Legislature(2017 - 2018)BARNES 124

04/05/2018 10:15 AM ENERGY

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Audio Topic
01:26:32 PM Start
01:27:03 PM HB382
02:59:18 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Meeting Postponed to 1:15 pm --
-- Location Change --
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 382 RAILBELT ELEC. TRANSMISSION AUTHORITY TELECONFERENCED
Heard & Held
-- Public Testimony --
- Commissioner Bob Pickett, RCA
- Julie Estey, Director of External Affairs, MEA
- Mike Craft, President & CEO, AK Environmental
Power
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE SPECIAL COMMITTEE ON ENERGY                                                                              
                         April 5, 2018                                                                                          
                           1:26 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                                                                             
03/29/18       (H)       Heard & Held                                                                                           
03/29/18       (H)       MINUTE(ENE)                                                                                            
04/05/18       (H)       ENE AT 10:15 AM BARNES 124                                                                             
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
ROBERT PICKETT, Commissioner, Chair                                                                                             
Regulatory Commission of Alaska (RCA)                                                                                           
Department of Commerce, Community & Economic Development                                                                        
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified during discussion of HB 382.                                                                   
                                                                                                                                
JULIE ESTEY                                                                                                                     
Director of External Affairs                                                                                                    
Matanuska Electric Association                                                                                                  
Palmer, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in opposition to HB 382.                                                                       
                                                                                                                                
                                                                                                                                
MIKE CRAFT                                                                                                                      
Alaska Environmental Power, LLC                                                                                                 
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 382.                                                                          
                                                                                                                                
STEVE KONKEL, MD                                                                                                                
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 382.                                                                          
                                                                                                                                
KERRY WILLIAMS                                                                                                                  
Alaska Climate Action Network                                                                                                   
Eagle River, Alaska                                                                                                             
POSITION STATEMENT:  Testified in support of HB 382.                                                                          
                                                                                                                                
BECKY LONG                                                                                                                      
Talkeetna, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 382.                                                                          
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
1:26:32 PM                                                                                                                    
                                                                                                                                
CHAIR  ADAM WOOL  called the  House Special  Committee on  Energy                                                             
meeting to order  at 1:26 p.m.   Representatives Wool, Spohnholz,                                                               
Johnston,  Johnson,  and Lincoln  were  present  at the  call  to                                                               
order.    Representatives  Rauscher  and Claman  arrived  as  the                                                               
meeting was in progress.                                                                                                        
                                                                                                                                
          HB 382-RAILBELT ELEC. TRANSMISSION AUTHORITY                                                                      
                                                                                                                                
1:27:03 PM                                                                                                                    
                                                                                                                                
CHAIR WOOL  announced that the  first 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."                                                                                                          
                                                                                                                                
1:27:31 PM                                                                                                                    
                                                                                                                                
ROBERT  PICKETT, Commissioner,  Chair,  Regulatory Commission  of                                                               
Alaska  (RCA),  Department  of  Commerce,  Community  &  Economic                                                               
Development,  (via  teleconference) stated  that  he  had been  a                                                               
Commissioner  with the  RCA  since  2008 and  had  served as  the                                                               
Chairman on  three different  occasions, including  the timeframe                                                               
in  which the  letter to  the Alaska  State Legislature  had been                                                               
issued on June 30,  2015.  He offered his belief  that this was a                                                               
very  timely hearing  as there  were a  lot of  issues yet  to be                                                               
resolved.   He  allowed  that  there was  some  criticism of  the                                                               
process to  date, that  it was  going too  slow, and  perhaps the                                                               
legislature should  take a more  aggressive stance at  this point                                                               
and begin  to mandate certain  structures.  He  expressed caution                                                               
that not  everything that  had been  said was  entirely contexted                                                               
properly.   He expressed his  understanding for  the frustration,                                                               
specifically  from the  potential  sponsors  of renewable  energy                                                               
projects and  the transmission system.   He pointed out  that the                                                               
earlier  testimony from  Janet Reiser  identifying the  pancaking                                                               
transmission rights was entirely correct.                                                                                       
                                                                                                                                
