Legislature(2009 - 2010)BARNES 124
03/18/2010 03:00 PM House ENERGY
| Audio | Topic |
|---|---|
| Start | |
| HB182 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 182 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ENERGY
March 18, 2010
3:11 p.m.
MEMBERS PRESENT
Representative Bryce Edgmon, Co-Chair
Representative Charisse Millett, Co-Chair
Representative Nancy Dahlstrom
Representative Kyle Johansen
Representative Jay Ramras
Representative Pete Petersen
Representative Chris Tuck
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 182
"An Act establishing the Greater Railbelt Energy and
Transmission Corporation and relating to the corporation;
relating to transition, financial plan, and reporting
requirements regarding planning for the initial business
operations of the Greater Railbelt Energy and Transmission
Corporation; relating to a report on legislation regarding the
Regulatory Commission of Alaska and the Greater Railbelt Energy
and Transmission Corporation; authorizing the Alaska Energy
Authority to convey the Bradley Lake Hydroelectric Project and
the Alaska Intertie to the Greater Railbelt Energy and
Transmission Corporation; and providing for an effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 182
SHORT TITLE: RAILBELT ENERGY & TRANSMISSION CORP.
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
03/12/09 (H) READ THE FIRST TIME - REFERRALS
03/12/09 (H) ENE, L&C, FIN
03/26/09 (H) ENE AT 3:00 PM BARNES 124
03/26/09 (H) Heard & Held
03/26/09 (H) MINUTE(ENE)
04/09/09 (H) ENE AT 3:00 PM BARNES 124
04/09/09 (H) Heard & Held
04/09/09 (H) MINUTE(ENE)
03/18/10 (H) ENE AT 3:00 PM BARNES 124
WITNESS REGISTER
JIM STRANDBERG, Project Manager
Alaska Energy Authority (AEA)
Department of Commerce, Community, & Economic Development
(DCCEC)
Anchorage, Alaska
POSITION STATEMENT: Gave a PowerPoint presentation titled,
"Greater Railbelt Energy and Transmission Corporation - GRETC"
during the hearing on HB 182.
ACTION NARRATIVE
3:11:08 PM
CO-CHAIR CHARISSE MILLETT called the House Special Committee on
Energy meeting to order at 3:11 p.m. Present at the call to
order were Representatives Millett, Edgmon, Petersen, Tuck,
Dahlstrom, and Ramras. Representative Johansen arrived as the
meeting was in progress.
3:11:20 PM
HB 182-RAILBELT ENERGY & TRANSMISSION CORP.
3:11:21 PM
CO-CHAIR MILLETT announced the first order of business would be
HOUSE BILL NO. 182, "An Act establishing the Greater Railbelt
Energy and Transmission Corporation and relating to the
corporation; relating to transition, financial plan, and
reporting requirements regarding planning for the initial
business operations of the Greater Railbelt Energy and
Transmission Corporation; relating to a report on legislation
regarding the Regulatory Commission of Alaska and the Greater
Railbelt Energy and Transmission Corporation; authorizing the
Alaska Energy Authority to convey the Bradley Lake Hydroelectric
Project and the Alaska Intertie to the Greater Railbelt Energy
and Transmission Corporation; and providing for an effective
date."
3:12:26 PM
CO-CHAIR MILLETT moved to adopt CSHB 182, 26-GH1041\E, Bailey,
3/18/10, as the working document.
3:12:34 PM
REPRESENTATIVE RAMRAS objected for the purpose of discussion.
3:12:43 PM
JIM STRANDBERG, Project Manager, Alaska Energy Authority (AEA),
Department of Commerce, Community, & Economic Development
(DCCED), began an overview of the Committee Substitute (CS) for
HB 182. He said he would present slides and with them a short
discussion on what the new Greater Railbelt Energy and
Transmission Corporation (GRETC) is about; for example, its
business purpose, its powers, external controls on its
operation, and its tasks.
3:15:02 PM
CO-CHAIR MILLETT advised teleconference participants that
opinions from the legal service are on-line.
3:15:27 PM
MR. STRANDBERG presented slide 2 which was a schematic of the
process that led to GRETC. He recalled that the bill presented
last year was very different than the CS now before the
committee. The original bill was held in committee to give all
six of the Railbelt utilities time to form a taskforce to review
the bill. AEA, the governor's office, and the Department of Law
(DOL), worked with the taskforce as it developed the proposed
CS. Mr. Strandberg referred to the Railbelt Electrical Grid
Authority (REGA) study that was completed by AEA in March, 2009.
