02/24/2015 10:15 AM House ENERGY
| Audio | Topic |
|---|---|
| Start | |
| Presentation: Copper River Valley Regional Energy Planning | |
| HB78 | |
| HB105 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| *+ | HB 78 | TELECONFERENCED | |
| += | HB 105 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ENERGY
February 24, 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: COPPER RIVER VALLEY REGIONAL ENERGY PLANNING
- HEARD
HOUSE BILL NO. 78
"An Act bearing the short title of the 'Alaska Competitive
Energy Act of 2015'; and relating to the Regulatory Commission
of Alaska."
- HEARD & HELD
HOUSE BILL NO. 105
"An Act relating to the programs and bonds of the Alaska
Industrial Development and Export Authority; related to the
financing authorization through the Alaska Industrial
Development and Export Authority of a liquefied natural gas
production plant and natural gas energy projects and
distribution systems in the state; amending and repealing bond
authorizations granted to the Alaska Industrial Development and
Export Authority; and providing for an effective date."
- MOVED CSHB 105(ENE) OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 78
SHORT TITLE: REGULATORY COMMISSION OF ALASKA
SPONSOR(s): REPRESENTATIVE(s) WILSON
01/23/15 (H) READ THE FIRST TIME - REFERRALS
01/23/15 (H) ENE, L&C
02/24/15 (H) ENE AT 10:15 AM CAPITOL 17
BILL: HB 105
SHORT TITLE: AIDEA: BONDS;PROGRAMS;LOANS;LNG PROJECT
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
02/11/15 (H) READ THE FIRST TIME - REFERRALS
02/11/15 (H) ENE, RES, L&C, FIN
02/17/15 (H) ENE AT 10:15 AM BARNES 124
02/17/15 (H) Heard & Held
02/17/15 (H) MINUTE(ENE)
02/24/15 (H) ENE AT 10:15 AM CAPITOL 17
WITNESS REGISTER
JOE BOVEE, Vice President Land and Resources
Ahtna, Incorporated
Glennallen, Alaska
POSITION STATEMENT: Provided a PowerPoint presentation entitled
"Copper River Valley Regional Energy Planning: A Public-Private
Partnership Working to Development(sic) Affordable Energy."
JASON HOKE, Executive Director
Copper Valley Development Association
Glennallen, Alaska
POSITION STATEMENT: Participated in the PowerPoint presentation
entitled "Copper River Valley Regional Energy Planning: A
Public-Private Partnership Working to Development(sic)
Affordable Energy."
ROBERT WILKINSON, Chief Executive Officer
Copper Valley Electric Association
Glennallen, Alaska
POSITION STATEMENT: Participated in a PowerPoint presentation
entitled "Copper River Valley Regional Energy Planning: A
Public-Private Partnership Working to Development(sic)
Affordable Energy."
BRUCE CAIN, Special Projects Manager
Ahtna, Incorporated
Glennallen, Alaska
POSITION STATEMENT: Participated in a PowerPoint presentation
entitled "Copper River Valley Regional Energy Planning: A
Public-Private Partnership Working to Development(sic)
Affordable Energy."
REPRESENTATIVE TAMMIE WILSON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Speaking as the sponsor, introduced HB 78.
DUFF MITCHELL, Executive Director
Alaska Independent Power Producers Association (AIPPA)
Juneau, Alaska
POSITION STATEMENT: On behalf of Representative Wilson,
sponsor, provided an overview of HB 78.
SUZANNE GIBSON, Senior Director
Energy Development
Cook Island Region, Inc.
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 78.
JOEL GROVES, Project Manager
Fishhook Renewable Energy
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 78.
TIM MCLEOD, President
Alaska Electric Light and Power Company
Juneau, Alaska
POSITION STATEMENT: Testified in opposition to HB 78.
MIKE CRAFT
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 78.
JODIE MITCHELL, Chief Executive Officer/General Manager
Inside Passage Electrical Cooperative
Juneau, Alaska
POSITION STATEMENT: Testified in opposition to HB 78.