MR. PICKETT  pointed out that  three of the  recommendations from                                                               
RCA directly  addressed a  lot of these  issues, noting  that RCA                                                               
had set timelines for reporting  from the impacted utilities.  He                                                               
opined that  there was  "a very balkanized  system that  from the                                                               
time I came  on the commission in 2008,  my overriding impression                                                               
was  just non-stop  fighting."   He offered  some of  the history                                                               
among  the   older  utilities  with  long   term  power  purchase                                                               
agreements.   He added that  the interaction among  the utilities                                                               
was "not particularly  helpful in many occasions."   He said that                                                               
earlier concerns for the availability  of natural gas from 2007 -                                                               
2009 brought up issues that  shaped the environment.  He reported                                                               
that  the  Legislature had  invested  about  $800,000 to  find  a                                                               
rational,  unified approach  to  energy, which  had very  limited                                                               
success.   He  discussed the  following two  legislative sessions                                                               
which attempted work with the  ISO (Independent System Operator),                                                               
USO  (unified  system  operator),   or  Transco  functions.    He                                                               
reported that,  since the utilities  went off the  Chugach system                                                               
and  created their  own system,  there  had been  more than  $1.5                                                               
billion in  new generation investment by  the Railbelt utilities.                                                               
He  explained that  per the  nature  of Alaska  statutes, once  a                                                               
utility  made  a  prudent investment,  each  utility  could  make                                                               
decisions  regarding   what  was   deemed  best  for   their  own                                                               
ratepayers.   He noted  that the  RCA lacked  any decision-making                                                               
power  over  what  transmission  or generation  was  built.    He                                                               
pointed out  that this had  resulted in  over-generation capacity                                                               
in the Railbelt.  He said  that the likelihood of any significant                                                               
new  generation on  an  economic  basis in  the  next decade  was                                                               
probably  slim   or  none.     He  cited   the  first   of  three                                                               
recommendations from  the RCA:   the  creation of  an independent                                                               
transmission  company  to  rationalize transmission  assets,  and                                                               
create a more  uniform, system wide tariff.  He  shared an update                                                               
for  the likelihood  of  a  filing for  a  certificate of  public                                                               
convenience  and  necessity.    He emphasized  that  merit  order                                                               
economic  dispatch   was  important,  although  it   was  a  very                                                               
complicated  process to  get  disparate utilities  to  work on  a                                                               
tight pooling  agreement.  He  expressed concern for  the current                                                               
lack of  enforceable reliability standards  in the Railbelt.   He                                                               
reported that voluntary standards had  been filed with RCA in the                                                               
fall  of  2013, and  within  four  months, those  standards  were                                                               
ignored.   He said that  there was  a lot of  initial controversy                                                               
questioning  the   statutory  or  regulatory  authority   of  the                                                               
commission over reliability standards.   He declared that the RCA                                                               
had  certificate power,  and that  it  was necessary  to be  fit,                                                               
willing, and  able to hold the  certificates.  He added  that, by                                                               
and large, the  utilities had "done an excellent  job keeping the                                                               
lights  on."   He noted  that  the voluntary  standards had  some                                                               
gaping   holes,   particularly   in    the   area   of   critical                                                               
infrastructure  protection,  which  covered  physical  and  cyber                                                               
security  issues.   He shared  that a  safeguard review  had been                                                               
conducted,  and that  all six  of the  utilities had  voluntarily                                                               
participated  in the  two-and-a-half-day review,  even as  it was                                                               
somewhat disruptive to  their operations.  He shared  that it was                                                               
his intention,  after the  filing of  the voluntary  standards in                                                               
mid-April, to open  a rule making docket on what  was on file and                                                               
to  proceed  to  incorporate  that into  the  regulations  on  an                                                               
enforceable basis.  He said  that would allow for identifying the                                                               
additional  physical  and  cyber  security  areas  needed  to  be                                                               
addressed.                                                                                                                      
                                                                                                                                
1:36:12 PM                                                                                                                    
                                                                                                                                
CHAIR WOOL  referenced the letter from  the Regulatory Commission                                                               
of  Alaska  (RCA) dated  June  30,  2015, [Included  in  members'                                                               
packets]  in  which  the  RCA requested  two  reports,  one  from                                                               
September  30,   2015,  and  another  from   December  31,  2015.                                                               
Representative  Wool asked  if any  other reports  been submitted                                                               
after these.                                                                                                                    
                                                                                                                                
MR  PICKETT  stated that  several  reports  had been  voluntarily                                                               
submitted throughout  2016 and 2017,  and that the  latest formal                                                               
action had been in August, September,  and October of 2017.  They                                                               
were requested to  come to a public meeting and  present a formal                                                               
update on the three key items [in the June 30, 2015 letter].                                                                    
                                                                                                                                
1:37:35 PM                                                                                                                    
                                                                                                                                
CHAIR WOOL asked  if the RCA was getting the  reports in a timely                                                               
manner.                                                                                                                         
                                                                                                                                
MR  PICKETT opined  that  he didn't  believe  the utilities  were                                                               
dragging  their feet,  and he  expressed  appreciation that  they                                                               
were bringing in  $1.5 billion dollars in  new generation capital                                                               
expenditures.    In  addition, there  were  several  depreciation                                                               
studies  and  rate cases  which  were  very time-consuming.    He                                                               
pointed out that  the utilities were also figuring  out their own                                                               
operational  protocols.   He mentioned  that the  talent pool  in                                                               
Alaska for technical operating abilities  and management of these                                                               
assets was  "fairly thin."  Due  to a lack of  staffing, when the                                                               
utilities were  assigned a task  that often meant that  that they                                                               
were  delaying  other projects.    He  noted that,  although  the                                                               
process would be  too slow for some, these  were very complicated                                                               
issues.  He  offered an example of a settlement  process for type                                                               
power pooling  where there were three  different entities, trying                                                               
to relate that  back to their generation stacks,  how things were                                                               
going to  be dispatched,  and how  the compensation  factors were                                                               
going to be played in.   He pointed out that, with several moving                                                               
variables, it  was not as easy  as it might seem  on the surface.                                                               
He  acknowledged  that  this  gave  utilities  the  incentive  to                                                               
perhaps move slower  than what the commission  or outside parties                                                               
would like.  He stated that  the RCA  would continue to  keep the                                                               
pressure on.                                                                                                                    
                                                                                                                                
CHAIR WOOL asked  which of the requirements or  standards was the                                                               
most difficult, controversial, or hardest to achieve.                                                                           
                                                                                                                                
