? February 17          All other non-utility                                                                       
     applications due                                                                                                           
      ? March 20  IPP seats selected by Alaska Independent                                                                      
     Power Producer Association                                                                                                 
     ? March 25 (est.)  Firm retained to conduct review of                                                                      
     ? May 11  Consumer advocacy seat selected                                                                                  
     ? May 15  Independent, unaffiliated seats selected                                                                         
     ? May 30  Implementation Committee Kick off                                                                                
      ? December 2020  Complete foundational documents and                                                                      
     stand up the organization                                                                                                  
4:10:00 PM                                                                                                                    
REPRESENTATIVE LINCOLN referenced the  composition of the twelve-                                                               
member board,  as listed on slide  8, and asked whether  a change                                                               
would be in response to a  definition from the legislation or the                                                               
RCA.  He  asked if there was anticipation for  a change and under                                                               
what circumstances.                                                                                                             
MS. ESTEY replied  that through the definition in  the MOU, there                                                               
was  now  establishment of  the  implementation  committee.   She                                                               
shared  that it  was imagined  that the  implementation committee                                                               
would become  the first  board as  the organization  was created.                                                               
She  added that  the implementation  committee, both  utility and                                                               
non-utility  stakeholders,  would  define  the  by-laws  and  the                                                               
articles of  incorporation within  the context of  the MOU.   She                                                               
allowed   that  there   was  latitude   for  adjustment   as  new                                                               
information was  presented.   She pointed  out that  the balanced                                                               
board required negotiation from both sides.                                                                                     
MR. HICKEY  shared that, with  similar entities in the  Lower 48,                                                               
as  market  segments coalesced  and  formed  associations with  a                                                               
function in  the market,  seats were applied  for and  the boards                                                               
were expanded.   He  stated that  there was  language in  the MOU                                                               
that required a  balancing of interests on the  board but allowed                                                               
flexibility of the management for its composition.                                                                              
CHAIR COGHILL  explained that the proposed  legislation requested                                                               
a  balanced  board  whereas  this  discussion  was  for  how  the                                                               
balancing act would  take shape.  He allowed that  Mr. Hickey was                                                               
proposing  to organize  an  answer for  the  requirements in  the                                                               
proposed statute.                                                                                                               
4:13:45 PM                                                                                                                    
SENATOR  GRAY-JACKSON  asked  how many  IPPs  (Independent  Power                                                               
Producer) existed.                                                                                                              
MR. HICKEY replied,  "there are a handful that we  know of, there                                                               
are some  small ones, some are  larger."  He offered  examples of                                                               
the wind  farms on Fire Island  and in Fairbanks, as  well as the                                                               
solar project in Willow.                                                                                                        
MS. ESTEY added that there  were four IPPs currently operating on                                                               
the Matanuska  Electric Association (MEA) system,  with many more                                                               
applications.    She  referenced the  consistent  interconnection                                                               
standards,  noting that  more certainty  would help  new projects                                                               
and increase the number of requests.                                                                                            
4:15:10 PM                                                                                                                    
SENATOR  MICCICHE   pointed  out  that,  although   the  proposed                                                               
legislation remained very general about  the board, board make up                                                               
was  often  a  key  to  success.     He  asked  if  the  proposed                                                               
legislation  should include  board  make up,  noting  that a  CEO                                                               
would be a tie breaking vote.                                                                                                   
MR.  BURNS replied  that there  were certain  decisions that  may                                                               
likely require a  super majority vote and as  the process evolved                                                               
there would  be these dialogues.   He offered his belief  that it                                                               
was  important to  achieve  a  balanced board,  but  that it  was                                                               
important  to move  forward, and  a  tie breaking  vote could  be                                                               
necessary.  He  reminded that the CEO was chosen  by consensus of                                                               
the entire board.  He opined  that it was often important to give                                                               
broad policy directives, and not minutiae, to the proposed RRC.                                                                 
MS. ESTEY  pointed out that  during the  implementation committee                                                               
phase there  would not  be a  CEO, hence  it would  be more  of a                                                               
balance.   She  added that  there were  provisions to  ensure the                                                               
minority opinions in any decision had a voice in the process.                                                                   
4:19:40 PM                                                                                                                    
MR. HICKEY  added that the  organization would be  developing the                                                               
operating guidelines used to operate  the system, and those types                                                               
of decisions  had to be  made with consensus.   He noted  that it                                                               
was important to express both minority and majority opinions.                                                                   
CHAIR COGHILL  pointed out  that there  were two  new authorities                                                               
for both  the planning and  organizational structure  through the                                                               
