03/05/2015 10:15 AM House ENERGY
| Audio | Topic |
|---|---|
| Start | |
| HB78 | |
| HB58 | |
| HB118 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 58 | TELECONFERENCED | |
| *+ | HB 118 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 78 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ENERGY
March 5, 2015
10:21 a.m.
MEMBERS PRESENT
Representative Liz Vazquez, Co-Chair
Representative Benjamin Nageak
Representative David Talerico
Representative Cathy Tilton
Representative Matt Claman
Representative Adam Wool
MEMBERS ABSENT
Representative Jim Colver, Co-Chair
COMMITTEE CALENDAR
HOUSE BILL NO. 78
"An Act bearing the short title of the 'Alaska Competitive
Energy Act of 2015'; and relating to the Regulatory Commission
of Alaska."
- HEARD & HELD
HOUSE BILL NO. 58
"An Act making an entity that is exempt from federal taxation
under 26 U.S.C. 501(c)(3) (Internal Revenue Code) and a
federally recognized tribe eligible for a loan from the Alaska
energy efficiency revolving loan fund; and relating to loans
from the Alaska energy efficiency revolving loan fund."
- MOVED CSHB 58(ENE) OUT OF COMMITTEE
HOUSE BILL NO. 118
"An Act adopting the Municipal Property Assessed Clean Energy
Act; authorizing municipalities to establish programs to impose
assessments for energy improvements in regions designated by
municipalities; imposing fees; and providing for an effective
date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 78
SHORT TITLE: REGULATORY COMMISSION OF ALASKA
SPONSOR(s): REPRESENTATIVE(s) WILSON
01/23/15 (H) READ THE FIRST TIME - REFERRALS
01/23/15 (H) ENE, L&C
02/24/15 (H) ENE AT 10:15 AM CAPITOL 17
02/24/15 (H) Heard & Held
02/24/15 (H) MINUTE(ENE)
02/26/15 (H) ENE AT 10:15 AM CAPITOL 17
02/26/15 (H) Heard & Held
02/26/15 (H) MINUTE(ENE)
03/03/15 (H) ENE AT 10:15 AM CAPITOL 17
03/03/15 (H) Heard & Held
03/03/15 (H) MINUTE(ENE)
03/05/15 (H) ENE AT 10:15 AM CAPITOL 106
BILL: HB 58
SHORT TITLE: ELIGIBILITY FOR AK ENERGY EFFIC LOANS
SPONSOR(s): REPRESENTATIVE(s) KREISS-TOMKINS, MILLETT
01/21/15 (H) PREFILE RELEASED 1/16/15
01/21/15 (H) READ THE FIRST TIME - REFERRALS
01/21/15 (H) ENE, L&C, FIN
02/10/15 (H) ENE AT 10:15 AM CAPITOL 17
02/10/15 (H) Heard & Held
02/10/15 (H) MINUTE(ENE)
02/26/15 (H) ENE AT 10:15 AM CAPITOL 17
02/26/15 (H) Heard & Held
02/26/15 (H) MINUTE(ENE)
03/05/15 (H) ENE AT 10:15 AM CAPITOL 106
BILL: HB 118
SHORT TITLE: MUNI ENERGY IMPROVEMNT ASSESSMNTS/BONDS
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
02/18/15 (H) READ THE FIRST TIME - REFERRALS
02/18/15 (H) ENE, CRA, FIN
03/05/15 (H) ENE AT 10:15 AM CAPITOL 106
WITNESS REGISTER
MIKE WRIGHT, Vice President Transmission and Distribution
Golden Valley Electric Association
Fairbanks, Alaska
POSITION STATEMENT: Testified in opposition to HB 78.
ROBERT KAHN, Executive Director
Northwest & Intermountain Power Producers Coalition
Mercer Island, Washington
POSITION STATEMENT: Testified in support of HB 78.
BOB PICKETT, Commissioner/Chair
Regulatory Commission of Alaska
Department of Commerce, Community & Economic Development
Anchorage, Alaska
POSITION STATEMENT: Testified during the hearing on HB 78 and
answered questions.
STUART GOERING, Assistant Attorney General
Commercial and Fair Business Section
Civil Division(Anchorage)
Department of Law
Anchorage, Alaska
POSITION STATEMENT: Answered a question speaking as the
attorney assigned to the Regulatory Commission of Alaska.
ETHAN SCHUUT, Senior Vice President of Land and Energy
Development
Cook Inlet Region, Inc.
Anchorage, Alaska
POSITION STATEMENT: Testified in support for HB 78.
DAVID PEASE, In-House Counsel
Matanuska Electric Association
Palmer, Alaska
POSITION STATEMENT: Testified in opposition to HB 78.
JULIE ESTEY, Director of Public Relations
Matanuska Electric Association
Palmer, Alaska
POSITION STATEMENT: Read from written comments submitted by Joe
Griffith, General Manager of Matanuska Electric Association.
TIM MCLEOD, President
Alaska Electric Light and Power
Juneau, Alaska
POSITION STATEMENT: Testified in opposition to HB 48.
REPRESENTATIVE TAMMIE WILSON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Speaking as the sponsor, testified during
the hearing on HB 48.