1:39:37 PM                                                                                                                    
                                                                                                                                
MR PICKETT offered  his belief that the  reliability standard was                                                               
difficult; however, if  the filing was made in  mid-April and the                                                               
two sets of  basic operating standards were  reconciled, that was                                                               
a  good step  forward  as  it had  been  controversial with  many                                                               
disputes for  over three years.   He pointed out that  there were                                                               
still  gaping  holes   and  that  there  was   not  any  critical                                                               
infrastructure protection.   He noted  the events of the  Net Cap                                                               
substation  in  the Bay  Area,  the  Ukrainian attacks,  and  the                                                               
Industrial Control system attacks,  and declared that the attacks                                                               
had become more  and more pervasive.  He added  that the State of                                                               
Alaska bulk  power systems, even  as a  small system, was  in the                                                               
crosshairs  of  various  state  actors  and  a  whole  series  of                                                               
advanced persistent  threats, all  of which would  be challenging                                                               
moving forward.   He  offered his belief  that the  Transco issue                                                               
was  going  to  be  an  economically driven  issue,  as  all  the                                                               
utilities  had  different  concerns   and  different  roles  that                                                               
transmissions play.   He offered an example for  AEL&P, which had                                                               
very few  transmission assets but a  fairly heavy load.   He said                                                               
that this would  have a different set of  circumstances than that                                                               
of  Homer  Electric,  Golden Valley,  and  Matanuska  with  these                                                               
transmission assets  spread over  a much larger  area.   He added                                                               
that  the economic  case for  each one  of them  was going  to be                                                               
different.   He shared  that RCA started  with the  assumption in                                                               
the legislative report  that there was not going to  be any state                                                               
appropriations for transmission or  other types of activities due                                                               
to state  budget constraints.   The commission does not  have the                                                               
power  to transfer  assets from  one  entity to  another, as  the                                                               
utilities  had  property  rights,  and,  in  statute,  they  were                                                               
guaranteed to be  able to collect in rates what  it would take to                                                               
pay for these assets.                                                                                                           
                                                                                                                                
1:41:38 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHNSTON  stated that  one of the  driving factors                                                               
was the economic dispatch.   She noted the many challenges facing                                                               
the utilities  and the  overbuilding of  production capabilities.                                                               
She said  that they  had messages from  people who  had renewable                                                               
energy sources who  had not been able to  participate online with                                                               
the Railbelt  as Independent  Power Producers  (IPPs).   When the                                                               
economic  dispatch question  was addressed,  it was  necessary to                                                               
have  a spin  rate; yet,  when there  was this  overproduction of                                                               
energy, how would that issue be resolved.                                                                                       
                                                                                                                                
MR. PICKETT  asked Representative Johnston if  she meant bringing                                                               
on more renewable energy.                                                                                                       
                                                                                                                                
REPRESENTATIVE  JOHNSTON  replied  that  most  renewable  energy,                                                               
except  hydro and  the  others  that were  not  available in  the                                                               
Railbelt, were  intermittent; hence,  a spin rate  was necessary.                                                               
She added that  there were various costs of  spin rates depending                                                               
on the  utility, offering  as an  example, a  utility that  had a                                                               
renewable IPP which  must design its spin rate  to compensate for                                                               
the intermittent  power.  She  asked whether trying to  arrive at                                                               
one Railbelt  system with economic  dispatch was one of  the most                                                               
significant issues  as the  cost of  production had  expanded the                                                               
cost throughout the Railbelt.                                                                                                   
                                                                                                                                
1:43:44 PM                                                                                                                    
                                                                                                                                
MR. PICKETT explained  that the amount of  capital investment had                                                               
been expanded  more than in generations  throughout the Railbelt.                                                               
He added  that, at the  same time, more efficient  generation had                                                               
been created regarding natural gas  generation.  This reduced the                                                               
amount of fuel  consumption by 25 to 30 percent.   He mused that,                                                               
regarding  the  intermittency  and  variability  issues  and  bar                                                               
support with voltage  support at different points  in the system,                                                               
the renewables  had a  more difficult time  with meeting  that as                                                               
they were  not dispatchable  all the time,  as was  possible with                                                               
most fossil  fuel generation.   He declared that the  states with                                                               
the most  success for  use of more  renewables had  embraced some                                                               
form of  a renewable  portfolio standard or  specific goals.   He                                                               
offered an  example of  Texas, as  it was  the leading  state for                                                               
wind production.  He explained  that Texas had established a date                                                               
for   11,000  megawatts   of  wind   energy.     The  region-wide                                                               
independent  system  operator,  Electric Reliability  Council  of                                                               
Texas (ERCOT), was directed by  the Texas legislature to create a                                                               
mechanism to put  the transmission in the areas of  West Texas to                                                               
get it to the  populated areas of the state.   He asked if Alaska                                                               
was willing to embrace a renewable portfolio standard.                                                                          
                                                                                                                                
REPRESENTATIVE  JOHNSTON  pointed  out that  Alaska  differed  in                                                               
population from Texas.                                                                                                          
                                                                                                                                
MR. PICKETT expressed his agreement.                                                                                            
                                                                                                                                
1:45:36 PM                                                                                                                    
                                                                                                                                
CHAIR WOOL  reflected that Representative Johnston  had mentioned                                                               
access, which was  an issue for the IPPs regarding  rates and the                                                               
charges to access the system.                                                                                                   
                                                                                                                                
MR. PICKETT interjected  that a corollary issue was  for what the                                                               
IPPs would be paid per kilowatt hour.                                                                                           
                                                                                                                                
