Legislature(2017 - 2018)BARNES 124

03/29/2018 10:00 AM ENERGY

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01:34:17 PM Start
01:34:40 PM HB382
03:03:01 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Meeting Postponed to 1:30 pm --
-- Location Change --
+= HB 382 RAILBELT ELEC. TRANSMISSION AUTHORITY TELECONFERENCED
Heard & Held
- Seth Brown, Principal & Vice President, GDS
Associates
- Paul Wielgus, Managing Director, GDS
Associates
<Above Presenter Removed from Agenda>
- Janet Reiser, Exec. Dir., AK Energy Authority
- Chris Rose, Renewable Energy Project (REAP)
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE SPECIAL COMMITTEE ON ENERGY                                                                              
                         March 29, 2018                                                                                         
                           1:34 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Adam Wool, Chair                                                                                                 
Representative Ivy Spohnholz, Vice Chair                                                                                        
Representative Matt Claman                                                                                                      
Representative John Lincoln                                                                                                     
Representative DeLena Johnson                                                                                                   
Representative Jennifer Johnston                                                                                                
Representative George Rauscher                                                                                                  
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 382                                                                                                              
"An Act creating the Railbelt Electrical System Authority; and                                                                  
relating to the duties of the Regulatory Commission of Alaska."                                                                 
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 382                                                                                                                  
SHORT TITLE: RAILBELT ELEC. TRANSMISSION AUTHORITY                                                                              
SPONSOR(s): REPRESENTATIVE(s) WOOL                                                                                              
                                                                                                                                
02/21/18       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/21/18       (H)       ENE, L&C                                                                                               
03/27/18       (H)       ENE AT 10:15 AM CAPITOL 17                                                                             
03/27/18       (H)       -- MEETING CANCELED --                                                                                 
03/29/18       (H)       ENE AT 10:00 AM BARNES 124                                                                             
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
ROB EARL, Staff                                                                                                                 
Representative Adam Wool                                                                                                        
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Introduced HB 382 on behalf of the bill                                                                  
sponsor, Representative Wool.                                                                                                   
                                                                                                                                
SETH BROWN, Vice President Transmission Services                                                                                
GDS Associates Inc.                                                                                                             
Marietta, Georgia                                                                                                               
POSITION   STATEMENT:     Provided   a  PowerPoint   presentation                                                             
entitled,  "Facilitation  of  the  Railbelt  Reliability  Council                                                               
(RRC)," dated 3/16/18, and answered  questions during the hearing                                                               
of HB 382.                                                                                                                      
                                                                                                                                
DAVID GLINES, Chair                                                                                                             
Board of Directors                                                                                                              
Alaska  Railbelt Cooperative  Transmission  and Electric  Company                                                               
(ARCTEC)                                                                                                                        
no address provided, Alaska                                                                                                     
POSITION STATEMENT:   Provided background information  related to                                                             
the  PowerPoint presentation  by GDS  Associates Inc.  during the                                                               
hearing of HB 382.                                                                                                              
                                                                                                                                
JANET REISER, Executive Director                                                                                                
Alaska Energy Authority (AEA)                                                                                                   
Department of Commerce, Community & Economic Development                                                                        
Anchorage, Alaska                                                                                                               
POSITION   STATEMENT:     Provided   a  PowerPoint   presentation                                                             
entitled, "Railbelt  Energy System:   USO/ISO/RRC  Discussion for                                                               
the House  Energy Committee," and  answered questions  during the                                                               
hearing of HB 382.                                                                                                              
                                                                                                                                
KIRK WARREN, Chief Operating Officer                                                                                            
Alaska Energy Authority (AEA)                                                                                                   
Department of Commerce, Community & Economic Development                                                                        
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Answered a  question during  the PowerPoint                                                             
presentation by the Alaska Energy  Authority at the hearing on HB                                                               
382.                                                                                                                            
                                                                                                                                
CHRIS ROSE, Executive Director                                                                                                  
Renewable Energy Alaska Project (REAP)                                                                                          
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 382.                                                                          
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
1:34:17 PM                                                                                                                    
                                                                                                                                
CHAIR  ADAM WOOL  called the  House Special  Committee on  Energy                                                             
meeting  to  order at  1:34  p.m.  Representatives Wool,  Claman,                                                               
Lincoln,   Spohnholz  were   present  at   the  call   to  order.                                                               
Representatives Rauscher,  Johnson, and  Johnston arrived  as the                                                               
meeting was in progress.                                                                                                        
                                                                                                                                
          HB 382-RAILBELT ELEC. TRANSMISSION AUTHORITY                                                                      
                                                                                                                                
1:34:40 PM                                                                                                                    
                                                                                                                                
CHAIR WOOL  announced that  the only order  of business  would be                                                               
HOUSE  BILL NO.  382, "An  Act creating  the Railbelt  Electrical                                                               
System Authority;  and relating to  the duties of  the Regulatory                                                               
Commission of Alaska."                                                                                                          
                                                                                                                                
1:34:50 PM                                                                                                                    
                                                                                                                                
ROB  EARL,   Staff,  Representative   Adam  Wool,   Alaska  State                                                               
Legislature,  reviewed the  documents included  in the  committee                                                               
packet and directed  attention to a letter dated  June, 30, 2015,                                                               
from the  Regulatory Commission  of Alaska  (RCA), which  read in                                                               
part:     "Non-discriminatory  access  to  the   grid,  open  and                                                               
transparent  system-wide   transmission  pricing,   and  economic                                                               
dispatch  of   generation  by  an  independent   entity  are  key                                                               
principles  that must  guide the  transformation of  the Railbelt                                                               
electrical system."                                                                                                             
                                                                                                                                
MR.  EARL paraphrased  from the  Sponsor  Statement [Included  in                                                               
members' packets] [original punctuation provided], which read:                                                                  
                                                                                                                                
     HB  382  calls  for  the establishment  of  a  Railbelt                                                                    
     Electrical System Authority (RESA).                                                                                        
                                                                                                                                
     Under HB  382, a  Railbelt Electrical  System Authority                                                                    
     would:                                                                                                                     
   · Manage a unified Railbelt transmission and generation                                                                      
     system with the goal of optimizing efficiency;                                                                             
   · Establish nondiscriminatory open access protocols for                                                                      
     the transmission system;                                                                                                   
   · Implement a long-term regional plan for the Railbelt                                                                       
     transmission and generation systems.                                                                                       
                                                                                                                                
     The Regulatory Commission of  Alaska (RCA) will appoint                                                                    
     16  board members  to govern  the Authority,  including                                                                    
     three  non-voting members.  Utility  membership on  the                                                                    
     board will not  exceed 5 members for the  first 5 years                                                                    
     and not exceed  1 member after 10 years.  The RCA would                                                                    
     have oversight of the RESA.  The RESA would function as                                                                    
     an  independent   system  operator   (ISO),  referenced                                                                    
     below.                                                                                                                     
                                                                                                                                
                           Background                                                                                         
     In a  June 30, 2015  letter to the Legislature  the RCA                                                                    
     noted that  "Concerns about the  fragmented, balkanized                                                                    
     and  often  contentious  Railbelt utilities  have  been                                                                    
     raised numerous times over the  past 40 years" and that                                                                    
     "Several  efforts   have  been   made  to   reform  and                                                                    
     reorganize  the Railbelt  electrical  system, but  none                                                                  
     have succeeded." The letter  further states that: "Non-                                                                    
     discriminatory   access   to   the   grid,   open   and                                                                    
     transparent   system-wide  transmission   pricing,  and                                                                    
     economic  dispatch  of  generation  by  an  independent                                                                    
     entity  are   key  principles   that  must   guide  the                                                                    
     transformation of the Railbelt electrical system."                                                                         
                                                                                                                                
     The RESA  would unify the Railbelt  utilities and other                                                                    
     important stakeholders to  oversee region-wide planning                                                                    
     for transmission  and generation.  The RESA  would also                                                                    
     act  like  an  Independent  System  Operator  (ISO)  to                                                                    
     perform merit  order economic dispatch of  the system's                                                                    
     electrical  generation  assets.  Merit  order  economic                                                                    
     dispatch would  run only the most  efficient electrical                                                                    
     generators in the region at  any given time, leading to                                                                    
     cost  savings  for  electrical  consumers  and  reduced                                                                    
     emissions. Open  access to the transmission  system and                                                                    
     a  universal transmission  tariff  would  lead to  more                                                                    
     opportunities  for   independent  power   producers  to                                                                    
     invest   in  renewable   energy  projects   across  the                                                                    
     Railbelt.                                                                                                                  
                                                                                                                                
     The   Alaska   Railbelt  Cooperative   Transmission   &                                                                    
     Electric Company  (ARCTEC) is  a consortium of  four of                                                                    
     the  six Railbelt  utilities formed  in  2011 with  the                                                                    
     stated  goal to  "develop  an  organization that  would                                                                    
     adopt  and  enforce   Railbelt  reliability  standards,                                                                    
     conduct  Railbelt  system   planning  and  ensure  open                                                                    
     access."  Toward this  end, ARCTEC  recently hired  GDS                                                                    
     Associates  to facilitate  the development  of what  is                                                                    
     being  called the  Railbelt Reliability  Council (RRC),                                                                    
     which  could  someday   function  like  an  Independent                                                                    
     System  Operator.  By  May  1,  2018,  GDS  expects  to                                                                    
     produce a  final report and  present an  MOU containing                                                                    
     its  recommendations for  stakeholders to  sign off  on                                                                    
     before proceeding with the development  of a formal RRC                                                                    
     business plan.                                                                                                             
                                                                                                                                
