Legislature(2019 - 2020)BUTROVICH 205

01/31/2020 03:30 PM RAILBELT ELECTRIC SYSTEM

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Audio Topic
03:32:10 PM Start
03:33:04 PM SB123
04:45:45 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SB 123 ELECTRIC RELIABILITY ORGANIZATIONS TELECONFERENCED
Heard & Held
-- Public Testimony --
           SB 123-ELECTRIC RELIABILITY ORGANIZATIONS                                                                        
                                                                                                                                
3:33:04 PM                                                                                                                    
CHAIR  COGHILL announced  consideration of  SENATE BILL  NO. 123,                                                               
"An  Act relating  to the  regulation of  electric utilities  and                                                               
electric   reliability  organizations;   and  providing   for  an                                                               
effective date."                                                                                                                
                                                                                                                                
CHAIR COGHILL stated  that this is the fourth hearing  on SB 123,                                                               
including  two  joint hearings  that  were  held with  the  House                                                               
Energy  Committee. The  intention today  is for  RCA Commissioner                                                               
Scott to review  the process issues that were  raised at previous                                                               
hearings;  discuss  the  difference  between the  RCA  and  state                                                               
agencies adopting regulations; explain  how SB 123 will intersect                                                               
with the existing  RCA tariff process; discuss  the provisions in                                                               
the bill  that allow the  RCA to modify standards  and integrated                                                               
resource  plans; and  discuss the  pre-approval provisions  in SB
123 for renewal versus expanded capacity.                                                                                       
                                                                                                                                
He advised  that he intended  to open public testimony  after the                                                               
RCA PowerPoint presentation.                                                                                                    
                                                                                                                                
3:35:16 PM                                                                                                                    
ANTONY  SCOTT,  Commissioner,  Regulatory  Commission  of  Alaska                                                               
(RCA), Anchorage, Alaska,  said he would respond  to the concerns                                                               
raised in previous hearings and  outline the commission's current                                                               
practice  and requirements  relating to  those concerns.  He will                                                               
also revisit some  of the key bill principles  that drive towards                                                               
palatable,  cooperative  solutions.  He  acknowledged  that  some                                                               
concern has  been raised about  modifying timelines in  the bill,                                                               
which seems  reasonable. The RCA's  main focus is to  ensure that                                                               
the bill passes so the process can move forward.                                                                                
                                                                                                                                
He  referenced  the point  that  Senator  Micciche raised  in  an                                                               
earlier  hearing regarding  reliability standards  and the  RCA's                                                               
authorities under AS 42.05.291(c). He  relayed that, to date, the                                                               
RCA  has not  promulgated Railbelt-wide  reliability regulations.                                                               
However, RCA  Chair Pickett has  made it  clear that if  the bill                                                               
does not  pass, the RCA will  proceed to that process.  He opined                                                               
that  everyone  would  agree  that that  approach  would  not  be                                                               
optimal.  He  characterized  the   RCA's  regulatory  process  as                                                               
"sticky"  and  relatively slow  to  respond  as compared  to  the                                                               
legislative  process.  He  expressed  hope that  the  bill  moves                                                               
forward so that  the process outlined in SB 123  can be relied on                                                               
and used.                                                                                                                       
                                                                                                                                
3:37:43 PM                                                                                                                    
MR. SCOTT  said he heard  concern about  the need to  ensure that                                                               
the processes outlined in SB 123  would be timely executed by the                                                               
commission. In  response, he pointed  out that the bill  makes it                                                               
clear  that the  reliability standard  is  a tariff  and will  be                                                               
filed as  one. Therefore, the RCA  has 45 days to  accept, reject                                                               
according to form and filing,  or open a docket of investigation.                                                               
If  a  docket  is  opened, the  reliability  standards  would  be                                                               
decided within 270 days as  per the timeline in existing statute,                                                               
AS 42.05.175(b).                                                                                                                
                                                                                                                                
MR. SCOTT turned to Integrated  Resource Plans (IRPs) and project                                                               
pre-approvals. He said the bill  contains language related to the                                                               
RCA accepting,  rejecting, or opening  a docket  of investigation                                                               
to consider an  IRP. He offered his belief that  it is reasonable                                                               
to specify  an initial  process or  timeline and  for the  RCA to                                                               
accept something  without opening a docket  of investigation. The                                                               
existing  statutory timelines  are clear  that once  a docket  is                                                               
opened, the RCA has six months  to make a final determination, he                                                               
said.                                                                                                                           
                                                                                                                                