CHAIR  WOOL  mused  that  this tied  into  spinning  reserve  and                                                               
offered his belief  that the State of Alaska had  declared a goal                                                               
to reach  a certain  percentage of renewables  by a  certain year                                                               
even  though this  was not  referenced in  recent testimony.   He                                                               
pointed out  that, as  other states had  been able  to accomplish                                                               
this efficiently and cheaply, Alaska  should not be an exception.                                                               
He  asked if  there  would be  a solution  from  the current  GDS                                                               
Associates process.                                                                                                             
                                                                                                                                
MR.  PICKETT replied  that  he wouldn't  prejudge  the final  GDS                                                               
Associates report, and  that he was looking  forward to reviewing                                                               
it.  He  opined that it would largely depend  on what happened to                                                               
the transmission assets and how  they were managed going forward.                                                               
He reflected on the potential  creation of a Transco, and whether                                                               
the transmission assets  remained in each of  the utility service                                                               
areas.    He  added  that  as, by  statue,  the  utilities  could                                                               
establish their  own transmission rates, there  would continue to                                                               
be the challenge of pancaking rates.                                                                                            
                                                                                                                                
CHAIR WOOL expressed his desire to see the upcoming reports.                                                                    
                                                                                                                                
1:48:21 PM                                                                                                                    
                                                                                                                                
JULIE  ESTEY, Director  of External  Affairs, Matanuska  Electric                                                               
Association (MEA),  Palmer, Alaska,  stated that MEA  opposed the                                                               
proposed  bill,  as  they  would  prefer  to  continue  with  the                                                               
regulatory  request  from  the  RCA  to  continue  the  voluntary                                                               
efforts which were working and  making progress.  She stated that                                                               
"we do  appreciate the pressure"  and that,  as the heat  was on,                                                               
they accepted the  challenge.  She presented  a PowerPoint, slide                                                               
1 "What  is the  Railbelt?" and  stated that  it was  an electric                                                               
system  of   six  interconnected  utilities,  an   islanded  grid                                                               
covering  a  very large  geographic  area  although it  served  a                                                               
relatively small load.   She pointed out that there  was a lot of                                                               
infrastructure serving  very few  ratepayers to cover  the costs.                                                               
She  noted  that  all  the  utilities  were  'public  power'  and                                                               
answered  to   its  members,  with   no  profit  motive   and  no                                                               
shareholders asking to share in a profit.                                                                                       
                                                                                                                                
1:51:05 PM                                                                                                                    
                                                                                                                                
CHAIR WOOL  reported that testimony  had indicated  that millions                                                               
had been  saved through this  loose power pool agreement,  and he                                                               
asked where had the savings had been realized.                                                                                  
                                                                                                                                
MS. ESTEY  replied that there  were several categories  of rates,                                                               
which  included  the COPA,  the  cost  of power  adjustment,  and                                                               
included the  cost of fuel and  purchase power.  She  noted that,                                                               
as  there were  expenditures  to  cover the  costs  to serve  the                                                               
members,  any income  from the  power  sales went  back into  the                                                               
balancing account.  She offered an  example of a drop in the COPA                                                               
rate  due to  sales to  other utilities.   She  pointed out  that                                                               
those  values varied,  and that  MEA had  seen those  adjustments                                                               
have real  value to its  members.  She  pointed out that  the RCA                                                               
closely reviewed the COPA for accuracy every quarter.                                                                           
                                                                                                                                
CHAIR  WOOL  asked  for  clarification that  the  portion  of  an                                                               
individual's billing designated to  COPA expense would be reduced                                                               
if there were sales to another utility.                                                                                         
                                                                                                                                
1:53:04 PM                                                                                                                    
                                                                                                                                
MS.  ESTEY stated  that the  total balancing  account which  went                                                               
into  the revenue  requirement around  the COPA  was reduced  and                                                               
then it was divided among the  members.  She returned to slide 1,                                                               
and addressed  the high reliability for  the transmission system,                                                               
which   dealt  with   the  redundancy   through  generation   and                                                               
transmission planning.   She explained  that this  was determined                                                               
by  how a  contingency  was handled.   She  added  that fuel  was                                                               
expensive relative to  the Lower 48, in some  cases almost triple                                                               
the cost.  She  noted that 40 percent of the  cost to the members                                                               
was fuel.                                                                                                                       
                                                                                                                                
1:56:02 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHNSTON asked  about the term of  the most recent                                                               
fuel contract.                                                                                                                  
                                                                                                                                
MS. ESTEY said that it was a five-year contract.                                                                                
                                                                                                                                
CHAIR WOOL noted  that if the Intertie with  Fairbanks went down,                                                               
that did not really affect the reliability for MEA.                                                                             
                                                                                                                                
MS. ESTEY  replied that it  was dependent  on the issue,  for how                                                               
much power  was on the system,  and where it was  coming or going                                                               
from.   She pointed  out that  this could  result in  a frequency                                                               
change  that impacted  everyone, as  the frequency  threshold was                                                               
very narrow for fluctuations.                                                                                                   
                                                                                                                                
CHAIR  WOOL  asked about  the  disagreements  on the  reliability                                                               
standards.  He acknowledged that cybersecurity was an issue.                                                                    
                                                                                                                                