     Formation of a Transmission  Company (Transco) has also                                                                    
     been proposed by the utilities  in association with the                                                                    
     American   Transmission  Company   (ATC).  To   achieve                                                                    
     desired results,  a Transco should  be separate  from a                                                                    
     RESA/RRC/ISO.  If formed,  in  addition  to owning  and                                                                
     operating  the  transmission  system, a  Transco  would                                                                    
     execute   major    maintenance,   transmission   system                                                                    
     upgrades, and  new transmission projects  necessary for                                                                    
     the  reliable  delivery  of electric  power  consistent                                                                    
     with transmission plans developed by a RESA/RRC/ISO.                                                                       
                                                                                                                                
     A draft  of GDS's recommendations was  presented to the                                                                    
                     th                                                                                                         
     RCA on  March 16.    That draft proposed  a nine-member                                                                    
     governing  board  for the  RRC,  with  three seats  for                                                                    
     Railbelt  utilities.  The  GDS draft  did  not  include                                                                    
     economic dispatch as a function of the RRC.                                                                                
                                                                                                                                
                                                                                                                                
1:39:11 PM                                                                                                                    
                                                                                                                                
DAVID  GLINES,   Chair,  Board  of  Directors,   Alaska  Railbelt                                                               
Cooperative  Transmission  and  Electric Company  (ARCTEC),  said                                                               
that ARCTEC  was a consortium  of four of the  Railbelt utilities                                                               
which  had funded  the GDS  Associated project  presented by  Mr.                                                               
Brown.   He stated  that the  project was in  response to  an RCA                                                               
instruction  to the  utilities "to  voluntarily get  together and                                                               
come  up  with some  solutions  in  terms of  re-structuring  the                                                               
Railbelt."    He  reported that  this  stakeholder  collaboration                                                               
effort began in the summer of 2017.                                                                                             
                                                                                                                                
CHAIR  WOOL  clarified that  ARCTEC  had  subcontracted with  GDS                                                               
Associates for the study of the Railbelt situation.                                                                             
                                                                                                                                
SETH BROWN, Vice President  Transmission Services, GDS Associates                                                               
Inc., provided a PowerPoint  presentation titled "Facilitation of                                                               
the  Railbelt   Reliability  Council  (RRC)."     He  shared  his                                                               
background of 30 years in  the [power] transmission business.  He                                                               
noted that  this was the  identical presentation as given  to the                                                               
RCA  on March  16, and  that there  had not  been any  subsequent                                                               
changes.   He pointed out  that these findings by  GDS Associates                                                               
were based on  the stakeholder process and had  not been endorsed                                                               
by ARCTEC.                                                                                                                      
                                                                                                                                
CHAIR WOOL asked if the complete report was due in May.                                                                         
                                                                                                                                
MR. BROWN expressed his agreement  that the final report would be                                                               
released no  later than  May 1.   He presented  an update  on the                                                               
process, slide 3,  and stated that there had  been a presentation                                                               
of  the  initial findings  at  the  RCA Technical  Conference  on                                                               
January 26,  2018.  He noted  that an update on  the facilitation                                                               
process  was filed  on March  7, a  technical conference  for all                                                               
interested  parties was  held in  Anchorage  on March  13, and  a                                                               
summary   of  the   comments  received   from  stakeholders   and                                                               
interested parties was  filed on March 20. He moved  on to a list                                                               
of stakeholders  and interested parties that  had been contacted,                                                               
slide 4.  He shared that  the RCA would approve the establishment                                                               
of   reliability,  security   and   other  operating   standards,                                                               
including cyber  security, and that  the commission  retained the                                                               
authority to  review and  approve investments  and administrative                                                               
costs   of  the   Railbelt   Reliability   Council  (RRC),   "RCA                                                               
Jurisdiction," slide  5.  He  noted that GDS Associates  had been                                                               
charged with preparing a draft  Memorandum of Understanding (MOU)                                                               
for all the  parties to sign.  He relayed  that the six utilities                                                               
were  developing   consensus  reliability  standards   to  govern                                                               
Railbelt grid operations and a report  would be filed by April 1,                                                               
"Reliability  Standards," slides  6 and  7.   He  added that  the                                                               
Railbelt managers had created  the Railbelt Cybersecurity Working                                                               
Group which  was developing a scope  of work and a  budget, which                                                               
would be incorporated  into the RRC when it was  established.  He                                                               
moved on to slide 8, "RRC  Scope and Functions," which listed the                                                               
three  primary functions  for the  RRC: reliability,  access, and                                                               
planning.  He  declared that the RRC would develop  the rules and                                                               
possibly work  in concert with  Transco for the rates,  terms and                                                               
conditions associated with open  access transmission, whereas the                                                               
non-rate terms and conditions would remain with the RRC.                                                                        
                                                                                                                                
1:48:25 PM                                                                                                                    
                                                                                                                                
CHAIR WOOL asked  if economic dispatch was part of  the scope and                                                               
functions.                                                                                                                      
                                                                                                                                
MR. BROWN  pointed to the  key takeaways  on slide 9,  and stated                                                               
that the  protocols, planning,  and informational  postings would                                                               
provide  transparency to  the stakeholders,  while the  RRC scope                                                               
and functions  had been  shown to work  in concert  with Transco.                                                               
He  stated that  economic dispatch  monitoring and  evaluation of                                                               
potential costs  and savings would provide  needed information to                                                               
stakeholders.  He shared that there  had been a lot of discussion                                                               
for  the need  to  have single  system,  economic, merit  ordered                                                               
dispatch for the Railbelt.  He  noted that the issue was that the                                                               
utilities  had  stated  that  this  was  already  being  achieved                                                               
through their  own mechanisms,  including power  pooling, whereas                                                               
other stakeholders felt  there was an even greater  savings to be                                                               
achieved  through  an  independent  system operator  (ISO).    He                                                               
shared that GDS  Associates recommended for the  RRC to undertake                                                               
a study of  single system, merit ordered dispatch.   He said that                                                               
there  had not  been a  study endorsed  by the  stakeholders that                                                               
could clearly  demonstrate over  a long period  of time  that the                                                               
net present  value of  those dispatch savings  would pay  for the                                                               
cost of an ISO.                                                                                                                 
                                                                                                                                
CHAIR WOOL  pointed out that the  RCA had listed this  as an item                                                               
of importance in a letter from 2015.                                                                                            
                                                                                                                                
MR. BROWN, in response to  Representative Spohnholz, said that an                                                               
ISO was  an independent system  operator.   He moved on  to slide                                                               
10, "RRC  Governance Structure," which  detailed that this  was a                                                               
bottom-up  organization, of  both voting  and nonvoting  members,                                                               
which could be defined by the  organization.  He noted that there                                                               
would be  technical and audit  committees, which would  report to                                                               
the Board of Directors.  He  shared that it was very important to                                                               
have an independent  organization which operated under  a code of                                                               
conduct.   He stated  that it would  be independently  staffed by                                                               
the RRC as defined by the MOU.                                                                                                  
                                                                                                                                
1:53:18 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHNSTON asked  for  clarification  that the  RRC                                                               
would work for the Board of Directors.                                                                                          
                                                                                                                                
MR. BROWN  explained that,  although they would  be hired  by the                                                               
Board  of Directors,  they  would still  have  independence.   He                                                               
noted that  the CEO of  the RRC would be  a voting member  of the                                                               
Board  of Directors.    He  pointed out  that  the  RRC Board  of                                                               
Directors would have four  transmission and four non-transmission                                                               
voting  members, with  the CEO  to cast  any tie  breaking votes,                                                               
slide  11.   He  noted  that it  was  necessary  to identify  the                                                               
transmission owning members  as this was what it  was "really all                                                               
about."  He added  that there were also seats on  the board for a                                                               
consumer advocate,  three utilities, and an  outside unaffiliated                                                               
director.                                                                                                                       
                                                                                                                                
MR. BROWN, in  response to Representative Johnson,  said that the                                                               
Matanuska  Electric  Association,  Inc. (MEA)  utility  would  be                                                               
included in  the Anchorage utility  board spot and that  it would                                                               
rotate with the other utilities in that area.                                                                                   
                                                                                                                                
REPRESENTATIVE  JOHNSON expressed  her concern  that the  largest                                                               
utilities were lumped together in one seat.                                                                                     
                                                                                                                                
MR. BROWN explained that this was  an attempt to strike a balance                                                               
of  power,   and  that  the   utilities,  with   some  reasonable                                                               
consensus, had not objected to  the structure.  He declared that,                                                               
as the work  was done in the technical committee,  there would be                                                               
representation from all six of the utilities.                                                                                   
                                                                                                                                
1:57:52 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHNSTON asked about  TRANSCO, listed for a future                                                               
place on the Board, slide 11.                                                                                                   
                                                                                                                                