RCA and he emphasized that this would not be done in a vacuum.                                                                  
4:21:20 PM                                                                                                                    
SENATOR  MICCICHE stated:   "nothing  creates trust  more than  a                                                               
well-constructed contract."   He expressed  his desire  to ensure                                                               
that everyone had an equal voice.                                                                                               
4:22:10 PM                                                                                                                    
MS. ESTEY returned  to the timeline on slide 10,  noting that the                                                               
goal  was to  have all  the foundational  documents completed  by                                                               
December 2020.   She declared  support for SB  123 and HB  151 as                                                               
the "correct  vehicles to  move this  forward.   She moved  on to                                                               
slide 11, "How the legislature can help," which read:                                                                           
     Establish a statutory framework  for the RRC to operate                                                                    
     under the RCA's regulatory authority.                                                                                      
     Provide a mechanism  to enforce consistent reliability,                                                                    
     facility and cyber security  standards developed by the                                                                    
     Authorize  the RRC  to  execute  a robust,  transparent                                                                    
     Integrated  Resource   Planning  process   and  support                                                                    
     resulting outcomes.                                                                                                        
     Provide  for  RCA  pre-approval of  projects  that  are                                                                    
     consistent  with the  Integrated  Resource Plan  and/or                                                                    
     reliability standards.                                                                                                     
     Allow the RRC time to  accomplish its goals but provide                                                                    
     discrete timelines.                                                                                                        
MS. ESTEY relayed that the  utilities worked well with deadlines,                                                               
as they were  "rule followers by nature."   She acknowledged that                                                               
the timelines ahead of the  utilities was a very appropriate role                                                               
for the State of Alaska.                                                                                                        
4:26:35 PM                                                                                                                    
MR. HICKEY offered an apology  for any inappropriate presentation                                                               
of adjustments  to SB 123,  as that was  not intended.   He spoke                                                               
about the  process for  negotiating the  RRC MOU,  which involved                                                               
consensus  drafting  of  the   document,  circulation  among  the                                                               
utilities,  distribution to  the stakeholders  and then  the RCA,                                                               
and finally back to the utilities.   He explained that SB 123 had                                                               
gone through the  same process.  He emphasized that  both the RRC                                                               
MOU and SB 123 had been  presented to the stakeholders, with some                                                               
of  the   resulting  comments   being  incorporated   into  those                                                               
documents.   He acknowledged that,  however, those  documents had                                                               
not  been endorsed  by the  stakeholders as  their documents  and                                                               
there could  be some disagreements.   He reported that  there had                                                               
been a  line by line  review with  the stakeholders and  that the                                                               
utilities had  adopted those suggestions which  the utilities had                                                               
unanimously agreed to in a consensus fashion.                                                                                   
REPRESENTATIVE  ZULKOSKY asked  if all  the suggested  amendments                                                               
had  been developed  in consensus  among all  the utilities  that                                                               
were part of the signed MOU.                                                                                                    
MR.  HICKEY  explained  that  these were  changes  that  the  six                                                               
utilities  agreed   on,  which  were  then   distributed  to  the                                                               
stakeholders for input.   The utilities then  revised any changes                                                               
to the  degree to  which all  the utilities  could agree.   These                                                               
changes  were then  presented to  the RCA,  and reviewed  line by                                                               
line  with  each  of  the commissioners.    These  comments  were                                                               
returned to  the utilities and  stakeholders for review,  and the                                                               
comments that  all could agree  on were incorporated.   He stated                                                               
that this was  the best that the unanimous utilities  could do in                                                               
order to come to agreement with the other stakeholders.                                                                         
MR. BURNS  shared that the  red-line version had  represented the                                                               
organizational development  team's (the six  utilities) consensus                                                               
document,  which  included  many   of  the  comments  from  other                                                               
stakeholders through the collaborative  dialogue.  He pointed out                                                               
that  this was  not a  document that  had been  agreed to  by all                                                               
CHAIR COGHILL  acknowledged that  a great deal  of time  had gone                                                               
into the suggested adjustments to SB  123, and asked, as the time                                                               
remaining  for this  meeting was  short, whether  these could  be                                                               
presented at another time.                                                                                                      
4:31:07 PM                                                                                                                    
MR.  HICKEY explained  the pillars  of the  process to  draft the                                                               
suggested  adjustments to  SB 123.    He said  that, first,  they                                                               
reviewed  SB  123  to  conform  with the  MOU,  which  was  quite                                                               
detailed, and looked  for places where there  was disagreement in                                                               
order to  make changes to  resolve these differences.   He stated                                                               
that  the  committee  had  four  pillars:   (1)  the  outcome  of                                                               
reliability  standards or  integrated  resource  plans should  be                                                               
developed from  the bottom up and  not from the top  down because                                                               
