Legislature(2009 - 2010)BARNES 124
03/26/2009 03:00 PM House ENERGY
| Audio | Topic |
|---|---|
| Start | |
| HB182 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 182 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ENERGY
March 26, 2009
3:06 p.m.
MEMBERS PRESENT
Representative Bryce Edgmon, Co-Chair
Representative Charisse Millett, Co-Chair
Representative Nancy Dahlstrom
Representative Kyle Johansen
Representative Jay Ramras
Representative Chris Tuck
MEMBERS ABSENT
Representative Pete Petersen
COMMITTEE CALENDAR
HOUSE BILL NO. 182
"An Act establishing the Greater Railbelt Energy and
Transmission Corporation and relating to the corporation;
relating to transition, financial plan, and reporting
requirements regarding planning for the initial business
operations of the Greater Railbelt Energy and Transmission
Corporation; relating to a report on legislation regarding the
Regulatory Commission of Alaska and the Greater Railbelt Energy
and Transmission Corporation; authorizing the Alaska Energy
Authority to convey the Bradley Lake Hydroelectric Project and
the Alaska Intertie to the Greater Railbelt Energy and
Transmission Corporation; and providing for an effective date."
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 182
SHORT TITLE: RAILBELT ENERGY & TRANSMISSION CORP.
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
03/12/09 (H) READ THE FIRST TIME - REFERRALS
03/12/09 (H) ENE, L&C, FIN
03/26/09 (H) ENE AT 3:00 PM BARNES 124
WITNESS REGISTER
JOE BALASH, Special Staff Assistant for Energy and Natural
Resource Issues
Office of the Governor
Juneau, Alaska
POSITION STATEMENT: Introduced HB 182 on behalf of the
governor.
KEVIN HARPER, Management Director
Enterprise Management Solutions
Black & Veatch
Seattle, Washington
POSITION STATEMENT: Presented a summary of the Alaska Railbelt
Electrical Grid Authority (REGA) Study.
JIM STRANDBERG, Project Manager
Greater Railbelt Energy and Transmission Corporation (GRETC)
Project
Alaska Energy Authority (AEA)
Alaska Industrial Development & Export Authority (AIDEA) and
Alaska Energy Authority (AEA)
Department of Commerce, Community, & Economic Development
(DCCED)
Anchorage, Alaska
POSITION STATEMENT: Presented HB 182 as the agency supporting
the governor.
LORALI CARTER, Manager
Government and Corporate Communications
Matanuska Electric Association (MEA), Inc.
Palmer, Alaska
POSITION STATEMENT: Testified during the hearing on HB 182.
BRAD JANORSCHKE, General Manager
Homer Electric Association (HEA)
Homer, Alaska
POSITION STATEMENT: Testified in support of HB 182.
DAVE GARDNER, Vice President
Marketing and Member Services
Golden Valley Electric Association (GVEA)
Fairbanks, Alaska
POSITION STATEMENT: Testified during the hearing on HB 182.
WILLARD DUNHAM, Vice Mayor
City of Seward
Seward, Alaska
POSITION STATEMENT: Testified during the hearing on HB 182.
REBECCA LOGAN, Chairman
Board of Directors
Chugach Electric Association (CEA), Inc.
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 182.
BRADLEY EVANS, CEO
Chugach Electric Association (CEA), Inc.
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the hearing on HB
182.
NORMAN ROKEBERG, Chairman
Advisory Working Group
Alaska Railbelt Electrical Grid Authority (REGA) Study
Alaska Energy Authority (AEA)
Alaska Industrial Development & Export Authority (AIDEA) and
Alaska Energy Authority (AEA)
Department of Commerce, Community, & Economic Development
(DCCED)
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 182.
ACTION NARRATIVE
3:06:18 PM
CO-CHAIR BRYCE EDGMON called the House Special Committee on
Energy meeting to order at 3:06 p.m. Present at the call to
order were Representatives Ramras, Johansen, Tuck, Millett, and
Edgmon. Representative Dahlstrom arrived as the meeting was in
progress.
HB 182-RAILBELT ENERGY & TRANSMISSION CORP.
CO-CHAIR EDGMON announced that the first order of business would
be HOUSE BILL NO. 182, "An Act establishing the Greater Railbelt
Energy and Transmission Corporation and relating to the
corporation; relating to transition, financial plan, and
reporting requirements regarding planning for the initial
business operations of the Greater Railbelt Energy and
Transmission Corporation; relating to a report on legislation
regarding the Regulatory Commission of Alaska and the Greater
Railbelt Energy and Transmission Corporation; authorizing the
Alaska Energy Authority to convey the Bradley Lake Hydroelectric
Project and the Alaska Intertie to the Greater Railbelt Energy
and Transmission Corporation; and providing for an effective
date."