FRED PARADY, Acting Commissioner
Department of Commerce, Community & Economic Development
Juneau, Alaska
POSITION STATEMENT: Answered a question during the hearing on
HB 105.
ACTION NARRATIVE
10:17:38 AM
CO-CHAIR JIM COLVER called the House Special Committee on Energy
meeting to order at 10:17 a.m. Representatives Claman, Wool,
Tilton, Vazquez, and Colver were present at the call to order.
Representatives Talerico and Nageak arrived as the meeting was
in progress.
^PRESENTATION: COPPER RIVER VALLEY REGIONAL ENERGY PLANNING
PRESENTATION: COPPER RIVER VALLEY REGIONAL ENERGY PLANNING
10:18:28 AM
CO-CHAIR COLVER announced that the first order of business would
be a presentation on Copper River Valley Regional Energy
Planning.
10:18:51 AM
JOE BOVEE, Vice President, Land and Resources, Ahtna,
Incorporated, said the presentation would focus on rural energy
partnerships within the Copper River Valley region.
10:20:01 AM
JASON HOKE, Executive Director, Copper Valley Development
Association (CDVA), said CVDA is the Alaska Regional Development
Organization (ARDOR), Division of Economic Development (DED),
Department of Commerce, Community & Economic Development
(DCCED), for the region of the state extending beyond Paxton to
the Matanuska-Susitna Borough, south to Valdez, and west almost
to the Canadian border (slide 2). Copper Valley is an
unorganized borough with no municipalities encompassing 20,649
square miles. There are twenty-three communities, eight tribal
governments, and two Native corporations, Ahtna, Incorporated
(Ahtna) and Chitina Native Corporation (CNC). The population of
3,000 residents is declining rapidly; Copper Valley is on the
road system with a rural lifestyle and the high expenses of
rural living (slide 3). Mr. Hoke said CVDA has contracted with
the Alaska Energy Authority (AEA), DCCED, to produce a Regional
Energy Plan of which draft Phases 1 and 2 are nearly complete.
The plan involved a collaboration between all of the communities
in the area, tribes, businesses, and energy companies. The
energy plan identifying long-term goals included an electrical
intertie with the Railbelt; developing natural gas; a liquefied
natural gas (LNG) feasibility project linked to the Interior
Energy Project; development of summer hydroelectric power with
storage and cogeneration; links to the Alaska LNG project; and
the development of other resources such as hydroelectric,
biomass, solar, wind, and geothermal (slide 4). Mr. Hoke
pointed out that non-state dollars are coming into the region;
for example, ARDOR has leveraged $4 for every $1 received from
the state, most of which has been directed to energy and energy
development. From private sources, Ahtna invested $3 million
last year, and the Copper Valley Electric Association invested
$8 million in the Allison Creek generation project. Finally,
with the help of CVDA, small businesses have obtained U.S.
Department of Agriculture Rural Energy for America Program loans
and grants totaling over $1 million toward energy efficiency.
10:24:02 AM
MR. BOVEE informed the committee that although in rural Alaska
residents have different backgrounds and cultural identities,
the high cost of energy unites everyone. He presented a map
illustrating oil and gas basins in Alaska and indicated that a
50-mile radius around Glennallen has been identified for middle
earth [outside of Cook Inlet and south of 68 degrees north
latitude] tax credits (slide 6). Over the past 10-15 years, oil
and gas research has been conducted in the Copper River Valley
region and a state exploration license was issued covering about
44,000 acres; in fact, millions of dollars have been invested in
exploration over the past 30-40 years. Recently, Ahtna invested
about $3 million in the Tolsona project west of Glennallen.
Previous geological data and past exploration have revealed
strong natural gas indications, and all of the exploration wells
have gas shows. He pointed out that the identified gas
formation is accessible to Southcentral Alaska and its
population centers, the highway, and tidewater at Valdez. Mr.