1:59:13 PM                                                                                                                    
                                                                                                                                
MS.  ESTEY reported  that the  first  reliability standards  were                                                               
filed when the  Intertie was built, and these  continue to evolve                                                               
as the  system grows  and adjusts.   She stated  that reliability                                                               
was  keeping the  lights on  and  that it  depended on  a lot  of                                                               
things, including  redundancy.  She  asked how much  was intended                                                               
to  be  built,  what  was the  benefit  for  building  additional                                                               
redundancy into a system, and did  the membership want to pay for                                                               
this.   She addressed spinning  reserve, through  generation, and                                                               
how well that  could be handled.  She pointed  out that there was                                                               
very little spinning reserve carried  in the systems in the Lower                                                               
48, whereas  in Alaska  there was almost  30 percent  of spinning                                                               
reserve  to ensure  enough power  if  the generators  stop.   She                                                               
declared that  this was  the sticking  point for  the reliability                                                               
standards.                                                                                                                      
                                                                                                                                
2:01:22 PM                                                                                                                    
                                                                                                                                
MS. ESTEY  advanced to slide  2, titled "Joint efforts  have been                                                               
discussed in  the past. What  is different?"  She  reported that,                                                               
in the past, the Railbelt  utilities had cooperated well, even as                                                               
this was an economic benefit for  the members, the state, and the                                                               
region.   She stated that there  was new leadership and  that the                                                               
economics  were different,  so that  the proactive  and voluntary                                                               
coordination  was  now  unprecedented   in  the  Railbelt.    She                                                               
declared that  the new generation options  had made collaboration                                                               
more economic, and that new  leadership had been working together                                                               
in a  new era  of cooperation.   She stated  that they  wanted to                                                               
take advantage of  the natural cohesion in the  Railbelt and make                                                               
more of  these agreements contractual  to outlive politics.   She                                                               
added that a member survey had  shown that 70 percent wanted more                                                               
renewables  on the  system, with  support for  paying more.   She                                                               
declared that there were many innovations available.                                                                            
                                                                                                                                
CHAIR WOOL referred  to earlier testimony stating  that there was                                                               
less demand for power in the Railbelt.                                                                                          
                                                                                                                                
MS. ESTEY said that  MEA was one of the few  not seeing a decline                                                               
in demand.   She reported that,  although MEA had added  1500 new                                                               
services during the  last year, there was only  a slight increase                                                               
in  load.   She  acknowledged  that this  could  be  a result  of                                                               
conservation or warmer weather.                                                                                                 
                                                                                                                                
CHAIR WOOL mused that the system demand was less.                                                                               
                                                                                                                                
REPRESENTATIVE  RAUSCHER declared  that the  electrical bill  had                                                               
been a lot higher at his house in the past year.                                                                                
                                                                                                                                
2:06:06 PM                                                                                                                    
                                                                                                                                
MS.  ESTEY   referenced  the  letter   written  by  RCA   to  the                                                               
legislature in 2015 voicing concerns  and urging the utilities to                                                               
take voluntary steps.  She  stated that the utilities were taking                                                               
those steps  and it was  working.   She declared that  there were                                                               
more proposals to  be presented to the RCA in  the upcoming year,                                                               
and that  it would become  clear whether statutory  changes would                                                               
be required  to make some  of these  changes.  She  declared that                                                               
reliability,  economic  dispatch,  and transmission,  along  with                                                               
some other complicating factors  with sales of utilities, created                                                               
a lot of  change.  She stated  that it was necessary  to hear all                                                               
the input and ensure there were not any unintended consequences.                                                                
                                                                                                                                
2:07:38 PM                                                                                                                    
                                                                                                                                
Ms. ESTEY  moved on  to slide 3,  titled "The  Railbelt utilities                                                               
are  moving forward  with voluntary  efforts."   She shared  that                                                               
first  there was  collaborative  modeling to  create an  economic                                                               
model for focused  actions.  She declared that  this had included                                                               
full open disclosure  for costs and other information.   She said                                                               
that there  had been a loose  Power Pool since 2015,  which was a                                                               
voluntary power  market which allowed  utilities to buy  and sell                                                               
power  when  it  was  most  economic.   She  said  that  MEA  had                                                               
recognized $16 million  in benefits in the  first year, resulting                                                               
in  lower costs  to its  members.   She explained  that this  was                                                               
structured into a Tight Power  Pool and, instead of voluntary, it                                                               
became a  contractual obligation  for utilities to  come together                                                               
and  share resources.    She  added that  this  would reduce  the                                                               
amount of fossil fuels burned.                                                                                                  
                                                                                                                                
2:09:58 PM                                                                                                                    
                                                                                                                                
CHAIR  WOOL asked  if the  goal of  the Tight  Power Pool  was to                                                               
incorporate all the utilities.                                                                                                  
                                                                                                                                
MS. ESTEY  expressed her agreement  that this was  the intention,                                                               
and  that all  the utilities  had "been  invited to  that table."                                                               
She explained that  80 percent of the benefits  were with getting                                                               
three  of the  Railbelt utilities  on-line.   She added  that the                                                               
Homer   Electric   Association   and   Golden   Valley   Electric                                                               
Association  were both  involved  in these  discussions and  were                                                               
making their decisions for the value  to each of them.  She noted                                                               
that  the addition  of Golden  Valley Electric  Association would                                                               
achieve the next  20 percent of additional  benefit, although the                                                               
benefit  for  the  addition of  Homer  Electric  Association  was                                                               
negligible.                                                                                                                     
                                                                                                                                
