02/26/2015 10:15 AM House ENERGY
| Audio | Topic |
|---|---|
| Start | |
| Presentation: Alaska Housing Finance Corporation | |
| HB58 | |
| HB78 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 58 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 78 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ENERGY
February 26, 2015
10:20 a.m.
MEMBERS PRESENT
Representative Jim Colver, Co-Chair
Representative Liz Vazquez, Co-Chair
Representative David Talerico
Representative Cathy Tilton
Representative Matt Claman
Representative Adam Wool
MEMBERS ABSENT
Representative Benjamin Nageak
COMMITTEE CALENDAR
PRESENTATION: ALASKA HOUSING FINANCE CORPORATION
- HEARD
HOUSE BILL NO. 58
"An Act making an entity that is exempt from federal taxation
under 26 U.S.C. 501(c)(3) (Internal Revenue Code) and a
federally recognized tribe eligible for a loan from the Alaska
energy efficiency revolving loan fund; and relating to loans
from the Alaska energy efficiency revolving loan fund."
- HEARD & HELD
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
PREVIOUS COMMITTEE ACTION
BILL: HB 58
SHORT TITLE: ELIGIBILITY FOR AK ENERGY EFFIC LOANS
SPONSOR(s): REPRESENTATIVE(s) KREISS-TOMKINS, MILLETT
01/21/15 (H) PREFILE RELEASED 1/16/15
01/21/15 (H) READ THE FIRST TIME - REFERRALS
01/21/15 (H) ENE, L&C, FIN
02/10/15 (H) ENE AT 10:15 AM CAPITOL 17
02/10/15 (H) Heard & Held
02/10/15 (H) MINUTE(ENE)
02/26/15 (H) ENE AT 10:15 AM CAPITOL 17
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
02/24/15 (H) Heard & Held
02/24/15 (H) MINUTE(ENE)
02/26/15 (H) ENE AT 10:15 AM CAPITOL 17
WITNESS REGISTER
JOHN ANDERSON, Director
Division of Research and Rural Development
Alaska Housing Finance Corporation
Department of Revenue
Anchorage, Alaska
POSITION STATEMENT: Directed the committee's attention to
documents provided in the committee packet related to a previous
hearing.
REPRESENTATIVE JONATHAN KREISS-TOMKINS
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Speaking as the sponsor, described the
changes made by the committee substitute for HB 58, labeled 29-
LS0254\H, Nauman, 1/27/15.
MIGUEL RORHBACHER, Staff
Representative Jonathan Kreiss-Tomkins
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: During the hearing on HB 58, on behalf of
Representative Kreiss-Tomkins, sponsor, explained the meaning of
various nonprofit tax codes.
JOHN ANDERSON, Director
Division of Research and Rural Development
Alaska Housing Finance Corporation
Department of Revenue
Anchorage, Alaska
POSITION STATEMENT: During the hearing on HB 58, answered
questions and stated that Alaska Housing Finance Corporation had
no position on the bill.
CHRIS ROSE, Executive Director
Renewable Energy Alaska Project
Anchorage, Alaska
POSITION STATEMENT: During the hearing on HB 58, testified in
support of the bill.
JOEL NEIMEYER, Federal Co-Chair
Denali Commission
Anchorage, Alaska
POSITION STATEMENT: During the hearing on HB 58, testified in
support of the bill.
DANIEL POWERS, Coordinator
Fairbanks Nonprofit Retrofit Pilot
Cold Climate Housing Research Center
Fairbanks, Alaska
POSITION STATEMENT: During the hearing on HB 58, testified in
support of the bill.
DAVE MESSIER, Rural Energy Coordinator
Tanana Chiefs Conference
Fairbanks, Alaska
POSITION STATEMENT: During the hearing on HB 58, testified in
support of the bill.
JAMES BERTRAND, Law Partner
Stinson Leonard Street
Minneapolis, Minnesota
POSITION STATEMENT: During the hearing on HB 78, testified on
behalf of Chugach Electric Cooperative, Inc.
CAROLYN ELEFANT, Owner
Law Office of Carolyn Elefant
Washington, D.C.
