Legislature(2015 - 2016)CAPITOL 17
01/29/2015 10:15 AM House ENERGY
| Audio | Topic |
|---|---|
| Start | |
| Presentation: First Infrastructure | |
| Presentation: Renewable Energy Alaska Project | |
| Presentation: Chugach Electric Association Inc. | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ENERGY
January 29, 2015
10:17 a.m.
MEMBERS PRESENT
Representative Jim Colver, Co-Chair
Representative Liz Vazquez, Co-Chair
Representative Benjamin Nageak
Representative David Talerico
Representative Cathy Tilton
Representative Matt Claman
Representative Adam Wool
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
PRESENTATION: FIRST INFRASTRUCTURE
- HEARD
PRESENTATION: RENEWABLE ENERGY ALASKA PROJECT
- HEARD
PRESENTATION: CHUGACH ELECTRIC ASSOCIATION INC.
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
STEVEN KLEIN, Managing Principal
First Infrastructure, LLC
Montclair, New Jersey
POSITION STATEMENT: Provided a PowerPoint presentation
entitled, "Financing Energy in Alaska," and dated 1/29/15.
CHRIS ROSE, Executive Director
Renewable Energy Alaska Project (REAP)
Anchorage, Alaska
POSITION STATEMENT: Provided a PowerPoint presentation
entitled, "An Independent System Operator for the Railbelt."
BRADLEY EVANS, Chief Executive Officer
Chugach Electric Association Inc. (CEA)
Anchorage, Alaska
POSITION STATEMENT: Provided a PowerPoint presentation
entitled, "Status update on the Railbelt Unified System Operator
(USO) Initiative."
BRIAN HICKEY, Executive Manager
Grid Development
Chugach Electric Association, Inc. (CEA)
Anchorage, Alaska
POSITION STATEMENT: Participated in the PowerPoint presentation
by Chugach Electric Association.
DUFF MITCHELL, Executive Director
Alaska Independent Power Producers Association (AIPPA)
Juneau, Alaska
POSITION STATEMENT: Asked a question during the presentation by
Chugach Electric Association.
ACTION NARRATIVE
10:17:34 AM
CO-CHAIR LIZ VAZQUEZ called the House Special Committee on
Energy meeting to order at 10:17 a.m. Representatives Claman,
Wool, Nageak, Talerico, Tilton, Colver, and Vazquez were present
at the call to order.
^PRESENTATION: FIRST INFRASTRUCTURE
PRESENTATION: FIRST INFRASTRUCTURE
10:18:50 AM
CO-CHAIR VAZQUEZ announced that the first order of business
would be a PowerPoint presentation entitled, "Financing Energy
in Alaska," dated 1/29/15, by Steven Klein, Managing Principal,
First Infrastructure.
CO-CHAIR COLVER expressed his interest in hearing information
that may lead to lowering energy costs.
10:20:02 AM
The committee took a brief at ease.
10:21:46 AM
STEVEN KLEIN, Managing Principal, First Infrastructure, LLC,
informed the committee his company is an advising and consulting
firm based in New Jersey. His presentation describes a concept
that is applicable in Alaska, and which has proven to be
feasible - it is a significant departure and innovative - but
not unprecedented. Mr. Klein acknowledged that Alaska is facing
severe fiscal challenges, however, this is the time to invest in
Alaska's future economic well-being. In order to finance energy
infrastructure, the prerequisites of comprehensive economic
development are: the identification of comparative economic
advantages; private capital for investment to leverage limited
state dollars; infrastructure necessary to support development
including roads, ports, power, energy transmission, energy
distribution, energy production, and telecommunications. He
stated that infrastructure development must be the priority as
it is a driving force, and the lack thereof is the most
significant hurdle that prevents or slows economic development.