3:07:26 PM
JOE BALASH, Special Staff Assistant for Energy and Natural
Resource Issues, Office of the Governor, informed the committee
HB 182 is a product of the joint efforts of the governor's
office, the Alaska Energy Authority (AEA), and the greater
Railbelt electric utilities. This product has been years in the
making and draws on the prior work of previous administrations
and the lessons of the past. Mr. Balash pointed out that 800
megawatts of power are generated and distributed by six
different entities along the Railbelt; however, the
circumstances of today provide an opportunity to unify the
transmission system and begin joint planning and financing of
the next wave of power generation for the Railbelt system. In
fact, unifying the system and capitalizing on efficiencies of
scale would save rate payers and the general economy "tens of
millions of dollars on an annual basis." He recalled in 2007,
the governor vetoed appropriations to the various utilities from
the Railbelt Energy Fund and called on the utilities to begin to
plan for unification. The Alaska Energy Authority (AEA), the
utilities, and a cross section of interested parties conducted
the Alaska Railbelt Electrical Grid Authority (REGA) study. In
2008, four of the six utilities signed a Memorandum of
Understanding (MOU) to support and pursue a unified power
provider. Mr. Balash opined each utility agrees that they are
better off working together; however, there are disagreements on
the details of this endeavor. The REGA study was finalized in
September, 2008 and in October, the governor, and the AEA met
with the board chairs of the utilities to begin work on
legislation. There was an additional meeting in November, and
in December the utilities provided the administration with a set
of characteristics for a company that would unify the system and
construct new power assets on a joint basis. From January to
February 2009, it became clear that every issue would not be
resolved immediately; therefore, the bill was introduced with
the commitment to the utilities that their concerns would
continue to be addressed. Thus amendments have been prepared on
an ongoing basis to increase the utilities' level of comfort
with the proposed legislation.
3:12:21 PM
KEVIN HARPER, Management Director, Enterprise Management
Solutions, Black & Veatch, presented a summary of the study that
looked at the economic and noneconomic benefits of creating the
Railbelt Electrical Grid Authority (REGA). The REGA study was
completed under the direction of the AEA and in response to a
legislative directive. Mr. Harper said the elements of the
proposed legislation are generally consistent with the
recommendations of the study and are supported by Black &
Veatch. One of the critical issues facing the Railbelt
utilities is the uniqueness of the area. For example, even
after all six utilities are combined, the Railbelt region is
relatively small, but must serve urban and rural customers over
an expansive geographic service territory. In addition, the
transmission lines do not have significant redundancies and have
limited interconnections. The second critical issue is the high
cost of electricity and the significant cost differences between
the existing six utilities. The third critical area is that the
region has historically been dependent on natural gas; however,
the source of natural gas is declining and the price is
projected to increase. Furthermore, there are infrastructure
issues such as the age of the generation facilities, and that
the region uses inefficient gas-fired facilities. Finally,
there is the question of what resources will be used for power
generation in the future. Options for the region include large
hydroelectric facilities or coal. Mr. Harper opined the
combination of these issues results in a changing environment
for power generation in the region and he identified the three
primary objectives of the REGA study: Identify the options for
how the generation and transmission system for the region can be
restructured; analyze each option; produce a final report for
the consideration of stakeholders and decision-makers.
3:19:07 PM
MR. HARPER emphasized that the REGA study was not an integrated
resource plan that would identify the best resources for future
power generation, but was a study to identify the best
organizational structure for the future. A review of
definitions relevant to the study began with the "coordinated
operation of the transmission grid." This phrase refers to the
movement of power by a stable system. The next term was
"economic dispatch" that is a centralized dispatching of all of
the region's generation facilities to produce energy at the
lowest cost. "Regional integrated resource planning" is a term
to describe the process of looking at supply-side and demand-
side options, and selecting the optimal resources to meet those
needs in the future. Finally, "joint project development"
refers to two or more utilities developing projects on a joint
basis.
MR. HARPER presented slide 4 that illustrated five different
organizational paths: Path 1 - Maintain the status quo; Path 2
- Create an entity to focus on operations of the transmission
grid; Path 3 - Create an entity that would be responsible for
the independent operation of the grid and regional economic
dispatch; Path 4 - Create an entity that would be responsible
for the independent operation of the transmission grid, regional
economic dispatch, regional resource planning, and joint project
development; Path 5 - Create an entity that would decide what
to build in the future and form a power pool for the
construction of assets.