POSITION STATEMENT: During the hearing on HB 78, testified on
behalf of the Alaska Independent Power Producers Association.
ACTION NARRATIVE
10:20:48 AM
CO-CHAIR LIZ VAZQUEZ called the House Special Committee on
Energy meeting to order at 10:20 a.m. Representatives Claman,
Talerico, Colver, Tilton, and Vazquez were present at the call
to order. Representative Wool arrived as the meeting was in
progress.
^PRESENTATION: ALASKA HOUSING FINANCE CORPORATION
PRESENTATION: ALASKA HOUSING FINANCE CORPORATION
10:22:07 AM
CO-CHAIR VAZQUEZ announced that the first order of business
would be an update of the report presented by the Alaska Housing
Finance Corporation on 1/27/15.
10:22:21 AM
JOHN ANDERSON, Director, Division of Research and Rural
Development, Alaska Housing Finance Corporation (AHFC),
Department of Revenue (DOR), in order to provide an update to
the presentation on 1/27/15, directed the committee's attention
to the following documents provided in the committee packet:
public facility loan program guide; a white paper on public
facilities; an executive summary on the 2014 Alaska housing
assessment study; AHFC Rebate and Weatherization Waitlists;
budgetary summary of programs; responses to questions.
10:23:54 AM
The committee took an at ease from 10:23 a.m. to 10:25 a.m.
10:25:09 AM
CO-CHAIR VAZQUEZ postponed the update until later in the
meeting.
[During the hearing on HB 58, Mr. Anderson answered questions.
There was no further testimony from AHFC.]
HB 58-ELIGIBILITY FOR AK ENERGY EFFIC LOANS
10:25:37 AM
CO-CHAIR VAZQUEZ announced that the next order of business would
be HOUSE BILL NO. 58, "An Act making an entity that is exempt
from federal taxation under 26 U.S.C. 501(c)(3) (Internal
Revenue Code) and a federally recognized tribe eligible for a
loan from the Alaska energy efficiency revolving loan fund; and
relating to loans from the Alaska energy efficiency revolving
loan fund."
[Before the committee was the committee substitute (CS) for HB
58, labeled 29-LS0254\H, Nauman, 1/27/15, which was adopted by
the committee on 2/24/15.]
10:26:09 AM
REPRESENTATIVE JONATHAN KREISS-TOMKINS, Alaska State
Legislature, sponsor of HB 58, informed the committee the
substantive change between HB 58 and the committee substitute
for HB 58, [29-LS0254\H, Nauman, 1/27/15], was the inclusion of
additional nonprofit entities such as the Veterans of Foreign
Wars (VFW) and American Legion organizations, which qualify for
a separate tax-exempt status.
10:27:13 AM
The committee took a brief at ease.
10:28:15 AM
REPRESENTATIVE KREISS-TOMKINS clarified that before the
committee was the CS for HB 58, Version H.
CO-CHAIR VAZQUEZ asked for a page-by-page explanation of the
changes to the bill.
REPRESENTATIVE KREISS-TOMKINS directed attention to Version H on
page 4, lines 17-18, which read:
(3) "tax-exempt entity" means an entity designated as
tax exempt under 26U.S.C.501(c)(3),(4),(6),(12), or
(19)(Internal Revenue Code).
REPRESENTATIVE KREISS-TOMKINS explained that there are different
kinds of nonprofits under tax code 501(c)(3). In further
response to Co-Chair Vazquez, he said the CS includes additional
nonprofit tax exempt entities such as those that qualify under
501(c)(19).
CO-CHAIR VAZQUEZ asked how the tax code differs.
10:30:39 AM
MIGUEL RORHBACHER, Staff, Representative Jonathan Kreiss-
Tomkins, Alaska State Legislature, speaking on behalf of
Representative Kreiss-Tomkins, sponsor of HB 58, informed the
committee that examples of nonprofits are as follows: (c)(3) -
United Way and food banks; (c)(4) - League of Women Voters and
community softball leagues; (c)(6) - business organizations and
chambers of commerce; (c)(12) - utility and agricultural
cooperatives; (c)(19) - veteran's services.