MR.  BROWN explained  that it  depended  on whether  one or  more                                                               
utilities  elected   to  transfer  their  existing   assets  into                                                               
TRANSCO.   If this was only  for new assets, it  may be necessary                                                               
to expand and bring another  not-transmission owner to the board.                                                               
He moved  on to slide  12, "RRC MOU/Regulatory  Compact," stating                                                               
that  GDS Associates  recommended a  Memorandum of  Understanding                                                               
that would  document consensus on  the RRC and recognize  the RCA                                                               
to retain full authority over the  RRC.  It would outline the RRC                                                               
structure and  scope, and  a commitment to  develop a  formal RRC                                                               
business  plan.   He  stated that  all  the utility  participants                                                               
would be signatory,  and it would be acknowledged by  the RCA and                                                               
interested parties.                                                                                                             
                                                                                                                                
CHAIR WOOL asked  if the utilities were the  only signatories for                                                               
the MOU.                                                                                                                        
                                                                                                                                
MR. BROWN  said that some  legal advice  would be necessary.   He                                                               
moved on to  slide 13 and discussed  the continuing collaboration                                                               
with stakeholders.   He stated that any follow  up meetings would                                                               
be  held as  necessary,  as the  goal was  to  develop the  final                                                               
report and the recommended MOU by the end of April.                                                                             
                                                                                                                                
REPRESENTATIVE  RAUSCHER  asked  if  the  agreement  between  the                                                               
utilities would make something happen.                                                                                          
                                                                                                                                
MR.  BROWN  opined that  there  was  a  reasonable chance  for  a                                                               
majority of  the utilities  to come  together, pointing  out that                                                               
they had  been supportive  of the  process, even  as none  of the                                                               
stakeholders were getting everything they would like.                                                                           
                                                                                                                                
REPRESENTATIVE  RAUSCHER  asked  about  the  influence  of  state                                                               
agencies in the Lower 48.                                                                                                       
                                                                                                                                
MR.  BROWN  explained  that  they   were  participants  in  these                                                               
regional  organizations,  even  though  they  do  not  manage  or                                                               
operate independent  transmission organizations.  In  response to                                                               
Representative Rauscher,  he declared that they  recommended that                                                               
AEA be  a participant,  which he opined  was consistent  with the                                                               
models in the Lower 48.                                                                                                         
                                                                                                                                
REPRESENTATIVE JOHNSON  asked if  the size  of the  grid affected                                                               
agreement, as  in Alaska  it was  smaller and  newer than  in the                                                               
Lower 48.                                                                                                                       
                                                                                                                                
MR. BROWN  shared that  stakeholders had told  him that  this was                                                               
the best opportunity in recent years to come to an agreement.                                                                   
                                                                                                                                
2:04:03 PM                                                                                                                    
                                                                                                                                
JANET REISER, Executive Director,  Alaska Energy Authority (AEA),                                                               
Department   of  Commerce,   Community  &   Economic  Development                                                               
(DCCED),  provided  a  PowerPoint presentation  titled  "Railbelt                                                               
Energy System," and  listed six of the  issues regarding Railbelt                                                               
electricity  reform, slide  2.   She addressed  the first  issue,                                                               
"Background:"  and stated  that  many of  the electrical  systems                                                               
across the  country were  siloed systems,  built up  around small                                                               
communities,  similar to  the variety  of  power cooperatives  in                                                               
Southcentral  Alaska, slide  3.   She  moved on  to  slide 4  and                                                               
stated  that  each  organizational   structure  had  an  inherent                                                               
conflict as  they each had  their own  fiduciary responsibilities                                                               
to  their  member  rate  payers,   even  as  the  utilities  were                                                               
interconnected.  She noted a  lack of centralized planning, which                                                               
often lead to a limited ability  to benefit all the ratepayers in                                                               
the region.   She explained that, as each  transmission owner had                                                               
its own  tariff, any expansion  had to  pay the tariff  for every                                                               
utility that touched that transmission.   She said there had been                                                               
at  least three  separate  initiatives to  restructure, slide  5,                                                               
which had been  proffered but not acted upon, and  that this, the                                                               
fourth attempt,  had been ongoing  for more than a  decade, slide                                                               
6.     She  said   that  the  key   items  for   change  included                                                               
institutional reform  and economic dispatch, a  fundamental first                                                               
order issue  per AEA, slide 7.   She declared that  the utilities                                                               
had been given time to  voluntarily undertake these efforts.  She                                                               
offered  her belief  that  the  system was  not  built to  easily                                                               
discharge  the fiduciary  responsibilities in  a systematic  way,                                                               
and hence, the efforts had failed.   She added that the utilities                                                               
needed to reconcile disparate reliability standards.                                                                            
                                                                                                                                
2:10:48 PM                                                                                                                    
                                                                                                                                
MS. REISER directed attention to  slide 8, "What has already been                                                               
done to that end?"   She applauded the announced efforts although                                                               
there was no  proof or evidence that these  efforts had happened.                                                               
She stated  that there was  a difference between  prudent utility                                                               
management and economic  dispatch.  She said that  there were two                                                               
similar sets of reliability standards,  although either set could                                                               
change because  neither were enforced.   She challenged  the idea                                                               
that all  the ARCTEC and  GDS component utilities would  agree on                                                               
the  findings.   She stated  that this  had the  potential to  be                                                               
another  failed attempt.   She  offered  her belief  that a  much                                                               
earlier economic dispatch study did  involve all the utilities in                                                               
the Railbelt,  although there was  no stakeholder process  and no                                                               
starting point  was agreed upon.   She expressed that  AEA agreed                                                               
with  GDS  Associates  that  this  needed  to  be  revisited  and                                                               
refreshed,  pointing out  that the  initial study  had cost  $1.5                                                               
million.    She  reiterated  that   a  regional  perspective  was                                                               
critical, as well as the inclusivity of all the stakeholders.                                                                   
                                                                                                                                
CHAIR  WOOL asked  for clarification  of the  definition for  the                                                               
starting point.                                                                                                                 
                                                                                                                                
2:14:30 PM                                                                                                                    
                                                                                                                                
KIRK  WARREN, Chief  Operating Officer,  Alaska Energy  Authority                                                               
(AEA), Department of Commerce,  Community & Economic Development,                                                               
explained that  economic dispatch  models and  transmission plans                                                               
were created  using the reliability  standards given the  RCA for                                                               
informational purposes.  In that  study, there was a benchmark to                                                               
identify what  improvements to the  system would happen  and what                                                               
economic  realities would  come from  those improvements.   Since                                                               
the utilities could not agree  during the development of the plan                                                               
for how the system was operated,  it was very difficult to arrive                                                               
at the  base case.   The assumptions made  in the base  case were                                                               
that   the   utilities   were  operating   as   efficiently   and                                                               
economically as they  could at the time, and that  there were not                                                               
any hurdles  to overcome in  order to  generate the savings.   He                                                               
opined that this  was the most conservative  approach possible to                                                               
ensure  that the  savings at  the end  of the  plan could  not be                                                               
minimized.                                                                                                                      
                                                                                                                                
MS. REISER directed  attention to slide 10,  "What needs remain?"                                                               
and  stated  that,  as  the utilities  along  the  Railbelt  were                                                               
cooperatives and  municipalities [owned], the public  had a right                                                               
to know  what was available  for money and for  savings, although                                                               
currently this  was not a  transparent process.  She  pointed out                                                               
that there  was not  any publicly  available information  for the                                                               
consumer.                                                                                                                       
                                                                                                                                
CHAIR  WOOL mused  that  for the  utilities,  as cooperatives  or                                                               
municipality owned, the ratepayers were  the owners.  He asked if                                                               
there   was  a   group   of  ratepayers   represented  in   these                                                               
discussions.                                                                                                                    
                                                                                                                                
MS. REISER offered  her belief that a variety of  groups had some                                                               
influence,  and that  these  issue-based  groups were  noticeable                                                               
during elections  for their advocacy toward  certain individuals.                                                               
She restated  the need for  the transparency which  was currently                                                               
lacking as an  important feature necessary to move  forward.  She                                                               
stated that  GDS Associates  and ARCTEC had  done good  work with                                                               
the basics  and that there were  areas of alignment.   She stated                                                               
that she had  some starting points for  an on-going conversation,                                                               
slide 11,  which included:   establish a  USO, or  unified system                                                               
operator, as opposed  to an ISO, or  independent system operator.                                                               
She noted  that, although GDS  Associates used the term  RRC, AEA                                                               
believed that it focused only  on the reliability parts, and that                                                               
the issue was much bigger than just  that.  She said that the USO                                                               
would  essentially  be  a  new organization  with  a  variety  of                                                               
functions, even  though the terms  could be  used interchangeably                                                               
at this earlier stage.                                                                                                          
                                                                                                                                
CHAIR  WOOL  expressed  his  agreement,   noting  that  this  was                                                               
referenced as a RESA in the  proposed bill.  He suggested to just                                                               
refer to it as a system operator at this stage.                                                                                 
                                                                                                                                