3:40:07 PM                                                                                                                    
CHAIR COGHILL relayed a concern  the Railbelt Reliability Council                                                               
(RCC)  voiced  that the  RCA  might  modify  a proposal  that  is                                                               
submitted before  opening a docket.  He asked for  assurance that                                                               
the RCA would provide feedback before opening a docket.                                                                         
                                                                                                                                
MR.  SCOTT  responded that  if  the  RCA modifies  anything,  the                                                               
commission  is  required to  hold  a  hearing and  that  requires                                                               
opening  a  docket.  If  the RCA  wanted  to  modify  reliability                                                               
standards, it is very clear that  the RCA must hold a hearing and                                                               
have a docket  of investigation that includes  testimony. That is                                                               
the RCA's  standard approach  to ensure that  people are  able to                                                               
make  their concerns  known. He  continued to  explain that  IRPs                                                               
come to  the commission as  a petition  for approval. He  said it                                                               
would not be unreasonable to specify  that the RCA must accept an                                                               
IRP, as filed,  within a certain amount of time  or open a docket                                                               
of investigation. He reiterated that  under existing law, the RCA                                                               
must make a final determination within six months.                                                                              
                                                                                                                                
3:42:26 PM                                                                                                                    
MR. SCOTT said  he heard the concern about ensuring  that the RCA                                                               
does not make a modification to  a standard or contents of an IRP                                                               
that is  not technically sound,  which is totally  reasonable. He                                                               
reviewed the RCA's normal practices  for tariff filings. When the                                                               
RCA opens a  docket of investigation, it has powers  to set rates                                                               
and establish  reliability standards.  Once the docket  is opened                                                               
and the RCA  has made its ruling, the  normal commission practice                                                               
is  to issue  an  order that  requires the  party  to modify  the                                                               
tariff consistent  with the commission's  findings. The  RCA also                                                               
specifies a  deadline for  return. He said  this is  considered a                                                               
compliance filing.                                                                                                              
                                                                                                                                
He said  he appreciates  that the  language in  SB 123  may raise                                                               
concerns that the  RCA would not necessarily need to  do that. He                                                               
explained that while  the RCA does not need to  send tariffs back                                                               
for  revisions,  it  has  almost  always  been  the  commission's                                                               
practice to do so. He said,  if it's the legislature's desire, he                                                               
didn't  see   any  problem  clarifying   that  an  ERO   has  the                                                               
opportunity to  make revisions  consistent with  the commission's                                                               
findings.  However,  it  is  important  for the  RCA  to  have  a                                                               
mechanism to ensure that the  party will comply. He characterized                                                               
it as a backstop in terms of the RCA's broader authority.                                                                       
                                                                                                                                
3:45:45 PM                                                                                                                    
SENATOR  MICCICHE  said the  committee  can  discuss how  an  ERO                                                               
filing  fits into  the tariff  structure, but  a new  ERO with  a                                                               
traditionally strained  relationship is  different. He  said he's                                                               
concerned about the language 123  because this new effort is very                                                               
important to all  parties. He said he can imagine  that the first                                                               
rendition of  a filing might be  something the RCA wants  to send                                                               
back for  amendments. However,  the current  law that  allows the                                                               
RCA to modify  the filing without an appeal is  a big problem. He                                                               
described a  hypothetical scenario  in which  the ERO  presents a                                                               
plan,  the RCA  amends it  so significantly  that the  deal falls                                                               
apart, and the ERO asks the legislature for a remedy.                                                                           
                                                                                                                                
He advocated for  language that will provide  an adequate process                                                               
for  an ERO  and the  RCA to  "bounce something  back and  forth"                                                               
without  getting into  the commission's  formal process.  That is                                                               
imperative for this to be successful, said.                                                                                     
                                                                                                                                
CHAIR COGHILL agreed with Senator Micciche.                                                                                     
                                                                                                                                
3:47:37 PM                                                                                                                    
Representative Hopkins joined the committee.                                                                                    
                                                                                                                                
3:47:49 PM                                                                                                                    
MR. SCOTT  replied it's a valid  concern but the question  is how                                                               
to  design  statutory  mechanisms  that  ensure  an  outcome  and                                                               
clarify  who has  the  final say.  In terms  of  "back and  forth                                                               
dialogue," he  recalled one provision  of SB 123  would establish                                                               
that  the RCA  had  an  ex officio  seat  on whatever  governance                                                               
structure an  ERO established.  The intent is  to allow  open and                                                               
regular  dialog  in  the  ERO  process  to  address  any  of  the                                                               
commission's potential  concerns, he  said. As  he reads  it, the                                                               
bill provides  a mechanism to ensure  those conversations happen,                                                               
while still  providing certainty that  decisions can be  made and                                                               
clarity as to who makes them.                                                                                                   
                                                                                                                                