10:25:08 AM
MR. KLEIN explained that infrastructure is most often a public
sector undertaking; on the other hand, when public funds are
scarce, private capital can be utilized. In this process - in
which the state's role is critical - the prerequisites of
private capital are: a stable, transparent political
environment; minimal political interference in the investment
process; and a public commitment. As background information, he
noted that the energy fund marketplace is growing domestically
and internationally; in fact, infrastructure and energy funds
are a large and growing category of investment among
institutional investors. However, to attract investment, the
state must establish the proper framework and incentives. For
example, a state-sponsored effort to attract investment could
involve the Alaska Industrial Development & Export Authority
(AIDEA), Department of Commerce, Community & Economic
Development (DCCED), and he provided a conceptual outline. Mr.
Klein disclosed that he is a paid consultant to AIDEA on a
number of projects, but at this hearing he was not representing
AIDEA, and his remarks are his own. Mr. Klein advised that
AIDEA is the state's economic development arm and is equipped to
provide the state's financial contribution by sponsoring
financial feasibility, strategic planning, and start-up efforts
that are needed. In addition, AIDEA's strong balance sheet can
support this effort. He noted that AIDEA is in a position to
form a separate entity, and holds the statutory legal authority
to form subsidiary corporations. Forming a separate entity is
critical to provide transparency and status which would attract
long-term private capital investment. For the funding
structure, he proposed AIDEA dedicate funds in a subordinated
investment in a fund of approved projects. The "subordinated
layer" assumes incremental risk beyond that of private
investors, and serves to induce private capital investments in
Alaska. Mr. Klein briefly described a similar fund in Michigan
that was formed from an initial subordinated investment
contribution of $20 million from the state. Subsequently, the
investment fund raised more than $40 million in private capital.
In consideration of the projects needed in Alaska, he
recommended that AIDEA dedicate $50 million contingent upon the
successful raising of at least four times that amount in the
private market.
10:32:25 AM
MR. KLEIN provided the following key principles of an
infrastructure fund that would be acceptable to private
investors:
· Must must be privately operated and governed.
· Must commit to achieve market returns for its investors.
· Representatives of the state or AIDEA would sit on the
board of directors, but the majority of the directors and
the investment committee must be from the private sector.
· Investment decisions must be made impartially on their
merits, without political considerations in accordance with
the dual objectives of achieving development needed for
Alaska and producing market returns.
· The investment team must be professionals in the industry.
· Must be authorized to make both equity and subordinated
debt investments in worthy projects.
· Fund term commensurate with the life of its investment.
MR. KLEIN said the aforementioned are the first steps to
creating a fund to address the long-term capital needs for
energy and infrastructure development; however, the fund would
not solve the near-term fiscal situation. He concluded that the
organization of the fund, raising money, and reviewing projects
are estimated to take one year, but work can begin now to create
a future for Alaska less dependent on the demand for fossil fuel
and more on broadly-based economic development activity.
10:36:14 AM
The committee took an at ease from 10:36 a.m. to 10:41 a.m.
^PRESENTATION: RENEWABLE ENERGY ALASKA PROJECT
PRESENTATION: RENEWABLE ENERGY ALASKA PROJECT
10:42:07 AM
CO-CHAIR VAZQUEZ announced that the next order of business would
be a presentation by Chris Rose, Executive Director, Renewable
Energy Alaska Project.
10:41:45 AM
CHRIS ROSE, Executive Director, Renewable Energy Alaska Project
(REAP), said his presentation would explain why an independent
system operator (ISO) for the Railbelt is important to renewable
energy in Alaska. He informed the committee that REAP is a
coalition of over 80 organizations, including electric
utilities, independent power producers (IPPs), businesses, and
other non-governmental agencies, and has been the state's only
organization focused on renewable energy and energy efficiency
since 2004. To explain some of the benefits of renewable
electricity, he recalled that in 2010, the legislature passed
House Bill 306, which created a 50 percent renewable electricity
goal. Also, renewable electricity is a hedge against rising
fuel prices. For example, Anchorage has a lot of natural gas-
fired generation; however, the gas [purchase] contracts do not
extend beyond 2019. Regardless of the amount of fossil fuel
available, there are uncertain prices in the future; therefore,
companies around the world are hedging against rising prices by
using renewable energy. Furthermore, the cost of renewable
energy technology is now approaching parity with other sources
of energy such as coal and natural gas. In fact, the cost of
electricity generated by wind turbines has dropped from $0.90
per kilowatt hour (kWh) to $0.3 in parts of the Midwest. Iowa
and South Dakota both produced more than 25 percent of their
electricity from wind; Alaska produces less than 1 percent.