10:33:03 AM
JOHN ANDERSON, Director, Division of Research and Rural
Development, Alaska Housing Finance Corporation (AHFC),
Department of Revenue (DOR), said he was available for questions
and Alaska Housing Finance Corporation had no position on the
bill.
CO-CHAIR VAZQUEZ asked whether HB 58 would have an impact on the
[Alaska energy efficiency revolving loan program (AEERLP),
Alaska Energy Authority, (AEA), Department of Commerce,
Community & Economic Development (DCCED].
MR. ANDERSON was unsure. There could be an increase of activity
but that is unknown at this time. Alaska Housing Finance
Corporation outreach related to the energy efficiency revolving
loan fund program (AEERLP) has involved many of the nonprofit
entities identified by the proposed legislation. In further
response to Co-Chair Vazquez, he said the program is
administered by AHFC, and the last loan approved was to the
Department of Transportation & Public Facilities (DOT&PF) in the
amount of $3.7 million, at 3.6 percent interest for a 15-year
term.
10:35:17 AM
REPRESENTATIVE TILTON surmised the bill extends eligibility to
some tribal entities, and the CS adds other nonprofits, but
there are no eligible entities that have been awarded funds at
this time.
REPRESENTATIVE KREISS-TOMKINS said the fund has been
underutilized to date.
REPRESENTATIVE TILTON observed that the fund has not been used -
perhaps because grants have been available - and asked if the
fund may not be necessary. She said, "Do you have kind of an
idea ... how many different entities would be, this would be
able to open it up for?"
MR. ANDERSON pointed out that the fund is not "sitting there."
Senate Bill 220 [passed in the 26th Alaska State Legislature]
provided AHFC the authority to bond for $250 million. In fact,
AHFC intends to identify a group of projects and then apply for
bonding. In further response to Representative Tilton, he said
the interest rates are determined through a market-driven
process and AHFC strives to make the best use of the program.
REPRESENTATIVE TILTON asked whether other funds are available to
nonprofit entities for energy efficiency.
MR. ANDERSON said AHFC was not aware of any other financing
mechanisms within state agencies.
10:39:49 AM
REPRESENTATIVE WOOL asked how the program differs from the
[Alaska Housing Finance Corporation (AHFC) homeowner
weatherization and energy efficiency programs].
MR. ANDERSON advised that residential energy efficient retrofits
are simple when compared to commercial projects. Superficially,
the two programs are similar in concept in that an audit is
done, the improvements are made, and a post-audit shows the
increase in energy efficiency; however, commercial buildings are
more in-depth. In further response to Representative Wool, he
affirmed that the program is intended for public facilities or
commercial operations of any size.
REPRESENTATIVE TILTON asked for an example of a project.
REPRESENTATIVE KREISS-TOMKINS said examples in Fairbanks would
be provided.
CO-CHAIR VAZQUEZ inquired as to pending applications.
10:42:43 AM
MR. ANDERSON said about six applications are in the technical
review process. In further response to Co-Chair Vazquez, he
advised that over the past two years AHFC has provided many
presentations to organizations such as Rotary International, the
Alaska Municipal League, the Institute of Architects, Renewable
Energy Alaska Project, and the Alaska Association of Facility
Administrators. In fact, a large energy efficiency conference
in Anchorage is upcoming that will reach many other
organizations. Although AHFC has no operating funds for the
program, presentation requests are fulfilled by staff, including
contacts with DOT&PF, and the Department of Education and Early
Development (EED).
CO-CHAIR VAZQUEZ asked for an example of the kind of project
that can be financed through the loan program.
MR. ANDERSON noted that the loan program could replace
fluorescent lights with LEDs, replace old boilers with energy-
efficient boilers, remove windows, add insulation, and install
better heating and ventilation systems.
REPRESENTATIVE TILTON asked whether the bill would extend the
loan program to for-profit tribal entities.