SENATOR MICCICHE said he sees  two approaches to solve the issue,                                                               
which  is to  either provide  a mechanism  that allows  "back and                                                               
forth"  discussions between  the ERO  and the  RCA or  remove the                                                               
"must have by" date. He emphasized  that six utilities are on the                                                               
verge  of something  really successful,  so the  legislature must                                                               
develop   statutes  that   work   regardless   of  the   specific                                                               
commissioners who serve on the RCA.                                                                                             
                                                                                                                                
CHAIR  COGHILL  related  his understanding  that  Mr.  Scott  has                                                               
agreed that this is necessary.  He expressed interest in ensuring                                                               
that the language in the  bill will allow discussions between the                                                               
ERO and the  RCA to address issues and concerns.  However, at the                                                               
end of the day,  the RCA has to [have authority].  He said he was                                                               
committed to finding statutory language to accomplish this.                                                                     
                                                                                                                                
3:51:29 PM                                                                                                                    
MR. SCOTT  recalled earlier concern  about ensuring that  the RCA                                                               
not  arbitrarily  dismiss  an  IRP   developed  by  the  ERO.  He                                                               
responded to the  concern by saying that the RCA  would give "due                                                               
weight" to the  process that led to the IRP  and the weighting of                                                               
various  minority  proposals  when  the RCA  decides  whether  to                                                               
investigate  or approve  an IRP.  That  is what  the RCA  already                                                               
does, so  it merely reflects  the current process.  It's entirely                                                               
possible new things  could arise that had not  been considered or                                                               
contemplated, he said. However, it's  reasonable that the RCA not                                                               
change things willy-nilly, he said.                                                                                             
                                                                                                                                
3:53:01 PM                                                                                                                    
MR. SCOTT recalled  earlier comments that the ERO  should be able                                                               
to ensure  needed projects  can be  built by  non-incumbents. For                                                               
example, if  Chugach Electric  Association, Inc.  is not  able to                                                               
build  a  facility  within  its service  territory,  but  an  IRP                                                               
identifies  it as  being  necessary, a  vehicle  should exist  to                                                               
ensure that the project gets built.                                                                                             
                                                                                                                                
He said he  was not clear that is needed  because the RCA already                                                               
has  the authority,  after a  hearing, to  order construction  of                                                               
projects  needed  by  the system.  Nothing  in  statute  prevents                                                               
infrastructure from  being owned and  operated by a  new utility.                                                               
The RCA  does not have a  statute that says, "Within  the Chugach                                                               
Service Territory  there is  no other  electric utility  that can                                                               
operate."   However,  the   current  statutes   state  that   the                                                               
commission  should try  to ensure  that there  aren't duplicative                                                               
facilities. He said this is  precisely not a duplicative facility                                                               
so he was unsure of the necessity to create express authority.                                                                  
                                                                                                                                
MR.  SCOTT said  he was  surprised  to see  language that's  been                                                               
circulated that  would give an  ERO the authority to  require new                                                               
facilities. If  he were  an incumbent utility,  he would  want to                                                               
preserve  the ability  to appeal  to the  commission rather  than                                                               
rely on an  ERO to determine what the utility  must construct. In                                                               
fact, there  may be some  due process concerns with  a non-profit                                                               
organization  with   police  power   to  mandate  what   must  be                                                               
constructed, although he did not think that was the intent.                                                                     
                                                                                                                                
3:55:41 PM                                                                                                                    
CHAIR COGHILL said  that issue has not surfaced as  a concern. He                                                               
guessed that  would be part  of an ERO's discussion  and planning                                                               
process  and is  something the  RCA  would consider.  He did  not                                                               
think  language to  address that  concern needed  to be  added to                                                               
this bill.                                                                                                                      
                                                                                                                                