3:23:34 PM
MR. HARPER displayed slide 5 that illustrated the following
evaluation scenarios: Scenario A - The future resources will be
large hydro/renewables/[demand side management (DSM)]/energy
efficiency; Scenario B - The future resource will be natural
gas; Scenario C - The future resource will be coal; Scenario D
- The future resources will be mixed. The REGA study does not
indicate which of the scenarios is best, but is meant to
identify what organizational structure is best under any of
these scenarios. Turning to the subject of stakeholder
involvement, Mr. Harper described the process his company
utilized to gather information and from whom. Furthermore,
prior to the preparation of the final study, public comments
were solicited and reflected in the draft report. He concluded
that the stakeholder involvement process was an important
element of the report and led to more effective final results
and recommendations. Mr. Harper then displayed slide 7,
"Results - Average Net Savings ($'000)." Describing the
columns, he said they show the net annual average savings for
each organizational path under each of the different scenarios.
The annual average net savings is a function of the cost of
power and the cost of the regional entity. Thus, the net annual
savings reflects the combination of the power cost savings and
the organizational cost. For example, Path 4 under Scenario A
saved $42.7 million over 30 years. This savings was also
presented on a percentage basis and on a typical monthly
residential bill. He pointed out Path 4 and Path 5 have the
greatest savings; however, the savings under Path 5 are
overstated because the cost of employees' salaries are included.
Also under Path 5, the utilities can decide on the resources to
be developed and if they choose a different resource, there
could be a different result. He stated the study considered
Path 5 as a transitional approach and not feasible for a long-
term solution; therefore, Path 4 was recommended. As a matter
of fact, the set of functional responsibilities [under Path 4]
is consistent with what is proposed in the legislation.
3:32:30 PM
MR. HARPER said the most significant challenge facing the region
is how to finance the future. It is anticipated that the total
capital investment required over the next 30 years ranges from
$2.5 billion to $8 billion. In perspective, using debt to
finance the future could put the total long-term obligation of
the region at up to seven times that amount. He advised dealing
with the issues in the region is an expensive, capital intensive
process, and emphasized the importance of having a regional
entity because the individual utilities will not qualify for the
necessary financing. In order to create the recommended
organizational structure, Mr. Harper suggested the following
steps for the state and the utilities: decide whether to form
a regional entity and to finalize its functional
responsibilities; decide the legal form of the regional entity;
develop a transition team to oversee implementation; adopt the
required legislative and regulatory actions; complete the
formation of the new entity; and develop the initial regional
integrated resource plan and the transmission expansion plan.
Mr. Harper concluded his presentation by noting that although
the region is faced with many challenges, it also has
significant resource options. Secondly, the concept of a
regional entity is new to Alaska, but is a well-tested idea in
the Lower 48. Thirdly, the economic benefits of the proposed
legislation are significant and are not "a leap of faith."
Finally, he cautioned against delay because the utilities will
continue to make decisions that are not necessarily best for the
region, and because with delay, momentum disappears.
3:39:19 PM
JIM STRANDBERG, Project Manager, Greater Railbelt Energy and
Transmission Corporation (GRETC) project, AEA, AIDEA, Department
of Commerce, Community, & Economic Development (DCCED),
presented a description of HB 182 and the approach the
administration is suggesting for the formation of the Greater
Railbelt Energy and Transmission Corporation (GRETC). Mr.
Strandberg informed the committee HB 182 is a product of a joint
effort between the Office of the Governor, the Railbelt electric
utilities, and the AEA. This is the first year step to create a
durable not-for-profit corporation to assume the responsibility
for Railbelt power generators and transmission lines of the
future. Efforts by the utilities to restructure in the past,
and the REGA study, have sought new and innovative approaches to
determine the best organization for the future of power
generation in the Railbelt. House Bill 182 is the first step in
a phased, two-year legislative process to form the GRETC; in
fact, this enabling legislation defines the business type and
statute, the board of directors, voting rights, and basic powers
and duties. Between year one and year two, the new company must
create transition plans, develop financing capabilities, and
develop the responsibilities of the Regulatory Commission of
Alaska (RCA). The AEA will assist in the financial and
regulatory work and will assist, through grants and support
labor, the formation of the GRETC board and by-laws. Mr.
Strandberg referred to the fiscal note for a description of the
funding sources of this support. Year two legislation will
propose financing capabilities, define the transition process,
and complete the formation of the company. He pointed out the
need to begin projects in the Railbelt area such as the
completion of the integrated resource plan. In fact, AEA is
working on the plan as part of the Susitna hydroelectric power
project funding. The plan is necessary to determine when,
where, and what kind of generation and transmission plants need
to be built. The plan is expected to be completed in November,
2009. Mr. Strandberg advised the committee of projects and
upgrading needed to the existing infrastructure in the Railbelt,
including the development of near-term fuel supplies. He opined
these tasks require a company that is a full-service utility and
that has planning, design, and management talent, combined with
a solid financial base. The company must also work with the
state in financial matters to maintain low rates to ensure the
public benefit to the Railbelt.
3:45:55 PM
MR. STRANDBERG continued to explain that one aspect of HB 182
will place two major assets owned by the AEA into GRETC.