REPRESENTATIVE KREISS-TOMKINS expressed his belief that the bill
would do so. He directed attention to page 4, lines 15-16,
which read:
(B) includes a subdivision, subsidiary, or business
enterprise wholly owned by a federally recognized
tribe;
REPRESENTATIVE KREISS-TOMKINS said he would accept an amendment
to exempt business enterprises and limit loan qualification to
the service-delivery entities which make up 98 percent of tribal
activity in Alaska. In response to Co-Chair Vazquez, he said
the bill has a zero fiscal note.
10:48:01 AM
REPRESENTATIVE TALERICO asked whether the sponsor would object
to "a sunset on the eligibility for the nonprofits and tribal
entities."
REPRESENTATIVE KREISS-TOMKINS said he would welcome such an
amendment. He assured the committee the intent of the proposed
legislation was to help public facilities above nonprofits, thus
another possible amendment would be to create a prioritization
so AHFC satisfies the needs of public facilities first. This
may be a different way to accomplish a sunset, or both concepts
may be included in a future CS.
REPRESENTATIVE TALERICO asked the sponsor to provide the
aforementioned concepts to the committee.
REPRESENTATIVE KREISS-TOMKINS agreed.
[The committee treated public comment as open on HB 58.]
10:51:15 AM
CHRIS ROSE, Executive Director, Renewable Energy Alaska Project
(REAP), informed the committee REAP is a coalition of over 80
organizations across the state including electric utilities,
Native corporations, independent power producers (IPPs),
developers, businesses, and non-governmental organizations
(NGOs). He said REAP was very interested in the loan fund when
it was established in 2010. Through [Senate Bill 220, passed in
the 26th Alaska State Legislature], the state mandated that a
certain percentage of the state's public buildings are to be
retrofitted by 2020. Mr. Rose said this is a very important
issue for the state given its current economic situation. He
recalled an AHFC white paper published 10/29/12, entitled,
"Energy Use in Alaska's Public Facilities," which indicated over
5,000 public buildings could be improved by the current loan
program, but unfortunately, no loans have been executed. He
suggested that some potential applicants are waiting for grants,
but said, "Those days are certainly over, at least for now."
Potential applicants should be encouraged because AHFC estimated
the state spends $642 million annually on energy, which is close
to 10 percent of the state's operating budget. A 20 percent
savings is possible, after a retrofit of all of the buildings,
and $125 million could be saved every year. Alaska Renewable
Energy Project supports the expansion of the program so that
qualified entities and tribal organizations may "get some of
these loans executed." Another action that may encourage the
use of the program would be for EED to make it easier for school
districts to participate. In conclusion, REAP supports the
expansion of the program, energy efficiency, and saving money.
CO-CHAIR VAZQUEZ said she had made the acting commissioner of
the Department of Administration aware of the program and asked
Mr. Rose to provide him with further information.
10:55:30 AM
JOEL NEIMEYER, Federal Co-Chair, Denali Commission, informed the
committee the Denali Commission, the Rasmuson Foundation, and
the Cold Climate Housing Research Center (CCHRC), have embarked
on a pilot effort in Fairbanks in order to demonstrate the
validity of energy audits followed by a loan program. The
intent is to move the program to rural Alaska, where energy
costs are very high. The Denali Commission regards the loan
program as a potential tool for rural Alaska and supports
expanding the number of eligible applicants. Mr. Neimeyer said
work done on a community scale is more efficient as contracts
for the energy audits, the construction of improvements, and the
post-construction monitoring would be bundled. The program is
an important tool for rural and urban Alaska.
10:57:42 AM
DANIEL POWERS, Coordinator, Fairbanks Nonprofit Retrofit Pilot,
CCHRC, informed the committee he is working on the Fairbanks
Nonprofit Retrofit Pilot project, one of the principles of which
is that Alaska is stronger when nonprofits and tribal
organizations spend less money on energy. The project is trying
to solve the statewide issue of energy efficiency for nonprofits
and has fourteen nonprofit and tribal participants that are
getting energy audits, having initial meetings with contractors,
studying the technical documents, and developing five-year plans
and strategies for building owners, whenever possible. He said
the expansion of the loan program offers advantages such as
reduced requests for capital from nonprofits and tribal
organizations, changes in the grant-based culture for energy
efficiency projects, and reduced operating costs for nonprofits
and tribal organizations. The project is collecting information
from each participant about barriers to lending, and the
barriers seen by auditors and funders. The bill expands state
resources to the organizations that provide essential services
to citizens. Mr. Powers stated his support for HB 58.