The study was to understand the economics of regional generation
and transmission (G&T); in fact, the study found that by forming
a unifying organization such as GRETC, ratepayers could save a
significant amount of money. Also, AEA recently completed the
Regional Integrated Resource Plan (RIRP), to identify future
power generation and transmission projects. He explained that
the RIRP defined projects of a critical need for the Railbelt,
such as fuel supply and near-term transmission lines, in
addition to the need for a unifying entity. Mr. Strandberg
opined there is relevant information available in the REGA and
RIRP documents; whereas the REGA study looked at a range of
business models from loose, voluntary organizations to tightly
integrated organizations, the RIRP report identified a list of
economic projects, all of which are beyond the utilities'
ability to fund. Slide 3 illustrated the shortfall between the
utilities' ability to raise money and the capital cost required
for the projects recommended in the RIRP. He pointed out that
GRETC would have the ability to save money through unified
operations, and as a strong financial vehicle, could address the
capital shortfall. The potential gap is up to $5 billion,
depending on the projects that are ultimately built in the
Railbelt, and he stressed that GRETC, with state financial
backing, is the best approach to address the capital shortfall.
3:21:11 PM
CO-CHAIR MILLETT noted GRETC and a joint action authority (JAA)
are basically the same mechanism. She asked whether there is a
need for GRETC, when the utilities are already authorized in
statute to form this type of union.
3:22:08 PM
MR. STRANDBERG responded that the JAA is a project-by-project
organization; however, GRETC has significant additional powers
and is configured as a conduit where state funds for the
Railbelt would flow into the corporation. The JAA is a totally
voluntary organization; for example, two utilities could join to
build a project, with the assumption that they are
interconnected on a temporary basis. GRETC is a better
framework to unify the Railbelt.
3:23:20 PM
REPRESENTATIVE JOHANSEN asked for the statutory reference for a
JAA.
3:23:39 PM
MR. STRANDBERG said AS 42.45.300, 42.45.310, and 42.45.320. He
displayed slide 4 which listed topics for discussion to
understand how the new legislation is different from last year:
governance; powers of the corporation; external controls for
corporate activities; initial tasks for GRETC. The governance
of the corporation is for a private, not for profit entity that
is not a state corporation. Also, each of the six Railbelt
utilities would have two board members and two votes, to enable
the smaller utilities to have a strong voting capability. GRETC
has up to six public utility members and twelve board members,
with one public member appointed by the governor from candidates
nominated by the public utility members. Although public
utility members do not have terms of service, the public member
has a four-year term. He clarified that the public utility
members are Railbelt utilities with distribution service areas
and retail customers. Other entities that do not have service
areas under jurisdiction by the Alaska Regulatory Commission
(RCA) would not be allowed to vote.
3:27:17 PM
CO-CHAIR MILLETT asked whether a for-profit utility such as
Doyon Utilities, Llc., would be allowed to be a part of GRETC.
3:27:47 PM
MR. STRANDBERG responded that it can be a member.
3:27:53 PM
REPRESENTATIVE TUCK asked whether it would be a voting member.
3:27:59 PM
MR. STRANDBERG said no. He presented slide 7 and said the
primary purpose of GRETC is to provide wholesale electric power
to Railbelt customers. To do this the corporation must procure
fuel supplies, develop operating standards for its service area,
and develop generation and transmission projects.
3:29:23 PM
CO-CHAIR MILLETT recessed the meeting to a call of the chair.
4:34:04 PM
CO-CHAIR MILLETT called the meeting back to order at 4:34 p.m.
Present at the call back to order were Representatives Millett,
Edgmon, Dahlstrom, and Tuck. Representatives Petersen, Ramras,
and Johansen arrived as the meeting was in progress.
4:34:38 PM
MR. STRANDBERG continued to explain that the primary business
purpose of GRETC is to provide wholesale power. To do this, the
corporation may do many things such as procuring fuel supplies
and developing operating standards for the service territory of
the corporation. The service territory is an aggregate of the
service areas of the public utility members that have joined the
corporation. He stressed that this is an important power, and
distinguishes GRETC from a JAA. Furthermore, a major difference
between the previous bill and the proposed CS is the "elective
power;" for example, the use of the word "may" instead of
"shall" throughout the proposed statute. Operating standards
are in statute presently in relation to intertie agreements and
the "basic rules of the road" for the interconnection of power
service.
4:36:55 PM
CO-CHAIR MILLETT asked for the purpose of a corporation, that is
not an oil and gas company, to bid on state lands for oil and
gas leases.
MR. STRANDBERG advised that the governor supports all aspects of
the bill with the exception of that clause. He questioned
whether this issue is appropriate for GRETC.