JOSHUA WALTON, Staff
Representative Liz Vazquez
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Explained the changes in the committee
substitute for HB 58, on behalf of Representative Vazquez, co-
chair of the House Special Committee on Energy.
REPRESENTATIVE KREISS-TOMKINS
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Speaking as one of the prime sponsors of HB
58, addressed the changes to the bill.
EMILY FORD, Energy Policy and Outreach Manager
Alaska Energy Authority
Department of Commerce, Community & Economic Development
Anchorage, Alaska
POSITION STATEMENT: Introduced HB 118 on behalf of the sponsor,
the House Rules Standing Committee at the request of the
governor.
ACTION NARRATIVE
10:21:37 AM
CO-CHAIR LIZ VAZQUEZ called the House Special Committee on
Energy meeting to order at 10:21 a.m. Representatives Claman,
Wool, Nageak, Talerico, Tilton, and Vazquez were present at the
call to order.
HB 78-REGULATORY COMMISSION OF ALASKA
10:21:58 AM
CO-CHAIR VAZQUEZ announced that the first order of business
would be HOUSE BILL NO. 78, "An Act bearing the short title of
the 'Alaska Competitive Energy Act of 2015'; and relating to the
Regulatory Commission of Alaska."
10:22:31 AM
MIKE WRIGHT, Vice President Transmission and Distribution,
Golden Valley Electric Association (GVEA), said he would testify
and also forward more detailed written comments to the
committee. Mr. Wright first sought to clarify terms that were
heard during the 3/3/15 hearing on HB 78. Discussed at the
previous hearing was the term "spinning reserve with respect to
integration cost," and he explained that spinning reserve is a
slice of generation that each Railbelt utility is responsible to
maintain online, in case of a failure of one of the larger
generators. To maintain this reserve, GVEA uses a battery
energy storage system (BESS), or a program that sheds load.
Spinning reserve is separate from what a utility may have to do
to provide regulation. He further explained that regulation is
the integration of a variable generation source such as wind or
solar. Therefore, a utility has to have additional generation,
in addition to what is required for spinning reserve, to provide
integration. On the other hand, "interconnect costs" are costs
of providing the infrastructure to interconnect generation from
any source. Returning attention to HB 78, Mr. Wright stated
that GVEA is opposed to the bill, which has the potential to
have negative effects on ratepayers. Generally, GVEA believes
that existing statute authorizes the Regulatory Commission of
Alaska (RCA) to regulate independent power producers (IPPs),
qualifying facilities (QFs), and public utilities. For example,
RCA has opened Docket R-13-002, which proposes revisions to
provisions that specifically address issues related to
cogeneration and small power producers. Also, GVEA believes the
state energy policy is "for economic development and to take
renewable resources into economic development." Since RCA is
not the right state agency to deal with economic development, he
suggested a more appropriate agency is the Alaska Energy
Authority (AEA) through the Renewable Energy Fund or the
Emerging Technology Fund. Mr. Wright stressed that GVEA already
has open access to its transmission and generation system; in
fact, interconnect specifications are available to any entity
for electrical loads from 10 kilowatt to 80 megawatt generation.
Fort Wainwright, Fort Greely, Ground Base Missile Defense, Pump
Station 9, Pogo Mine, Chena Power, and Delta Wind Farm have all
made modifications to interconnect by following these
specifications. He pointed out that the facilities that are
needed to interconnect are the responsibility of the IPPs, and
power purchase agreements must be negotiated, including the cost
of integration. In addition, integration costs are higher for
solar or wind, because of the variable nature of their
generation. Mr. Wright explained that GVEA's tariff wheeling
rates or transmission tariffs are approved by RCA, and Fort
Wainwright currently uses GVEA's transmission system to wheel
power from Fairbanks to Fort Greely and Ground Base Missile
Defense. For small scale renewables under two megawatts, GVEA
has a streamlined process with no integration costs. Entities
are given two options: to receive rate changes quarterly, or to
negotiate a long-term agreement. Mr. Wright restated that GVEA
"does have open access and it is available to anybody who would
want to interconnect with our system."
10:31:26 AM
REPRESENTATIVE WOOL asked whether the same generation unit is
used for both spinning reserve and integration.
MR. WRIGHT responded that the source of generation depends upon
the particular circumstances; for example, GVEA may have all of
its spinning reserve handled by BESS, and not have to have
another generator online, so the generator that is online is
providing room for Eva Creek Wind Farm and, elsewhere, customer
load can be shed (SILO). If an expensive generator must come
online, GVEA would SILO because the chance of an outage is low.
Although circumstances could arise when BESS is offline or
cannot meet spinning reserve, so dispatch would determine what
response is most economical. In further response to
Representative Wool, he confirmed that spinning reserve is
sometimes met entirely by BESS alone.
REPRESENTATIVE TALERICO asked for the web site which provides
interconnection information for IPPs.
MR. WRIGHT said that would be included in his written testimony.
REPRESENTATIVE WOOL inquired as to whether the military bases
are selling or buying power at this time.