Simply, during the period ending July 31, 2010, each Railbelt
utility can choose to sign a letter of intent to accept a phased
approach to commit human resources and physical assets into
GRETC. Included with the letter of intent will be state
commitments to begin the process of committing to the GRETC
concept. He recalled the high price of oil and the need to have
a diversified system throughout the Railbelt by 2020,
contributed to the formation of this company. Further, the next
ten years will be a transition period during which new major
projects will be developed to restructure the Railbelt
physically and contractually. The vision behind the legislation
is that by year 10 of the transition period, there will be a
diversified power supply portfolio and a robust transmission
system. In addition, during the transition period, the state
must act to maintain power supplies at reasonable prices to the
consumer. For the large scale projects, financing, debt, and
equity management will drive how the utilities will need to
commit to power sales agreements and bond sales. He concluded
that the proposed legislation seeks to create a not-for-profit
and robust private corporation, with specific public duties and
responsibilities to provide a single system rate of wholesale
power to all Railbelt utilities on a nondiscriminatory basis.
3:49:53 PM
REPRESENTATIVE RAMRAS recalled this idea surfaced during the
previous administration and asked how HB 182 differs from what
was proposed then. He then asked how the concerns of the GVEA
are addressed by the proposed legislation.
3:50:36 PM
MR. STRANDBERG acknowledged that the legislation enabling the
REGA study was passed during the previous administration. The
process began then; in fact, many of the basic concepts were
laid in that legislation. Responding to Representative Ramras'
second question, he said the process is a collaborative process
and GVEA has been included. His agency has largely followed the
recommendations of the REGA study, however, there are
differences. The GVEA board of directors, the AEA, and the
governor's office met recently; moreover, GVEA was "at the
table" for the entire process. As a matter of fact, the general
manager of GVEA was a member of the advisory work group and has
participated from the beginning. He declined to state GVEA's
position.
3:53:26 PM
REPRESENTATIVE RAMRAS remarked:
Given that they have some profound concerns, what is
the plan over the interim to try and work through
those concerns ... to try and mitigate their concerns,
and some of the concerns of the other utilities that
are allowing Golden Valley to ... articulate some of
the objectionable points to the GRETC program?
3:53:59 PM
MR. STRANDBERG restated that the process involved all of the
utilities, of which GVEA is one. The AEA served as a
facilitator and sought to develop approaches that were
satisfactory to all. He confirmed that the AEA will continue to
meet and facilitate discussions between the utilities to attempt
to come to a consensus solution; however, he agreed that there
is work to be done.
3:54:49 PM
REPRESENTATIVE TUCK asked whether the AEA is presenting the
bill.
3:55:09 PM
MR. STRANDBERG said HB 182 is the governor's bill and the AEA is
the agency supporting the governor's office in this matter.
3:55:33 PM
REPRESENTATIVE TUCK asked whether the corporation will have
bonding capabilities.
3:55:55 PM
MR. STRANDBERG said yes, and explained that the financing
capabilities of the GRETC are not dealt with in the enabling
legislation; however, the intent is to develop the capabilities
over the next year, so that the company can shoulder long-term
debt.
3:56:24 PM
REPRESENTATIVE TUCK surmised that one of the other identified
tasks is to develop transition plans specific to each of the six
utilities. He asked for clarification of the task to become
properly structured under the RCA, and whether the RCA is going
to be the ultimate authority for the corporation.
3:56:59 PM
MR. STRANDBERG pointed out the corporation will be a regulated
public utility, except that it does not have a requirement to
secure a Certificate of Public Convenience and Necessity. This
is because the legislature is creating this corporation and
requiring a certificate would be a duplication. In addition,
there are statutory responsibilities built-in that direct the
company's purpose. Referring to the regulatory tasks, he said
that one task is to develop the responsibilities for regulation
by the RCA. This will be a large company with large assets and
RCA's jurisdiction may need to be a "custom approach."
3:58:36 PM
CO-CHAIR EDGMON observed "this bill doesn't seem to be on the
slow track."
3:59:06 PM
MR. STRANDBERG advised that the schedule responds to the needs
of the Railbelt; in fact, the dates were set at the urging of
the utilities.
3:59:34 PM
CO-CHAIR EDGMON expressed his understanding from the utilities
that they are interested in the proposed legislation but not
overly supportive. He asked how the directives of the proposed
legislation will be advanced according to the schedule when the
utilities may need more time; in fact, there is no mandate for
them to join in the effort.