11:01:36 AM
REPRESENTATIVE WOOL asked for the status of the projects.
MR. POWERS answered that the audits were completed last year and
quotes from contractors are being collected. The Fairbanks
Resource Agency office building is completed with boilers
installed and energy monitoring in place. Using a loan, the
agency installed energy efficient boilers and smart pumps to
reduce its electrical load. Other recommendations include
adding insulation and extending a hot water line to an adjacent
property to save energy and cost. Out of the fourteen
nonprofits, about seven nonprofits are still in the decision-
making process to determine if they can accept the payback
schedule and follow the recommendations of the audit. He said
he expected a busy construction season to complete the projects
that have financing through the Denali Commission and Rasmuson
Foundation. In further response to Representative Wool, he said
he did not have sufficient information to support the estimate
of 20 percent savings made by a previous speaker because each
building and audit are different; also, there is the question
of whether nonprofits can afford to make improvements that are
paid back from the cash flow of energy savings. The pilot
project was tasked to find the point of economy for the retrofit
marketplace so as not to overinvest.
11:06:54 AM
DAVE MESSIER, Rural Energy Coordinator, Tanana Chiefs Conference
(TCC), informed the committee TCC is a nonprofit tribal
consortium that works with 42 federally recognized tribes in the
Interior. He said he is in strong support of the modifications
to the Alaska energy efficiency revolving loan fund proposed in
HB 58. The electricity rates in the region are high and energy
efficiency projects have saved school districts, clinics,
tribes, and cities tens of thousands of dollars in energy costs.
Expanding access to the program would assure entities have
access to funding for retrofitting facilities in rural Alaska,
Fairbanks, and across the state. The Tanana Chiefs Conference
is a nonprofit that would benefit from the proposed legislation
in that it operates more than 200,000 square feet of clinic and
office space in Fairbanks, and it supports any legislation that
makes energy efficiency funding easier to access for nonprofits.
Spending money wisely for energy means money can be used to
better serve Alaskans who are in need of help. Mr. Messier
added that from his experience in the energy field, he knows
that technology change takes time and successful projects will
lead to more success.
CO-CHAIR VAZQUEZ stated her concerns about whether there is
sufficient staffing to administer the program and if there are
safeguards to minimize loan defaults.
11:11:44 AM
REPRESENTATIVE KREISS-TOMKINS reviewed the committee's
suggestions for a new proposed CS: create a structure that
guarantees public facilities have first priority access to the
revolving loan fund; clarify the line between for-profit tribal
enterprises and nonprofit tribal organizations that deliver
services to Alaskans; default safeguards; address the staffing
issue.
CO-CHAIR VAZQUEZ closed public testimony on HB 58.
HB 58 was held over.
11:13:17 AM
The committee took an at ease from 11:13 a.m. to 11:20 a.m.
HB 78-REGULATORY COMMISSION OF ALASKA
11:20:50 AM
CO-CHAIR VAZQUEZ 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."
11:21:47 AM
JAMES BERTRAND, Law Partner, Stinson Leonard Street, informed
the committee he is also the co-chair of the Energy Division at
the law firm of Stinson Leonard Street, and his testimony was on
behalf of Chugach Electric Association, Inc. (CEA), an
electrical cooperative in Anchorage. He provided brief
background information on his experience in electrical energy
issues, including the restructuring of transmission systems and
the impacts of universal system operators (USOs) and independent
system operators (ISOs) on utilities and independent power
producers (IPPs). Mr. Bertrand stated he is familiar with the
proposed regulations under consideration by the Regulatory
Commission of Alaska (RCA) to bring Alaska regulations into
compliance with the federal structure, and offered to answer
questions in this regard.