MR. WRIGHT stated that all of the bases buy almost no power;
Eielson Air Force Base buys very little, and Fort Wainwright
provides all of its own power. University of Alaska Fairbanks
(UAF) is also interconnected and supplies almost all of its own
power. He expressed his understanding that military bases are
not allowed to sell power because they are not allowed to
compete with private or public business sectors.
REPRESENTATIVE CLAMAN also requested the site for the web site
with interconnection information.
MR. WRIGHT provided the web site as follows:
www.gvea.com/images/epf/NON_Utility_Producer_Interconnect2013.PD
F.
10:39:54 AM
ROBERT KAHN, Executive Director, Northwest & Intermountain Power
Producers Coalition (NIPPC), informed the committee NIPPC is a
group of IPPs and marketing entities that develop, own, and
operate power plants, and sell electricity under PPAs, or
wholesale, throughout the West. Members of NIPPC have invested
billions of dollars building power plants in Idaho, Washington,
and Oregon, including wind farms, biomass facilities, gas-fired
power plants and coal generation that collectively exceeds 4,000
megawatt. Mr. Kahn said although Alaska faces unique
circumstances and opportunities, it is useful to hear insights
from its neighbors in the Lower 48. He said Alaska is at the
point to update its energy policy infrastructure, and the focus
of the proposed legislation is to allow for competition, which
is how Americans get the best product for the least cost.
Regulated monopolies are uncomfortable with the bill because it
affects the range of services they solely offer, and means they
must accommodate competition and IPPs. While a regulated
monopoly has an overall responsibility for maintaining system
reliability, since 1978 in the Lower 48, utility monopolies have
not had sole responsibility or monopoly control of generation.
Mr. Kahn opined competition will enable Alaskans to employ
ingenuity and attract new capital, as has happened in the Lower
48. For example, in Idaho Power's service territory, about 20
percent of resource space is provided by QFs generating power by
many sources including low-head hydroelectric (hydro), biomass
and cogeneration at lumber mills, solar projects, and wind
projects. Another example in the Northwest is of an investor-
owned utility that announced about six years ago that it would
build a wind farm, and estimated that the cost of energy would
exceed $100 per megawatt hour. Instead, the utility put out a
request for proposal to any wind power developer who could bid
at $65 per megawatt hour or less. A developer was found through
the competitive bid process, and the utility is satisfied with
the resulting project. Mr. Kahn urged that the legislature
enable competition in order to provide Alaskans with the least
cost energy and to bring its policy infrastructure up to date.
REPRESENTATIVE WOOL asked how many megawatts are transmitted by
the Railbelt system.
MR. KAHN did not know.
10:48:12 AM
BOB PICKETT, Commissioner/Chair, Regulatory Commission of
Alaska, said he has served on RCA since 2008. Mr. Pickett
cautioned that his remarks may be limited because RCA has a
number of dockets open that are embedded with transmission
elements. However, there are other aspects to the bill, and the
sponsor of the bill requested RCA "offer its input." On 2/25/15,
RCA held a public meeting and discussed the bill; at this time
RCA does not oppose or support HB 78, but has raised questions.
As a commissioner, Mr. Pickett's perspective is a concern about
intertwining AS 42.05 [Alaska Public Utilities Regulatory Act]
with the state energy policy [House Bill 306, passed in the 26th
Alaska State Legislature]. This concern has been expressed in
many ways, including in RCA's approval of a power purchase
agreement between Chugach Electric Association and Fire Island
Wind. He explained the basis for his concern is that the state
energy policy is an aspirational goal; however, HB 78 raises
questions from an administrative and practical standpoint. For
example, the bill may contain possible unintended consequences
for non-electric utilities and very small electric utilities.
Of the 129 electric utilities in the state, 32 are economically
regulated by RCA. Further, RCA does not want to negatively
impact administration of the Power Cost Equalization (PCE)
program. In that regard, RCA will continue to work with
Representative Wilson and the Department of Law. He recalled
that RCA has been directed by the legislature to issue a report
to the legislature, no later than 6/30/15, on the desirability
of creating an integrated system operator (ISO) or unified
system operator (USO) in the Railbelt; RCA has been working on
this report and has requested responses from interested parties
on the statutory and regulatory authority currently held by RCA,
and what additional action is needed to develop an ISO or USO,
if so desired.
10:52:44 AM
REPRESENTATIVE CLAMAN referred to the two-year timeline RCA
typically requires to act, and noted the proposed legislation
requires a one-year response. He asked for more background
information on the timeline RCA requires for different issues.
MR. PICKETT responded that there are different statutory
deadlines; the two-year period referred to in the bill applies
to the maximum timeframe allowed for rulemaking dockets. The
statutory deadline applies to all industry groups, and he
pointed out that completing the rulemaking process earlier would
be possible if RCA's workload allowed. Although all of the
deadlines have been previously considered by the legislature, he
acknowledged the timelines may be frustrating to a project's
sponsor. Mr. Pickett described a docket in the past that
required an extension; however, when completed, it solved a 20-
year-old problem. The commission receives approximately 700-900
filings per year, of which approximately 150 are suspended, and
hearings are a time-consuming and intensive process. He
questioned whose due process rights are truncated when timelines
are reduced.