4:38:09 PM
CO-CHAIR MILLETT then asked whether GRETC would be a oil and gas
producer.
MR. STRANDBERG said the intent is for GRETC to be a generation
and transmission company that seeks to develop reliable, long-
run fuel supplies.
CO-CHAIR MILLETT assumed the governor is not supportive of
proposed Sec. 42.50.170 (a) and (b).
4:39:14 PM
MR. STRANDBERG said correct. He then displayed slide 8 which
listed the major differences between the 2009 proposed
legislation and the CS. GRETC is now a voluntary organization,
and has the flexibility to emerge economically as the major G&T
provider in the Railbelt; however, subgroups of utilities can
develop G&T projects outside of GRETC and retain membership.
GRETC remains the primary recipient of state financial aid into
the Railbelt. After further changes to the original bill, GRETC
is no longer directed to become an all-requirements provider of
wholesale power for the Railbelt thus has the flexibility to
allow utilities to act independently. Mr. Strandberg advised
that similar re-structuring elsewhere in the country has evolved
in "a multi-step fashion."
4:43:18 PM
CO-CHAIR MILLETT pointed out that sec. 7, the section related to
consumer protection by the Regulatory Affairs & Public Advocacy
(RAPA) office of the DOL, was repealed. She asked whether
consumer protection was replaced by RCA regulation and
oversight.
MR. STRANDBERG said yes. In further response to Co-Chair
Millett, he explained that RAPA represents the public interest,
and once the corporation is placed under RCA jurisdiction, RAPA
may still participate in any RCA process.
CO-CHAIR MILLETT observed RAPA and the RCA serve two different
purposes. She noted the governor's concern about consumer
protection and repeated her question as to why sec. 7 was
repealed.
4:46:00 PM
MR. STRANDBERG expressed his understanding that neither the CS,
nor the original bill, included a provision concerning RAPA.
CO-CHAIR MILLETT clarified that sec. 7, proposed AS 42.05.431,
referred to the RAPA office, and sec. 7 was repealed in the CS.
MR. STRANDBERG said the CS has a one-step process toward a full
economic regulatory approach. He acknowledged there may have
been interim versions of the bill.
4:48:56 PM
REPRESENTATIVE TUCK asked whether there was the potential for
GRETC and a public utility to be in competition for a project.
MR. STRANDBERG stated the chance is possible, but unlikely,
given the structure of the corporation.
REPRESENTATIVE TUCK gave the example of Doyon Utilities, which
has a huge consumer group on military bases, but would not be a
voting member, and may have to compete for fuel supplies.
4:50:21 PM
MR. STRANDBERG observed there is a relatively complex regulatory
environment applicable in this case. The RCA does not have
jurisdiction over federal establishments such as military bases,
and there is a current contract between Doyon Utilities and the
federal government. Under the current regulatory environment,
there can be flows of power from regulated utilities onto
military bases; in fact, competitive situations could develop.
He said, "I believe they would be relatively unlikely."
CO-CHAIR MILLETT asked whether industry, commercial, and
residential users would pay the same rate for electrical power.
4:52:31 PM
MR. STRANDBERG referred to page 10, line 14, under general
powers of the corporation. He read:
[GRETC may] generate, manufacture, purchase, acquire,
accumulate, transmit, meter, and dispatch retail
electric power and ancillary services to an industrial
customer, and sell at retail, supply, and dispose of
electric power to an industrial customer.
MR. STRANDBERG advised that this issue attracted significant
attention from the taskforce. In general, GRETC has the ability
to serve a large load, but must consult with the public utility
whose service area is nearby. This public utility has the first
right of refusal to serve that load at its own retail tariff.
He pointed out that any regulated utility has a number of
tariffs; in fact, a public utility could negotiate a wholesale
power rate at a different rate for residential and industrial
consumers.
MR. STRANDBERG continued to slide 9 which listed the external
controls as follows: areas of oversight such as consumer
protection, financial oversight, and the effectiveness of the
corporation; protections such as RCA economic regulation for a
five-year period and "top-to-bottom" management audits at three-
year intervals for ten years. He cautioned that further actions
may need to be taken after ten years.
4:58:52 PM
REPRESENTATIVE TUCK surmised that after ten years, GRETC would
be an unregulated corporation.
MR. STRANDBERG spoke to corporation protections beyond RCA
jurisdiction such as the requirement that processes be public, a
dispute resolution process, a rate appeals process, and
consumers' protest hearings. These oversights and public
processes are built-in to the basic structure of the
corporation.