3:56:22 PM                                                                                                                    
MR.  SCOTT  said  he  heard   concern  that  interested  parties,                                                               
including  the utilities,  would not  have a  clear voice  in any                                                               
regulatory  process  the  commission initiates.  He  assured  the                                                               
committee  that the  existing  regulation  practice provides  for                                                               
this. The  RCA is different from  most agencies in that  the five                                                               
commissioners consider  all regulations  in a public  process and                                                               
any private  or informal discussions on  proposed regulations are                                                               
prohibited. When  the RCA opens  a regulation docket,  the issues                                                               
are   considered,  draft   regulations  are   noticed,  and   the                                                               
commission must  respond to all  substantive comments  in public.                                                               
Any  subsequent changes  require more  public comment.  The RCA's                                                               
process provides ample  opportunity for all parties  to be heard,                                                               
and each regulation requires three  votes to pass. Further, it is                                                               
not  uncommon  for  the  commission  to  receive  proposed  draft                                                               
regulations to adopt and he anticipates the RCC will do that.                                                                   
                                                                                                                                
3:58:49 PM                                                                                                                    
SENATOR MICCICHE asked  how often regulations are  adopted with a                                                               
simple majority  and whether  it was rare  for the  commission to                                                               
have a split decision.                                                                                                          
                                                                                                                                
MR. SCOTT responded that he  is aware of some regulation projects                                                               
that had split decisions but it happens both ways.                                                                              
                                                                                                                                
3:59:56 PM                                                                                                                    
MR. SCOTT  discussed the  governance structure.  He said  the RCA                                                               
recommends maintaining flexibility for  the commission to approve                                                               
EROs  with different  governance structures.  This is  needed for                                                               
the backstop to be effective  and it recognizes that the Railbelt                                                               
may continue to change.                                                                                                         
                                                                                                                                
4:01:25 PM                                                                                                                    
MR.  SCOTT  turned to  project  pre-approval.  He explained  that                                                               
project  pre-approval   is  a  determination  of   need  for  and                                                               
suitability of  a given project.  It is not a  determination that                                                               
the  cost of  that  project,  whatever it  turns  out  to be,  is                                                               
prudent  and  collectable  in  rates.   The  standards  that  the                                                               
commission would  use to determine  the need for a  given project                                                               
include whether it  is safe and if it is  needed to provide safe,                                                               
reliable,  and adequate  service.  These  are existing  standards                                                               
under AS  42.04.291. An IRP  would help the commission  make that                                                               
decision, he  said. The bill  provides that  project pre-approval                                                               
can  be  requested  outside  of  an  IRP  process,  which  is  an                                                               
important backstop because  IRPs go stale, new  events may occur,                                                               
and it  might be necessary to  act in a hurry.  However, there is                                                               
no obligation to build anything that comes from an IRP.                                                                         
                                                                                                                                
4:03:02 PM                                                                                                                    
MR. SCOTT said a recent  superior court ruling by Judge Lamoureux                                                               
creates a need for this process.  He said he would skip over this                                                               
due to  time constraints today,  but he  would provide a  copy of                                                               
the ruling  to the  committee. He said  the IRP  planning process                                                               
and  the  large project  pre-approval  process  will ensure  that                                                               
utilities get  cost recovery.  It will  also provide  safe harbor                                                               
against unfortunate court decisions.                                                                                            
                                                                                                                                
4:03:41 PM                                                                                                                    
MR. SCOTT  said project pre-approval  can happen outside  an IRP,                                                               
but  since  an  IRP  considers alternatives,  it  will  basically                                                               
"grease  the skids."  He said  the  strong language  in the  bill                                                               
provides  deference to  any project  that is  consistent with  an                                                               
IRP. He noted that some suggestions  have been made to modify the                                                               
scope  of projects  requiring pre-approval,  clarifying that  the                                                               
commission would not  be involved in routing  or specific project                                                               
siting.                                                                                                                         
                                                                                                                                
He  pointed  out that  although  other  states may  identify  the                                                               
location of  a transmission  line, the RCA  is not  interested or                                                               
involved in that  process in Alaska. He noted  that some interest                                                               
has been  expressed in clarifying the  scope of what counts  as a                                                               
large  project   includes  battery  storage  or   reactive  power                                                               
devices.  He said  that is  reasonable, as  is the  adjustment of                                                               
appropriate transmission length from five miles to ten.                                                                         
                                                                                                                                
4:05:20 PM                                                                                                                    
CHAIR COGHILL  said some concern  about reliability  and managing                                                               
power fluctuations  or interruptions arises  at both ends  of the                                                               
Railbelt.  There was  also concern  about investing  in something                                                               
that the bill would bar. He  said he's looked for ways to provide                                                               
some  comfort  that   the  utilities  can  take   care  of  their                                                               
constituencies while working  in the ERO. He asked  if one avenue                                                               
would  be to  raise the  issue with  the ERO  and put  it in  the                                                               
planning process.  Additionally, the RCA  could open a  docket to                                                               
address the issue, based on recommendations from the ERO.                                                                       
                                                                                                                                