Regarding the instantaneous penetration into a state's
electrical grid, Colorado has had 60 percent electrical power on
the grid at one time and Texas 39 percent. Denmark, Spain, and
Portugal have demonstrated that it is possible to put a lot of
wind energy on an electrical grid and not suffer unreliability.
In the Lower 48, 60,000 megawatts (MW) of wind power have been
added to a grid without additional commercial storage. This is
possible because there is flexibility in the grid. He pointed
out that the costs of integrating wind are about $0.005 per kWh
in the Lower 48. Grid system flexibility is the result of a
large balancing area in which to utilize different sources of
power. Utilities often adjust for the unpredictability of
electrical demand thus the variability of wind - and the
variability in demand - cancel each other out within a balancing
area. However, in the Railbelt, the transmission system is
small and "islanded." Furthermore, the system is constrained
and is not one balancing area, but four. There are six
utilities operating an average annual load of 600 MW - which
would equal one small power plant in the Lower 48 - with four
balancing areas and seven owners, thus integrating wind is more
difficult.
10:46:46 AM
MR. ROSE, in response to Co-Chair Vazquez, explained that a
balancing area is an area within which a utility that is
balancing the supply and demand of electricity, as well as load
and supply. A bigger balancing area has more sources of
generation and a variety of demands, or loads. In a small
village it is harder to balance wind generation without storage;
Kodiak has a population of 8,000 - a small balancing area - but
they have 9 MW of wind on the grid and battery storage. Slide
5, entitled "Alaska's Energy Infrastructure" illustrated the
grid between Homer and Fairbanks; there is a bottleneck on the
Kenai Peninsula which limits the amount of power to Anchorage at
75 MW, and another at Willow which limits the amount of power at
80 MW. Barriers to renewables in the Railbelt are not driven by
technology, but by policy, operations, and contracts; in fact,
there are already dispatchable potential renewable resources in
the Railbelt such as hydroelectric (hydro), geothermal, and
wind, which is the resource waiting to get into the grid right
now.
10:49:25 AM
CO-CHAIR COLVER surmised the concept of an ISO is to drop the
barriers that exist due to trade and business considerations,
but the cost of maintaining transmission is a cost to each
utility's consumers. A regional system would increase the
economy of scale by using one utility for financing, operating,
and maintenance, which is a more efficient use of the sources of
power.
MR. ROSE agreed that efficiency is a big factor; however, his
presentation addresses transmission and not unifying the
generation of power.
CO-CHAIR COLVER observed that constraints cost consumers.
MR. ROSE opined the utilities work very well together
operationally, although there is not one entity running the
entire grid. An ISO is also known as a unified system operator
(USO). The Alaska Energy Authority (AEA), Department of
Commerce, Community & Economic Development (DCCED), spent $1
million on a study that supported a regional resource plan,
regional generation planning, and regional transmission planning
for the Railbelt, and he stated his organization's support for
regional transmission planning that separates transmission from
generation. Other issues in the Railbelt that are related to
renewables are as follows:
· In the Lower 48, there are demand response resources that
utilities can pay to shut off power and balance the load
for renewables.
· Ramp rates are too low to allow the Bradley Lake
Hydroelectric Project (Bradley Lake) to be used as a
battery to store wind energy.
· Take or pay fuel contracts for natural gas contracts
direct that utilities pay for natural gas even when it is
displaced by wind or other renewables.