2:12:00 PM                                                                                                                    
                                                                                                                                
MS.  ESTEY directed  attention to  slide  4, "Potential  Economic                                                               
Benefits," which  reflected the 2016  modeling effort.   She said                                                               
there  was between  $15 -  $25  million in  annual savings,  with                                                               
merit  order  dispatch.   She  reiterated  that approximately  80                                                               
percent of the value was from  MLP, MEA, and Chugach in the tight                                                               
pool.   She  said that  the  addition of  Golden Valley  Electric                                                               
Association brought  an additional  19 percent  of savings.   She                                                               
noted that there were still more savings to be achieved.                                                                        
                                                                                                                                
2:13:21 PM                                                                                                                    
                                                                                                                                
MS. ESTEY  shared slide 5,  "Are the utilities taking  too long?"                                                               
She shared  a timeline that  began in  2015 and included  the RCA                                                               
letter  and  the  loose  power  pool;  in  2016,  the  model  was                                                               
developed reflecting  the value  of transactions; in  2017, there                                                               
was  an MOU  for the  tight power  pool; and  in 2018,  there was                                                               
further  testing   of  economic   dispatch,  the   RRC  (Railbelt                                                               
Reliability Council)  structure was filed  with the RCA,  and the                                                               
tight power pool filing was made.   She stated that the utilities                                                               
were  developing  tools for  communication  with  each other  and                                                               
their members.                                                                                                                  
                                                                                                                                
2:16:46 PM                                                                                                                    
                                                                                                                                
CHAIR  WOOL reflected  that the  timeline on  slide 5  could have                                                               
begun in 1995,  per Robert Pickett, Commissioner of  the RCA, and                                                               
he  listed   events  including   the  Railbelt   Electrical  Grid                                                               
Authority, 2008.  He expressed  his desire to highlight that this                                                               
had been going on far longer than since 2015.                                                                                   
                                                                                                                                
MS. ESTEY acknowledged that this  was an excellent point and that                                                               
this was the  source of much frustration.  She  admitted that the                                                               
reputation had  been earned.  She  pointed out that this  was now                                                               
stakeholder and utility  driven, based on economics  and what was                                                               
right for  members, as  opposed to the  earlier issues  driven by                                                               
state agencies.   She moved  on to  slide 6, "The  Utility Lens,"                                                               
and  stated  that the  goals  for  Railbelt collaboration,  which                                                               
included:  burn the least amount  of fuel, as 40 percent of costs                                                               
were  for fuel,  while  only 6  percent  was for  administration;                                                               
manage   and    reinforce   reliability,   which    required   an                                                               
enforceability  mechanism; reduce  rate  increases,  even as  the                                                               
increases  in fuel,  materials, labor,  and health  benefits made                                                               
sustained  rate  decreases   doubtful;  system-wide  focus;  open                                                               
access and clear path for  independent power producers; and stand                                                               
up  the  RRC  (Railbelt  Reliability Council)  and  let  it  make                                                               
decisions.  She  listed the proposed members of the  RRC board as                                                               
the stakeholder group that should be making the decisions.                                                                      
                                                                                                                                
CHAIR WOOL  asked if  all the utilities  were comfortable  with a                                                               
governing body,  with the  utilities as  the minority,  that made                                                               
policy decisions.                                                                                                               
                                                                                                                                
MS. ESTEY stated that the  stakeholder driven process was pushing                                                               
the  proposed GDS  Associates model,  with  the utilities  having                                                               
three of the  nine seats on the  RRC.  She declared  that MEA was                                                               
supportive.                                                                                                                     
                                                                                                                                
2:23:06 PM                                                                                                                    
                                                                                                                                
MS. ESTEY  returned attention to  slide 6, and listed  the issues                                                               
important  to  MEA, which  included  a  structure and  solutions:                                                               
free  of control  from for-profit  special  interests; free  from                                                               
instability caused  by political  cycles; free from  conflicts of                                                               
interest;  inclusive of  many voices;  transparent, collaborative                                                               
and  deliberative  to  fully understand  impacts  to  ratepayers;                                                               
firmly rooted in technical  excellence and fiscal responsibility;                                                               
and with RCA oversight.                                                                                                         
                                                                                                                                
2:24:16 PM                                                                                                                    
                                                                                                                                
MS.  ESTEY  moved on  to  slide  7,  "Good Things  are  Happening                                                               
Everyday".   She shared  the 2017  accomplishments at  MEA, which                                                               
included:   safest year  on record;  rate case  with less  than 1                                                               
percent  total bill  impact  after  a new  power  plant; new  gas                                                               
contract to  save members $2  - $3  million, about $5  each month                                                               
for the typical  member; outages were cut in half  from 2016; net                                                               
metering  members   doubled;  many  renewable  projects   in  the                                                               
pipeline, including solar  and waste heat; and,  $1 million given                                                               
back to  the community by  members voluntarily rounding  up their                                                               
bills through Operation Round Up.                                                                                               
                                                                                                                                
REPRESENTATIVE JOHNSTON  reflected that this process  had gone on                                                               
for  the last  forty  years, yet  there was  still  the issue  of                                                               
winners and losers.   She acknowledged that  the conversation was                                                               
changing  along   with  the  changing   of  CEOs,   although  she                                                               
maintained  concerns for  generation in  the Railbelt,  more than                                                               
was necessary.  She asked if  the MEA co-op could be "mothballed"                                                               
as profit was still built in to the model.                                                                                      
                                                                                                                                