this was an operating entity that  had to work on the ground; (2)                                                               
to use existing regulatory procedures  with a focus on the tariff                                                               
process.  He explained that  the utilities would submit a tariff,                                                               
and the RCA had  45 days to open a docket  of investigation or it                                                               
would become  law.  If there  was a docket of  investigation, the                                                               
tariff would not  be modified but would be  investigated and then                                                               
returned to the  utilities with comments for necessary  work.  He                                                               
pointed  out that  the modifications  were not  being made  in an                                                               
adjudicatory proceeding.  The committee  used this same viewpoint                                                               
to  make  modifications  to  SB  123.   He  added  that  (3)  the                                                               
committee used short  timelines to allow the  organization to "be                                                               
nimble and  can pivot and  respond to  things in the  system that                                                               
need to be responded to in a  very short time."  The final pillar                                                               
(4)  was  for all  the  processes  to  be open,  transparent  and                                                               
inclusive.   He noted  that a  definition for  "pre-approval" had                                                               
been added,  as there had  been some confusion  regarding "siting                                                               
authority"  versus "pre-approval."   He  explained that,  in many                                                               
states,  "siting   authority"  included  the  ability   to  route                                                               
transmission lines  through specific neighborhoods,  to determine                                                               
the color  of the  poles, and  to regulate  framing construction.                                                               
He  stated that  this definition  would narrowly  define "project                                                               
pre-approval" as  "the RCA providing  a finding that  the project                                                               
is necessary and  that prudent costs incurred  in developing that                                                               
project  can be  recovered in  rates."   He said  it specifically                                                               
excluded  the ability  for the  RCA to  route transmission  lines                                                               
through  local areas  as  the committee  wanted  to preserve  the                                                               
ability for  local areas  to have local  criteria that  met local                                                               
needs.   He  noted that  they had  tried to  maintain this  theme                                                               
throughout the MOU and with the revisions to SB 123.                                                                            
CHAIR  COGHILL expressed  his agreement  for this  approach.   He                                                               
shared  that he  recognized there  were some  process issues  for                                                               
"how its  done" whereas  his preference was  to keep  the statute                                                               
based on  "what we  want you  to do, not  necessarily how  you do                                                               
it."  He noted that the  committee revisions had started with the                                                               
MOU, whereas the  statute started with "how do we  direct this to                                                               
make sure  that it happens  well."  He  said he would  suggest to                                                               
the Senate Special Committee on  Railbelt Electric Systems (SRBE)                                                               
and the  House Special  Committee on Energy  (HENE) to  view this                                                               
"from what do we  want you to do and stay out of  how you do it."                                                               
He applauded  the work  on the  MOU but  clarified that  the SRBE                                                               
would not  start with  the MOU.   He declared  that the  SRBE was                                                               
probably working "off  a different set of pillars but  we want to                                                               
end up at the same place."                                                                                                      
MR.  HICKEY  expressed his  desire  that  the provided  documents                                                               
would  offer   "a  window  into   our  thinking  more   than  any                                                               
prescriptive way that we think you need to do anything."                                                                        
MR.  BURNS  declared that  all  the  utilities were  "poised  and                                                               
prepared to assist in any way  to achieve this legislation and to                                                               
do it as quickly as possible."                                                                                                  
4:39:07 PM                                                                                                                    
TONY IZZO, CEO, Matanuska Electric  Association, Inc. (MEA), said                                                               
that MEA was probably the  second largest electric utility in the                                                               
state, serving  more than 66,000  meters in  an area the  size of                                                               
the State  of West Virginia.   He  reported that his  utility was                                                               
growing,  adding  between 1,000  and  1,200  services and  meters                                                               
annually.  He offered his belief  that the proposed bills, HB 151                                                               
and  SB 123,  were  the  right vehicle  to  provide the  enabling                                                               
legislation to make  this a reality.  He shared  that he had been                                                               
in  the utility  business  for 40  years, with  20  years in  the                                                               
Railbelt.  He  reviewed the history for  this legislation, noting                                                               
that in  2014 the Alaska State  Legislature had asked the  RCA to                                                               
do  an analysis  on  the  need for  institutional  reform in  the                                                               
Railbelt electric  grid.  He  acknowledged that there  were "less                                                               
than  good relationships  leading  to  questionable decisions  at                                                               
times" and offered  his belief that the industry  had earned that                                                               
reputation.   However,  he  opined that  the  industry had  moved                                                               
beyond that many years earlier.   He shared that, after moving to                                                               
Alaska 20 years ago, Alaska had  been about 20 to 30 years behind                                                               
the Lower  48.  He opined  that since then many  lessons had been                                                               
learned from the Lower 48 and many pitfalls had been avoided.                                                                   
MR. IZZO referenced a 2015 letter  from the RCA to the leadership                                                               
of the  Alaska State  Legislature, which  indicated the  need for                                                               
institutional reform  and included a  lot of detail.   He offered                                                               