Bovee noted that the drilling challenges of high pressure water
zones can be alleviated since they have been identified (slide
7). He displayed a map showing Copper River Basin Natural Gas
within which has been found natural gas and shale oil during
years of exploration. In the last 18 months an area on state
land has been explored, including 40 miles of 2D seismic. Also
shown were oil and gas exploration wells (slide 8). From all of
the previous and current data, porous, permeable, and
hydrocarbon-bearing lower Cretaceous zones have been identified,
which indicates the region has the correct geology for gas
structures. Several large, fault-bounded geologic structures
have been identified, two of which cross onto state land.
However, high pressure water zones are present. He described a
cross-section of the geology of the area (slide 9).
10:28:42 AM
MR. BOVEE turned to market opportunities, which are critical for
exploration and development. Market research determined that if
the region could only produce thousands of British thermal units
(Btus) per day, it would not be economically feasible to develop
the industry. If millions of Btus were produced per day, the
market would be the Copper River Valley area, including the
electric association, the school district, and commercial and
residential markets. If billions of Btus were produced per day,
the region would attract instate or international markets (slide
10). An analysis of the local market indicated that there is a
high need for natural gas and thus determined that the local
market is viable. Based on $4 per gallon fuel oil, using
natural gas would represent a cost savings of 15 percent for
home heating (slide 11). Mr. Bovee said the next step for his
organization is to engineer and design a new well to be
completed in 2016. The well will be located in a new, very
promising site. Further, CVDA is finalizing an application to
the Regulatory Commission of Alaska (RCA) for local gas
distribution, which will take about one year. Also, CVDA is
evaluating developing markets, which may be a pipeline, a micro
LNG plant trucking LNG to rural communities, or an electrical
intertie.
CO-CHAIR COLVER asked for the prospects of the basin in the
Tolsona area.
MR. BOVEE answered that at the time of the state license, CVDA
reprocessed old data and found a gap; with new seismic data,
four sides of a gas structure east of Tolsona Lake have been
identified, and he estimated the structure is five miles square
at its base at 5,000 feet.
10:34:24 AM
CO-CHAIR COLVER asked about challenges to oil and gas
development in the basin.
10:34:36 AM
MR. BOVEE recalled the previous wells that were drilled in the
'90s and '00s encountered high pressure water zones and high
pressure gas zones. The problems caused by these zones can be
countered by installing well casing. The other problem is
attracting financiers and developers to a small market.
However, the region's location on the road system is a benefit.
He urged the committee to consider improvements to the middle
earth tax credit legislation.
10:37:08 AM
ROBERT WILKINSON, Chief Executive Officer, Copper Valley
Electric Association, said CVEA provides electrical service to
the Copper Valley area and Valdez with power from the Solomon
Gulch hydroelectric facility - which is a combustion turbine
cogeneration project adjacent to Petro Star refinery - and two
diesel-fired generation plants. Currently under construction is
the Allison Creek project which will increase CVEA's renewable
energy portfolio from 50 percent to 64 percent. In the Copper
River basin, the average residential cost per kilowatt hour in
2014 was 28 cents. He attributed the high cost of electric
rates to the use of diesel fuel and the cost of operating and
maintaining four power plants. Copper Valley Electric
Association believes the best long-term solution for lower cost
is a CVEA intertie to the Railbelt energy grid. Benefits would
include improved reliability and transfer capacity, economic
development opportunities, development of stranded energy
projects such as Tiekle River and Silver Lake, service to new
commercial customers, and lower rates to residents.
Approximately 20 years ago, CVEA proposed an intertie from
Glennallen to Sutton, and the prefeasibility study provided a
foundation of data (slide 13).
10:39:34 AM
BRUCE CAIN, Special Projects Manager, Ahtna, informed the
committee Ahtna has proposed an LNG demonstration project which
ties into an Ahtna gas development project as well. The purpose
is to begin working in the local market and build a small
community natural gas distribution grid which could be started
now if LNG was trucked to a small regasification plant. The
proposed demonstration project would be shared with the state as
successful methods to convert small communities or isolated
areas to natural gas become clear. The project benefits the
Copper River Valley community by the construction of a local gas
distribution grid for the power plant and business area that can
be used following the future development of a natural gas
system. Mr. Cain noted that a CAPSIS request in the amount of
$175,000 has been submitted for a feasibility study, and the
total project cost is estimated to be $8 million to $10 million
funded by Rural Development, U.S. Department of Agriculture,
grants, and private investment (slides 14 and 15).