REPRESENTATIVE CLAMAN restated his question that the proposed
legislation suggests that RCA would make a decision within one
year.
MR. PICKETT said the time required depends on the nature of the
filing; in fact, RCA opened a recent rulemaking docket related
to PCE, and he anticipated that it will be accomplished in less
than a two-year period.
REPRESENTATIVE WOOL referred to Mr. Pickett's characterization
of the state's [energy] goal as aspirational, and asked whether
he meant "aspirational, meaning not realistic in the near
future."
MR. PICKETT explained that an aspirational goal is very
different than a binding renewable portfolio standard (RPS) goal
that many states have. He opined that filings that come to RCA
for a binding RPS are different, and an aspirational goal may
have a "tipping effect" on decisions such as the Fire Island
Wind PPA. He expressed frustration with the "disjointed" state
energy policy, and questioned how viable the 50 percent
renewable goal can be without [the proposed Watana-Susitna Hydro
project].
CO-CHAIR VAZQUEZ inquired as to whether Mr. Pickett seeks a more
focused and realistic state policy.
MR. PICKETT stated that he is a regulator, not a legislator. He
advised that the state needs to speak clearly and provide a
mechanism.
10:59:31 AM
STUART GOERING, Assistant Attorney General, Commercial and Fair
Business Section, Civil Division (Anchorage), Department of Law,
in response to Co-Chair Vazquez, said DOL has no position on HB
78 at this time, and he is scheduled to meet with the sponsor of
the bill to discuss issues and clarify the bill's intent.
CO-CHAIR VAZQUEZ expressed her interest in the unintended
consequences of the bill.
MR. GOERING said her question could be better addressed after
his meeting with the sponsor of the bill.
11:01:43 AM
ETHAN SCHUUT, Senior Vice President of Land and Energy
Development, Cook Inlet Region, Inc. (CIRI), noted that he
submitted written testimony to the committee on 3/4/15. Mr.
Schuut relayed that CIRI is very knowledgeable about the
electric utility system in the Railbelt, and thus is concerned
that the system is broken and lawless, and that reform is needed
to protect the state's economy and the ratepayers. He stated
that HB 78 would introduce competition and invite private
investment, both of which are cornerstones of the national
economy.
11:03:16 AM
The committee took an at ease from 11:03 a.m. to 11:04 a.m.
11:04:03 AM
MR. SHUTT continued to explain that the system is broken and
lawless as relates to the interaction between IPPs and the
regulated electric utilities. He said CIRI believes HB 78 would
bring protection for private investment into the system. He
acknowledged the Railbelt electrical system is governed by
technical rules, but there are no meaningful rules or
requirements governing the commercial negotiations between IPPs
and the regulated utilities; in fact, he said, "Many of the
things that we've seen and directly witnessed in our
negotiations and interactions with the Railbelt electric
utilities would result in [Federal Energy Regulatory Commission]
enforcement investigations if we were an interconnected state
with any other state in the Union." Mr. Schuut expressed CIRI's
concern with impacts to ratepayers, and said HB 78 is
legislation that is long overdue.
11:05:52 AM
DAVID PEASE, In-House Counsel, Matanuska Electric Association,
disclosed that he works for MEA and does not advise them. Mr.
Pease returned attention to the subject of incremental cost,
noting that IPPs want to pay for power at the incremental
avoided cost to the utility, which could be $.30 per kilowatt
hour if generated by diesel; however, that power may not be
available when needed, and instead, the power could be produced
from wind or hydro. But IPPs want a long-term contract based
upon incremental avoided cost, and then each utility would be
required to buy power from an IPP or QF at what could be well in
excess of the average avoided cost to the utility, and which
would not benefit ratepayers. He referred to previous testimony
related to Fire Island Wind, and said MEA determined it is
expensive to "follow the wind," and to account for its
unreliability and provide "spin" when wind is offline. Mr.
Pease cautioned that [proposed section 14] of the bill precludes
a public utility from passing on the costs of a judicial
proceeding. He advised that MEA has received proposals by IPPs
and QFs regarding projects without real substance; one such
dispute "went all the way up to FERC and involved hundreds of
thousands of dollars of litigation costs." He advised that
under this provision, utilities would not be able to recover
from rates the costs of legitimate challenges to projects.
Presently, MEA is engaged in a dispute that is on its way to the
Alaska Supreme Court and which cost the state over $100,000 to
appeal. He described MEA's successful experience with other
small IPP hydro projects. The bill also seeks to allow IPPs and
QFs exception from an exemption that is before RCA and other
courts in a prolonged dispute. The exemption is essential to a
Bradley Lake [Hydroelectric Project] construction project, and
"tinkering with that exemption throws a wrench into" aspects of
power from the Bradley Lake facility. Mr. Pease concluded that
IPPs and QFs want to sell what they believe is firm power, but
wind is not a firm power, and IPPs and QFs do not have the
capacity and backup required to make firm power, therefore, they
want a firm power price for non-firm power.
REPRESENTATIVE WOOL asked whether hydropower is firm power.
MR. PEASE answered no; however, it can be firm power depending
upon its generating capacity and whether generation occurs
regardless of the reservoir level.