4:00:28 PM
MR. STRANDBERG opined the bill takes a collaborative approach
underlined by a phased commitment process. This process will
give the utilities time, and will develop enough information
about financing and regulations, so they can decide to
participate. In essence, the proposed corporation will
capitalize large scale projects and negotiate long-term power
sale contracts with each of the utilities at a single system-
wide rate. This does not require the utilities to invest money,
but only to commit politically, and be ready to sign the power
contracts after the cost of the power is known. Mr. Strandberg
said, "The structure of this is that ... we would get smart
together over the next year .... so it could go into operation
approximately eighteen months from now."
4:02:57 PM
CO-CHAIR EDGMON recalled that the energy challenges in rural
areas of the state are troubling, at the least. He asked
whether this effort is concurrent with the statewide energy plan
presented by Mr. Haagensen, Director, AEA, or whether it was on
a faster track.
4:04:19 PM
MR. STRANDBERG deferred the question to Mr. Haagenson. He then
noted that the AEA is working to integrate the REGA effort with
other statewide regional plans; however, the basic concept is
that each region is different and each region needs its own
process such as a REGA study or a plan similar to the GRETC. To
deal equally with all regions of the state, the processes would
have to be linked together.
4:05:05 PM
CO-CHAIR EDGMON surmised this effort is separate from the
[Alaska Energy A first step toward energy independence] document
provided to the committee by the AEA in January, 2009.
MR. STRANDBERG said, "It's separate, but it's related."
4:05:23 PM
REPRESENTATIVE JOHANSEN referred to page 7, line 31, of the
bill, and surmised the integrated resource plan would give a
picture of "what's out there," and the next step for investment
in the future. He asked how the board of directors will agree
to take on the debt of the corporation.
4:06:21 PM
MR. STRANDBERG explained the 13 member board of directors is
currently envisioned to operate under a simple majority. The
underlying principle is that the board is configured to
represent all of rate payers of the Railbelt; therefore, board
members "[have] a different hat that is put on by each of these
board people when they come into the boardroom." He opined a
simple majority, or some variation of that, is the appropriate
approach, given the mandate that each board member represents
all of the people of the Railbelt.
4:07:48 PM
REPRESENTATIVE JOHANSEN opined the big questions will be asked
when money is spent on projects. He restated his question as to
whether a simple majority of the board will incur debt.
4:08:20 PM
MR. STRANDBERG indicated yes. He reminded the committee that
one of the mandates of the company is to provide
nondiscriminatory, equal reliability and power at a single
system-wide rate; thus the company must function to build the
network and to avoid regional voting without further
intervention from the legislature.
4:09:30 PM.
REPRESENTATIVE JOHANSEN requested clarification. "The statute
simply says you can borrow money and otherwise contract
indebtedness, so this will be in the by-law process?" he asked.
4:09:54 PM
MR. STRANDBERG said the business processes will be in the by-
laws; however, the ability to secure financing will be built-in
next year after the financial powers are specified. He
clarified that there was nothing in the enabling legislation to
allow the corporation to "go borrow money."
4:10:37 PM
REPRESENTATIVE TUCK asked whether the corporation will have
bonding authority.
MR. STRANDBERG answered that it could. However, that aspect has
not been dealt with yet.
4:11:15 PM
LORALI CARTER, Manager, Government and Corporate Communications,
Matanuska Electric Association (MEA), Inc., read a statement
from a 1962 report commissioned by the [Municipality] of
Anchorage, CEA, the cities of Fairbanks and Seward, MEA, HEA,
Copper Valley Electric Association, and GVEA. The report listed
the advantages and feasibility of a cooperative power generation
and transmission system for the Railbelt. Ms. Carter stated
that MEA appreciates the attention the governor and the
legislature have paid to this issue, and agrees that this is a
critical time in the Railbelt. She noted that MEA participated
in the REGA study; however, she opined the proposed legislation
is not a product of REGA and HB 182 does not follow a particular
path recommended by the REGA study. Aspects of HB 182 that are
supported by MEA are the public participation and the "postage
stamp rate." Ms. Carter related MEA's reservations about the
framework of voluntary participation; in fact, there is no
precedence for voluntary cooperation between the six utilities
and the transition plan is not likely to happen. Furthermore,
MEA believes RCA oversight is critical as the RCA is the
appropriate consumer protection agency. If the new corporation
is not required to be certificated by the RCA "it essentially
guts their enforcement authority." She then pointed out that
the Healy Coal plant is not part of the legislation discussing
the transfer of state assets, thus MEA is concerned that the
plant was negotiated as a "side deal." Ms. Carter assured the
committee MEA wants a generation and transmission system that is
successful and unified, but this legislation simply creates a
framework for voluntary participation. Regarding the timing of
the process, she indicated that the utilities are waiting for
the outcome of the bill and are moving forward with their own
plans for their members.
4:16:59 PM
CO-CHAIR MILLETT asked about MEA's plans for future power
generation.
4:17:15 PM
MS. CARTER said MEA is planning on building a 180 megawatt
natural gas plant at Eklutna. Presently, MEA has an all-
requirements contract with CEA that expires in 2014.
