Legislature(2019 - 2020)CAPITOL 17
05/09/2019 08:30 AM House ENERGY
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| HB151 | |
| Adjourn |
* first hearing in first committee of referral
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| *+ | HB 151 | TELECONFERENCED | |
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ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ENERGY
May 9, 2019
1:04 p.m.
MEMBERS PRESENT
Representative Grier Hopkins, Chair
Representative Ivy Spohnholz, Vice Chair
Representative John Lincoln
Representative George Rauscher
MEMBERS ABSENT
Representative Zack Fields
Representative Tiffany Zulkosky
Representative Lance Pruitt
COMMITTEE CALENDAR
HOUSE BILL NO. 151
"An Act relating to the regulation of electric utilities and
electric reliability organizations; and providing for an
effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 151
SHORT TITLE: ELECTRIC RELIABILITY ORGANIZATIONS
SPONSOR(s): ENERGY
05/03/19 (H) READ THE FIRST TIME - REFERRALS
05/03/19 (H) ENE, RES
05/09/19 (H) ENE AT 8:30 AM CAPITOL 17
WITNESS REGISTER
JOE G. HARDENBROOK, Staff
Representative Grier Hopkins
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 151 on behalf of the House
Special Committee on Energy, sponsor, on which Representative
Grier serves as chair.
ROBERT PICKETT, Commissioner
Regulatory Commission of Alaska (RCA)
Department of Commerce, Community & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 151.
ACTION NARRATIVE
1:04:24 PMS
CHAIR GRIER HOPKINS called the House Special Committee on Energy
meeting to order at 1:04 p.m. Representatives Lincoln,
Rauscher, Spohnholz, and Hopkins were present at the call to
order.
HB 151-ELECTRIC RELIABILITY ORGANIZATIONS
1:05:07 PM
CHAIR HOPKINS announced that the only order of business would be
HOUSE BILL NO. 151, "An Act relating to the regulation of
electric utilities and electric reliability organizations; and
providing for an effective date."
CHAIR HOPKINS passed the gavel to Vice Chair Spohnholz.
1:05:41 PM
The committee took a brief at-ease.
1:06:38 PM
CHAIR HOPKINS paraphrased from a written statement, which read
as follows [original punctuation provided]:
Madame Chair thank you for the opportunity to
present HB 151 to the committee today. In 2014, the
Alaska Legislature provided the Regulatory Commission
of Alaska a grant of $250,000 and a request that the
commission determine "whether creating an independent
system operator or similar structure for electric
utilities in the railbelt area is the best option for
effective and efficient electrical transmission."
This legislative appropriation and request has
resulted in almost five years of consistent effort by
the Regulatory Commission and Railbelt utilities to
examine this technically complex issue. Inherent to
these discussions on cooperation, sharing of resources
and economies of scale are political, regional and
parochial interests and considerations. A review of
the comments submitted to the RCA [Regulatory
Commission of Alaska] abundantly illustrate the wide
cooperation and concerns - of utilities, ratepayer
groups, non-profits and local governments during this
process.
The efforts of the RCA have resulted in voluminous
records of hearings, public comment and shared data.
The process undertaken by the RCA has resulted in
increased cooperation amongst the utilities of the
Railbelt, better information sharing between the RCA
and the utilities, and an understanding that the RCA
may lack adequate authority under existing statutes to
create and/or regulate an independent system operator
for the railbelt.
To this end, the RCA drafted suggested legislative
language in March of this year and requested that
interested parties submit comments and suggested
revisions. The legislation that we are considering
today is the legislative manifestation of those
efforts. As chair of this committee, I asked
Legislative Legal Services to craft legislation based
upon the suggested legislative language upon which the
RCA has been receiving public comments. It was our
goal that this bill mirror as closely as possible the
intent of the legislative language drafted by the RCA,
and use the bill as a vehicle to examine, explore and
gain a greater understanding of this complex issue.
If events in the near future demonstrate that the
RCA's proposed legislative language is a necessary
tool to bring about increased efficiency, cooperation
and cost-savings for the railbelt utilities and
consumers, this legislation can be a vehicle to grant
the RCA new authority to regulate and, if necessary
create an entity to accomplish these goals.