2:20:04 PM                                                                                                                    
                                                                                                                                
MS. REISER stated  that there was agreement for the  need to have                                                               
an  independent organization  that  would represent  stakeholders                                                               
with no majority  control and a transparent public  process.  She                                                               
stated that  AEA would benefit  all the ratepayers, as  they were                                                               
"not beholden to the ratepayers" of  any of the utilities, but to                                                               
watch out for  the ratepayers in all Alaska.   She noted that the                                                               
formula for payment of the  PCE (power cost equalization) program                                                               
was based on the average Railbelt  utility cost.  She added that,                                                               
as AEA  administered the  PCE program, it  was important  for the                                                               
rate  in the  Railbelt to  be the  most efficient  and reasonable                                                               
rate as it affected Rural Alaska.                                                                                               
                                                                                                                                
REPRESENTATIVE RAUSCHER asked what role  was played by the RCA in                                                               
this model, slide 12.                                                                                                           
                                                                                                                                
MS.  REISER  explained  that  the RCA  would  have  the  ultimate                                                               
authority and jurisdiction over the proposed organization.                                                                      
                                                                                                                                
REPRESENTATIVE RAUSCHER  asked what  experience had  prepared AEA                                                               
for this critical and complex process.                                                                                          
                                                                                                                                
MS. REISER stated  that the discussion by GDS  Associates and AEA                                                               
were all important  elements of this proposed  organization.  She                                                               
directed attention to  slide 12, which compared  the proposals by                                                               
GDS Associates, AEA,  and the proposed bill.  She  noted that all                                                               
the entities agreed on the  functions, and that economic dispatch                                                               
should be looked at although it still  needed a lot of work.  She                                                               
declared that AEA believed that  economic dispatch was the reason                                                               
for this proposed organization, that there  was a lot of money to                                                               
be  saved by  the ratepayers,  that  the state  had a  compelling                                                               
interest in the  benefits, and that the  voluntary management had                                                               
not been  successful.  She  pointed out that GDS  Associates felt                                                               
the form  should be  a new private  entity, whereas  the proposed                                                               
bill  suggested  that it  be  a  subdivision  of  the RCA.    She                                                               
reported that AEA had suggested  that it house the administrative                                                               
functions, such as finance and  contract management, but that the                                                               
decision making  should remain with the  CEO and the Board.   She                                                               
pointed  out that  all three  entities  had agreed  that for  the                                                               
governance,  no   stakeholder  group   should  have   a  majority                                                               
interest.  She noted that  there were different proposals for the                                                               
levels of  membership on the  board and  stated that AEA  felt it                                                               
was  more important  for the  role  of the  organization and  the                                                               
representation on the board.   She suggested that, although there                                                               
was agreement for a voluntary  membership by the utilities, there                                                               
should be harsh consequences for  not participating.  She offered                                                               
her   belief  that   the  organization   should   be  under   the                                                               
jurisdiction of the  RCA.  She moved  on to slides 13  and 14 and                                                               
stated  that  AEA  had  been the  primary  conduit  for  regional                                                               
planning both in  Rural Alaska and the Railbelt,  and could offer                                                               
assistance  with staff,  ability,  and technical  capacity.   She                                                               
stated that AEA  was not proposing to  act as the USO,  and to do                                                               
it  by  themselves, slide  15,  and  they  were not  proposing  a                                                               
specific structure or  to make the rules.  She  declared that the                                                               
state needed  to play a stronger  role and that it  was necessary                                                               
for legislation to push the utilities.                                                                                          
                                                                                                                                
2:27:54 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHNSTON  shared that  she had  a long  history in                                                               
this area and mused that she had  seen "a lot of who's on first."                                                               
She expressed  her concerns,  noting that  AEA had  successes and                                                               
failures.   She  asked if  the leadership  from Ms.  Reiser would                                                               
bring  AEA to  a  better  place, and  whether  this new  proposed                                                               
governance entity would require more staff and more funding.                                                                    
                                                                                                                                
MS. REISER  replied that  AEA was  now a  different organization.                                                               
She relayed that she brought  project, engineering, and technical                                                               
leadership, as well as extensive  experience and direct knowledge                                                               
with the  Railbelt.  She  added that there  was also a  change in                                                               
perspective from  the Board,  that AEA had  not been  involved in                                                               
Railbelt issues  to the extent  that it  should.  She  noted that                                                               
there  were   some  structural   inefficiencies  needing   to  be                                                               
addressed at the state level because  of a lack of success at the                                                               
private level.   She shared  that one  reason for her  hiring had                                                               
been  to  participate  in  this  process.   She  added  that  the                                                               
commissioner  [Department  of   Commerce,  Community  &  Economic                                                               
Development] was supportive of the  efforts to move forward.  She                                                               
offered  her belief  that the  State of  Alaska had  a compelling                                                               
interest in  the process.   She  declared that  this would  be "a                                                               
different look at the approach to the Railbelt."                                                                                
                                                                                                                                
REPRESENTATIVE  JOHNSTON shared  that  it was  sometimes hard  to                                                               
separate the  person from the structure.   She asked if  this new                                                               
structure would be independent from Ms. Reiser personally.                                                                      
                                                                                                                                
MS.  REISER acknowledged  the concern,  and she  opined that  the                                                               
same  could  be  said  for  the  utilities,  pointing  to  recent                                                               
turnovers  at  the  higher  levels.    She  stated  that  it  was                                                               
"shocking the  number of folks with  good institutional knowledge                                                               
and leadership  that will be turning  over as they retire."   She                                                               
declared  that it  was important  that  the staff,  the Board  of                                                               
Directors, and  the Commissioner  all support  the program.   She                                                               
explained  that  this  was  institutional  reform  and  that  the                                                               
structure was being  set up to be self-sustaining  and to outlive                                                               
any one person.                                                                                                                 
                                                                                                                                
REPRESENTATIVE  JOHNSTON  expressed  her  concern  that,  as  she                                                               
looked  back, she  had  seen  a lot  of  transformation in  power                                                               
generation  and  in  transmission.     She  cautioned  against  a                                                               
structure that was looking backward.                                                                                            
                                                                                                                                
REPRESENTATIVE  RAUSCHER asked  if  she had  had  talks with  the                                                               
utilities.                                                                                                                      
                                                                                                                                
MS. REISER shared the process  to date, which included conception                                                               
of  the idea,  proposal to  the board  and the  approval to  move                                                               
forward,  approval from  the DCEED  commissioner, and  discussion                                                               
with the  governor.   She noted that  the presentation  to ARCTEC                                                               
had  been cancelled,  and  that, although  the  program had  been                                                               
moving forward conceptually for 2 -  3 weeks, it was necessary to                                                               
get all the permissions before it could be rolled out.                                                                          
                                                                                                                                
REPRESENTATIVE RAUSCHER  questioned how  this could  move forward                                                               
if there had not yet been any discussion with the utilities.                                                                    
                                                                                                                                
MS. REISER stated that there  had been several conversations with                                                               
the  RCA and  GDS  Associates.   She pointed  out  that the  only                                                               
proposals were  from GDS Associates  and the proposed bill.   She                                                               
acknowledged  that  there  was  intent  to  speak  with  all  the                                                               
utilities,  although "there's  quite a  bit of  hostility towards                                                               
AEA for  even venturing into  these waters, and it's  a difficult                                                               
proposition."  She declared that  she had no problem with talking                                                               
to the utilities.                                                                                                               
                                                                                                                                
CHAIR  WOOL, in  response to  Representative Johnson,  said there                                                               
would  be  opportunities  for  other   groups  to  speak  to  the                                                               
committee.     He  suggested  that  AEA   offered  infrastructure                                                               
assistance and facilitation, instead of governance.                                                                             
                                                                                                                                
MS. REISER emphasized that this  was the beginning of the process                                                               
and  that   AEA  wanted  to   continue  to  work  with   all  the                                                               
stakeholders to make it work.                                                                                                   
                                                                                                                                
2:38:37 PM                                                                                                                    
                                                                                                                                
CHRIS ROSE,  Executive Director, Renewable Energy  Alaska Project                                                               
(REAP), stated  that REAP had  been working on  renewable energy,                                                               
energy  literacy, and  energy efficiency  promotion for  14 years                                                               
and was  in support  of HB 382.   He emphasized  that this  was a                                                               
consumer issue  that should have been  dealt with 10 or  15 years                                                               
ago.    He  expressed  appreciation that  ARCTEC  had  hired  GDS                                                               
Associates to move the process  forward, even though REAP was not                                                               
convinced that this would move forward  as it had failed so often                                                               
in  the past.   He  declared that  a voluntary  process will  not                                                               
work, as  even legislative attempts  had not worked in  the past.                                                               
He urged for  institutional reform in the Railbelt.   He strongly                                                               
suggested that members  read the RCA letter dated  June 30, 2015,                                                               
as it "really  sets the stage for everything  we're talking about                                                               
from the last three years or so."                                                                                               
                                                                                                                                
MR.  ROSE  paraphrased  from  a   letter  dated  March  28,  2018                                                               
[original punctuation  provided] [Included in  members' packets],                                                               
which read:                                                                                                                     
                                                                                                                                
      Renewable Energy Alaska Project is a statewide, non-                                                                      
     profit coalition of over  80 dues-paying diverse energy                                                                    
     stakeholder  organizations.  We  have been  working  to                                                                    
     promote renewable energy,  energy efficiency and energy                                                                    
     literacy across  Alaska since 2004.  I am  writing this                                                                    
     letter to respectfully encourage  the Committee to pass                                                                    
     HB 382. There are  several important issues that relate                                                                    
     to the Railbelt's future contained in the bill:                                                                            
                                                                                                                                