4:17:56 PM
CO-CHAIR MILLETT further asked about MEA's negotiations for gas.
4:18:12 PM
MS. CARTER said [gas contracts] are preliminary at this stage.
She added that the producers do not negotiate gas contracts
beyond "three years out."
4:18:38 PM
REPRESENTATIVE TUCK asked what MEA wants to see in the proposed
corporation.
4:19:10 PM
MS. CARTER explained participation in the corporation should be
mandatory, and MEA would like to see the policy makers require
the Railbelt utilities to unify power generation and
transmission.
4:19:49 PM
REPRESENTATIVE TUCK assumed the board of directors would have
two members from each of the six utilities. He asked whether
there are utilities that would not participate in the voluntary
program.
4:20:23 PM
MS. CARTER declined to speak for the other utilities. However,
MEA's point of view on majority vote is that there should not be
veto power in the boardroom.
4:20:57 PM
REPRESENTATIVE JOHANSEN expressed his surprise that the
utilities would not want to participate after 40 years of
discussion about unification. He asked how unification will
come about if the utilities continue "in their own direction."
4:23:13 PM
MS. CARTER encouraged the committee to remember the Railbelt is
a region that includes areas such as Fairbanks and Homer, that
have very unique circumstances. Although MEA and other
organizations have made recommendations over many years,
unification has not taken place, thus MEA's concern with the
voluntary framework of the legislation.
4:24:14 PM
REPRESENTATIVE JOHANSEN asked whether MEA is willing to give
something up for unification to take place.
4:24:29 PM
MS. CARTER referred to the transfer of state assets, as well as
assets owned by the utilities, in the proposed legislation.
There is opportunity afforded in HB 182 to unify the generation
and transmission system where all of the assets go to the
corporation, and the utilities continue as distribution
companies only.
4:25:22 PM
REPRESENTATIVE JOHANSEN asked whether MEA was the largest
utility of the six in the Railbelt area.
4:25:33 PM
MS. CARTER said MEA is the second largest cooperative by
membership, the third largest by "load," and has the largest
service area. She emphasized that neither the MEA board of
directors nor its general manager has taken a formal position on
this version of the bill. She restated her point that voluntary
participation in the unification process has been unsuccessful.
In further response to Representative Johansen, she said MEA
continues to "sit at the table" and discuss its unique needs and
point of view.
4:26:32 PM
CO-CHAIR EDGMON asked what would have to occur within the
corporate structure of MEA to participate.
4:27:09 PM
MS. CARTER agreed that changes would need to be made. Part of
MEA's reservation with the legislation is the transition plan
and its timeline.
4:27:44 PM
CO-CHAIR MILLETT listed the various capabilities of the six
utilities. She then asked for the implication of "postage
stamp" rates.
4:28:27 PM
MS. CARTER explained postage stamp rate means that the retail
customers will pay the same amount regardless of their location.
Anchorage Municipal Light and Power (ML&P) has the lowest rates
at this time because they have ownership in a gas field.
Looking at an overall policy, postage stamp rates will mean that
rates for some customers will go up and some will go down.
4:29:31 PM
CO-CHAIR MILLETT pointed out ML&P members will not want their
rates to go up. She said, "I would imagine it would be a hard
sell to those that are enjoying low rates."
4:30:01 PM
MS. CARTER restated, "We support a postage stamp rate because
we want to see fairness along the Railbelt end rate and that
would be one ... benefit to a generation and transmission
entity....
4:30:31 PM
REPRESENTATIVE TUCK stated his understanding that by 2010, the
corporation would have contracts with the individual utilities;
therefore, the postage stamp rates would be the wholesale prices
to each of the six utilities, not postage stamp rates to the
retailers. If the latter is true, "It's going to be troublesome
for some utilities, because they're not going to be able to
offer the same rates because they have different overheads,
different infrastructure, operation, maintenance
responsibilities ... so, are we talking about postage stamp
rates for wholesale or for retail?" he asked.
4:31:44 PM
MS. CARTER deferred to Mr. Strandberg.
4:32:13 PM
REPRESENTATIVE TUCK further asked whether MEA is concerned that
the Healy Coal plant should be part of the assets distributed by
the utilities.
4:32:35 PM
MS. CARTER said, "That it should be a part of this legislation
for the transfer of state assets."
4:32:38 PM
BRAD JANORSCHKE, General Manager, Homer Electric Association
(HEA), read [original punctuation provided]:
As you are aware, Homer Electric Association is one of
the 6 Railbelt electric utilities included in the
proposed legislation. Over the last 6 months, HEA's
members have experienced rates that have increased
from about 14.5 cents to 21.5 cents per kWh, a 48%
increase driven primarily by escalating fuel costs.