I'd like to thank the commissioners of the RCA, their
staff and the personnel at the Department of Commerce,
Community and Economic Development for their
assistance in bringing this bill before us.
Additionally, the railbelt utilities have demonstrated
an increasing willingness to cooperate with each other
both through the data sharing that has been a part
of the RCA's process to date and through real and
documented advances in joint planning, pooling and
resource sharing. These efforts are laudable and
should be recognized.
All these things said, there is a challenging road
ahead for bringing about greater efficiency and
cooperation among railbelt utilities. Should
voluntary measures towards that end continue to
flounder, this legislation will be primed and ready to
allow the RCA to advance Alaska towards that goal.
At this point, I'll hand the presentation over to Mr.
Hardenbrook, aide to the committee, to discuss the
components of the bill. Thank you, Madame Chair.
1:11:26 PM
JOE G. HARDENBROOK, Staff, Representative Grier Hopkins, Alaska
State Legislature, on behalf of the House Special Committee on
Energy, sponsor, presented HB 151. He paraphrased written
information, which read as follows [original punctuation
provided]:
Madame Chair thank you for the opportunity to
present HB 151 to the committee today. As
Representative Hopkins mentioned earlier, this
legislation has come before us due to the efforts of
the RCA in addressing a question posed by the
legislature in 2014. Following this overview,
Commissioner Pickett of the RCA will be available to
discuss at greater lengths the RCA's process,
timeline, recommendations and findings over the years
that they have examined this issue. Additionally, we
have online today Sandon Fisher of the Legislative
Legal Agency to answer questions from the committee.
I'd like to take a moment to go through the back up
material we've provided to the committee for their
edification on this topic.
The first item is a letter dated June 30, 2015 from
Commissioner Pickett in his capacity as Chair of the
RCA sent to then-Speaker Chenault and then-President
Meyer detailing the RCA's findings and recommendations
in response to the legislature's question on the
advisability of creating an independent system
operator or similar structure for the Railbelt. The
letter notes that for over 40 years, concerns about
the "fragmented, balkanized and often contentious
Railbelt utilities have been raised numerous times,"
and that over $1.5 billion had been invested in new
generation in the five-year span from 2010 to 2015
an unprecedented level of investment. The letter goes
on to state "To realize the maximum benefit from this
investment, the Railbelt electrical transmission
system and generation must be operated in the most
effective and efficient manner possible. The key
question is: does the current institutional structure
allow the maximum benefits to be realized? Is there
evidence to believe the current system is not optimal?
If the electrical system in the Railbelt has
opportunity for improvement, what are the options and
how do we best get there?" Also identified was the
lack of an institutional structure to finance new
transmission projects across the respective service
areas of the Railbelt utilities. A study by the
Alaska Energy Authority and Electric Power Systems
Consulting Engineers identified $900 million in such
cross-service area projects that could, if constructed
and managed for maximum economic dispatch, yield
annual projected savings of $146 to $241 million.
The letter of 2015 identified five key questions to
answer:
1. What does an economically efficient electrical
system look like?
2. Is there reason to believe that the Railbelt is not
a fully efficient system?
3. What can we learn from the previous efforts at
reform?
4. What are the ranges of generic policy instruments
to move towards greater efficiency in the Railbelt?
5. What are specific examples of Independent System
Operator (ISO)/Transco models, and how applicable are
they to the Railbelt situation?
1:14:25 PM
Additionally, five findings and recommendations were
included in the letter, which I will summarize here:
First the Railbelt electrical transmission system
requires institutional reform. The RCA recommended an
independent transmission company should be created.
Second While short term energy transactions are
occurring between utilities, true economic dispatch
system-wide does not occur. The letter noted that
lower 48 independent system operator models may be
overly complex for the comparatively small Railbelt
utilities, and that a more simple, custom setup may be
more appropriate. The RCA recommended system-wide
economic dispatch making full use of the regulatory
and statutory authority possessed by the RCA and noted
that voluntary efforts utilizing power pools could be
interim steps towards tighter power pooling and
economic dispatch. Further, the letter states that if
voluntary efforts to move towards system-wide economic
dispatch fail, the RCA will work with the legislature
and administration to institutionalize system-wide
economic dispatch.