11:24:54 AM
CAROLYN ELEFANT, Owner, Law Office of Carolyn Elefant, speaking
on behalf of the Alaska Independent Power Association (AIPPA),
informed the committee her firm focuses on energy regulatory
issues. She provided a brief background of her experience
working at the Federal Energy Regulatory Commission (FERC) in
the field of the regulation of transmission and wholesale power
sales for utilities that are connected to the interstate grid.
Ms. Elefant stated that the Public Utility Regulatory Policies
Act (PURPA) and the emergence of open access transmission have
transformed the electric utility industry. In fact, in the
Lower 48, a trend is to move to a further modernization of the
utility industry which includes power supplied by IPPs and self-
generation through net metering. She said she has been involved
with regulatory proceedings before RCA related to its
implementation of PURPA. Regarding the proposed legislation,
Ms. Elefant said the changes she has observed in the electric
industry in the Lower 48, resulting from PURPA and open access
transmission policies, differ somewhat from Alaska where there
is a harsh climate and rural and remote communities; however,
Alaskan ratepayers pay some of the highest electricity rates, in
spite of Alaska's sources of power such as wind, hydropower,
marine hydrokinetic and solar. She opined that marketing the
state's alternative power sources would reduce rates, diversify
power supply, and foster competition. Furthermore, competitive
energy markets would attract financing for new technologies, and
competition depends on the availability of access, opportunities
for IPPs and non-utility generators, and transparency.
11:29:38 AM
MS. ELEFANT continued to explain that in the Lower 48, PURPA
opened competition by requiring utilities to purchase power from
smaller non-utility generators - which are known as qualifying
facilities (QFs) - at the same price as power from another
utility, or as self-generated power. This price is known as the
avoided cost. The two goals of PURPA are: to stimulate
competition and to be ratepayer neutral. For example, using
avoided cost ensures that ratepayers are not paying any more for
power than if the utility generated the power. In addition,
PURPA addressed the question of open access to transmission by
implementing regulations directing states to develop robust
interconnection policies to ensure QFs have access to
interconnection. Ms. Elefant stressed that PURPA also fosters
private investment, thus projects must be economically feasible,
and to this end, a utility is required to provide information on
its avoided cost for the perusal of IPPs. In 35 years PURPA has
had some opposition; however, after some changes were made in
2005, PURPA continues to apply in areas where there is no
competitive market, such as Alaska. In addition, other laws
apply in Alaska that provide open access to the grid for IPPs;
FERC regulates the nation's transmission grid, and in 1996
issued Order No. 888 which required all utilities to provide
open access to their transmission lines on a non-discriminatory
basis. Federal Energy Regulatory Commission Order No. 888 was a
landmark order and as a result robust power markets have evolved
along with new technologies and economic development.
MS. ELEFANT observed that the proposed legislation would have
Alaska enjoy the benefits of competition and the characteristics
of access, opportunity, and transparency that have benefitted
other jurisdictions. The bill provides: opportunity by
ensuring IPPs can sell power into the grid; non-discriminatory
access to transmission; transparency on avoided,
interconnection, and integration costs. She concluded that the
proposed legislation would promote competition and diversity,
and lower rates for consumers.
11:37:25 AM
CO-CHAIR COLVER asked for the differences between Alaska's
transmission systems and those of the Lower 48
MS. ELEFANT answered that in the Lower 48, transmission is
regulated on the federal level because there is interstate
interconnection; however, distribution systems are regulated by
the states. In Alaska, the state has full control from
transmission to the user. In parts of the Lower 48, there are
problems with power congestion, which must be managed in an
equitable manner.
REPRESENTATIVE CLAMAN asked for a description of the differences
between HB 78 and PURPA.
MS. ELEFANT explained that HB 78, along with regulatory changes,
would bring Alaska in alignment with PURPA. The bill does not
replace PURPA, but ensures compliance with components of PURPA;
for example, HB 78 requires utilities to make their avoided cost
available to IPPs and their investors for competitive purposes.
Regarding interconnection, PURPA recognizes the importance of
non-discriminatory interconnection and integration costs, as
does HB 78, although HB 78 goes further regarding integration
costs. In addition, HB 78 gives QFs access to transmission,
which differs slightly from PURPA.