11:13:25 AM
JULIE ESTEY, Director of Public Relations, Matanuska Electric
Association, read from written comments submitted by Joe
Griffith, General Manager, MEA, as follows:
Due to limited time for public testimony and
proceedings at the RCA I have been unable to testify
in response to House Bill 78. However, the subject is
important to our members, and the entire Railbelt, and
I hope your committee will weigh my written comments
in considering how to proceed. MEA remains interested
in exploring cost effective ways to diversify the
Railbelt energy portfolio. We currently have two
independent power producers on our system, along with
our shares of Eklutna and Bradley Lake hydro projects,
and find immense value in the economic power that they
provide. There is a rule for cost effective
independent power producers to play in our service
area, and the entire Railbelt. However well
intentioned, we do not believe House Bill 78 is an
effective platform to achieve the results that will
ultimately benefit the independent power producers,
utilities, our ratepayers or members in the entire
Railbelt system. House Bill 78 presents a significant
concern to MEA for two primary reasons: First, the
proposed legislation will benefit corporate for profit
entities at the expense of ratepayers, imposing
significant financial and operational constraints on
utilities, the majority of which are nonprofit,
member-owned power producers. I view this legislation
as a mechanism to shift the burden of project
economics to the utilities and their members, forcing
a nonprofit entity to provide subsidies to a for
profit organization to improve their profit margin.
With these subsidies, virtually any proposed IPP
project can become economic but the burden will be
borne by the ratepayers or members. I don't believe
that that is good fiscal policy or the role of
government. Second, this legislation is unnecessary
to ensure IPPs have access they seek to the market.
The Regulatory Commission of Alaska has both an R and
I docket currently open to address many of the
elements of this legislation. The RCA staff has
presented recent changes to bring Alaska's regulations
implementing the federal Public Utility Regulatory
Policy Act or PURPA, to reflect changes made by FERC.
These suggested regulation changes are the product of
an 18-month process with input from IPPs, utilities
and other experts. This process also has the benefit
of the time and subject matter expertise of the
commissioners and commission staff to work through the
various complexities, details, and consequences to
find solutions that benefit Alaskan ratepayers. In
addition, the commission recently opened an I docket
to consider the creation of an independent or unified
system operator for the Railbelt which would also
alleviate some of the concerns expressed by the
independent power producers who have influenced House
Bill 78. To avoid a duplication of effort and
potentially conflicting regulations with unintended
consequences, I would urge this committee to put House
Bill 78 aside, and let the regulatory process proceed
through the agency charged with utility oversight, the
RCA. Specific considerations regarding House Bill 78
include: incremental avoided cost is flawed because it
does not represent the true avoided cost of electric
utilities because the calculation is based on peak
loads, this shifts the playing field so inefficient
reserve machines are the avoided cost definer, not the
more efficient newer machines which are actually more
likely to be avoided, and operate at a lower cost to
utilities. This means in most cases members will be
paying more for each kilowatt than they should. This
may be a fair standard in the Lower 48 where the
robust grid results in less disparity, but it does not
take Alaska's unique circumstances into account.
There is also a need to account for a distinction
between firm and non-firm power. Non-firm power
fluctuates and cannot be counted on by the utility at
a specific time. This results in considerable expense
for utilities to regulate because it is necessary to
run back up generation to cover potential power
shortfalls in transmission space on our congested
system. That must also be reserved. It may also have
impacts on take or pay gas contracts all resulting in
significant costs to ratepayers. Third, the bill does
not address the cost, complexities, and
responsibilities of participating in an open access
system. MEA has completed considerable studies and
corresponding system upgrades to connect our new EGF
power plant to the Railbelt. We have spent
significant time and expense working closely with our
Railbelt colleagues to ensure the capacity and
necessary protections are in place to protect the
larger system. We did that because it was our
responsibility as a user of that larger system. For a
true level playing field to exist, this should be
consistent for all users who request open access. It
also contains no means to protect the utility from an
IPP or QF that underprice their estimated price of
power just to beat the utility avoided costs. To
date, Alaska's small market has attracted primarily
local businesses and entrepreneurs, but your body
needs to have a vision for the future, when outside
entities with less than scrupulous intentions may use
this well-meaning legislation to the detriment of
Alaska. The legislation does not address the impact
to utilities resulting from the uncertainty of a
proposed IPP project. Under this bill, IPPs don't
have to guarantee they will ever build a project; if
the utility was counting on 50 megawatts in three
years from an IPP that never materialized, it could be
a significant issue to cover that kind of shortfall,
at great expense. In addition, the staff cost and
studies associated with such a project for the
utility, would be borne by our members. ... If the
goal is to bring more independent power producers or
qualified facilities into the electrical system in
Alaska, we need to be careful of enacting requirements
that make buying power from them more expensive and
costly to our members. MEA spent considerable time
and expense in late 2014 to try and justify the
purchase of CIRI Fire Island Wind Phase 2 power. In
the end, even their initially attractive price did not
pencil out when we added the cost to transport and
regulate the non-firm power. I hope we have the
opportunity to give this another look if the tax
credits are extended. However, this legislation would
make that opportunity, and others like it, much more
difficult to justify to our membership in the future.