MS.  ESTEY declared  that they  to be  looking at  the costs  and                                                               
benefits, pointing out that all  the new efficient generation was                                                               
replacing old  generation.  She  stated that, although  there was                                                               
additional  power  generation,  they  preferred to  not  use  the                                                               
older, more  expensive generation.   She shared that  they looked                                                               
closely at  the recovery of  costs, including those on  the power                                                               
plant and the transmission system through the base rate.                                                                        
                                                                                                                                
CHAIR WOOL  asked if a  full system integrated with  one spinning                                                               
reserve  that could  accommodate  the fluctuations  of many  IPPs                                                               
would solve the spinning reserve problems for them.                                                                             
                                                                                                                                
MS. ESTEY explained  that their new power plant was  able to help                                                               
regulate  the wind,  and, although  it was  a bit  different than                                                               
spinning  reserve, it  was regulation  for variable  power.   She                                                               
said that  MEA looked  forward to working  with the  IPPs through                                                               
these  new   structures  to  better  understand   the  costs  and                                                               
benefits.  She  declared that a diversified  energy portfolio was                                                               
a smart, long term strategy.                                                                                                    
                                                                                                                                
CHAIR  WOOL  asked  about a  plan  if,  at  the  end of  the  GDS                                                               
Associates  process,  there was  a  recommendation  to ARCTEC  to                                                               
which MEA did not agree.                                                                                                        
                                                                                                                                
MS. ESTEY  said that MEA  was ready  to move forward  looking for                                                               
solutions and was ready to present  a solution to the RCA for its                                                               
approval.                                                                                                                       
                                                                                                                                
2:34:14 PM                                                                                                                    
                                                                                                                                
MIKE  CRAFT, Alaska  Environmental Power,  LLC, reported  that he                                                               
was the owner  of the Delta Wind Farm, and  he offered his belief                                                               
that the comments by Commissioner Picket  "were right on.  It was                                                               
a very fair analysis  of where we are at."  He  said that the six                                                               
utilities on the  Railbelt grid did a good service  to the public                                                               
and  were  good at  what  they  did.   He  said  that he  had  no                                                               
complaints for  the way electricity  was delivered to  his house,                                                               
and that he  appreciated the service.  He  expressed concerns for                                                               
an ISO  situation because  his experience for  the past  12 years                                                               
had shown him  that there was an inherent self-build  bias by the                                                               
utilities, even as  he conceded that this was their  job to "look                                                               
out  for   their  shareholders."     He   opined  that,   as  the                                                               
shareholders  of  one  utility   had  no  responsibility  to  the                                                               
shareholders of another  utility, it was not  realistic to expect                                                               
them to  average out any impact  to the public.   He reflected on                                                               
the issues  which lead to  his decision  for where to  locate his                                                               
wind  farm.    He  shared  his  belief  that  the  three  largest                                                               
renewable energy  projects in Alaska  "were dead on  arrival less                                                               
than  a month  ago at  the RCA,  and most  of it  had to  do with                                                               
integration and transmission  issues."  He suggested  that it was                                                               
unfortunate  that $240  million in  private capital,  as well  as                                                               
thousands of jobs,  was not invested in the State  of Alaska.  He                                                               
declared that this would send  a signal that "Alaska's not really                                                               
open for business  for the private sector to come  in here and do                                                               
projects that do have public benefit."   He declared the need for                                                               
a board  for the ISO  which would  mirror the description  in the                                                               
proposed bill, otherwise, "we will  be getting more of what we've                                                               
already gotten,"  which he opined  had not gotten the  state very                                                               
far.  He  reflected that some of the issues  stated by the Alaska                                                               
Power  Producers Association  were for  self-direction, voluntary                                                               
coordination,  no increase  to their  own  ratepayers, free  from                                                               
political cycles, and no competition.   He expressed his concern,                                                               
declaring  that the  ISO  had  to be  independent.   He  directed                                                               
attention to the state energy  policy which stated that, by 2025,                                                               
the  state  should  have  50 percent  renewable  [power]  and  it                                                               
encouraged private sector  development.  He stated  that this was                                                               
not happening.   He declared that  the state was in  trouble with                                                               
the  Environmental  Protection Agency,  as  it  was necessary  to                                                               
modify the  power plants  at a  cost of about  $163 million.   He                                                               
reported  that   the  military   were  concerned   for  personnel                                                               
stationed in Fairbanks.   He opined that the  larger issues would                                                               
not be  addressed by a local  utility.  He directed  attention to                                                               
his letter  dated April 4,  2018 [Included in  members' packets].                                                               
He stated his support for HB 382.                                                                                               
                                                                                                                                
CHAIR WOOL asked if the proposed board structure was acceptable.                                                                
                                                                                                                                
MR  CRAFT  replied  that  he   liked  the  board  description  as                                                               
described in the proposed bill.                                                                                                 
                                                                                                                                
2:43:48 PM                                                                                                                    
                                                                                                                                
CHAIR WOOL opened public testimony.                                                                                             
                                                                                                                                