MR. BOVEE concluded that the entities in the Copper River Valley
region are working together on energy projects. Finalizing
Phase 11 of the Copper Basin Regional Energy Plan will result in
a prioritized list of the top projects as follows (slide 16):
· evaluation of the intertie
· the LNG demonstration project
· Ahtna natural gas exploration
10:43:24 AM
The committee took an at ease from 10:43 a.m. to 10:47 a.m.
HB 78-REGULATORY COMMISSION OF ALASKA
10:47:34 AM
CO-CHAIR COLVER announced that the next order of business would
be HOUSE BILL NO. 78, "An Act bearing the short title of the
'Alaska Competitive Energy Act of 2015'; and relating to the
Regulatory Commission of Alaska."
10:47:44 AM
REPRESENTATIVE TAMMIE WILSON, Alaska State Legislature, sponsor
of HB 78, paraphrased from the following sponsor statement
[original punctuation provided]:
It is my honored to present HB78 on behalf of the
Alaska Independent Power Producers. Competition is
good. Competition brings out the best of America and
Alaska. Competition is the basis for a free and market
force driven society. Business and industrial sectors
that have vibrant competitive markets work hard to
drive down consumer prices. Competition sparks
innovation to improve production, shave unnecessary
costs, and continually improve customer service in the
never ending pursuit to meet or beat competition.
Alaskans understand and embrace competition as an
integral component of our existence as Alaskans.
Competition is not complicated. Alaskans understand
competition in the sports arena and in all endeavors
that require a pursuit of excellence. As with our
world famous Iditarod Dog Sled Race, we don't just
hand out trophies, we expect our Alaskan winners to
earn it. Our Alaska electrical energy laws and
regulations that not only discourage competition, but
more aptly pre-empt competition and discourage private
investment in our electrical energy infrastructure. As
a result to our economic counterproductive and
anticompetitive policies, Alaska ranks last of all 50
states in the production of competitive electricity
from independent power producers. Due, in part, to our
lack of wholesale electrical competition Alaska also
has the highest average cost of industrial, business
electricity rates in the nation. Also, Alaska almost
has the highest average residential electricity rates
in the nation. Our noncompetitive high electric rates
negatively impact our economic development and
unnecessarily burden our Alaskan businesses, mines,
entrepreneurs and households. Our high electrical
energy costs, not only impact our economy, they also
impact our local government operations, schools,
hospitals, and services. A school or hospital dollar
unnecessarily spent on uncompetitive electricity is a
dollar that could be more productively spent on
educating our youth or reducing the health care costs
for Alaskans. Wilson started out as a territory and as
a young state, we rightfully granted monopoly rights
to utilities and awarded exclusive service territories
in our effort to provide incentives to drive
electrical service to all urban and rural Alaskans
alike. However, we have outgrown this monopoly model
that now holds back the diversification and vibrancy
of our non-oil industry economy. We must integrate
wholesale competition to encourage private capital
investment into energy generation and transmission to
not only decrease electricity costs but also to
improve Alaskans long term energy security from future
rate increases. Fair play, open access to
transmission, nondiscrimination in the procurement of
lowest cost energy allows market forces to pick
winners and provides an avenue for Alaska to meet its
goals as stated in our State Energy Policy. The Alaska
Competitive Energy Act embraces competition as the
guiding principle for our electrical generation and
transmission industry because Alaskans know that
competition works.
REPRESENTATIVE WILSON said she has heard from private industry
that projects have already been built, but are unable to access
the grid. She stressed that private businesses are needed at
this time of the current state budget deficit, and the grid must
be shared. Representative Wilson directed attention to a letter
from "Chugach Power" found in the committee packet that
recommends waiting "for a report that may come out, my
understanding, may not come out until June." However, she
advised that residents in her legislative district are moving,
and businesses are not expanding, "because they keep waiting for
more affordable energy ...."