· Ad hoc roles of engagement for IPPs mean there are no
market rules for IPPs.
· No mandate for integrated resource planning.
· No Federal Energy Regulatory Commission (FERC)
jurisdiction.
MR. ROSE described the wind system on Fire Island that has 11
turbines. Chugach Electric Association, Inc. (CEA) bought the
power from Fire Island Wind at the flat rate of 9.7 cents per
kWh for 25 years. Cook Inlet Region Inc. (CIRI) owns Fire
Island Wind and has room for 54 turbines, but could not sell
that much power after negotiating with multiple entities. The
Regulatory Commission of Alaska (RCA) approved the power
purchase agreement; however, although CIRI used federal tax
credits to build Phase 1 turbines, it has given up trying to
expand to Phase 2, resulting in a potential loss of $100 million
of local economic activity. Golden Valley Electric Association
(GVEA) was going to pay 6.3 cents per kWh, but after
transmission by three utilities, the cost to consumers would
have been over 20 cents per kWh. He said this is a great
example of the need for an ISO and a universal transmission
tariff.
10:56:09 AM
CO-CHAIR VAZQUEZ asked for the boundaries of the Railbelt
utilities.
MR. ROSE answered that Homer Electric Association (HEA) is in
the south and serves the Kenai Peninsula; CEA serves parts of
the Kenai Peninsula; Anchorage Municipal Light & Power (ML&P) is
midtown and downtown Anchorage; Matanuska Electric Association
(MEA) starts at Eagle River and goes north past Wasilla; GVEA is
at the very end; and then service by the municipal utility of
the City of Seward. Currently, there are opportunities for the
Railbelt: the utilities have spent over $1 billion on new
natural gas generation which provides flexibility to do more; it
is possible to do some transmission system upgrades and to
create an ISO. Therefore, REAP has reviewed this situation
extensively and supports the following seven ISO principles:
· A non-profit, non-asset-owning entity governed by an
impartial, diverse, and independent group of stakeholders
not dominated by utility companies.
· Mandatory participation of all six utilities.
· Operational authority over the transmission system - but
not the generation system - and regional planning.
· Operational authority over reliability rules for the entire
grid.
· Create a universal transmission tariff that would be
transparent and that would not multiply or "pancake" one
rate on top of the other.
· Provide economic dispatch for efficiency.
· Regulated by RCA.
MR. ROSE said an important part of a system is a transmission
company (TRANSCO), which is an entity that would own, operate,
maintain, and upgrade transmission lines within the constraints
of the ISO. A TRANSCO must be under the direction of an ISO and
would be a for-profit entity that would gain a regulated rate of
return on its investment in building transmission. He
recommended that the legislature agree to a set of ISO
principles and send a clear signal to RCA that its intent is for
RCA to establish an ISO. Mr. Rose concluded that having more
renewables in the electrical grid makes sense; for example,
Norway is a gas producer, but has 98 percent renewable
electricity on its grid; Alaska can too, and thereby decrease
its use of fossil fuel imports, stabilize energy prices,
diversify the economy, and create jobs.
11:02:27 AM
REPRESENTATIVE WOOL surmised in order to introduce more
renewables the transmission grid must be more unified. He
questioned whether a more robust and accessible grid would
alleviate the problem of the unreliability of wind generation in
Fairbanks.
MR. ROSE responded that increasing the capacity of the grid and
one dispatcher make the balancing area bigger, and areas with
high penetration have many wind farms from which to draw power.
In addition, meteorologists can now predict wind events.
REPRESENTATIVE WOOL asked whether individual utilities, or
others, are currently responsible for infrastructure to correct
bottlenecks on the grid.
MR. ROSE said that is a good question. The state has built a
lot of transmission and some is owned by utilities. There has
been a failed attempt to build a bigger power line on the Kenai
Peninsula, and he is aware of a proposed alternative route for a
high voltage direct current (DC) cable from Nikiski to Beluga.
CO-CHAIR VAZQUEZ asked for Alaska's hydro potential, compared
with other states.