MR. SCOTT answered  that the bill absolutely  provides the avenue                                                               
for any utility  to come before the commission and  say, "We need                                                               
to  do this."  This  can  be done  outside  an  IRP process.  For                                                               
example, a  utility may  have a project  it thinks  is necessary,                                                               
even if the  IRP does not think it is  needed. He reiterated that                                                               
the commission exists  to provide an avenue for  approval of such                                                               
a project.                                                                                                                      
                                                                                                                                
CHAIR COGHILL  responded that when  the utilities  put themselves                                                               
together  in  a  reliability  organization,   they  will  have  a                                                               
reliability  council   that  is  bound  by   certain  contractual                                                               
agreements. It  is up to  them to  seek flexibility, he  said. He                                                               
added that he'd  try to find ways to address  this in statute but                                                               
if a reliability organization is  approved under this statute and                                                               
it  becomes an  RRC,  the reliability  council must  specifically                                                               
state their  needs. He said he  wants to send a  signal that this                                                               
should not be the only place it  is taken up. He asked the record                                                               
to reflect that it is  the committee's intention to find suitable                                                               
language.                                                                                                                       
                                                                                                                                
4:08:38 PM                                                                                                                    
MR. SCOTT  addressed concerns about  scope of  projects requiring                                                               
project pre-approval,  especially if the project  is refurbishing                                                               
something  that already  exists. He  said that  seems reasonable,                                                               
but  you  don't  want  a  refurbishment  clause  to  swallow  the                                                               
process. He cited the example  of resource performance reviews of                                                               
the Clean Air  Act. He suggested that fine  distinctions would be                                                               
better addressed in regulation.  Although the commission does not                                                               
currently have  a definition  of what  constitutes refurbishment,                                                               
the RCA  could be directed to  establish one. It would  allow the                                                               
commission to collect  information to help it  determine where it                                                               
is  reasonable to  draw those  lines and  craft language  that is                                                               
consistent.                                                                                                                     
                                                                                                                                
CHAIR COGHILL  said he's  tried to protect  the authority  of the                                                               
ERO but  he also wants  the public to understand  the interaction                                                               
between the  ERO and  the RCA as  the regulator.  Many approaches                                                               
can  be taken,  but his  goal  is to  provide clarity  as to  the                                                               
respective roles.                                                                                                               
                                                                                                                                
4:11:18 PM                                                                                                                    
MR.  SCOTT  advised  that  the last  slide  in  the  presentation                                                               
reiterates  his  previous  testimony  about  the  incentives  for                                                               
collaborative efforts  in SB  123. He  related that  as currently                                                               
drafted,   the  RCA   would  not   delegate  its   authority  for                                                               
reliability  and planning  to the  ERO.  However, the  commission                                                               
would assign  most of the work  to the ERO and  create incentives                                                               
for  the reliability  organization to  replicate public  interest                                                               
weighing  and  assessments  the  RCA   would  engage  in  so  the                                                               
commission could easily adopt them.                                                                                             
                                                                                                                                
CHAIR  COGHILL  said this  tells  the  utilities to  collaborate,                                                               
develop a workable  plan, and the RCA will work  with it. He said                                                               
this is  a new  authority because the  legal structure  calls for                                                               
collaboration under  the ERO, but the  RCA will still be  part of                                                               
the process.                                                                                                                    
                                                                                                                                
4:12:35 PM                                                                                                                    
SENATOR MICCICHE  opined that  public pressure  provides adequate                                                               
motivation for these organizations to  succeed in this effort. He                                                               
said he was pleased to hear  that the commission would not create                                                               
redundant work  when talent exists in  the organizations, because                                                               
the utilities  had that fear.  He commented that a  new technical                                                               
branch of the RCA is needed.                                                                                                    
                                                                                                                                
CHAIR COGHILL  said he  was pleased with  the confidence  in this                                                               
structure.                                                                                                                      
                                                                                                                                
He  again  highlighted that  the  Southeast  Alaska Power  Agency                                                               
(SEAPA) has its own structural  grid but has still voiced concern                                                               
that it  could be  affected by the  bill even  though Legislative                                                               
Legal  Services has  said  the  bill clearly  does  not apply  to                                                               
SEAPA. He asked Mr. Scott to give his perspective.                                                                              
                                                                                                                                