5:00:11 PM
REPRESENTATIVE JOHANSEN assumed there would be an infusion of
capital funds from the state and decisions to build would come
from the RIRP.
MR. STRANDBERG agreed that the RIRP would be provided to GRETC
for consideration and use; however, which projects get funded,
and the loan and grant conditions thereof, would need to be
developed in order to protect the public interest.
REPRESENTATIVE JOHANSEN stressed that he would need to
understand the process before approving funding that then moves
"out of my hands." He then referred to page 10, line 26, under
powers of the corporation, and asked for the meaning of "owning
and operating facilities to find and extract fuel deposits."
MR. STRANDBERG deferred this question to the administration.
5:04:01 PM
REPRESENTATIVE JOHANSEN further asked whether associated
concepts are in question by the governor.
MR. STRANDBERG said correct.
REPRESENTATIVE JOHANSEN then referred to page 12, lines 5-6, and
surmised that if the proposed legislation passed, GRETC could go
outside the state and look for oil and gas.
5:05:40 PM
MR. STRANDBERG expressed his belief that the service area
defined for the operations of the corporation are the service
areas of the public utilities. The language applies to the need
to do business inside and outside of the state to acquire
equipment, for example.
REPRESENTATIVE JOHANSEN questioned the language. His final
concern was that the governor does not support all of the
sections of the bill, although the governor is the sponsor.
5:08:26 PM
CO-CHAIR MILLETT referred to sec. 6 of the original bill, and
asked why the open and transparent public process to review
GRETC's books and records was left out of the CS.
5:09:56 PM
MR. STRANDBERG called attention to page 18, line 10, for the new
location of Sec. 42.50.210, right to examine books and records.
He recalled a provision to allow members, companies that take
services from GRETC, or ratepayers, access to books and records.
CO-CHAIR MILLETT concluded there was no provision in the current
CS for the general public to examine the corporation, and asked
why.
MR. STRANDBERG explained that the utilities wanted this
approach. Although, there are significant audit processes that
are public and delivered to the legislature, an examination of
the innards of the corporation is only accessible to members and
ratepayers.
CO-CHAIR MILLETT asked whether there has been an examination by
DOR to look at the financial health of each of the six utilities
involved before the state extends general funds, a line of
credit, and bonding capacity to the corporation.
5:12:04 PM
MR. STRANDBERG said that AEA, with Seattle Northwest Securities,
looked at the public records of the six utilities in order to
determine their borrowing power. However, there were no audits
conducted by the administration.
CO-CHAIR MILLETT questioned whether the legislature can ask for
an audit of the utilities before the state invests. She
expressed her concern about the state having to "save" utilities
that are not financially healthy.
5:14:11 PM
MR. STRANDBERG offered to provide the work papers from Seattle
Northwest Securities. He added that the new corporation would
have a board of directors of 13 people. This board would have a
goal of "least-cost power," and he opined it unlikely that the
process would be possible with a properly functioning board.
CO-CHAIR MILLETT confirmed her desire for DOL, DOR, or
legislative audit to look at the financial health of all of the
utilities prior to a decision on the bill, for the benefit of
consumers. She suggested taking a financial health inventory of
the corporations.
5:17:13 PM
REPRESENTATIVE JOHANSEN also expressed concern about state funds
passing to groups with unknown financial situations. He
acknowledged that most in the utility industry are very
experienced and knowledgeable.
CO-CHAIR MILLETT announced the committee's intent to return to
the bill next meeting.
HB 182 was held.
5:19:10 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Energy meeting was adjourned at 5:19 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| (H) ENE Agenda 03182010.pdf |
HENE 3/18/2010 3:00:00 PM |
|
| GRETC- House Energy slides 3-18-10 JBJSS.pdf |
HENE 3/18/2010 3:00:00 PM |
|
| CS HB 182.pdf |
HENE 3/18/2010 3:00:00 PM HENE 3/23/2010 3:00:00 PM |
HB 182 |
| LAA Legal Memo on CS HB 182.pdf |
HENE 3/18/2010 3:00:00 PM HENE 3/23/2010 3:00:00 PM |
HB 182 |
| GRETC Letter to Governor Parnell 02112010.PDF |
HENE 3/18/2010 3:00:00 PM |
|
| Fiscal Note CS HB 182.PDF |
HENE 3/18/2010 3:00:00 PM HENE 3/23/2010 3:00:00 PM |
HB 182 |
| Gallagher email (HB 182).PDF |
HENE 3/18/2010 3:00:00 PM HENE 3/23/2010 3:00:00 PM |
HB 182 |