MR. ROSE answered that Alaska has the most untapped potential
for hydro; however, there is a limit to what is realistic
because of its lack of proximity to transmission, with the
exception of Southeast. Hydro is a long-term investment that
requires certainty and predictability. In further response to
Co-Chair Vazquez, he said geothermal is a great resource if
available because it is base load, dispatchable, and is lower
maintenance than coal, nuclear, or natural gas plants. Mt.
Spurr is a good prospect for geothermal.
11:07:15 AM
The committee took an at ease from 11:07 a.m. to 11:10 a.m.
^PRESENTATION: CHUGACH ELECTRIC ASSOCIATION INC.
PRESENTATION: CHUGACH ELECTRIC ASSOCIATION INC.
11:10:50 AM
CO-CHAIR VAZQUEZ announced that the final order of business
would be a presentation by Bradley Evans and Brian Hickey of
Chugach Electric Association.
11:10:55 AM
BRADLEY EVANS, Chief Executive Officer, Chugach Electric
Association Inc. (CEA), said he would provide a PowerPoint
presentation entitled, "Status update on the Railbelt Unified
System Operator (USO) Initiative," which is a very significant
industry initiative under consideration in the Railbelt. If
realized, the initiative would result in substantial savings to
consumers and would provide an opportunity for private financing
for infrastructure development and uniform open access, thereby
eliminating individual tariffs. Independent systems have built
up over the years in the Railbelt, but the system has grown to
the point where it needs to evolve. The CEA initiative calls
for a regulatory compact through RCA leading to the development
of a universal tariff. He recalled that the initiative has been
presented to legislators, the Regulatory Commission of Alaska
(RCA), utility boards, Renewable Energy Alaska Project (REAP),
state administrators, the Municipality of Anchorage,
Commonwealth North, and the public. The legislature also funded
an ongoing investigation on this matter by RCA. He directed
attention to slide 2, entitled, "Railbelt Transmission," and
noted other entities that receive transmission benefits are
Doyon Utilities, the University of Alaska Fairbanks power plant,
the military, and independent power producers (IPPs); however,
the aforementioned are not "the utilities that would lead the
effort to do this."
11:15:54 AM
REPRESENTATIVE WOOL confirmed that Valdez and Glennallen are off
the Railbelt system.
MR. EVANS said correct. In further response to Representative
Wool, he said there is a capacity-sharing agreement on
investments made by the northern utilities to the system that
establishes permanent capacity rights to move energy across the
Homer system. Mr. Evans returned to the presentation, stating
that the Railbelt is changing from its historical environment of
stability. In the early '80s, the state invested $89 million in
the Alaska Intertie which connected two major generating
utilities in Southcentral with Fairbanks. Now there are five
major generation and transmission utilities, the operations of
which would be enhanced by a single organization that is
technically experienced and stakeholder driven. Furthermore,
with a single uniform transmission rate, there could be a
business structure that supports private investment in
transmission infrastructure. He characterized one difficulty is
paying for the connection between territories; a utility's
business model does not support financing that type of
transmission by rate recovery. In addition, CEA believes
consistent and non-discriminatory open access transmission rules
are needed along with a regional approach to reliability. Slide
4, entitled "Railbelt 1985-2013" illustrated the load-balancing
areas of the three utilities. During this time period the
utilities voluntarily adopted reliability, operating, and
planning standards as part of the Alaska Intertie Agreement,
using a model from the Lower 48. Other actions were: Bradley
Lake Agreements with transmission access; the Northern Intertie;
the Anchorage Loop. Throughout this time period the region was
stable, without a lot of development, and CEA economically
dispatched most of the Railbelt system. Historically, a lot of
economical dispatch was occurring, until now. Slide 5,
entitled, "Current Railbelt structure" illustrated the more
fractured areas of responsibility and economic dispatch zones;
although some economic transfers help utilities, the system is
not unified and thus the transfers are not as effective as
possible. One requirement of a unified system operator (USO) is
the achievement of economic dispatch across the system to ensure
substantial cost savings to balance the cost of new investment.