MR. SCOTT said to form an  ERO requires the interconnection of at                                                               
least  two  utilities,  one  or  which  is  subject  to  the  RCA                                                               
statutes.  None  of  the  SEAPA   utilities  are  subject  to  AS                                                               
04.240.291,  which  is  the  RCA  statute  governing  quality  of                                                               
service. He said he cannot see  any possible way that there would                                                               
be nexus with SEAPA. He added that  the bill is clear that for an                                                               
electric   system   that  requires   an   ERO,   there  must   be                                                               
interconnected   entities.  They   are  not   necessarily  public                                                               
utilities,  but must  comply  with  the reliability  requirements                                                               
under this  statute. That's very  important, he said,  because an                                                               
entity  that is  exempt  from the  statute can't  be  part of  an                                                               
interconnected  system.  For  example, Cook  Inlet  Region,  Inc.                                                               
(CIRI) is exempt,  but because it interconnects  with the system,                                                               
it  would  be subject  to  the  reliability requirements  of  the                                                               
system as a whole.                                                                                                              
                                                                                                                                
CHAIR  COGHILL  stated,  "At  this   point,  SEAPA  is  not  rate                                                               
regulated."                                                                                                                     
                                                                                                                                
MR. SCOTT confirmed  that SEAPA is not subject  to the provisions                                                               
that would  require an ERO. However,  if SEAPA wanted to  form an                                                               
ERO, it could apply and the RCA would consider it.                                                                              
                                                                                                                                
4:17:10 PM                                                                                                                    
SENATOR  MICCICHE asked  if  this would  prevent  a utility  from                                                               
deciding to  go out to its  membership to no longer  be regulated                                                               
by the RCA.                                                                                                                     
                                                                                                                                
MR. SCOTT answered no.                                                                                                          
                                                                                                                                
SENATOR  MICCICHE  related  his understanding  that  the  utility                                                               
would still  need to meet  the reliability standards  because the                                                               
utility is interconnected to the  transmission network, but every                                                               
other process will no longer be under the RCA's jurisdiction.                                                                   
                                                                                                                                
MR. SCOTT  answered that none  of the ratepaying  processes would                                                               
be subject  to the RCA. For  example, if a co-operative  chose to                                                               
no longer  be regulated,  it would still  have a  certificate and                                                               
some of the  RCA statutes would apply.  However, the co-operative                                                               
would  be exempt  from  the rules  requiring  tariff filings  and                                                               
approval for tariff changes.                                                                                                    
                                                                                                                                
4:18:08 PM                                                                                                                    
CHAIR  COGHILL asked  the record  to  reflect that  SEAPA is  not                                                               
regulated and not part of the requirements in SB 123.                                                                           
                                                                                                                                
MR. SCOTT agreed that is correct.                                                                                               
                                                                                                                                
4:18:50 PM                                                                                                                    
CHAIR COGHILL opened public testimony on SB 123.                                                                                
                                                                                                                                
4:19:47 PM                                                                                                                    
MIKE CRAFT,  Owner/Operator, Delta Wind Farm,  Fairbanks, Alaska,                                                               
stated that since  the wind farm went online 13  years ago as the                                                               
first grid-scale wind  project on the Railbelt grid,  it has been                                                               
limited  to two  megawatts, in  part  due to  integration of  the                                                               
power. He said SB 123 is  important because it will open the grid                                                               
to renewable energy projects on  the Railbelt grid. He added that                                                               
he  does  have concern  with  the  lack  of efficiencies  in  the                                                               
current  power distribution  system due  to pancake  transmission                                                               
fees and up to 40 percent in line loss.                                                                                         
                                                                                                                                
He said  SB 123 will  diversify fuel sources, which  will improve                                                               
reliability  and  improve  energy  security  related  to  service                                                               
interruption due to  snow slides and earthquakes.  He pointed out                                                               
that the  bill does not  address the state's  aspirational energy                                                               
policy,  and  acknowledged  that  it   might  not  be  the  right                                                               
mechanism to  do so.  He offered his  belief that  public benefit                                                               
cannot be  measured by  cost alone since  the benefits  must also                                                               
consider   security  and   environmental   attributes.  He   said                                                               
Fairbanks and  North Pole suffer  from air pollution as  a result                                                               
of thermal  inversion, so bringing renewable  energy online could                                                               
help alleviate this problem. He  said independent power producers                                                               
have been waiting  to move renewable energy  projects forward for                                                               
ten years.  During this time, Fairbanks  has developed technology                                                               
and the workforce to do the  work, so the community currently has                                                               
shovel-ready projects.  In closing he  said that SB 123  might be                                                               
the way for these projects to happen.                                                                                           
                                                                                                                                