10:52:49 AM
REPRESENTATIVE TILTON asked why the legislature should not wait
for the Regulatory Commission of Alaska (RCA) to issue its
report.
REPRESENTATIVE WILSON explained that last year RCA requested
more direction on how it can better service Alaskans, and that
was the origin of the bill. There may be changes that can be
made through the legislative process, but to stop legislation
"instead of working in tandem," would slow progress on the
issue.
10:54:05 AM
DUFF MITCHELL, Executive Director, Alaska Independent Power
Producers Association (AIPPA), said AIPPA has worked on the bill
for three years. He provided an overview of HB 78, saying that
the bill embodies competition and fair play; the bill includes
non-discrimination elements, opens doors for access to
transmission, and sets basic ground rules. Currently, Alaska
differs from the rest of the nation in its regulation of
generation and transmission, and the bill brings Alaska in
alignment. Mr. Mitchell said Alaska ranks poorly in competitive
generation and high cost because it does not invigorate
competitive market forces. He disagreed that HB 78 is
deregulation; in fact, the bill creates wholesale competitive
regulation: Any contract by an independent power producer (IPP)
would be sold to a utility on a power purchase agreement (PPA)
and authorized by RCA. In addition, HB 78 follows the state
energy policy [passed in the 26th Alaska State Legislature]
which promotes the development of renewable energy, encourages
coal and other gas hydrates for electrical generation, and
encourages economic development by streamlined regulatory
processes. Yet today, "the RCA takes two years for a docket, in
the private business, that's a lifetime [and] puts you out of
business." Furthermore, in 2012, RCA heard testimony in which
the state energy policy was characterized as aspirational, thus
HB 78 is a reflection of that characterization.
10:57:43 AM
CO-CHAIR COLVER asked what the bill directs RCA to do, beyond
its current responsibilities.
MR. MITCHELL advised that some RCA rules are out of syncopation
with the Public Utility Regulatory Policies Act of 1978 (PURPA).
Further, although RCA narrowly addresses avoided cost, it does
nothing to address open access to transmission, equal costs, or
the nondiscriminatory aspects, and other aspects, of the state
energy policy. The bill transforms the state energy policy so
that RCA would be required to consider aspects of the state
energy policy, such as streamlining and making regulations more
equal and fair.
CO-CHAIR COLVER inquired as to the utilities' reporting
requirements, which affect their rate structure.
MR. MITCHELL said the bill asks utilities to produce and publish
avoided costs of generation; this is important so that proposed
energy projects can complete their prefeasibility studies and
compete against a known cost.
CO-CHAIR COLVER asked whether the reports are currently not made
public.
MR. MITCHELL acknowledged that some utilities publish an average
which may include the cost of hydroelectric power from a source
built 100 years ago, but do not publish the source and the cost
of each type of generation; an IPP needs to know the incremental
cost of diesel, for example.
11:00:43 AM
REPRESENTATIVE WOOL asked for the effect of avoided costs "on
the equation."
MR. MITCHELL recalled PURPA passed in 1978 and each state
implemented its version of PURPA. Prior to 1999, utility issues
were heard by the Alaska Public Utilities Commission (APUC) and
in 1982, APUC ruled that although incremental cost analysis was
appropriate, Alaska utilities were not sufficiently
sophisticated to calculate incremental costs. The ruling was to
be temporary. Therefore, although PURPA directs that the
utility displace the higher-cost source, usually oil, so an IPP
can compete with oil; if the costs are averaged, lower costs
from older power projects keep the avoided cost low. He noted
that the federal definition of avoided cost is an incremental
cost system, not an average cost system.
REPRESENTATIVE WOOL questioned whether having a transmission
company (TRANSCO) or an independent system operator (ISO)
dispatching energy over a robust transmission system would solve
grid access problems for IPPs.
MR. MITCHELL observed that HB 78 lays the ground rules of
nondiscrimination and equal treatment; however, a TRANSCO or ISO
would not solve problems without rules to follow. He pointed
out the great risk of an organization of utilities rule-making
without legislative direction, guidance, and principles.