We urge you to allow the RCA process with both the R
docket and the independent system operator I docket to
find conclusions before you pass legislation that will
result potentially in unintended consequences and
additional costs for Alaskans. And that is the end of
my testimony.
11:21:48 AM
TIM MCLEOD, President, Alaska Electric Light and Power (AEL&P),
said AEL&P is the electric utility serving Juneau. Mr. McLeod
informed the committee he is not opposed to the independent
development of projects, as long as there are no negative
impacts to AEL&P customers. [Indisc.] He acknowledged that
there are communities in Alaska with very high rates due to
their location, although in Juneau, Barrow, Ketchikan, Wrangell,
and Petersburg electric rates are below the national average,
and rates are slightly above the national average in Sitka and
Anchorage; in fact, utilities have done a good job in high
population areas - which are generally the areas targeted by
IPPs. Alaska is subject to, and must comply with PURPA
regulations, and has regulations that require open access to
certain transmission systems. Mr. McLeod returned attention to
the differences in transmission systems between Alaska and the
Lower 48, and advised that in Juneau the transmission lines were
constructed to deliver power from a hydro project to a specific
load; however, in the Lower 48, transmission lines are similar
to an intertie. When an IPP asks to use AEL&P's transmission
lines, permission is given as long as it will not use capacity
that AEL&P customers eventually need, and there are many other
similar isolated transmission systems throughout Alaska. Mr.
McLeod said PURPA regulations provide opportunities for QF
projects to come online while protecting ratepayers, but the
language of the proposed legislation "goes well beyond PURPA."
He opined that currently IPPs and QFs have more than a level
playing field because if they can provide energy at the avoided
cost, the utility must buy their energy and that is an
advantage. He expressed concern about mixing the state energy
policy and HB 78, and said RCA should not make any decisions
that are inconsistent with state legislation, but in regard to
bringing on IPPs, decisions need to be made based on the avoided
cost, and it shouldn't do harm to customers to bring an IPP or
QF online. If the state energy policy is in conflict with that
decision, it should not supersede the avoided cost formula.
11:28:44 AM
MR. MCLEOD further explained that HB 78 places an additional
burden on the utilities to provide information; for example,
producing and posting the avoided cost for each unit in a
system. In Juneau, AEL&P has 10 individual hydro generators
units and nearly 20 backup diesel generators, which are
mandated. In response to Representative Wool's earlier
question, he said hydro is a firm energy source, although the
amount of fuel can be limited at times. The hydro units are
managed as an entire system, so the avoided cost of each unit
fluctuates and thus cannot be posted independently due to
maintenance and changes, and he provided examples. Furthermore,
the cost of a hydro project is up-front, and the output cost
depends on the flow of energy from the project. Therefore,
loads and costs are higher depending upon precipitation levels;
in fact, 20 percent of AEL&P's load is interruptible, so the
company has tried to "match all of our hydro projects in unison,
so that with the variation of inflows and so forth, we can sell
every kilowatt hour that we can get out of these hydro projects
because that produces the lowest cost overall for our system."
Mr. McLeod concluded the true avoided cost should be the cost to
the utility, if not for the IPP's facility. Also, the economy
of scale makes it difficult for small projects to compete
against large projects.
11:34:46 AM
REPRESENTATIVE WOOL asked whether AEL&P keeps any spinning
reserve.
MR. MCLEOD said no. An example of spinning reserve in a hydro
system would be in Kodiak, where the utility had hydro and
diesel, and then added wind generators which were controlled by
the hydro and diesel. But to eliminate the diesel, a third
hydro unit was added at the Terror Lake hydro facility. This is
an example of integration cost: the additional unit was not
needed for energy, but to control the wind generation with more
spinning reserve.
REPRESENTATIVE CLAMAN surmised that an advantage of hydro is
that there is no costly storage required, and there is more
flexibility in delivering power.
MR. MCLEOD said correct.
REPRESENTATIVE TALERICO stated that in the Interior, Golden
Valley Electric Association feeds about 43,000 meters, more than
some of the aforementioned communities. That cost has averaged
between 22.5 cents and 27 cents per kilowatt hour. He pointed
out that that cost is for the hub community, and costs inflate
as they reach businesses in villages, which do not qualify for
the Power Cost Equalization program.
11:39:13 AM
HB 78 was held over with public testimony open.
11:39:39 AM
The committee took an at ease from 11:39 a.m. to 11:44 p.m.
11:44:29 AM
REPRESENTATIVE TAMMIE WILSON, Alaska State Legislature, said
monopolies do not want change; however, she continues to be
contacted by independent power producers who have put millions
of dollars into projects that monopolies have obstructed. She
stressed that today's testimony shows one group up against the
other, without compromise, but HB 78 would create a fair playing
field. Representative Wilson noted that the sponsors have
provided everything the committee has requested of them, and
reviewed the vetting process that will take place in the next
committees of referral, the House Labor and Commerce Standing
Committee and the House Finance Committee.
CO-CHAIR VAZQUEZ observed that the bill presents an array of
issues that have existed for decades; therefore, the committee
seeks to be diligent and give the time, energy, and focus that
the bill deserves.