4:24:17 PM                                                                                                                    
JOEL GROVES, Member, Fishhook  Renewable Energy (FRE), Anchorage,                                                               
Alaska, stated  that FRE is  an independent power  producer (IPP)                                                               
that has  worked on new  hydropower in Southcentral  Alaska since                                                               
2006.  He said  he  believes  that the  six  utilities should  be                                                               
commended  for  their  efforts to  address  the  Railbelt  energy                                                               
issues. The [proposed] RRC represents  a real milestone since six                                                               
utilities  have come  together to  reach agreement,  but it  also                                                               
highlights the RRC structural deficiencies  that still need to be                                                               
addressed.                                                                                                                      
                                                                                                                                
MR. GROVES  said SB 123  is vital  to move some  reforms forward.                                                               
From  the  IPP  perspective,  market  conditions  remain  decades                                                               
behind the Lower 48; IPPs  lack open access transmission tariffs,                                                               
non-discriminatory  access,  and  independent  governance  of  an                                                               
integrated   regional   grid.   He  characterized   the   state's                                                               
aspirational  energy   policy  as  "toothless."  From   a  public                                                               
interest  perspective, the  Railbelt grid  has excess  generation                                                               
capacity,  deficient   transmission  capacity,   and  inefficient                                                               
operation of  its existing assets.  This results in  higher rates                                                               
in the Railbelt  and statewide since the  Power Cost Equalization                                                               
Program  subsidies are  based on  Railbelt and  Juneau rates  for                                                               
electricity.  He  pointed out  that  when  the Railbelt  suffers,                                                               
everyone in the Bush also  suffers. SB 123 will benefit everyone,                                                               
he said. In closing, he endorsed Mr. Craft's comments.                                                                          
                                                                                                                                
4:27:42 PM                                                                                                                    
BERNIE  SMITH, representing  self,  Anchorage,  Alaska, spoke  in                                                               
support of  SB 123.  He agreed with  Commissioner Scott  that the                                                               
bill needs to  move forward. He said he has  been involved in the                                                               
Railbelt issues since  the late 1990s, serving  as a commissioner                                                               
on the  RCA, as staff  to the Energy  Policy Task Force  in 2003,                                                               
and  holding other  positions in  the energy  field. He  said the                                                               
bill and the RCA letter  dated January 15, 2020 work hand-in-hand                                                               
to  allow  the six  Railbelt  utilities  to  unite to  create  an                                                               
efficient  electric reliability  group.  All  six utilities  have                                                               
signed a Memorandum  of Understanding (MOU) to form  the RRC with                                                               
12 shareholders. SB 123 will  add an initiative for the utilities                                                               
and stakeholders to  continue to work together, he  said. It will                                                               
give  the RCA  power  to  oversee and  ensure  that the  Railbelt                                                               
electric  customers have  a reliable  system. He  agreed with  an                                                               
earlier  testifier that  in  the past  five  years, the  Railbelt                                                               
utilities   have  seen   great  improvement   in  their   working                                                               
relationships.  He commended  the committee  for helping  to make                                                               
this happen.                                                                                                                    
                                                                                                                                
4:30:53 PM                                                                                                                    
BRIAN  MURKOWSKI, Consultant,  Ocean Renewable  Power Corporation                                                               
Anchorage, Alaska,  stated that he  has 25 years of  local energy                                                               
and finance  experience and he  encourages the committee  to pass                                                               
SB  123 in  its  original  form. He  expressed  concern that  the                                                               
committee  could get  bogged down  with amendments  and the  bill                                                               
could  lose momentum.  SB 123  will provide  needed stability  in                                                               
pricing, reliability,  and security, he said.  He echoed previous                                                               
testimony from Mr. Craft and Mr.  Smith. This bill will allow new                                                               
entrants to  contribute to  the available  power grid  and reduce                                                               
the cost of power to  consumers. The governance structure may not                                                               
be  ideal, but  those details  hopefully could  be negotiated  by                                                               
stakeholders  outside the  legislature.  He said  Alaska has  the                                                               
highest cost of energy in North  America and this bill could help                                                               
reduce those costs. He offered  his belief that inexpensive power                                                               
will positively benefit  consumers and the economy  and should be                                                               
encouraged.                                                                                                                     
                                                                                                                                