Third Here I will read directly from the letter:
"Many past efforts to reform and rationalize the
Railbelt electrical system have failed. Substantial
time and money has been expended on consulting
reports, endless meetings, legislative hearings, and
many frustrating hours in the RCA's East Hearing Room.
A great deal of skepticism exists about the ability of
the electric utilities to voluntarily reform and
restructure the Railbelt grid and move towards true
merit order economic dispatch." The RCA recommended
that should voluntary efforts fail that compulsory
steps be taken.
Fourth Railbelt utilities and consumers will benefit
from systemwide reliability standards.
Fifth In order to implement a Railbelt-wide plan,
the RCA's resources will be stretched thin and may
require regulatory cost charges in addition to those
currently assessed.
1:16:26 PM
I share this letter with the committee to help paint a
full picture of how the legislation before the
committee has come to be. Commissioner Pickett will
go into greater detail on the efforts undertaken by
the RCA since this letter, and the voluntary efforts,
timelines and data collection the commission has
requested, directed and overseen from Railbelt
utilities since that time.
Madame Chair, I would like to note and appreciate the
efforts of the RCA, Legislative Legal and the Attorney
General's office in the drafting of this legislation.
I anticipate that the committee's review of this
legislation will be thorough, and that these entities
will continue to play a key role in our understanding
of this issue and our actions to bring about a more
cost-effective and resource-efficient electrical
system in Alaska's Railbelt.
1:17:16 PM
MR. HARDENBOOK presented the sectional analysis, which read as
follows [original punctuation provided]:
Section 1 amends AS 42.05 to allow the Regulatory
Commission of Alaska (RCA) to regulate Interconnected
Electric Energy Transmission Networks (IEETN) and
Electric Reliability Organizations (ERO) and mandates
that utilities participate in an ERO if they operate
in an IEETN.
Section 1, Subsection b lays out a process for the RCA
to certify an ERO, including rules for:
1. creating and approving/denying reliability standards
2. membership of an ERO's board of directors and its
decision-making process
3. equitable distribution of fees and charges
4. enforcement of reliability standards
5. an open process for crafting standards and exercising
its duties
Subsection b further mandates that an ERO's rules
provide for independence from users, owners and
operators of bulk-power systems and that the board's
membership include the Chair of the RCA and the
Attorney General (or their designees) as non-voting
members.
Section 1, Subsection c lays out a process by which
the RCA can create, certify and regulate an ERO if no
entity or person steps forward to create one.
Section 1, Subsection d mandates that ERO reliability
standards and modifications shall be tariff
provisions, and that users, owners and operators of
bulk-power system shall comply with reliability
standards proposed by the ERO and approved by the RCA.
This subsection further mandates that any reliability
standards provide for operation of the bulk-power
system or facility, cybersecurity protection and the
ability to modify the standards to ensure reliability.
Further, reliability standards may not mandate
enlargement of existing or construction of new
transmission or generation capacity.
Section 1, Subsections e&f allow the RCA to approve,
deny, modify and enforce reliability standards -
during drafting and when they are in effect by the
RCA's own motion or upon complaint.
Section 1, Subsections g, h, i & j state that an ERO
may penalize a user, owner or operator of a bulk-power
system for violating reliability standards and
notifies the RCA of its action. The RCA can uphold,
modify or discard the ERO's penalties upon appeal.
Further, the RCA can order a user, owner or operator
of a bulk-power system to comply with a reliability
standard and penalize offending parties. Penalties
must be commensurate to the seriousness of the
violation and consider efforts taken to address the
violations.
Section 1, Subsections k & l allow the RCA to mandate
an ERO conduct assessments of the bulk power system.
Further, the RCA may adopt regulations governing EROs,
including cost recovery surcharges and potentially
requiring an ERO obtain a certificate of public
convenience and necessity.