CO-CHAIR VAZQUEZ requested that Mr. Mitchell summarize the
ground rules found within HB 78.
MR. MITCHELL summarized that all parties have an equal stake,
pay the same rate, are treated equally, have the same rules of
integration and interconnection, and have a voice in future
decision-making. Unlike the bylaws of the Alaska Railbelt
Cooperative Transmission & Electric Company (ARCTEC), these
rules ensure IPPs have a role and stability so they can get
private financing.
11:06:13 AM
CO-CHAIR COLVER opened public testimony on HB 78.
11:06:27 AM
SUZANNE GIBSON, Senior Director, Energy Development, expressed
the support of Cook Inlet Region Inc. (CIRI) for HB 7. Ms.
Gibson said the new legislation would facilitate the state's
energy policy goal to encourage renewable and alternative
generation. Her role at CIRI is to develop energy projects such
as Fire Island Wind, which has delivered renewable wind power to
Chugach Electric Association Inc., (CEA) since September, 2012.
Fire Island Wind has generated more than 120,000 megawatt hours
and substantially lowered the consumption of natural gas;
however, to develop projects, CIRI recognizes the need for the
cooperation of the purchasing utilities. In 2014, CIRI began
the second phase of the project; however, although power was
offered at a cost of 6.3 cents per kilowatt hour, no utilities
executed a power purchase agreement. Without a buyer, CIRI
considered proceeding as a qualifying facility (QF); however,
the regulatory framework was insufficient upon which to make
investment decisions. The proposed rules before RCA in Docket
R-13-002 are intended to clarify regulations on cogeneration,
small power production, and QFs, and may be met with more
resistance from utilities and attempts to "water down the
language." Even if PURPA regulations are adopted, additional
action is needed from the legislature; Docket R-13-002 does not
provide a framework for creating competitive wholesale
electricity and does not ensure access to the transmission
system by QFs and IPPs, but this can be accomplished by HB 78.
A clear legislative framework has been requested by IPPs and RCA
commissioners, and a lack of legislative rules regarding fair
consideration and nondiscriminatory open access transmission
service were the primary barriers preventing the successful
development of Fire Island Wind Phase 2. Ms. Gibson said her
experience led her to be an advocate for appropriate and
necessary changes so that Alaska can adopt practices implemented
by the energy utility industry across the U.S. In 2015, CIRI
planned to invest $50 million to add capacity to the wind
project, expand the diversity of fuel supply, provide economic
stimulus, cut carbon emissions, and move toward the state's
renewable energy goal; however, a lack of definitive rules
allows the utilities to reinforce their barriers to IPP
development. She provided the following examples: CEA's
existing tariff discriminates against IPPs because no IPP can
qualify to be an eligible customer without a process that takes
18 months; utilities have full discretion including penalties
for the use of generators, the capital cost of new equipment,
assumed losses of value from hydroelectric resources, additional
personnel costs, punitive natural gas price increases, and
uncertain transmission wheeling rates. Ms. Gibson closed,
saying the lack of rules is difficult for utilities and IPPs and
leads to repeated negotiations with certain utility executives.
11:14:40 AM
JOEL GROVES, Project Manager, Fishhook Renewable Energy,
informed the committee Fishhook Renewable Energy is developing a
run-of-river hydropower project in Hatcher Pass. Mr. Groves
said the experience of Fishhook Renewable Energy affirms that of
AIPPA and CIRI: The existing regulatory framework is hostile to
IPPs in Alaska. Since 2006, his company has suffered delays to
the project stemming from the existing regulatory framework.
Generally speaking, the management of the Matanuska Electric
Association (MEA) and CEA have been conducive to the development
of IPPs; however, management can change, thus the reforms in HB
78 are critical to moving Alaska's electrical sector toward a
more competitive framework and lower costs.