Adding to the examples of barriers on the present system that
were mentioned by the previous speaker, he said in addition to
the added costs of "pancaking," it is difficult to negotiate
contracts with multiple utilities "today in this fractured
system."
11:23:25 AM
MR. EVANS directed attention to slide 6 entitled,
"Inefficiencies of current structure," and pointed out there is
no business case for the regional expansion of transmission,
which has meant there is underinvestment in regional
infrastructure. There is a loss of regional economic
opportunities; for example, energy from the Alaska Intertie was
necessary for the development of the Fort Knox Gold Mine, which
is estimated to have a $3 billion economic impact to Fairbanks.
He expressed CEA's concern about the economy, jobs, and further
enterprises which may be lost due to a lack of power. Another
problem as a result of the fracturing of electric utilities, is
that a lot of generation has been built - which was not done on
a regional basis - and that has created transmission congestion.
For example, the transmission congestion at Bradley Lake Hydro
limits the access of the northern utilities to the state's
biggest renewable resource. He said, "But there's no business
model, and no way for me to make the investment to unconstrain
it - it doesn't exist - it, it's a dogfight down at the
[Regulatory Commission of Alaska]...." Mr. Evans acknowledged
that RCA's workload is increased because of the inefficiency of
the current structure. He returned to CEA's proposal of a USO
and said it was "pretty well synchronized" with that of REAP,
although from a different perspective. Attributes of a USO
include:
· stakeholder governance
· ensures system-wide economic dispatch
· the engine of a system-wide transmission rate
· eliminates congestion which limits the use of resources
· enables a greater investment in transmission through a
universal tariff if the cost is borne by all who receive
benefits from economic development
11:29:29 AM
BRIAN HICKEY, Executive Manager, Grid Development, Chugach
Electric Association, Inc. (CEA), informed the committee he
would provide an update on four topics, including the current
status of the initiative. Mr. Hickey stressed that the intertie
benefits are regional and thus do not accrue to only one of the
six vertically-integrated utilities; sharing of regional costs
creates the uncertainty that prevents the development of
interregional projects. He advised that his presentation
includes numbers that are "directionally correct, they're based
on a very complex production cost and model where we evaluate
all of the variables, fuel cost, generation availability,
transmission constraints, outages - scheduled and forced - and
we evaluate all of those against a series of sensitivities."
Sensitivities could include the loss of a large commercial user
or the loss of a large generator. After being run through a
model, the numbers presented were for a single test year,
considering that the assets would have a 40-50 year life. A
study by the Alaska Energy Authority (AEA), Department of
Commerce, Community & Economic Development, indicated benefits
in a range from $75 million to $210 million; however, the CEA
study indicated benefits from $75 million to $140 million in
annual fuel savings based on an economic dispatch scenario.
Without any improvements to the system, CEA believes there is
approximately $50 million in benefits and approximately $50
million annually in Railbelt transmission costs. He cautioned
that one problem with the economic model is that the benefit is
a savings in fuel, but projects cannot be financed by savings.
The universal tariff and rate structure are needed so that
utilities can collect money to pay for the investments that save
money. He stressed that the projected savings are using the
current Railbelt system, but dispatched by a USO. The system
proposed by AEA - which included a second line between Anchorage
and the Kenai Peninsula, and a second line to Fairbanks - is
estimated to cost $880 million.
11:34:48 AM
MR. HICKEY continued to explain that an $880 million investment
over 40 years equals out to a cost of $80-$90 million per year
over a building period of 10-15 years; compared to an economic
benefit between $75-$140 million per year, the decision to build
is questionable. However, there are the additional benefits of
economic development associated with lower cost power, such as
construction jobs and construction, and the increased resilience
of the grid. He then described the current limitations to the
grid. In order to accomplish its proposal, CEA looked to
independent system operators (ISOs) and regional transmission
organizations (RTOs) in the Lower 48. These systems are a
product of the Federal Energy Regulatory Commission (FERC) and
operate over a region with a universal tariff. Texas is a good
model for Alaska because it is a non-FERC regulated ISO. He
explained CEA prefers a USO system over an ISO system because
ISOs and RTOs in the Lower 48 have a competitive commodities
market function, and Alaska does not have competitive markets.