11:42:53 AM
REPRESENTATIVE CLAMAN recalled hearing that Alaska may be sued
for noncompliance, but PURPA has been in effect for 35 years and
there has been no lawsuit against Alaska. Alaska does not have
an interstate commerce issue, and is quite a distance from the
Lower 48.
MS. ELEFANT clarified that PURPA does apply to states and
territories that are not interconnected to the grid such as
Alaska, Hawaii, Texas, Puerto Rico, and the Virgin Islands.
Alaska is exempt from some of the federal requirements like open
access because the source of Order No. 888 is found in the
Federal Power Act and it applies to interstate transactions.
She remarked:
The fact that Alaska is not regulated under the
Federal Power Act, I don't think would enable it to
make a case ... for not being subject to PURPA. But
that said, certainly a lawsuit or an enforcement
action is, is a very extreme step. ... Parties will go
to FERC and they will say to FERC, 'Hey, this state
isn't complying with PURPA ...' and FERC will issue a
ruling ... and then FERC has the option of actually
bringing the suit in federal court.
MS. ELEFANT advised that FERC has brought action once under
unusual circumstances, and lawsuits happen infrequently.
11:46:28 AM
REPRESENTATIVE CLAMAN surmised the risk of a lawsuit is
unlikely.
MS. ELEFANT said yes.
CO-CHAIR VAZQUEZ asked for an explanation of avoided cost.
MS. ELEFANT said a utility supplies power by self-generation or
by buying power from another utility. Under PURPA, if a utility
buys power from an IPP QF, the utility is "avoiding" the cost of
paying the other utility or of producing power. The purpose is
to ensure ratepayer neutrality whether power comes from a QF or
is self-generated. In further response to Co-Chair Vazquez, she
said transparency means the information on what a utility pays
to self-generate power is made public. With this information, a
QF can evaluate whether a project is economically feasible.
CO-CHAIR VAZQUEZ asked about integration cost.
MS. ELEFANT said integration costs are the costs incurred when
introducing power into the system; for example, an intermittent
power source, such as wind, may require payment to keep a back-
up generator on standby service.
CO-CHAIR VAZQUEZ asked how HB 78 adds transparency to
integration costs.
11:53:50 AM
REPRESENTATIVE TAMMIE WILSON, Alaska State Legislature, sponsor
of HB 78, informed the committee a local attorney was available
to answer questions on Alaska issues.
REPRESENTATIVE WOOL surmised that PURPA is a set of federal
regulations and FERC is the agency that enforces the
regulations.
MS. ELEFANT stated that PURPA is a federal law that encourages
federal and state cooperation. The Federal Energy Regulatory
Commission put in place regulations that set federal parameters
for PURPA; for example, FERC has a regulation that reinforces
that utilities have to pay avoided cost, but each state is
responsible for implementing its own PURPA programs. In fact,
if there is a contract between a utility and a QF, the state,
but not FERC, would look at the contract. A state can adopt
regulations to implement PURPA as long as the regulations are
consistent with the parameters set by FERC.
REPRESENTATIVE WOOL expressed his understanding that FERC is a
federal regulatory agency, but because Alaska is not connected
to the Lower 48, its regulations don't apply.
MS. ELEFANT said there are two main categories that FERC
administers. The first is the Federal Power Act, which gives
FERC authority over power transactions on the interstate grid,
and which does not apply to Alaska and Hawaii. The second
category, those regulated by PURPA, do apply to Alaska and
Hawaii by direction from Congress.
11:58:32 AM
REPRESENTATIVE WOOL then asked whether FERC determines whether
there is congestion, and no further power is needed for a
certain area.
MS. ELEFANT said FERC would not manage the aforementioned issue
in Alaska. In the Lower 48, some areas are governed by a
regional transmission organization (RTO); on the other hand, in
Idaho, or parts of the country without RTOs, the utilities make
these decisions.
12:01:09 PM
CO-CHAIR VAZQUEZ said public testimony on HB 78 remained open.
HB 78 was held over.
12:01:54 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Energy meeting was adjourned at 12:01 p.m.
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