11:17:25 AM
TIM MCLEOD, President, Alaska Electric Light and Power Company
(AEL&P), said AEL&P is a utility that has served Juneau for over
120 years and is now a subsidiary of Avista Corp. Mr. McLeod
said HB 78 would raise the cost of energy in Alaska. He stated
that all of the power-generating units in Juneau were paid for
with private funds; in fact, AEL&P is an investor-owned utility
that owns Gold Creek, Annex Creek, Salmon Creek, and Lake
Dorothy projects, and has financial responsibility for the
Snettisham Hydroelectric Project which was built by the federal
government. He opined that throughout the state most of the
projects are being paid for through rates and private
investment. Mr. McLeod said AEL&P's corporate goals are:
provide reliable and safe electrical service from renewable
resources; provide among the lowest rates and maintain financial
integrity; use electrical resources efficiently. In addition,
AEL&P thrives on the well-being of its community. He pointed
out that AEL&P has the capability of becoming an IPP; however,
to do so would raise rates. Most other utilities in the state
have similar goals, and that is why they are opposed to the
proposed bill. The plans that utilities make in order to
provide low-cost power can be interrupted by existing
regulations; for example, a utility is required to buy power
from a QF and his understanding is that AEL&P's incremental cost
may be the cost of diesel generation. Mr. McLeod advised that
Inside Passage Electric Cooperative is in the process of
building a small hydroelectric project in Hoonah - by using
grant funds - built the facility for less than an IPP building
with private funds could have, and significantly lowered the
cost of energy. Mr. McLeod urged for the legislature to defer
to RCA, because it has the expertise to write policy for the
utilities to follow.
11:22:36 AM
MIKE CRAFT informed the committee he entered the energy market
in 2007 because his community was in decline. He questioned
whether any planning was done by the utilities then or now. He
referred to the letters of support and opposition to the bill
that are found in the committee packet, and noted that
opposition testimony by the utilities does not provide reasons,
justification, or an explanation of how the bill would raise
rates. He stated this is untrue; in fact, the more power he
sells to the utility, the lower the price becomes. When
competing with diesel, the cost is 37 cents per kilowatt hour
(kWh), with coal, the cost is 6.5 cents per kWh, making the
average cost 9.8 cents per kWh, and the cost comes down. On a
federal level, costs based on averages are illegal, and
camouflage the true cost of producing power across the state.
Mr. Craft said RCA asked for direction from the legislature
because it is a regulator and - as such - cannot act on policy
that has not passed out of the legislature. Returning to the
subject of time, and concerns that the bill is progressing
quickly, he stressed that the residents of Fairbanks are out of
time, and cannot wait one more year. He restated that the
Railbelt utilities do not engage in collective long-term
planning; however, IPPs have projects ready right now that will
bring the cost of power down and create jobs.
11:26:28 AM
JODIE MITCHELL, Chief Executive Officer/General Manager, Inside
Passage Electrical Cooperative (IPEC), urged the committee to
wait for RCA to decide on Docket R-13-002 because it is the
appropriate body to address the foregoing questions. The
utilities understand the time that is needed for RCA to issue
decisions. She advised that the high cost of power is due to
the size of the state and the lack of interconnection or
superhighways of transmission assets. Ms. Mitchell said HB 78
puts the burden of costs on the utilities which will be passed
along to consumers, and she cautioned against frivolous costs.
In her position, she hears many proposals for low-cost power
that are not working projects; however, if an IPP can truly
displace diesel she would purchase its power. The fixed rate of
return at IPEC is 4 percent or less, and she expressed her
belief that an IPP could not exist on a similar rate of return
and would have to prove its cost savings.
11:29:12 AM
CO-CHAIR COLVER stated HB 78 was [held over] with public
testimony open.
REPRESENTATIVE CLAMAN asked when the RCA report is expected.
CO-CHAIR VAZQUEZ advised RCA is discussing the issue on 2/25/15;
however, the report that is expected in June is very restrictive
in its scope; it is to consider whether an ISO is the most
efficient way to deal with Railbelt congestion, and may not
address the issues within HB 78.