2:44:10 PM                                                                                                                    
                                                                                                                                
STEVE KONKEL reflected  on the history of  these issues, pointing                                                               
to testimony on  another bill on February 2, 2016,  with the same                                                               
issues.   He  shared that  there were  some key  concepts, noting                                                               
that rate payers had a  fundamental interest in energy efficiency                                                               
and innovation,  in a  system which took  full adventure  of what                                                               
Alaska can do.  He pointed  to the savings from a possible merger                                                               
of two  utilities in the  Anchorage area.  He  addressed economic                                                               
dispatch,  and expressed  his  agreement  with Chairman  Pickett,                                                               
that  this  was challenging  and  involved  merit order  dispatch                                                               
which  required  rules.    He reflected  on  the  GDS  Associates                                                               
testimony which stated  that this worked in the  Lower 48 because                                                               
it was  a benefit to  the whole system.   He reiterated  that, as                                                               
merit order dispatch was part  of economic dispatch, the rules of                                                               
the road had to be approved by the  RCA.  He pointed out that the                                                               
scope of  the GDS Associates  process did not  include integrated                                                               
resources planning.   He noted that, as there  was currently more                                                               
capacity than necessary,  there was not any  worry for additional                                                               
investment  in generation  capacity.   He stated  that there  was                                                               
concern for  pancaking tariffs  and investments  that need  to be                                                               
made  in  transmission.   He  expressed  his  hope that  the  GDS                                                               
Associates process  resulted in  real investment that  could help                                                               
with  a  larger area  to  load  balance and  accomplish  economic                                                               
dispatch  in a  way  that would  save millions  of  dollars.   He                                                               
suggested  that this  be viewed  on  a regional  basis to  better                                                               
include  cooperation.    He  asked  that  there  be  a  focus  on                                                               
ratepayers, renewables, innovation, and ways  to do things in the                                                               
Railbelt that  might have statewide benefits  from investments in                                                               
technology.                                                                                                                     
                                                                                                                                
2:49:26 PM                                                                                                                    
                                                                                                                                
KERRY  WILLIAMS,  Alaska  Climate Action  Network,  referenced  a                                                               
letter  to the  committee  [Included in  members'  packets].   He                                                               
questioned the amount of renewable  energy which could be brought                                                               
on-line.  He pointed out that,  even with the savings in cost per                                                               
kilowatt hour, the renewables were  not accommodated.  He pointed                                                               
out  that,  as there  was  increased  efficiency  in the  use  of                                                               
electricity,   the   amount   of  electricity   consumption   was                                                               
decreasing and  there would  not be a  need for  more generation.                                                               
He noted  that this  did not  include the  issue of  electric and                                                               
battery-operated vehicles, which were currently  2 percent of the                                                               
new vehicle  total and doubling every  year and a half.   He said                                                               
that  100 percent  of new  vehicles would  be electric  within 10                                                               
years,  and  that  this  could  be  a  challenge  for  generation                                                               
capacity.   He said  that this  was an  opportunity to  lower our                                                               
rates by taking advantage of  electric vehicles and other storage                                                               
opportunities, but  that, without  HB 382,  it would  not happen.                                                               
He declared his support for HB 382.                                                                                             
                                                                                                                                
2:56:01 PM                                                                                                                    
                                                                                                                                
BECKY  LONG  reported  that  she   had  been  following  Railbelt                                                               
electric and transmission issues since  the 1980s and had focused                                                               
on these  specific issues  since January  2011 when  the Railbelt                                                               
Regional  Integrated Resource  plan was  introduced.   She stated                                                               
her support  for HB 382  and offered  her belief that  a Railbelt                                                               
electrical transmission  authority was necessary to  bring region                                                               
wide  merit order  economic dispatch,  a maximum  benefit to  the                                                               
ratepayers.  She added that  she supported the independent system                                                               
operator (ISO) concept  stated in the proposed bill  and that she                                                               
was comfortable with this authority  being a division of the RCA,                                                               
noting that she  was impressed with their work.   She offered her                                                               
belief  that  the  utilities would  not  succeed  voluntarily  in                                                               
getting together  economic dispatch and reliability  standards on                                                               
their  own.   She declared  that this  process would  benefit the                                                               
Railbelt  region.   She  stated  that  these were  fast  changing                                                               
times,   and  that   the   new   transmission  and   distribution                                                               
technologies  could  address  the intermittencies  of  renewables                                                               
through  the interconnectivity  of the  electrical systems.   She                                                               
said that electric management could  help to change the nature of                                                               
peaks and the need for peaking  and stand by capacity.  She added                                                               
that passive consumption  was on the brink for  the radical shift                                                               
due to  the coming  on line of  information technology  and smart                                                               
grid  technology.   She noted  that  response and  demand by  the                                                               
consumer  was  an  important  trend.   She  stated  that  it  was                                                               
possible  for  a  more  flexible  system  without  bringing  more                                                               
capacity on to the system to meet peak demands.                                                                                 
                                                                                                                                
2:58:58 PM                                                                                                                    
                                                                                                                                
CHAIR WOOL  thanked everyone for  adjusting their  schedules. [HB                                                               
382 was held over]                                                                                                              
                                                                                                                                
2:59:18 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Special Committee on Energy meeting was adjourned at 2:59 p.m.                                                                  

Document Name Date/Time Subjects
HB 382 - Letter of Opposition - Alaska Power Assn..pdf HENE 4/5/2018 10:15:00 AM
HB 382
HB 382 - Letter of Support - AEP 04.05.2018.pdf HENE 4/5/2018 10:15:00 AM
HB 382
HB 382 - MEA Presentation - 4.5.18.pdf HENE 4/5/2018 10:15:00 AM
HB 382