Section 1, Sec 42.05.293 details the process an ERO
must follow to accomplish Integrated Lowest Cost
Planning within the proposed reliability standards.
Standards must evaluate the cost-effectiveness of
meeting customer service requirements, including new
generation, transmission and conservation projects
at the lowest cost, regardless of the location or
ownership of new facilities.
Section 1, Sec 42.05.294 grants RCA the authority to
prohibit or allow new construction of large energy
facilities in line with the requirements of a bulk-
power system and adopted reliability standards. This
section also defines "large energy facility."
Section 2 defines bulk power systems, cybersecurity
incidents, electric reliability organization,
interconnected electric energy transmission network,
load-serving entity and reliable operation.
Section 3 authorizes RCA to adopt regulations that
will take effect after the effective date of this
bill.
Sections 4 & 5 deal with effective dates.
1:21:38 PM
MR. HARDENBROOK, having concluded his presentation of the
sectional analysis, offered to answer questions from the
committee and pointed out that Sandon Fisher of Legislative
Legal Services was available via teleconference to answer
questions.
1:21:52 PM
REPRESENTATIVE RAUSCHER asked which model was used to identify
the previously mentioned cost savings of $146-$240 million.
MR. HARDENBROOK answered page 2, third paragraph, of a letter to
former Senate President Meyer and former Speaker of the House
Chenault.
1:22:53 PM
The committee took a brief at-ease.
1:23:18 PM
MR. HARDENBROOK referred again to third paragraph of the
aforementioned letter.
REPRESENTATIVE RAUSCHER asked, "Did you run it by the governor?"
MR. HARDENBROOK explained that HB 151 was based on language
drafted by the RCA, and the sponsor and staff have worked with
the RCA and the Department of Commerce, Community & Economic
Development (DCCED), but not directly with the Office of the
Governor.
CHAIR HOPKINS added that he and his staff have worked with the
Office of the Attorney General - which works with the RCA - to
ensure that the language in HB 151 mirrored the original
language put forth by the RCA.
REPRESENTATIVE RAUSCHER noted that his district comprises three
utilities - Golden Valley Electric Association (GVEA), Copper
Valley Electric Association (CVEA), and Matanuska Electric
Association (MEA) - and he asked whether the bill sponsor had
"discussed it with each or one of those utilities before
drafting it."
CHAIR HOPKINS answered that he had not spoken directly with the
utilities, because they had the opportunity to comment on the
draft legislation put forward by the RCA. He remarked that
since it is only the railbelt utilities being addressed, only
GVEA and MEA, in Representative Rauscher's district, would be
impacted by the Electric Reliability Organization (ERO).
REPRESENTATIVE RAUSCHER asked if the utilities are in support of
the proposed language.
CHAIR HOPKINS answered that support varied with each utility.
He explained that some want the voluntary ability, some want
stronger action, and some have concerns about cost options.
MR. HARDENBROOK added that the sponsor's staff has reached out
to the representatives of all the railbelt utilities to make
sure they are aware of the work being done on the issue and the
hearing that would be taking place today.
VICE CHAIR SPOHNHOLZ offered her understanding that the railbelt
utilities have been working for several years to put together a
Railbelt Reliability Corporation (RRC), and currently four of
the six have agreed to participate. Further, she proffered that
this is the second consecutive legislature where the chair of
the House Special Committee on Energy has introduced legislation
encouraging the railbelt utilities to engage in a reliability
project. She indicated that Alaska has a lot of utilities for
its comparatively small population, in part because of the
geography of the state, and the state cannot overbuild its
energy capacity. She said a proposed rate savings of $146-$241
million annually is a significant amount. She suggested that
utilities could be invited to testify at a future hearing on HB
151 to express their thoughts about the proposed legislation.
She asked Representative Rauscher if that would address his
concern.
REPRESENTATIVE RAUSCHER said he doesn't understand much about
this, but appreciates what has been said. He asked for
confirmation that the comment period had ended a few weeks ago.
CHAIR HOPKINS responded yes.
REPRESENTATIVE RAUSCHER asked what the RCA has done with the
comments.