Furthermore, the Texas model is mandated by the state public
utilities commission (PUC). He advised that the key to the
financial side of the initiative is the regulatory contract,
which is the assignment of authority to the USO by RCA to
administer the universal tariff. Also, the USO is required to
ensure economic dispatch, which means using the next most
efficient megawatt generated every minute of the day in the
entire region. The regulatory compact would also require non-
discriminatory open access, a common set of reliability
standards, long-term planning in interconnection protocols,
reliability compliance, plan projects, and condition projects.
On the other hand, RCA must recognize and incorporate the
standards and protocols developed by the USO. In addition, RCA
would have to ensure timely cost recovery which requires the
recovery of debt before the completion of a project, or what is
known as a forward-looking rate structure. Finally, RCA must
ensure a fair distribution of knowledgeable stakeholders on the
USO board of directors. A general USO organization chart
indicated the USO between RCA and various entities (slide 16).
11:41:40 AM
MR. HICKEY turned to the current status of the initiative and
informed the committee the Alaska Railbelt Cooperative
Transmission Electrical & Electric Company, Inc. (ARCTEC) is
comprised of four utilities that have organized to address
regional issues. The group is planning to reach non-utility
stakeholders such as REAP, industrials, and community economic
development groups in order to develop the scope on the facets
of the USO to present to RCA. Other awaited items are the RCA
report and upcoming directions from RCA requesting statutory
changes to regulations. Mr. Hickey concluded that numerous
resolutions in support of the concept of a USO have been passed,
and this is the time to coalesce ideas into a single vision,
although AEA's ability to transfer state assets into the USO
would have to be addressed.
11:44:05 AM
UNIDENTIFIED SPEAKER (Indisc.)
MR. HICKEY said it is a fact that vertically-integrated
utilities have their own service territory and are mandated to
serve their consumers under a fiduciary obligation; each utility
looks at its own business model. The issue is that there is no
business model for looking at regional generation.
UNIDENTIFIED SPEAKER (Indisc.)
MR. HICKEY said CEA has a 30 percent non-spinning reserve
requirement and a 100 percent of the largest single contingency
spinning reserve requirement in the Railbelt.
11:45:58 AM
REPRESENTATIVE WOOL assumed that most of the utilities are in
favor of a USO.
MR. HICKEY acknowledged that the utilities may not have a common
vision, but there is movement in that direction.
REPRESENTATIVE WOOL observed some utilities would benefit more
than others. He asked whether a centrally-located power
generator that has capacity is not in need of the grid as much
as others.
MR. HICKEY said correct. Some utilities have not paid for
transmission and some would have more benefit than others; this
has been at the root of stalemates on other occasions. In
further response to Representative Wool, he cautioned that a
number of generators are old and inefficient, thus there is not
an oversupply - but a moderate amount - of modern and efficient
generation.
REPRESENTATIVE WOOL surmised using the most efficient generation
all of the time would relieve the use of less efficient systems.
For example, Aurora Energy's coal power plant in Fairbanks may
not be needed.
MR. HICKEY agreed, noting that there would need to be a second
power line north to do so. The benefit comes from being able to
use the most efficient generator wherever it may be.
REPRESENTATIVE WOOL noted that the savings would come from
efficient generation and the costs from increased
infrastructure.
MR. HICKEY said maintenance on existing Railbelt facilities is
about $48 million per year.
11:50:51 AM
REPRESENTATIVE TALERICO expressed his understanding that if
there is a single payer rate, IPPs have the opportunity to feed
power into the system; however, his biggest concern is not
efficiency but cost because his constituents are struggling.