     Reliability Standards                                                                                                    
                                                                                                                                
     One important  issue for the  Railbelt is  the creation                                                                    
     and  enforcement  of   electric  reliability  standards                                                                    
     across   the  entire   region.   These  standards   are                                                                    
     essential to  ensure that the transmission  system, and                                                                    
     the  "dispatch"   (use  of)  the   region's  electrical                                                                    
     generators  is  as  efficient  and  safe  as  possible,                                                                    
     including  threats  against   cyber  security.  In  the                                                                    
     Regulatory Commission of Alaska's  June 30, 2015 letter                                                                    
     to  the   Legislature,  the  Commission   made  several                                                                    
     findings  and recommendations  regarding the  Railbelt.                                                                    
     One of those findings  was that region-wide reliability                                                                    
     standards  were  both  necessary  and  lacking  in  the                                                                    
     Railbelt.  In  its  letter,  the  Commission  gave  the                                                                    
     utilities  time to  voluntarily  come  up with  uniform                                                                    
     regional reliability standards.                                                                                            
                                                                                                                                
     It  is now  nearly  three years  later and  reliability                                                                    
     standards  have  still  not   been  agreed  to  by  the                                                                    
     utilities.  Four of  the  six  Railbelt utilities  that                                                                    
     have   formed  an   organization  called   the  "Alaska                                                                    
     Railbelt   Cooperative    Transmission   and   Electric                                                                    
     Company" (ARCTEC)  recently hired an  outside technical                                                                    
     advisor from  Georgia called GDS Associates  to look at                                                                    
     reliability  and   other  Railbelt  issues,   and  make                                                                    
     recommendations as  to the form  and function of  a new                                                                    
     organization  that  ARCTEC  is proposing  to  call  the                                                                    
     Railbelt  Reliability Council,  or RRC.  Note the  word                                                                    
     "reliability"  in the  title of  the RRC.  GDS is  over                                                                    
     halfway through  a process  of talking  to stakeholders                                                                    
     and  making its  recommendations  and  is scheduled  to                                                                    
     wrap up its  process near the beginning of  May. GDS is                                                                    
     hoping to  get agreement  from a range  of stakeholders                                                                    
     on  a Memorandum  of Understanding  that  would be  the                                                                    
     beginning of the formation of the so-called RRC.                                                                           
                                                                                                                                
     While REAP appreciates the effort  that ARCTEC (as well                                                                    
     as non-ARCTEC utilities  Homer Electric Association and                                                                    
     Anchorage  Municipal   Light  and  Power)   are  making                                                                    
     through the  GDS process,  unfortunately REAP  does not                                                                    
     believe  that the  voluntary process  that the  RCA has                                                                    
     requested the  utilities to  engage in  will ultimately                                                                    
     be  successful.   There  is  simply   too  disagreement                                                                    
     amongst  the utilities.  As mentioned,  two of  the six                                                                    
     utilities  are not  aligned enough  with the  others to                                                                    
     even  belong to  ARCTEC, and  the utilities  repeatedly                                                                    
     fail to  speak with  one voice. More  importantly, each                                                                    
     of the six utilities  has a fiduciary responsibility to                                                                    
     its respective  members, and not  to the  region. Since                                                                    
     none of  the utilities  has an  explicit responsibility                                                                    
     to   the  region,   it  is   REAP's  belief   that  the                                                                    
     legislature  must declare  that  reliability and  other                                                                    
     standards be established  through the proposed Railbelt                                                                    
     Electrical System  Authority, or RESA, contained  in HB                                                                    
     382.  There is  no disagreement  that the  region needs                                                                    
     reliability  standards -  the real  question is  how we                                                                    
     are ever going  to get there from here.  The RESA would                                                                    
     ensure  that standards  are set,  and then  enforced by                                                                    
     the RCA.                                                                                                                   
                                                                                                                                
     Economic Dispatch                                                                                                        
                                                                                                                                
     For at  least the  last four  years, the  driving force                                                                    
     behind the  formation of a  new entity in  the Railbelt                                                                    
     has been  saving consumers money  by ensuring  that the                                                                    
     most efficient  generators in the region  are being run                                                                    
     in a  logical order, from the  most efficient generator                                                                    
     first, to  the second most efficient  second, the third                                                                    
     most  efficient third,  and so  on,  as the  electrical                                                                    
     demand in  the region goes  up and down. This  is known                                                                    
     as "merit  order economic dispatch." At  present, merit                                                                    
     order  economic  dispatch  is not  being  done  in  the                                                                    
     Railbelt  region. Instead,  each respective  utility is                                                                    
     balancing  supply and  demand of  electricity in  their                                                                    
     own   respective  service   areas.   Since  today   the                                                                    
     utilities  are  connected  by  transmission  lines,  as                                                                    
     opposed  to when  they were  first established  over 70                                                                    
     years ago,  economic dispatch in  the entire  region is                                                                    
     technically feasible.  However, despite  some bilateral                                                                    
     contracts  and  the  sharing of  state-owned  resources                                                                    
     like the Bradley Lake hydro  facility, the six Railbelt                                                                    
     utilities   are   not  dispatching   their   respective                                                                    
     generation  assets   on  a  regional  basis.   This  is                                                                    
     inherently  inefficient. It  means that  less efficient                                                                    
     generators are being run in  the region when they could                                                                    
     remain idle, allowing the sale  of more economic energy                                                                    
     to  flow  from  the  most  efficient  generators.  This                                                                    
     inefficiency unnecessarily consumes  more fuel. Burning                                                                    
     more  fuel  in  inefficient generators  costs  Railbelt                                                                    
     consumers money.                                                                                                           
                                                                                                                                
     The need  for merit  order dispatch was  recognized and                                                                    
     called  out  by the  RCA  in  its  2015 letter  to  the                                                                    
     legislature.  In that  letter, the  Commission set  the                                                                    
     utilities on  a course  to voluntarily  come up  with a                                                                    
     model  for   merit  order  economic  dispatch   of  the                                                                    
     region's  generation assets,  instead of  the utilities                                                                    
     continuing  to  balance  supply  and  demand  in  their                                                                    
     respective, smaller and suboptimal, service areas.                                                                         
                                                                                                                                
     Almost  three years  after the  Commission's letter  to                                                                    
     the legislature,  there is  still no  economic dispatch                                                                    
     in  the Railbelt.  Over a  year  ago, Chugach  Electric                                                                    
     Association,  Anchorage Municipal  Light and  Power and                                                                    
     Matanuska   Electric  Association   announced  to   the                                                                    
     Commission that those three  utilities that serve parts                                                                    
     of  Anchorage were  going to  form what  they called  a                                                                    
     "tight  power  pool"  as a  precursor  to  region  wide                                                                    
     economic dispatch. They told  the Commission they would                                                                    
     need  an additional  year to  sort out  how they  would                                                                    
     settle  the sharing  of their  generation assets.  That                                                                    
     additional  year has  now come  and gone  and there  is                                                                    
     still  no  tight  power pool  in  the  Anchorage  area.                                                                    
     Furthermore,   there   is    little   consistency   and                                                                    
     transparency  about how  those negotiations  are going.                                                                    
     Instead, the  public hears one  story from  one utility                                                                    
     about how  the pool  is progressing, and  another story                                                                    
     from  another utility.  The  "pool"  has no  designated                                                                    
     spokesperson.                                                                                                              
                                                                                                                                
     While  there may  be some  disagreement about  how much                                                                    
     merit order dispatch  can be done in  the entire region                                                                    
     that   stretches  from   Homer  to   Fairbanks  without                                                                    
     transmission  upgrades  to  the north  and  south  from                                                                    
     Anchorage, the  RCA and the  public were told  that the                                                                    
     tight  power   pool  would  be  possible,   and  indeed                                                                    
     operating, by a few months ago.                                                                                            
                                                                                                                                
     What  should be  very disturbing  to Railbelt  electric                                                                    
     consumers is  the fact that ARCTEC's  consultant GDS is                                                                    
     no  longer  recommending  that the  so-called  Railbelt                                                                    
     Reliability  Council that  it  is  formulating for  the                                                                    
     utilities  even   include  the  function   of  economic                                                                    
     dispatch. The  reason that GDS  gave to  the Commission                                                                    
     at a  RCA public workshop  held March 16, 2018  is that                                                                    
     there  is fundamental  disagreement  among the  parties                                                                    
     about the  basis for economic  dispatch. This  is still                                                                    
     another  example   of  how   conflict  among   the  six                                                                    
     utilities hurts  the region as  a whole.  REAP believes                                                                    
     that merit  order dispatch  of the  region's generating                                                                    
     assets must  be a  function of any  new entity  that is                                                                    
     established for the Railbelt.                                                                                              
                                                                                                                                
     Non-Discriminatory Open Access to Transmission                                                                           
                                                                                                                                
     There  are  at least  two  problems  with the  way  new                                                                    
     entities or  projects can currently  try to  access the                                                                    
     Railbelt transmission system.                                                                                              
                                                                                                                                