VICE CHAIR SPOHNHOLZ suggested the question could be asked
directly of a representative of the RCA, Robert Pickett.
REPRESENTATIVE RAUSCHER shared that he had not realized Mr.
Pickett would be available at today's hearing.
MR. HARDENBROOK noted that the legislature would receive a
report early next week from the RCA detailing its work on the
issue, including the five areas Mr. Hardenbrook mentioned and
progress to date since 2015. He indicated there would be a
wealth of documentation for those interested to review.
VICE CHAIR SPOHNHOLZ announced the committee would hear invited
testimony on HB 151.
1:30:15 PM
ROBERT PICKETT, Commissioner, Regulatory Commission of Alaska
(RCA), Department of Commerce, Community & Economic Development
(DCCED), imparted that he has been commissioner for 12 years and
chair of the commission for 6 of those years. He remarked that
the previous speakers had given good information regarding what
the RCA did in 2014 and the letter of 2015, which contained the
RCA's findings and recommendations. Regarding the language put
out by the RCA in mid-March, he said the RCA thought it would be
helpful to get input from the industry and "other impacted
parties" regarding areas the RCA considered in need of
attention. That said, he highlighted that at this point, the
RCA has a formalized process by which it determines support or
opposition to a bill. He observed that the language in HB 151
seems "conservative" compared to the language put out by the
RCA. He added, "We have not, however, addressed all of the
comments we did receive and ... hammered out some further
language." Notwithstanding that, he opined that HB 151 would
"get the ball rolling." He confirmed that the RCA would be
submitting its findings to the legislature early next week in a
three-page letter to leadership made available to all members of
the legislature. He said there would be approximately 17 pages
of an appendix detailing each recommendation. That information
would be backed up by a record of nearly 2,000 pages.
1:33:01 PM
MR. PICKETT reviewed the first recommendation in the
aforementioned letter, which read as follows [original
punctuation provided, with some formatting changes]:
Recommendation No.1: An independent transmission
company should be created to operate the transmission
system reliably and transparently and to plan and
execute major maintenance, transmission system
upgrades, and new transmission projects necessary for
the reliable delivery of electric power to Railbelt
customers. This independent transmission company
should be certificated and regulated as a public
utility under AS 42.05. The RCA should be granted
siting authority for new generation and transmission,
and granted explicit authority to regulate integrated
resource planning in the Railbelt electrical system. A
mandatory report on the status of the current efforts
to develop an independent Railbelt electric
transmission company shall be filed with the
Commission no later than September 30, 2015. A second
report on transmission restructuring shall be filed
with the Commission no later than December 31, 2015.
Failure to file these reports will be construed as a
failure of the current voluntary efforts to develop an
independent Railbelt electric transmission company. If
voluntary efforts fail, the Commission will work with
the Legislature and the Administration to develop and
implement specific legislation and to prioritize
actions necessary to create an independent Railbelt
electric transmission company.
MR. PICKETT stated that the idea has been around for quite some
time. He continued as follows:
In fact, back in 2007, the legislature appropriated
roughly $800,000 to put into effect what was called
the [Railbelt Electrical Grid Authority] (REGA) Study.
That was when the Watana planning was still going on
and there were some obvious constraints in the defense
mission a couple years later that went to the Alaska
Energy Authority study on transmission, and the ...
figure that was mentioned a little earlier, with some
... savings - I think there's been a lot of
reassessment of that particular study, and with that,
... they're probably not nearly as robust as what was
indicated in the outcome of that study. But ... we
have clearly identified some real savings that can be
attained ... from the world's large utilities over the
past five years.
1:34:02 PM
MR. PICKETT reported that since 2015, a business plan was filed,
and a certificate of public inconvenience and assessment of
application was anticipated by September 2016, but over the next
few years progress seemed to slow down. He said the RCA
received an application on 2/25/19 for transfer certificate of
public convenience and necessity (CPCN). He said, "It did not
have all of the ... utilities involved as [signatories], but
they have been involved in terms of the planning process." He
said he could not speak to that further, but noted that the RCA
supports the recommendation for the creation of an independent
transmission company. He said it is highly unlikely that the
legislature will be able to make significant appropriations for
transmission projects, but he talked about mechanisms being put
in place.