Fuel costs are not our only challenge, nor are we
alone. In addition to the need to address future fuel
needs, the Railbelt utilities are facing many other
challenges that will require cooperation, planning,
and capital if we are to ensure three fourths of
Alaska's population is to continue to receive
reliable, cost effective power.
HB 182 does create the opportunity for the utilities
to participate in an organization that will be
responsible for addressing and creating the synergies
needed to solve the previously mentioned challenges.
Many details need to be worked out and it is
anticipated these details will be addressed in a yet
to be developed transition plan. HEA will work in
good faith to assist in the development of such plan.
Although we have a concern about board composition
outlined in the current bill, we are working with the
administration to resolve that concern. As a result,
HEA does support the concept of HB 182 and we support
the movement of this bill to the next stop.
4:34:40 PM
CO-CHAIR MILLETT asked how HEA generates power.
4:34:50 PM
MR. JANORSCHKE explained HEA purchases power from CEA; operates
and maintains Bradley Lake [Hydroelectric Project]; and also
operates a 40 megawatt "co-gen" unit at the Agrium [fertilizer
plant] site.
REPRESENTATIVE TUCK asked whether Bradley Lake Hydroelectric
Project (Bradley Lake) is state-owned.
4:35:36 PM
MR. JANORSCHKE responded that Bradley Lake is a state-owned
asset, operated and maintained by HEA on behalf of all of the
Railbelt utilities that participate in the project. In further
response to Representative Tuck, he said HEA buys power from the
Bradley Lake facility, and has a separate operation and
maintenance contract.
4:35:58 PM
CO-CHAIR EDGMON asked whether HEA has sufficient spare power to
power Pebble [Mine].
4:36:11 PM
MR. JANORSCHKE said no.
4:36:15 PM
DAVE GARDNER, Vice President, Marketing and Member Services,
Golden Valley Electric Association (GVEA), informed the
committee the GVEA board is still reviewing HB 182. The board's
concerns are based on the unanswered questions in the
legislation, such as how an entity created by the legislation
would provide the same level of reliability that members
currently receive from GVEA. He emphasized that GVEA does not
refute the concept of a Railbelt generation transmission
organization; however, GVEA wants to first see a Railbelt
integrated resource plan that clearly states the purposes of a
unified Railbelt utility. Mr. Gardner listed other questions
about the unification process. He then explained GVEA needs a
low fuel cost supply of power and that issue is not addressed by
the bill. Furthermore, unlike some of the other Railbelt
utilities, GVEA will not need new generation facilities or
transmission lines for more than 20 years. Mr. Gardner opined
the proposed legislation does not address the diverse needs of
the utilities, but seeks to form an organization to force the
utilities under one umbrella "and hopes that everyone's needs
will converge and that savings will follow." His association
has promoted the concept of a Railbelt organization for more
than 30 years; in fact, it joined with other utilities and the
state to construct the Bradley Lake Hydroelectric Project. More
recently, CEA, ML&P, and GVEA formed a joint action agency to
promote combined generation and transmission activities, and
joined with HEA to settle the issues surrounding the Healy Clean
Coal Project. He concluded that GVEA will continue to work with
the administration on this legislation.
4:41:21 PM
REPRESENTATIVE TUCK asked whether GVEA would accept mandatory or
voluntary participation in the corporation.
4:41:36 PM
MR. GARDNER stated GVEA's number one concern is that "It be
fairly applied to all utilities and that the reliability issues
be safeguarded."
4:42:03 PM
REPRESENTATIVE TUCK asked at what voltage is GVEA's point of
demarcation between transmission and distribution.
4:42:28 PM
MR. GARDNER explained its primary voltage is 138,000 volts;
however, GVEA owns all of its generation north of "the range."
Golden Valley Electric Association purchases power from CEA and
from the Bradley Lake facility, thus owns the generation, the
transmission, and the distribution.
4:43:06 PM
REPRESENTATIVE TUCK further asked about distribution at a lower
voltage.
4:43:25 PM
MR. GARDNER noted there are substations located throughout
GVEA's system. In further response to Representative Tuck, he
said he was unsure about the point of distribution in all
instances. He added that GVEA has the second lowest residential
rates, following ML&P.
4:44:46 PM
CO-CHAIR EDGMON asked about the reality of the timeline set in
the proposed legislation.
4:45:14 PM
MR. GARDNER restated GVEA's commitment to work with the
committee, the administration, the RCA, and other agencies as
needed.
4:45:34 PM
WILLARD DUNHAM, Vice Mayor, City of Seward, informed the
committee the City of Seward Electric System (SES) is a utility
system under home rule ownership similar to ML&P. As a small
utility it uses about nine to ten megawatts of power that is
provided by CEA. The SES includes approximately 40 miles of
transmission line, with services provided by both the city and
CEA. In addition, SES provides back-up diesel generation and
has provided emergency power to the communities of Moose Pass
and Cooper Landing. Mr. Dunham stated that the City of Seward
feels the GRETC proposal is worth exploring, but asks that the
small utilities are protected and given an even voice in voting.