     First,    today    each    single    utility    handles                                                                    
     interconnection within  their respective  service area.                                                                    
     There  are  six  utility  transmission  owners  in  the                                                                    
     Railbelt, along with the  Alaska Energy Authority. This                                                                    
     means the  process that  an independent  power producer                                                                    
     must  go through  to send  power into  the grid  from a                                                                    
     project  varies from  utility to  utility. There  is no                                                                    
     region-wide,  consistent and  transparent set  of rules                                                                    
     for accessing  the transmission  system, a  system that                                                                    
     has been constructed entirely from  public money of one                                                                    
     sort  or  the  other   (federal,  state,  municipal  or                                                                    
     cooperative).  This   lack  of   predictability  chills                                                                    
     investment from  the private sector that  Alaska sorely                                                                    
     needs.                                                                                                                     
                                                                                                                                
     Second, there is  not one single tariff,  or charge, to                                                                    
     move electrons  across the Railbelt.  In fact,  in some                                                                    
     cases  there are  what is  referred  to as  "pancaking"                                                                    
     transmission  tariffs. This  is a  situation where  the                                                                    
     movement  of  electrons from  A  to  B incurs  multiple                                                                    
     tariffs  from different  transmission  owners that  are                                                                    
     stacked  (or  pancaked)  on top  of  each  other.  Such                                                                    
     redundant  costs to  transmit electricity  have serious                                                                    
     economic consequences for consumers.                                                                                       
                                                                                                                                
     Region-Wide Planning                                                                                                     
                                                                                                                                
     REAP  believes   that  region-wide  planning   for  the                                                                    
     Railbelt is one of the  most important functions that a                                                                    
     new Railbelt Electrical  System Authority could handle.                                                                    
     The Railbelt has never been  planned as one region. One                                                                    
     recent result  of this  lack of  planning has  been the                                                                    
     overbuilding of  generation assets in the  Railbelt. In                                                                    
     its 2015 letter to the  legislature, the RCA noted that                                                                    
     the  Railbelt utilities  have  collectively built  $1.5                                                                    
     billion dollars of new generation  projects in the last                                                                    
     several years.  With the exception of  the Southcentral                                                                    
     Power Plant that Chugach and  ML&P built together, none                                                                    
     of  those  new  generation  assets were  built  with  a                                                                    
     regional  approach  in  mind.  This  lack  of  regional                                                                    
     planning  also extended  to how  new generation  assets                                                                    
     are impacting  the existing transmission system.  It is                                                                    
     also  worth  noting  that in  comparison  to  the  $1.5                                                                    
     billion the  utilities spent  on new  generation, those                                                                    
     same utilities  spent next  to nothing  on transmission                                                                    
     system upgrades.                                                                                                           
                                                                                                                                
     Now that the lack of  regional planning has resulted in                                                                    
     more new electric generation in  the Railbelt than what                                                                    
     was  necessary for  the region  as a  collective whole,                                                                    
     Railbelt consumers  are on  the hook  to pay  for those                                                                    
     capital expenditures. Each  of the respective utilities                                                                    
     that built power plants committed  their members to pay                                                                    
     back  those  expenditures  for the  next  25-30  years.                                                                    
     Incredibly,  this was  done without  either MEA  or HEA                                                                    
     having  any long-term  contracts for  natural gas,  and                                                                    
     both  Chugach and  ML&P likely  to run  out of  the gas                                                                    
     reserves they  now own long  before the  new generation                                                                    
     assets are paid for. You might  ask why the RCA did not                                                                    
     prevent   the  utilities   from  building   unnecessary                                                                    
     generation, or  generation that  is vulnerable  to fuel                                                                    
     price volatility? The  answer is that the  RCA does not                                                                    
     have  what is  known  as "siting  authority" over  each                                                                    
     respective utility's decision  to build new generation.                                                                    
     If the  Commission had siting authority,  it could pre-                                                                    
     approve  new generation  projects  before power  plants                                                                    
     were  built.  Instead,  without siting  authority,  the                                                                    
     RCA's hands are tied until  after a utility has already                                                                    
     made its decision to plan,  finance and construct a new                                                                    
     power plant.  Only after the  power plant is  built and                                                                    
     the utility  and its consumers are  committed to paying                                                                    
     for it does  the RCA have a role. That  role is to hear                                                                    
     the  utility's  request  to  charge  a  tariff  to  its                                                                    
     customers  to pay  the investment  back.  This lack  of                                                                    
     siting  authority by  the Commission  has forced  it to                                                                    
     allow those tariff requests in  case after case because                                                                    
     to deny  the tariff would  cause financial havoc  for a                                                                    
     utility that has already built a power plant.                                                                              
                                                                                                                                
     Regional  planning would  take  into  account what  new                                                                    
     generation   assets  the   entire  region   needs,  and                                                                    
     therefore  avoid   a  repeat  in  the   future  of  the                                                                    
     overbuilding   that  has   recently  happened   in  the                                                                    
     Railbelt.  Regional  planning   would  also  take  into                                                                    
     account where  potential renewable energy  assets could                                                                    
     be located,  both relative to the  resource's proximity                                                                    
     to   the  need   for  power,   and  its   proximity  to                                                                    
     transmission. Giving  a new Railbelt  Electrical System                                                                    
     Authority the  ability to plan for  both new generation                                                                    
     and   transmission   assets   allows   generation   and                                                                    
     transmission asset decisions to  be made in the context                                                                    
     of each  other, and  on a regional  basis. This  is far                                                                    
     more  effective that  making  generation decisions  for                                                                    
     each Railbelt utility service  district in isolation of                                                                    
     what the neighboring utility has  decided to do, or not                                                                    
     do. It is also more  efficient to plan for the regional                                                                    
     electrical system as just that,  a system that includes                                                                    
     generation   assets   and   the   transmission   assets                                                                    
     necessary to move the  electrons efficiently to market.                                                                    
     Having   the  Railbelt   Electrical  System   Authority                                                                    
     objectively  decide which  transmission projects  are a                                                                    
     priority for  the region  also protects  consumers from                                                                    
     the  impacts  from  a future,  for-profit  transmission                                                                    
     utility  building  transmission   that  does  not  have                                                                    
     positive  long-term  benefits  relative  to  its  cost.                                                                    
     Regional   planning  means   that  the   best  possible                                                                    
     decisions  get made  for  the  entire Railbelt,  saving                                                                    
     consumers  money.  However, region-wide  planning  must                                                                    
     include   stakeholders   besides   the   six   Railbelt                                                                    
     utilities.                                                                                                                 
                                                                                                                                
     Diverse Governance Structure                                                                                             
                                                                                                                                
     The  governance  structure  of  the  proposed  Railbelt                                                                    
     Electrical  System   Authority  is  perhaps   the  most                                                                    
     important part  of HB 382.  Without the  proper balance                                                                    
     of  independence  and   stakeholder  input  from  other                                                                    
     sectors  of Alaskan  society besides  the six  Railbelt                                                                    
     electric utilities,  Alaskans will  see no  real change                                                                    
     in the way business is done in the Railbelt.                                                                               
                                                                                                                                
     Seventy-seven  years   ago,  when  my   local  electric                                                                    
     utility  in the  Matanuska Valley  was formed,  I think                                                                    
     the  concept of  a  local  cooperative meant  something                                                                    
     very different to  the citizens of Palmer  than it does                                                                    
     today. Though  Matanuska Electric Association  is still                                                                    
     a cooperative,  most of its members  do not participate                                                                    
     in  its governance.  In  fact, in  the  Railbelt it  is                                                                    
     pretty  typical for  utility  board  elections to  draw                                                                    
     less than  20% of a cooperative's  eligible voters. Ask                                                                    
     the average electric consumer today  what kind of legal                                                                    
     structure  their  electric  utility  is  and  they  are                                                                    
     likely to  say they don't  know. In contrast,  when MEA                                                                    
     was  formed in  1941, there  wasn't any  electricity in                                                                    
     Palmer.  People were  joining together  to provide  it,                                                                    
     with an  assumption and social compact  that they would                                                                    
     remain accountable to each other.                                                                                          
                                                                                                                                
     Since the  six Railbelt  utilities were  formed decades                                                                    
     ago,  road systems,  electric  transmission lines,  and                                                                    
     telephone  and internet  service have  all come  to the                                                                    
     region.  The RCA  itself  has stated  that  if we  were                                                                    
     start  over today,  we would  certainly  have just  one                                                                    
     utility  in the  Railbelt.  For  context, the  combined                                                                    
     average electric load of all  six Railbelt utilities is                                                                    
     just over  600 MW. In  contrast, a typical  power plant                                                                    
     (not  utility) in  the  Lower 48  is  around 1,000  MW.                                                                    
     While REAP is  not advocating for all  six utilities to                                                                    
     be made  into one, what the  Railbelt Electrical System                                                                    
     Authority would do is make  sure that all six utilities                                                                    
     take full  advantage of  the fact  that today  they are                                                                    
     connected.  The region's  future prosperity  depends on                                                                    
     it.                                                                                                                        
                                                                                                                                