REPRESENTATIVE CLAMAN referred to the one-year timeline
provision in the bill for RCA decisions, and suggested the
committee may support an amendment to extend the timeline to two
years.
CO-CHAIR VAZQUEZ said testimony remains open on the bill in
order to hear further expert witnesses.
REPRESENTATIVE WILSON offered to provide all that is needed.
HB 58-ELIGIBILITY FOR AK ENERGY EFFIC LOANS
11:49:06 AM
CO-CHAIR VAZQUEZ announced that the next order of business would
be HOUSE BILL NO. 58, "An Act making an entity that is exempt
from federal taxation under 26 U.S.C. 501(c)(3) (Internal
Revenue Code) and a federally recognized tribe eligible for a
loan from the Alaska energy efficiency revolving loan fund; and
relating to loans from the Alaska energy efficiency revolving
loan fund."
11:49:30 AM
REPRESENTATIVE TILTON moved to adopt the proposed committee
substitute (CS) for HB 58, labeled 29-LS0254\G, Nauman, 3/4/15,
as the working document.
11:50:04 AM
JOSHUA WALTON, Staff, Representative Liz Vazquez, Alaska State
Legislature, explained Version G has a title change and two
significant changes from Version H. On page 1, lines 1-5 the
new title read:
An Act making an entity that is exempt from federal
taxation under 26 U.S.C. 501(c)(3), (4), (6), (12), or
(19)(Internal Revenue Code) and a federally recognized
tribe eligible for a loan from the Alaska energy
efficiency revolving loan fund; relating to loans from
the Alaska energy efficiency revolving loan fund; and
relating to the annual report published by the Alaska
Housing Finance Corporation.
MR. WALTON explained the first change specifies which types of
tax-exempt entities would be allowed to borrow from the fund.
The second change to the title refers to a report further
described in section 1. The first change to the language in the
bill was new section 1 found on page 1, beginning on line 7 and
continuing to page 2, line 11 which read:
Section 1. AS 18.56.200(d) is amended to read:
(d) The corporation shall include in its annual
report under (b) of this section
(1) a report of its activities under
(A) AS 18.55.010 - 18.55.290 (Housing
Project and Public Building Assistance Act);
(B) AS 18.55.300 - 18.55.470 (programs
of moderate income and rental housing);
(C) AS 18.55.480 - 18.55.960 (Slum
Clearance and Redevelopment Act); and
(D) AS 18.56.855 (Alaska energy
efficiency revolving loan fund);
(2) a summary of its efforts to implement a
program to extend the operation of the programs
authorized under AS 18.55 and this chapter to rural
communities;
(3) an evaluation of the corporation's
ability to fulfill the objectives of AS 18.56.010(b) -
(e); and
(4) the amount of interest rate, building,
and other subsidies for each program of the
corporation for which subsidies are given.
MR. WALTON said section 1 amends existing statute to add Alaska
energy efficiency revolving loan fund to the list of programs
that are included in Alaska Housing Finance Corporation's annual
report to the legislature. Sections 2, 3, 4, 5, and 6 were
renumbered. The second substantive change is the addition of
new section 7 found on page 5, lines 10-16 which read:
Sec. 7. AS 18.56.855 is amended by adding new
subsections to read:
(k) In considering applications and making loans
from the Alaska energy efficiency revolving loan fund,
the corporation shall give priority to energy
efficiency improvements to buildings owned by a
regional educational attendance area, the University
of Alaska, a municipality, or the state over other
applications and loans.
(l) Notwithstanding any provision of this
section, the recipient of a loan under this section
may not be a for-profit business enterprise
MR. WALTON said subsection (k) ensures that state and
governmental facilities are given priority over tax-exempt
entities and federally recognized tribes, and subsection (1)
ensures that the recipient of a loan cannot be a for-profit
business enterprise. All of changes are in response to concerns
raised by the committee.
11:54:11 AM
CO-CHAIR VAZQUEZ objected to the motion for discussion purposes.
11:54:34 AM
REPRESENTATIVE KREISS-TOMKINS, Alaska State Legislature, one of
the prime sponsors of HB 58, said the aforementioned changes
came from House Special Committee on Energy deliberation during
a previous hearing. He stated that the changes have improved
the bill and urged that the bill move from committee.
REPRESENTATIVE CLAMAN confirmed that in new subsection [(k)] the
described entities are the same and are not a larger class of
groups than existed before.
REPRESENTATIVE KREISS-TOMKINS said that is accurate, all of
previous public entities that had access to the revolving loan
fund now have first priority access.
11:56:31 AM
CO-CHAIR VAZQUEZ removed her objection.
[There being no further objection, Version G was before the
committee.]
11:57:44 AM
REPRESENTATIVE TILTON moved to report CSHB 58, Version 29-
LS0254\G, Nauman, 3/4/15, out of committee with individual
recommendations and the accompanying zero fiscal note. There
being no objection, CSHB 58(ENE) was reported out of the House
Special Committee on Energy.
11:58:33 AM
The committee took a brief at ease.
REPRESENTATIVE KREISS-TOMKINS thanked the committee.
11:59:03 AM
The committee took an at ease from 11:59 a.m. to 12:00 p.m.