1:35:49 PM
MR. PICKETT referred to the second recommendation in the letter,
which read as follows [original punctuation provided, with some
formatting changes]:
Recommendation No.2: System-wide merit order economic
dispatch of the Railbelt's electrical generation units
will bring the maximum benefit to ratepayers. The
Commission should use all the regulatory and statutory
authority it currently has to strongly promote
economic dispatch, and seek new statutory authority as
needed to promote this goal. Voluntary efforts by the
utilities to utilize loose power pools should be
encouraged as an interim step towards a tighter power
pooling system. As actual data is generated concerning
costs, benefits and other outcomes of voluntary power
pooling strategies, quarterly reports shall be filed
with the Commission. These reports will be analyzed
and reviewed to assess the organizational and
governance structure needed for an independent
consolidated system operator. The first report shall
be for the fourth quarter of 2015 (October 1, 2015
through December 31, 2015) and shall be filed no later
than January 30,2016. Quarterly reports shall be filed
with the Commission throughout 2016, due no later than
30 days after the end of the applicable reporting
quarter. Failure to file these quarterly reports will
be construed as a failure of voluntary efforts to move
towards system-wide merit order economic dispatch. If
voluntary efforts fail, the Commission will work with
the Legislature and the Administration to develop and
implement specific action steps to institutionalize
system-wide merit order dispatch.
MR. PICKETT explained that the new generation is significantly
more efficient in terms of natural gas or coal, and the RCA
wants to encourage institutional change that would "make that
happen." He said given the size of the market, it was
determined that it would be more effective to focus first on
loose, power pool agreements, then move into more binding,
longer-term, tighter pool agreements. He said after 2016, the
idea of creating a stand-alone, unified system operator was
deemed to be "not the most effective use for resources." He
said pooling may provide a "platform in the future for that to
happen." He said Chugach Electric and Municipal Light and Power
started with very tight pooling and estimated a savings of a
minimum of $10 million annually. He said they were beginning to
apply that model for the rest of the railbelt. He indicated
that three utilities in the central railbelt "eventually signed
on, on a more formalized basis into this tight pool" and saw an
estimated savings of up to $16 million. He mentioned a joint
agreement that was entered into, and there was a one-year
development period, and "they did come back to us in September
of 2017 and continued to have a fairly optimistic picture of
what was going on." He said those involved were trying to
figure out how to integrate the nonparties - both GVEA and
Palmer Electric Company (PEC). He mentioned a presentation was
made in May 2018 and follow-up efforts were made in June 2018.
He said:
That was after a merger was approved by voters of
Anchorage, and we had some questions as to whether
that was going to have any impact on this, and at that
time we were told that, "No, it would not." That
changed, and by October of last year, we were informed
that that process had essentially stopped, and until
all of the activities related to the proposal were
dealt with one way or another, they could not make any
commitments as to when it would resume.
MR. PICKETT said the bad thing is that the savings will not be
realized by the three utilities until "this process restarts,"
but the positive thing is that there has been an increase in the
action between dispatch centers and a better understanding
between utilities.
1:40:46 PM
VICE CHAIR SPOHNHOLZ asked Mr. Pickett if he was saying that the
merger was responsible for the slowdown.
MR. PICKETT answered, "It was alluded that that was the fact."
The transaction was not finalized, and he said he could not
speak to it one way or another. Notwithstanding that, he
proffered that it was a matter of staff resources and "the
ability to continue on all these paths at the same time." In
response to a follow-up question, he said the names of the three
utilities mentioned previously were Municipal Light and Power,
Chugach Electric, and MEA.
MR. PICKETT said the RCA continues to support Recommendation 2,
as shown in the letter, regarding system-wide merit order
economic dispatch of the Railbelt's electrical generation units.
He noted that even though there is better cooperation between
utilities, there is no institutional change.