     Besides  the   transmission,  road   and  communication                                                                    
     infrastructure  that  has  been  built  over  the  last                                                                    
     decades, there  are other changes  and trends  that the                                                                    
     current system of  six independently operated utilities                                                                    
     cannot  effectively  address.  For  example,  over  the                                                                    
     decades there  has been  an increase  in the  number of                                                                    
     commercial and  industrial electrical consumers  in the                                                                    
     region. Those  consumers are  a stakeholder  group that                                                                    
     should   have   input   into  planning   the   region's                                                                    
     electrical   system.  Another   change  has   been  the                                                                    
     meteoric  drop in  the  cost  of renewable  electricity                                                                    
     from wind  and solar, even  as the efficiency  of those                                                                    
     technologies  continues to  increase.  For example,  in                                                                    
     1990, the  average price  of wind  power in  the United                                                                    
     States   was   65   cents/kWh.   Today,   the   average                                                                    
     unsubsidized  price  for  wind  in  the  Lower  48  has                                                                    
     dropped  to under  5 cents/kWh,  making it  competitive                                                                    
     with  natural  gas and  coal.  Likewise,  the price  of                                                                    
     utility-scale  solar has  dropped precipitously  in the                                                                    
     last 10 years, with  the average unsubsidized price now                                                                    
     also down to  around 5 cents/kWh. In  2017, nearly half                                                                    
     of all new generating  capacity additions in the United                                                                    
     States were  wind or solar.  In the rest of  the world,                                                                    
     most of  those wind  and solar installations  are being                                                                    
     developed  by  independent power  producers,  companies                                                                    
     that   specialize  in   those   technologies  and   are                                                                    
     therefore  most often  in the  best  position to  build                                                                    
     projects as efficiently  as possible. Independent power                                                                    
     producers are another constituency  that must be at the                                                                    
     table when plans are made for our electric future.                                                                         
                                                                                                                                
     There are  other trends that are  not being effectively                                                                    
     addressed or  represented in the current  system of six                                                                    
     utilities  that  make  decisions  independent  of  each                                                                    
     other.  One  is  the increasing  use  of  "distributed"                                                                    
     power. This  refers to both  an accelerating  number of                                                                    
     people  in the  Railbelt  who are  putting cheap  solar                                                                    
     panels on  their homes, and businesses  who are finding                                                                    
     it  more economical  to generate  their  own power  on-                                                                    
     site,   often  coupled   with  energy   storage.  Those                                                                    
     businesses and consumers need a seat at the table.                                                                         
                                                                                                                                
     Another  major  trend  is energy  efficiency.  As  more                                                                    
     consumers have been made aware  of how energy efficient                                                                    
     lighting  and  appliances  can  save  them  money,  the                                                                    
     demand  for electricity  in the  Railbelt has  actually                                                                    
     been  decreasing, even  as the  region as  a whole  has                                                                    
     overbuilt generation. Fortuitously,  another trend that                                                                    
     can  counter  that  decrease   in  demand  is  electric                                                                    
     vehicles, or  EVs. EVs, and  the lithium  ion batteries                                                                    
     that run  them, are coming  down in price so  fast that                                                                    
     many experts, investors, nations  and car companies are                                                                    
     betting  on  them  to  completely  change  the  way  we                                                                    
     transport  ourselves. The  cost  of  operating a  Chevy                                                                    
     Bolt or  Tesla Model 3 with  a range of over  200 miles                                                                    
     that one  can purchase today for  about $35,000 (before                                                                    
     a federal tax  credit of up to $7,500) is  half of what                                                                    
     it costs  to operate  a standard  car with  an internal                                                                    
     combustion engine. Even  with the Railbelt's relatively                                                                    
     expensive 20  cent/kWh power, a  Chevy Bolt can  go 200                                                                    
     miles  on  $12 worth  of  electricity.  In contrast,  a                                                                    
     person with a  car that gets 25 mpg  and uses $3/gallon                                                                    
     gasoline would spend $24 to  go the same 200 miles. EVs                                                                    
     also have  only about  20 moving  parts, as  opposed to                                                                    
     roughly 2,000  moving parts in the  internal combustion                                                                    
     engines of  today, making EVs  cheaper to  maintain and                                                                    
     likely  to  last  much  longer. As  the  price  of  EVs                                                                    
     continues   to  drop   every  year,   a  transportation                                                                    
     revolution  is  brewing.  It  is  imperative  that  the                                                                    
     governance  structure  of  a  new  Railbelt  Electrical                                                                    
     System Authority  also have people and  entities on the                                                                    
     governing  board  who  understand  how  the  trends  of                                                                    
     energy  efficiency  and   electric  transportation  fit                                                                    
     together so they can help  the Railbelt prepare for its                                                                    
     future.                                                                                                                    
                                                                                                                                
     Besides   different   types  of   electric   consumers,                                                                    
     independent power producers,  and renewable, efficiency                                                                    
     and electric vehicle  stakeholders, other entities that                                                                    
     should be  represented on  the governance  structure of                                                                    
     the  Railbelt  Electric  System Authority  include  the                                                                    
     Alaska  Energy Authority  (AEA), the  RCA itself  and a                                                                    
     representative  of any  new  transmission utility  that                                                                    
     might be formed in the future.                                                                                             
                                                                                                                                
     Just   two   weeks   ago,  ARCTEC's   consultant,   GDS                                                                    
     Associates, made a  preliminary recommendation in front                                                                    
     of  the  RCA  that  the  governing  board  of  ARCTEC's                                                                    
     proposed  Railbelt Reliability  Council be  made up  of                                                                    
     nine members,  with just three  seats held  by Railbelt                                                                    
     utilities. This  preliminary recommendation  is further                                                                    
     evidence that  a diverse  group stakeholders,  not just                                                                    
     the   same  six   utility  players,   must  guide   the                                                                    
     Railbelt's  future.  It  is also  consistent  with  the                                                                    
     language in HB 382, which  states that no more than 40%                                                                    
     of  the  governing  board of  the  Railbelt  Electrical                                                                    
     System Authority  come from  the six  existing Railbelt                                                                    
     utilities.                                                                                                                 
                                                                                                                                
     If  the governance  structure  of  the Railbelt  System                                                                    
     Authority did  not include the  wide array  of Alaskans                                                                    
     that have a stake in how  the region plans for and then                                                                    
     produces and  transmits electricity, Alaskans  will see                                                                    
     more of the  same conflict among the  utilities who are                                                                    
     now running the  show, and Alaska will  continue to lag                                                                    
     behind  other states  and  nations  that have  embraced                                                                    
     regional electric systems and  renewable energy. A wide                                                                    
     variety  of non-utility  stakeholders are  part of  the                                                                    
     governance  in   those  so-called   Independent  System                                                                    
     Operators    (ISOs)     and    Regional    Transmission                                                                    
     Organizations (RTOs) in other jurisdictions.                                                                               
                                                                                                                                
     The  Railbelt needs  a  vision of  our  future that  is                                                                    
     based  on objective  reality, not  six often  competing                                                                    
     versions  of it.  Indeed,  it  is utility  disagreement                                                                    
     over what the region needs  that GDS pointed to when it                                                                    
     told the  RCA on March  16th that it was  not including                                                                    
     the function of economic  dispatch in ARCTEC's proposed                                                                    
     Railbelt   Reliability   Council.   Instead,   GDS   is                                                                    
     currently  proposing that  the RRC  be stood  up first,                                                                    
     and  then a  wide  group of  stakeholders could  design                                                                    
     still  another  study  to determine  whether  it  makes                                                                    
     sense  to  have  only  the  most  efficient  generators                                                                    
     operating in the Railbelt at any one moment in time.                                                                       
                                                                                                                                
     By  not  including  economic   dispatch  in  the  RRC's                                                                    
     functions,  GDS  is  essentially saying  that  Alaskans                                                                    
     need to spend more time  and more money on more studies                                                                    
     to determine what  common sense tells us  is true: that                                                                    
     consumers will save money if  natural gas is not burned                                                                    
     inefficiently. This  conclusion by GDS  underscores why                                                                    
     we  need a  Railbelt Electrical  System Authority  now,                                                                    
     and why the  utilities cannot control it.  If Alaska is                                                                    
     going to do what other  jurisdictions have now done for                                                                    
     decades  and make  the planning  and operations  of our                                                                    
     electrical system  more efficient on a  regional basis,                                                                    
     we cannot afford to continue  to wait for the utilities                                                                    
     to address these issues voluntarily.                                                                                       
                                                                                                                                
     Conclusion                                                                                                               
                                                                                                                                
     Today  we  are  at  an  important  crossroads  for  the                                                                    
     Railbelt,  and for  the state.  If Alaska  is going  to                                                                    
     diversify its  economy, the Railbelt will  have a major                                                                    
     role  to play.  Energy  efficiency, electric  vehicles,                                                                    
     renewable energy and distributed  energy are all making                                                                    
     what was for many  decades a relatively static electric                                                                    
     industry  one of  the most  dynamic  and fast  changing                                                                    
     industries  on  the  planet.  The  Railbelt  Electrical                                                                    
     System Authority  is necessary  for the  Railbelt's six                                                                    
     independent utilities to come  together to meet today's                                                                    
     trends   and  challenges.   Today,  the   six  Railbelt                                                                    
     utilities still do  not speak with one  voice, in large                                                                    
     part because  their respective fiduciary duties  are to                                                                    
     their  own  members,  and  not  to  the  region.  While                                                                    
     efforts to pool  generation resources around Anchorage,                                                                    
     and to look at new  models like an RRC are commendable,                                                                    
     consumers cannot  wait any longer for  the utilities to                                                                    
     voluntarily put  something together with  the requisite                                                                    
     functions  and  governance   structure.  Consumers  are                                                                    
     already on  the hook for more  generation capacity than                                                                    
     the region as a whole  needed, and the resulting higher                                                                    
     electricity   prices  in   the  Railbelt   will  impact                                                                    
     consumers all over the state  as the target electricity                                                                    
     price  for the  Power Cost  Equalization program  rises                                                                    
     higher and higher.                                                                                                         
                                                                                                                                