his belief  that this letter was  "at a high level  accurate" and                                                               
that currently  this was a critical  point for the growth  of the                                                               
utilities.  He  opined that this was the time  to codify the good                                                               
behavior recently exhibited by the  utilities in order to build a                                                               
good foundation  going forward.   He  added that,  although there                                                               
was a great deal of trading  among the utilities, it could better                                                               
include the other stakeholders.   He reported that, as 40 percent                                                               
of the cost of a kilowatt hour  in the Railbelt was for fuel, any                                                               
means to reduce that fuel was necessary.                                                                                        
4:44:57 PM                                                                                                                    
ANNA HENDERSON, General Manager,  Municipal Light & Power, shared                                                               
her support for the positions  advanced by the presenters, noting                                                               
that  a  lot  of work  had  been  put  into  this process.    She                                                               
expressed her agreement  with the comments from  Mr. Izzo, adding                                                               
that  institutional   regulatory  reform  in  the   Railbelt  was                                                               
necessary  to  address a  lack  of  regulation, specifically  for                                                               
reliability,  interconnection,   regional  planning,   and  cyber                                                               
security.  She stated her  support for the committees telling "us                                                               
what to  do versus  telling us  how to  do it."   She  shared her                                                               
vision that  this enabling  legislation would  lead to  a "robust                                                               
regulatory process with the Regulatory  Commission of Alaska that                                                               
will add  further process and clarification  to the regulations,"                                                               
and acknowledged it would be a multi-year process.                                                                              
4:47:21 PM                                                                                                                    
MR.  IZZO,  in response  to  Representative  Fields, offered  his                                                               
belief  that  the construct  of  the  proposed legislation  would                                                               
create  a "one  stop shop  across the  grid through  the planning                                                               
process with stakeholders."   He offered an example  for the need                                                               
of more megawatts  for generation, noting that  the request could                                                               
now be  made to the entire  broad stakeholder group.   He pointed                                                               
out that this would provide reliable service at a lowest cost.                                                                  
CHAIR  COGHILL reiterated  that both  renewables and  reliability                                                               
were high on the list.                                                                                                          
4:50:02 PM                                                                                                                    
BRAD  JANORSCHKE, General  Manager,  Homer Electric  Association,                                                               
Inc., reported  that Homer Electric  had about 35,000  meters and                                                               
was  90 percent  reliant on  natural gas.   He  acknowledged that                                                               
this was the most alignment he  had seen among the utilities, and                                                               
although there were still differences  of opinion, these could be                                                               
worked through.  He shared his  desire to focus on renewables and                                                               
reduce dependence on  natural gas.  He reported  that his utility                                                               
was  moving forward  with  a very  large  battery energy  storage                                                               
system that could  provide benefits for the entire  Railbelt.  He                                                               
stated his  support for the  organizational development  team and                                                               
the RRC  MOU, noting that even  as recently as five  years prior,                                                               
the utilities  would never  have gotten  together.   He expressed                                                               
his hope that  any legislation would align with the  MOU and stay                                                               
focused  on reliability  standards.   He asked  what impact  this                                                               
would have  on the  Bradley Lake energy  program, noting  that it                                                               
supplied  almost 50  percent of  the power  in the  western Kenai                                                               
Peninsula  with  no jurisdiction  by  the  RCA per  an  exemption                                                               
created by the  Alaska State Legislature in 1988.   He referenced                                                               
the idea  of the  CEO position  as a  tiebreaker and  opined that                                                               
"the last  job I would ever  want is to  be a tie breaker  for my                                                               
bosses."   He stated that any  changes to proposed SB  123 by the                                                               
ODT  were valid  and he  asked that  the legislature  put thought                                                               
into these.   He questioned,  however, what could be  missing and                                                               
what was not necessary.                                                                                                         
4:56:14 PM                                                                                                                    
JOHN  FOUTZ, Electric  Utility Manager,  City of  Seward, pointed                                                               
out that  this was a small  utility, and the only  utility on the                                                               
Railbelt  which  purchased  power  instead  of  generating.    He                                                               
expressed his  appreciation for  the format of  "what to  do, not                                                               
how  to  do  it."   He  stated  support  for  a deadline  on  the                                                               
utilities to "help  get us across the finish line."   He declared                                                               
support for the  proposed legislation and asked  that the utility                                                               
perspective also be considered.                                                                                                 
CHAIR  COGHILL declared  that a  tremendous effort  had been  put                                                               
forward and  this was a structure  to work from.   He stated that                                                               
it  was   important  to  recognize   the  perspective   of  other                                                               
stakeholders.     He  acknowledged   the  importance   of  energy                                                               
REPRESENTATIVE  HOPKINS expressed  his appreciation  for all  the                                                               
work, noting that this impacted the economy of the state.                                                                       

Document Name Date/Time Subjects
SB 123-RRC Power Point Presentation 1-27-20 final.pdf SRBE 1/27/2020 3:30:00 PM
SB 123