HB 105-AIDEA: BONDS;PROGRAMS;LOANS;LNG PROJECT
11:30:28 AM
CO-CHAIR COLVER announced that the final order of business would
be HOUSE BILL NO. 105, "An Act relating to the programs and
bonds of the Alaska Industrial Development and Export Authority;
related to the financing authorization through the Alaska
Industrial Development and Export Authority of a liquefied
natural gas production plant and natural gas energy projects and
distribution systems in the state; amending and repealing bond
authorizations granted to the Alaska Industrial Development and
Export Authority; and providing for an effective date."
CO-CHAIR VAZQUEZ disclosed that her husband, Mark Davis, is an
employee of AIDEA.
11:31:06 AM
REPRESENTATIVE TILTON moved to adopt the proposed committee
substitute (CS) for HB 105, labeled 29-GH1019\W, Shutts,
2/23/15, as the working draft. There being no objection,
Version W was before the committee.
CO-CHAIR COLVER directed attention to the change to HB 105 in
[Version W] as follows:
On page 4, line 21, after "terminal"
Delete: "The terminal may be located anywhere
within Cook Inlet"
Insert: "to be located at Point MacKenzie"
CO-CHAIR COLVER explained this change reauthorizes $50 million
[of bonding] authority to AIDEA for a port facility to be
located at Point MacKenzie, and noted that AIDEA seeks to have
legislative reauthorization within five years of a project.
Other changes in [Version W] are as follows:
On page 5, line 1, after "infrastructure"
Delete: "on the North Slope"
Insert: "in the state that will provide natural
gas to Interior Alaska"
On page 5, line 3, after "distribution"
Delete: "system"
Insert: "systems"
On page 5, line 3, after "infrastructure"
Delete: "in"
Insert: "that will provide natural gas to"
CO-CHAIR COLVER said these changes relate to the bill's previous
authorization for a project sited on the North Slope. The new
language changes the intent of the bill to deliver energy to the
Interior.
11:33:32 AM
REPRESENTATIVE TILTON moved to adopt Amendment 1 as follows:
On page 4, line 20, before "equipment"
Delete: "loading and conveyer"
There being no objection, it was so ordered.
11:34:51 AM
REPRESENTATIVE CLAMAN moved to adopt Amendment 2 as follows:
On page 4, line 19, after "and"
Delete: "related"
There being no objection, it was so ordered.
REPRESENTATIVE CLAMAN expressed his understanding that HB 105
provides direction consistent with the intent of the governor
related to AIDEA's investment in projects.
11:35:43 AM
FRED PARADY, Acting Commissioner, Department of Commerce,
Community & Economic Development, said yes; specifically the
bill is needed to authorize the consideration of natural gas
sourced from areas not located on the North Slope for the
Interior Energy Project.
CO-CHAIR COLVER pointed out there are private sector proposals
for liquefied natural gas (LNG) facilities at Point MacKenzie.
The intent of the rail spur to the port at Point MacKenzie is to
move products more competitively, as requested by the Matanuska-
Susitna (Mat-Su) Borough, but not to compete with the Port of
Anchorage because that port is situated to cargo and container
shipping.
CO-CHAIR VAZQUEZ advised HB 105 increases AIDEA's bonding
authority from $6 million to $10 million in section 1, from $10
million to $25 million in section 2, and from $20 million to $25
million in section 3.
CO-CHAIR COLVER said his constituents in Delta Junction are
looking for leadership on providing affordable energy to the
Interior which would strengthen the regional economy and support
military installations. He expressed his hope that providing
affordable energy to Alaskans becomes a common goal.
REPRESENTATIVE WOOL agreed.
11:39:30 AM
The committee took an at ease from 11:39 a.m. to 11:41 a.m.
11:41:27 AM
REPRESENTATIVE TILTON moved to report CSHB 105, Version 29-
GH1019\W, Shutts, 2/23/15, as amended, with individual
recommendations and the accompanying zero fiscal note. There
being no objection, CSHB 105(ENE) was reported out of the House
Special Committee on Energy.
11:41:52 AM
The committee took an at ease from 11:41 a.m. to 11:45 a.m.
11:46:42 AM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Energy meeting was adjourned at 11:46 a.m.