4:48:51 PM
REBECCA LOGAN, Chairman, Board of Directors, Chugach Electric
Association (CEA), Inc., expressed her organization's support of
HB 182. She noted that the bill is the result of two years of
work and the study authorized by AEA. Following the conclusion
of the study, representatives of the Railbelt electric
utilities, the AEA, and the administration, worked together to
develop the proposed legislation. Further, amendments have been
introduced to address concerns about the original bill. Ms.
Logan stated CEA believes a single organization charged with
providing generation and transmission services for an
interconnected Railbelt will be able to provide savings. She
reviewed the organization of the GRETC corporation and opined
the corporation is needed to provide joint planning, a unified
transmission system, the construction of a major hydro plant and
transmission system, and to provide a unified voice for energy
matters that require state involvement. However, each utility
will need a transition plan to ensure that the customers of each
utility are treated fairly. This transition period will take a
number of years. Ms. Logan concluded that HB 182 would create
an organization that can effectively plan, finance, construct,
and operate generation and transmission facilities to serve the
Railbelt.
4:53:55 PM
REPRESENTATIVE RAMRAS expressed his appreciation of this
opportunity to move Alaska's electrical generation into the 21st
Century.
4:54:29 PM
CO-CHAIR EDGMON asked for clarification of the timeline outlined
in the proposed bill.
4:54:44 PM
BRADLEY EVANS, CEO, Chugach Electric Association (CEA), Inc.,
opined most of the large scale transition plan matters could be
identified during the timeline contemplated in the proposed
legislation; in fact, CEA has been studying restructuring with
ML&P over the past two years and has been looking at issues such
as financing, asset transfers, and the utilities' covenants.
Although the amount of transition work may be different for each
utility, CEA anticipates its transition can be accomplished in
the time period allowed.
4:56:14 PM
MS. LOGAN added that CEA and ML&P have been working in
anticipation of a merger, and have spent hundreds of thousands
of dollars laying the groundwork for the corporation.
4:56:50 PM
REPRESENTATIVE TUCK asked whether the state shared in the
groundwork.
4:57:03 PM
MS. LOGAN said yes.
4:57:09 PM
CO-CHAIR EDGMON asked whether CEA agrees with the establishment
of postage stamp rates.
4:57:26 PM
MS. LOGAN said, "... eventually ... this will lead to postage
stamp rates."
4:57:52 PM
NORMAN ROKEBERG, Chairman, Advisory Working Group, Alaska
Railbelt Electrical Grid Authority (REGA) Study, provided a
short background on the REGA Study. He explained that the
rationale for the study was the history of conflict between the
Railbelt utilities and their inability to solve this complex
issue. Mr. Rokeberg expressed his concern about the ownership
of the Railbelt grid that is spread between the six utilities
and the state. He opined the state needs a "smart grid" that
can accept alternate energy sources and meet the needs of
reliability and affordability. Last year, the legislature
appropriated funds for the regional resource plan that is
underway now. He said he also has concerns about the complex
and difficult issue of financing. The authority, even with
bonding authority, may not have the ability to enter the market
under current federal Internal Revenue Service statutes and
regulations. That area, and the regulatory issues, will take a
significant amount of time to resolve. He cautioned against
"lose(ing) the momentum we have with the REGA study together
with the [integrated resource plan], and the work that the
utilities have put into this at this juncture...." Mr. Rokeberg
strongly recommended that the committee review the legislation
and move it forward. He stressed that it is imperative that the
legislature provide leadership regarding the participation of
the utilities, and to work with the administration. The grid is
necessary to deliver power from a variety of sources to the
Railbelt population which represents 75 percent of the
population of the state.
5:02:36 PM
[HB 182 was held over for further public testimony.]
5:02:57 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Energy meeting was adjourned at [5:02] p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Hb182 Bradley Lake.pdf |
HENE 3/26/2009 3:00:00 PM |
HB 182 |
| GRETC REGA Study Results Recommendations 3-26-09.pdf |
HENE 3/26/2009 3:00:00 PM |
HB 182 |
| HB182 Commerce Fiscal Note.pdf |
HENE 3/26/2009 3:00:00 PM |
HB 182 |
| HB182 Transmittal Letter.pdf |
HENE 3/26/2009 3:00:00 PM |
HB 182 |
| Hb182 Intertie Document.pdf |
HENE 3/26/2009 3:00:00 PM |
HB 182 |
| HB182 Sectional Analysis.pdf |
HENE 3/26/2009 3:00:00 PM |
HB 182 |