1:43:29 PM
MR. PICKETT next brought attention to Recommendation 3 in the
letter, which read as follows [original punctuation provided,
with some formatting changes]:
Recommendation No.3: Though history strongly indicates
that the current voluntary transmission restructuring
and economic dispatch efforts by the utilities may
fail, the Commission believes the utilities must be
given the opportunity to succeed. The timelines
outlined in Recommendations 1 and 2 allow for this
potential success. Failure of the voluntary efforts
and initiatives will trigger the compulsory steps
identified in Recommendations 1 and 2.
MR. PICKETT said many comments have been received from various
entities and utilities, and the RCA will address those comments.
He said, "So, we do continue to support the voluntary efforts,
but we believe that at this stage ... some additional incentives
and pressure need to be put on."
1:45:43 PM
MR. PICKETT turned to Recommendation 4 in the letter, which read
as follows [original punctuation provided, with some formatting
changes]:
Recommendation No.4: Enforceable and consistent
Railbelt operating and reliability standards are
necessary for consistent, safe, reliable, and
efficient operation of the Railbelt electric system.
The RCA strongly encourages the IMC and Homer Electric
to resolve their differences and develop a common
Railbelt operating and reliability standard. In
January 2016 the RCA will initiate a process to
determine if it should adopt regulations concerning
Railbelt operating and reliability standards.
MR. PICKETT said Alaska is the only state that does not have
enforceable electric reliability standards. He said the Lower
48 is under the jurisdiction of the National Electrical
Reliability Council (NERC) and the Federal Energy Regulatory
Commission (FERC). Following a major blackout in the Midwest,
in 2003, NERC was created with the authority to set up regional
electrical liability organizations, with mandatory terms and
stringent penalties set up. Hawai'i and Alaska were not
covered. Hawai'i has since adopted many of the NERC guidelines
and reliability standards in its state statute. Alaska is left
as the state that has done nothing. Mr. Pickett explained that
utilities have had standards on a voluntary basis. Most of the
utilities signed on to the Intertie Management Committee (IMC)
standards, while Homer Electric developed its own set of
standards; the two standards were not entirely consistent.
After 10 years, with the hard work of representatives of
utilities and the Alaska Energy Authority (AEA), a modified
standard applying to all the railbelt utilities was adopted. He
indicated this happened in April 2018, which pleased the RCA.
He stated, "We would see an RRC-type of organization fitting
nicely into the ERO role, under the jurisdiction of the
commission, and it would make things a lot more flexible, in
terms of the maintenance and development of standards." He said
utilities have technical expertise in terms of operational and
liability aspects of the standards and how this relates back to
capital investment and "what might or might not have to happen."
MR. PICKETT said there are areas that need to be "fleshed out."
He mentioned cyber-security concerns and physical security and
"other things that are a little bit outside just normal
operational issues but can provide a very significant impact to
the functioning of the railbelt electric system." He said the
utilities that voluntarily participated in several cyber
security exercises have offered ideas on how to maintain
confidentiality and the handling of classified information. He
characterized the voluntary efforts in the reliability sector as
"demonstrating the greatest amount of progress," but said that
"the statutory approach that is mirrored in [HB] 151" would
provide additional tools. Notwithstanding that, he said the RCA
is strongly encouraging the RRC to "proceed ahead" and "keep
moving as they have been moving" to be in position to respond to
any changes
1:52:40 PM
MR. PICKETT directed attention to Recommendation 5 in the
letter, which read as follows [original punctuation provided,
with some formatting changes]:
Recommendation No.5: The RCA will be hugely impacted
by these proposed Railbelt electric system changes.
The initial action steps will need to be implemented
within existing RCA resources. The Commission is self-
supporting through regulatory cost charges (RCCs), and
does not rely upon state undesignated general funds.
If the RCA receives the necessary Administration and
Legislative support, the FY 2017 RCA budget will
require the necessary RCC funded resources to
implement these proposed recommendations. Each of the
findings and recommendations were voted upon
individually at the June 29, 2015, RCA Special Public
Meeting and all were passed unanimously. These
recommendations are respectfully submitted to the
Legislature for its review and consideration. Upon
request, the Regulatory Commission of Alaska will
assist the Legislature in developing solutions
addressing these critical issues. Thank you for the
opportunity to provide this information to you.