HB 118-MUNI ENERGY IMPROVEMNT ASSESSMNTS/BONDS
12:00:11 PM
CO-CHAIR VAZQUEZ announced that the final order of business
would be HOUSE BILL NO. 118, "An Act adopting the Municipal
Property Assessed Clean Energy Act; authorizing municipalities
to establish programs to impose assessments for energy
improvements in regions designated by municipalities; imposing
fees; and providing for an effective date."
12:00:19 PM
EMILY FORD, Energy Policy and Outreach Manager, Alaska Energy
Authority (AEA), Department of Commerce, Community & Economic
Development (DCCED), provided a PowerPoint presentation entitled
"HB 118 Property Assessed Clean Energy (PACE)," and dated
3/5/15. Ms. Ford informed the committee HB 118 creates a
property-assessed clean energy program known as Commercial PACE.
The program applies to commercial property, and allows property
owners to finance qualifying energy efficiency improvements over
time through a voluntary assessment on their property tax bill.
The legislation provides: voluntary participation by
municipalities and commercial business owners; mortgage holder
consent required before applications are approved and
assessments are placed; improvements can include energy
efficiency upgrades, renewable energy, conversion to natural
gas, high-efficiency boilers, and more. The repayment
obligation transfers with the sale of the property (slide 2).
Energy efficiency upgrades are financed by capital secured by a
primary lien on the property, and lower-interest capital and
favorable repayment terms can be raised from the private sector.
Ms. Ford said the goal is to lower energy costs, thus PACE would
allow for longer repayment periods and for the use of
traditional lending sources. In Alaska, PACE provides
consistency with state energy goals, including energy efficiency
and renewable energy targets (slide 3). Thirty-one states have
authorized PACE programs, and state legislatures must provide
authority for local governments to expand their taxing
authority. Municipalities are to create the program and select
financing models, using resources available from the U.S.
Department of Energy (slide 4). The bill includes statutory
language that provides consistency statewide for municipalities
that choose to opt-in to the program, which can be done through
municipal bonds, a private sector model, or a hybrid model that
would identify all funding sources (slide 5). Further, HB 118
is authorizing legislation for local governments that collect
property taxes and choose to create a PACE program and allow
commercial property owners to opt-in to the program; there are
24 eligible local communities in Alaska representing a total
population of 639,314 (slide 6). Turning to the sectional
analysis of the bill, she highlighted the following: section 1
amends AS 29 by a new proposed chapter AS 29.49: Municipal
Property Assessed Clean Energy Act, which would allow for
property tax assessments to be added for financing of qualified
projects on real property, and would require a written contract
between the local government and the record owner of the real
property (slide 7). Proposed AS 29.49.040: Establishes the
program, and directs agreements related to financing,
assessments, and other costs (slide 8). Proposed AS 29.49.060:
Defines the Procedure to Create the Program, and requires that
the governing body of the municipality adopt a resolution
containing certain elements (slide 9). Proposed AS 29.49.060
also requires the municipality to hold a public hearing with
public comment, adopt a resolution, hire and set compensation
for an administrator, and impose fees to offset the costs of
administering the program (slide 10).
12:05:38 PM
MS. FORD further advised proposed AS 29.49.070 details the
requirements for a publically available report including a
description of qualified projects, sample forms and contracts, a
plan to ensure sufficient capital, and guidelines for bonding
and repayment (slide 11). The report must also include a
description of the application process, a method to ensure that
qualified applicants can demonstrate financial ability, the
collection process, lender notice requirements, review
requirements, marketing and education services, quality
assurance and antifraud measures, collection procedures, and the
report must be available to the pubic online and by hardcopy
(slide 12). Proposed AS 29.49.080: Notice to Mortgage Holder
Required, requires proper notice, proposed AS 29.49.090: Review
Required, requires a third-party baseline energy audit and
projected energy savings and that, after completion, the
municipality shall obtain third-party verification (slide 13).
Proposed AS 29.49.110: Contractual Assessment must be Noticed,
requires further notice, and proposed AS 29.49.210: Contractual
Assessments and any Interest or Penalties are Primary Liens on
the Property, requires liens stay with the land and are not
eliminated by foreclosure, penalties and interest may be added
to delinquent installments, and municipalities may recover cost
and expenses to collect delinquent installments. Proposed AS
29.49.130: Collection of Assessments, allows municipalities to
contract with other governing bodies of another taxing unit to
perform assessments and collections (slide 14). Proposed AS
24.49.140: Municipalities may Issue Bonds or Notes to Finance
Qualified Projects, allows municipalities to issue bonds or
notes to finance qualified projects, but they may not be general
obligation bonds and must be secured by payments from the
contractual assessments, municipal reserves, municipal bond
insurance, and any other fund lawfully available for purposes
consistent with this chapter (slide 15). Proposed AS 29.49.150:
Joint Implementation, allows any combination of municipalities
to agree to jointly implement or administer a program or
contract with a third party, and further proposed statutes in
the bill are related to definitions, the short title, and the
effective date.
12:08:51 PM
HB 118 was held over.
12:09:55 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Energy meeting was adjourned at 12:09 p.m.