Some older facilities operate more cheaply than newer
facilities, and he questioned whether the USO would have the
"ability to make those decisions, as well."
MR. EVANS stated there is another factor to economic dispatch;
efficiencies matter, but so does the cost of fuel. A less
efficient engine may run on cheaper fuel and the USO would make
the most economic decision.
REPRESENTATIVE WOOL asked whether an IPP could easily introduce
power into a system, pay a tariff, and sell its product.
MR. EVANS said yes. An IPP using the "highway" system would
know what the access points are - and the cost - without
negotiating with five different entities. It is possible to
establish an RTO that is not mandated to do economic dispatch,
but this task has been added to the initiative "because that's
where the savings are."
11:54:12 AM
DUFF MITCHELL, Executive Director, Alaska Independent Power
Producers Association (AIPPA), addressed the "highway analogy"
of open access and non-discrimination access. He pointed out
that Bradley Lake hydro is currently supplying power to Golden
Valley Electric Association (GVEA) at less than the $0.13-$0.15
per kWh "pancake" rate that GVEA charged to Fire Island Wind.
Mr. Mitchell asked whether there would be a postage stamp rate
under the initiative. He said, "It's one thing to have open
access, it's another thing to go down the highway, and everybody
pays the same toll." Mr. Mitchell questioned whether the
sameness standard would be provided to all participants
regardless of their stature in the initial organization of the
USO.
MR. HICKEY assured the committee the universal tariff is a
common rate paid by everyone. He said he was not involved in
the aforementioned negotiations; however, the Bradley Lake hydro
transfer rate contract was signed in 1987. He remarked:
However, in this uniform system, system operator
world, those contracts would have to go away and every
megawatt that moved would, every end-use customer that
used a megawatt would pay a fixed rate for that
megawatt. So anyone that put their power on the grid,
there would be no, there is no wheeling rate to the
generators in this world. What there is is a charge
to every customer in the Railbelt that is equal to the
power they use - the cost of the transmission system,
divided by the amount of power they use. And so it
takes the transmission system off of that table and
out of that negotiation, and that's why I believe the
independent system operators, the regional
transmission organizations in the Lower 48 have been
so successful in facilitating economic dispatch.
REPRESENTATIVE WOOL asked for an explanation of a ramp rate.
MR. HICKEY answered that the ramp rate is a physical feature of
a particular generator: how fast it can go from no load to full
load. A mismatch between generation and load can cause outages.
CO-CHAIR VAZQUEZ said the desire of the committee is to present
information to the community and stakeholders in order to "solve
some of the issues we've been dealing with for decades."
11:58:54 AM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Energy meeting was adjourned at 11:58 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 2015-01-29 - Chris Rose - House Energy Presentation.pptx |
HENE 1/29/2015 10:15:00 AM |
|
| 2015-01-29 - Steve Klein - presentation to house energy.pptx |
HENE 1/29/2015 10:15:00 AM |
|
| 2015-01-29 - Chris Rose - ISO paper 7-11-14.pdf |
HENE 1/29/2015 10:15:00 AM |
|
| 2015-01-29 - Chris Rose - REAP Approved ISO Principles.pdf |
HENE 1/29/2015 10:15:00 AM |
|
| 2015-01-29 - Steve Klein - presentation to house energy.pdf |
HENE 1/29/2015 10:15:00 AM |
|
| 2015-01-29 - HENE - Agenda.pdf |
HENE 1/29/2015 10:15:00 AM |
|
| 2015-01-29 - Chris Rose - House Energy Presentation.pdf |
HENE 1/29/2015 10:15:00 AM |
|
| 2015-01-29 - Chugach Electric - ISO Presentation final.pptx |
HENE 1/29/2015 10:15:00 AM |
|
| 2015-01-29 - Chugach Electric - ISO Presentation final.pdf |
HENE 1/29/2015 10:15:00 AM |