4:33:24 PM                                                                                                                    
TONY  SLAPONBARKER,  Vice  President,  Energy  &  Sustainability,                                                               
Coffman Engineers,  Anchorage, Alaska said  he has been  a member                                                               
of the Rural  Energy for America Program (REAP) for  10 years and                                                               
participated  in  the  policy  committee. He  is  speaking  as  a                                                               
lifelong Alaskan who wants the state  to be successful. SB 123 is                                                               
an excellent  start to modernize  the Alaska grid, since  it will                                                               
provide  diversification  of  Alaska energy  production,  improve                                                               
security and geographical distribution,  while also providing for                                                               
multiple fuel sources. Further, it  will allow the most efficient                                                               
power generation  to be used  at any  one time. This  should help                                                               
save  money, provide  better access  to  the grid  for IPPs,  and                                                               
reduce  pollution. It  could help  assist with  backup power  and                                                               
allow utilities  to share resources  across the grid.  He related                                                               
several  examples,  including  wind  power  on  Fire  Island,  to                                                               
illustrate his point.                                                                                                           
                                                                                                                                
4:36:43 PM                                                                                                                    
SHAINA KILCOYNE, Energy  and Sustainability Manager, Municipality                                                               
of Anchorage, Anchorage, Alaska,  stated that the Municipality of                                                               
Anchorage  assembly passed  the  Anchorage  Climate Action  Plan,                                                               
which is  a road  map for reducing  greenhouse gas  emissions and                                                               
preparing  for  the  impacts  of   climate  change.  This  effort                                                               
includes  work  to  reduce energy  use,  improve  public  health,                                                               
promote energy  independence, strengthen  the economy,  and build                                                               
more livable and resilient communities.  The MOA recognizes it is                                                               
limited  in its  efforts to  meet  emission goals  so it  readily                                                               
works with utilities  as well as state and  regional partners. In                                                               
its climate action  plan, MOA seeks to support  a system operator                                                               
to  provide regional  planning,  improve  system efficiency,  and                                                               
increase opportunities for independent  power producers. While an                                                               
ERO  is different  than a  system operator,  SB 123,  as written,                                                               
will get  MOA closer  to its energy  goals by  requiring regional                                                               
planning,   improving    system   efficiency,    and   increasing                                                               
opportunities  for   independent  power   producers.  It   is  an                                                               
important step  forward in  bringing more  stable-priced non-fuel                                                               
dependent renewable  energy to  Alaskans. Southcentral  Alaska is                                                               
very fortunate to have moderately-priced  natural gas, with three                                                               
new natural gas plants generating  over 80 percent of Anchorage's                                                               
electricity.  Even  though the  energy  efficiency  of these  new                                                               
plants reduces fuel  usage, it is critical  to have collaboration                                                               
and  regional  planning  with  the utilities  to  bring  on  more                                                               
renewable  energy,  which  is something  the  Railbelt  utilities                                                               
recently  have been  working towards.  SB 123  will help  achieve                                                               
this more quickly and this will benefit Anchorage ratepayers.                                                                   
                                                                                                                                
4:39:20 PM                                                                                                                    
PATRICE  LEE, Citizens  for Free  Air, Fairbanks,  Alaska, stated                                                               
that  the  Interior  needs affordable,  reliable,  and  renewable                                                               
energy  because of  challenges associated  with poor  air quality                                                               
that leads to  health issues. Her organization is  counting on SB
123  to bring  a more  reliable energy  system to  the state  and                                                               
reduce energy costs to Interior  residents. She expressed concern                                                               
that a five  member team might not be large  enough to accomplish                                                               
the work necessary to be successful.                                                                                            
                                                                                                                                
CHAIR COGHILL  agreed that SB 123  is designed to obtain  as much                                                               
collaboration as possible.                                                                                                      
                                                                                                                                
[SB 123 was held in committee with public testimony open.]                                                                      

Document Name Date/Time Subjects
SB 123-Version M.PDF SRBE 1/31/2020 3:30:00 PM
SB 123
SB 123 - CIRI Letter of Support SB 123 1.31.20.pdf SRBE 1/31/2020 3:30:00 PM
SB 123
SB 123 - Support for SB 123 Jessica Austin 01-28-2020.pdf SRBE 1/31/2020 3:30:00 PM
SB 123