MR. PICKETT said for the past four and a half years, the RCA has
been able to operate within its budgetary constraints, and it
anticipates that will not change with the proposed fiscal year
2020 (FY 20) budget. He talked about flexibility in position
descriptions, and indicated it is difficult to fit into the
state classification system, especially in terms of technical
engineering and policy positions.
MR. PICKETT concluded by offering to answer questions from the
committee.
1:54:13 PM
REPRESENTATIVE LINCOLN asked Mr. Pickett to briefly describe
some of the projects that the $900 million would cover.
MR. PICKETT answered that the RCA has "not really taken that
into that much account," because it thinks an independent
assessment of specific, cost-effective projects needs to be
done. Nevertheless, he mentioned a project involving cable run
from the Kenai Peninsula to the Beluga/Tyonek area, which he
said is probably one of the single biggest components of that
budget. He talked about an incorrect projection of savings that
he read. He said, "It sort of laid out an optimal road map, if
you wanted to maximize security and redundancy and reliability
in the railbelt and not be subject to having one transmission
line go down and having a big impact, this is one way you might
do it; and ... that just sort of fell out of that."
1:56:20 PM
REPRESENTATIVE RAUSCHER referred to resolutions currently in the
House, one to support a railway from Canada and one that would
support money coming from the U.S. Department of Defense (DoD)
to connect CVEA to GVEA and MEA. He surmised that the future
holds "an interesting aspect here." He asked if CVEA is
"advised of the talks going on."
MR. PICKETT recollected that in terms of filing, CVEA has not
participated directly in the last four years; however, he said
the RCA's process is open to the public. In response to a
follow-up question, he said the RCA gives notice but does not
extend specific invitations. He indicated that those on the
mailing list, who actively participate are probably notified
"more than they want to be many times." He indicated that CVEA
is on the mailing list and does receive notice of any changes
related to electric utilities.
REPRESENTATIVE RAUSCHER asked how important it is to the process
going forward that all the utilities participate.
MR. PICKETT answered it is important "to promote the maximum
cooperation with all of the entities impacted - ... not just the
utilities - because this is a fairly significant change." He
stated his belief that the reliability aspect is so important
that the division will proceed with all statutory and regulatory
authority "to keep moving the ball forward." He continued:
What is possible through legislation, however, is a
structure that would be much more amenable and easier
to work with for the utilities, for the commission,
and for other parties, because if we have to distill
everything down to a ... two-year, rule-making process
every time we change reliability standards, I don't
think anybody's going to be particularly happy with
that approach.
1:59:36 PM
VICE CHAIR SPOHNHOLZ remarked that that would not be very
practical. She then asked Mr. Pickett if he would submit his
notes from his talking points to the committee for the benefit
of the recording secretary.
CHAIR HOPKINS clarified that HB 151 deals with the generation
infrastructure and trying to provide the lowest cost electricity
to consumers along the railbelt and forcing utilities to work
together toward those mandated standards. He mentioned
different processes going forward simultaneously. He said he
hopes to make clarifications to HB 151 during Interim, based on
the feedback Mr. Pickett provided.
[HB 151 was held over.]
2:01:33 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Energy meeting was adjourned at 2:01 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 2019-05-08 HB 151 Fiscal Note.pdf |
HENE 5/9/2019 8:30:00 AM |
HB 151 |
| 2019-05-08 - RCA order Re Proposed Legislative Language.pdf |
HENE 5/9/2019 8:30:00 AM |
HB 151 HB 151 - RCA Order inviting comment on Proposed Legislative Language |
| 2019-05-08 - RCA Proposed Legislative Language.pdf |
HENE 5/9/2019 8:30:00 AM |
HB 151 RCA Proposed Legislative Language |
| HB 151 - Sectional Analysis.pdf |
HENE 5/9/2019 8:30:00 AM |
HB 151 |
| 2015-06-30 - RCA Recommendation to Legislature.pdf |
HENE 5/9/2019 8:30:00 AM |
HB 151 |