     Alaska  can also  no longer  afford to  operate with  a                                                                    
     balkanized   Railbelt  electricity   system.  We   need                                                                    
     regional  planning, economic  dispatch and  reliability                                                                    
     standards  to  protect  consumers and  transparent  and                                                                    
     consistent   interconnection   standards   to   attract                                                                    
     investment.  Most  importantly,  we need  a  governance                                                                    
     structure for the  Railbelt Electrical System Authority                                                                    
     that  does not  rely  on utilities  alone  to plan  the                                                                    
     region's  future. Consumers  and investors  have waited                                                                    
     long enough for voluntarily  action. The utilities' RRC                                                                    
     model  will not  get us  to where  the region  must go.                                                                    
     Instead,  REAP  respectfully  suggests  that  you,  the                                                                    
     elected representatives of  the state's consumers, take                                                                    
     the   required  action   to   establish  the   Railbelt                                                                    
     Electrical System  Authority. Thank  you very  much for                                                                    
     your consideration of this critical  issue. I am always                                                                    
     available to  answer any questions  that you  may have,                                                                    
     or to provide background materials.                                                                                        
                                                                                                                                
2:46:24 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHNSON  asked to  ensure that  the RCA  was given                                                               
some credit.                                                                                                                    
                                                                                                                                
MR.  ROSE replied  that this  was not  intended to  disparage the                                                               
RCA.                                                                                                                            
                                                                                                                                
REPRESENTATIVE JOHNSTON asked if this  would be a loaded economic                                                               
dispatch due to all the  generation plants that were beholding to                                                               
the co-op membership.   She suggested that this  could force some                                                               
of the utilities into bankruptcy.                                                                                               
                                                                                                                                
MR.  ROSE pointed  out that,  as the  expenditures for  the power                                                               
plants were  already included in  the rates,  those jurisdictions                                                               
were already  paying for  it.  The  concept of  economic dispatch                                                               
would  allow any  of those  utilities to  buy power  from someone                                                               
else cheaper  than they could  produce the  power.  He  said that                                                               
moving forward  this could reduce  the cost of  operation because                                                               
power was bought cheaper.                                                                                                       
                                                                                                                                
REPRESENTATIVE JOHNSTON declared that  she was 100 percent behind                                                               
economic dispatch.   She asked  whether, as the operation  of the                                                               
plant was a labor agreement, this was forcing the situation.                                                                    
                                                                                                                                
2:50:27 PM                                                                                                                    
                                                                                                                                
MR.  ROSE opined  that the  power plants  had a  relatively small                                                               
labor  force,  as   most  of  the  labor   force  maintained  the                                                               
transmission lines,  which would need  to be kept operating.   He                                                               
pointed out that the utilities would  not go away, but that there                                                               
would  be  one  single  system   operator  to  dispatch  all  the                                                               
generation units  in a  merit order in  which the  most efficient                                                               
would go  first.  He  stated that this  was a consumer  issue and                                                               
the question was  really for when.  He referenced  the $1 million                                                               
study in 2010  for a regional integrated resource  plan which was                                                               
supposed to be enforced by  proposed legislation.  He stated that                                                               
there  was work  still  to be  done, and  he  supported that  AEA                                                               
wanted to  keep this  project moving.   He  declared that  it was                                                               
necessary to  have a neutral  facilitator.  He pointed  out that,                                                               
over time, there  had not been any agreement  from the utilities.                                                               
He opined  that the  aforementioned letter from  the RCA  in 2015                                                               
had been  a request  to the  legislature to  do something  if the                                                               
voluntary efforts  requested from  the utilities did  not happen.                                                               
He expressed  his agreement  that the  inherent problem  was that                                                               
the six  utilities each  had fiduciary  duties to  its membership                                                               
and not to  the region.  He  declared that, as the  RCA, AEA, and                                                               
the university  had all  called for a  regional approach,  it was                                                               
incumbent for the  legislature to consider a way to  work it out.                                                               
He stated  that the lack of  economic dispatch was a  problem for                                                               
REAP.                                                                                                                           
                                                                                                                                
REPRESENTATIVE JOHNSTON  stated that the cost  for future changes                                                               
to transmission would push changes to the system.                                                                               
                                                                                                                                
MR.  ROSE  expressed  his agreement,  although  a  roadblock  for                                                               
transmission  was a  lack of  reliability standards.   He  opined                                                               
that there was now less demand with the changes in technology.                                                                  
                                                                                                                                
2:56:38 PM                                                                                                                    
                                                                                                                                
CHAIR  WOOL acknowledged  that economic  dispatch  was an  issue,                                                               
noting that the presentation by  GDS Associates referred to it as                                                               
a sticking point  among the utilities.  He asked  if most parties                                                               
agreed  that   there  was  some   savings,  although   there  was                                                               
disagreement for how much would be saved.                                                                                       
                                                                                                                                
MR. ROSE expressed  his agreement and noted that  the other issue                                                               
was for  the cost  of setting  up a  system operator  to dispatch                                                               
versus how  much would be saved.   He pointed out  that every new                                                               
addition for transmission would potentially offer more savings.                                                                 
                                                                                                                                
CHAIR WOOL offered an understanding  that the utilities would not                                                               
take on an endeavor that would  lessen their return, due to their                                                               
concern solely for service areas and not a system wide concern.                                                                 
                                                                                                                                
MR. ROSE stated  that although change was hard, there  would be a                                                               
transition process and  the longer the wait, the  harder it would                                                               
be.   He  declared  the  need for  a  "hammer"  to implement  the                                                               
changes.                                                                                                                        
                                                                                                                                
CO-CHAIR WOOL asked  if it had been made easier  for other states                                                               
with the integration  of nearby states, or had  it been necessary                                                               
to have legislation to force the issue.                                                                                         
                                                                                                                                
MR. ROSE replied that it varied  and stated that there were other                                                               
independent   system   operators    and   regional   transmission                                                               
organizations.  He  pointed out that Alaska was  trying to change                                                               
a system  for 500,000 people whereas  a change on the  East Coast                                                               
would be  for 60 million  people.   He pointed to  the transition                                                               
over time  in Texas.   He declared that  it was necessary  to get                                                               
this transition  to a true independent  system operator completed                                                               
in Alaska, as there were other pressing energy issues.                                                                          
                                                                                                                                
REPRESENTATIVE RAUSCHER  offered his understanding  that economic                                                               
dispatch was in  progress and that the utilities  would be filing                                                               
with RCA in the next few months.  He asked what was the fear.                                                                   
                                                                                                                                
MR. ROSE  declared that  REPA did not  believe it,  that economic                                                               
dispatch was not  happening and that nothing had been  filed.  He                                                               
declared the need for a referee for all these disputes.                                                                         
                                                                                                                                
3:02:18 PM                                                                                                                    
                                                                                                                                
[HB 382 was held over.]                                                                                                         
                                                                                                                                
3:03:01 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Special Committee on Energy meeting was adjourned at 3:03 p.m.                                                                  

Document Name Date/Time Subjects
HB 382 - AEA Railbelt Transmission Plan - Executive Summary - 3.6.17.pdf HENE 3/29/2018 10:00:00 AM
HB 382
HB 382 - GDS Presentation - HENE - 3.29.18.pdf HENE 3/29/2018 10:00:00 AM
HB 382
HB 382 - RCA 6.30.15 LTR to the Legislature.pdf HENE 3/29/2018 10:00:00 AM
HB 382
HB 382 - Joint Utility Opposition Letter 3.27.18.pdf HENE 3/29/2018 10:00:00 AM
HB 382
HB 382 - Support Letter - Tony Slatonbarker 3.23.18.pdf HENE 3/29/2018 10:00:00 AM
HB 382
HB 382 - Alaska Railbelt Regional Integrated Resource Plan Study - Exec Summ - Feb. 2010.pdf HENE 3/29/2018 10:00:00 AM
HB 382
HB 382 - Fiscal Note - RCA.pdf HENE 3/29/2018 10:00:00 AM
HB 382
HB 382 - Sponsor Statement.pdf HENE 3/29/2018 10:00:00 AM
HB 382
HB 382 - AEA Presentation for HENE 3.29.18.pdf HENE 3/29/2018 10:00:00 AM
HB 382
HB 382 - Letter of Support - AK Climate Action Network - 3.28.18.pdf HENE 3/29/2018 10:00:00 AM
HB 382
HB 382 - Letter of Support - Andrew McDonnell.pdf HENE 3/29/2018 10:00:00 AM
HB 382
HB 382 - Letter of Support - REAP 3.29.18.pdf HENE 3/29/2018 10:00:00 AM
HB 382