Legislature(2019 - 2020)CAPITOL 17
01/23/2020 10:15 AM House ENERGY
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| Audio | Topic |
|---|---|
| Start | |
| HB151 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 151 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ENERGY
January 23, 2020
10:17 a.m.
MEMBERS PRESENT
Representative Grier Hopkins, Chair
Representative Ivy Spohnholz, Vice Chair
Representative John Lincoln
Representative Zack Fields
Representative Tiffany Zulkosky
Representative George Rauscher
MEMBERS ABSENT
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
05/09/19 (H) Heard & Held
05/09/19 (H) MINUTE(ENE)
01/23/20 (H) ENE AT 10:15 AM CAPITOL 17
WITNESS REGISTER
JOE G. HARDENBROOK, Staff
Representative Grier Hopkins
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented an overview on the committee
substitute for HB 151 on behalf of the bill sponsor, the House
Special Committee on Energy.
ROBERT PICKETT, Chair
Regulatory Commission of Alaska (RCA)
Anchorage, Alaska
POSITION STATEMENT: Testified during the presentation of the
committee substitute for HB 151.
ACTION NARRATIVE
10:17:53 AM
CHAIR GRIER HOPKINS called the House Special Committee on Energy
meeting to order at 10:17 a.m. Representatives Hopkins,
Lincoln, Rauscher, and Zulkosky were present at the call to
order. Representatives Fields and Spohnholz arrived as the
meeting was in progress.
HB 151-ELECTRIC RELIABILITY ORGANIZATIONS
10:19:48 AM
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."
10:20:18 AM
REPRESENTATIVE SPOHNHOLZ moved to adopt the proposed committee
substitute (CS) for HB 151, Version 31-LS0870\U, Klein/Fisher,
12/20/19, as the working draft. There being no objection,
Version U was before the committee.
10:20:42 AM
JOE G. HARDENBROOK, Staff, Representative Grier Hopkins, Alaska
State Legislature, paraphrased from a prepared statement
[original punctuation provided], which read:
Mister Chairman thank you for the opportunity to do
a quick overview on the CS for House Bill 151 and to
update the committee on some of the developments that
occurred over the interim. We have Commissioner Bob
Pickett of the RCA online today to discuss the
commission's continuing efforts and their support for
the legislation being crafted by the Senate Special
Committee on the Railbelt Electrical System the
companion legislation to the bill before us.
The CS which the committee has adopted moves SB 123
and HB 151 into total alignment, reflecting the most
recent draft language vetted by the utilities,
stakeholders and advocates and endorsed by the
Regulatory Commission. It is our hope that by
combining our efforts with the other body we can work
constructively together on this complex issue, engage
with the utilities, the RCA and consumers to craft the
best legislation possible and to work towards
increasing efficiencies in the Railbelt and ultimately
increasing reliability and reducing cost to Alaska
families and businesses.
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, namely, would electric utility
customers from Fairbanks to Homer benefit from
increased cooperation between the interconnected
utilities of the Railbelt?
Among the RCA's recommendations was formation of a
reliability organization, which would write and
enforce common standards for safe and reliable
operation of the interconnected utilities. The
Railbelt electric utilities have made significant
progress toward collaboration and cooperation over the
interim. Most recently, all six entered into an
agreement to work together to establish a reliability
organization.
The Memorandum of Understanding establishing this
organization is in your packet.
The RCA, in their letter of this month updating the
Legislature on the utilities' progress, has
recommended statutory changes that would affirm the
RCA's authority to regulate a reliability
organization; define the basic structure,
responsibilities and authorities of a reliability
organization; and empower the RCA to require pre-
approval of large generation and transmission projects
undertaken by utilities that are part of this
interconnected network. HB 151 and SB 123 reflects
these recommendations and, if enacted, would support
the utilities' voluntary work to develop a reliability
organization.
For the information of the committee, we have provided
in the bill packet the following items:
• The letter from the RCA to the legislature dated
January 15, 2020 detailing progress to date on this
issue and updating the legislature on progress towards
the five goals listed in the RCA's 2015 letter to the
legislature.
• A copy of the 2015 RCA letter to the legislature
• A copy of the MOU establishing the Railbelt
Reliability Council signed December 6, 2019
• An article from the Alaska Journal of Commerce dated
12/31/19 which provides a good synopsis of efforts to
date and details the significance of the MOU which was
signed.
It is the hope of the chairman that these documents
will provide the committee with 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, and the voluntary
efforts, timelines and data collection the commission
has requested, directed and overseen from Railbelt
utilities.
Mister Chairman, I would like to note and appreciate
the efforts of the RCA, Legislative Legal and the
leadership of the Senate Special Committee on the
Railbelt Electrical System in crafting this
legislation.
I anticipate that the committee's review of this
legislation in conjunction with the other body 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.
10:24:44 AM
MR. HARDENBROOK paraphrased the Sectional Analysis to HB 151,
version U, which read [original punctuation provided]:
House Bill 151 establishes clear statutory authority
for the Regulatory Commission of Alaska (RCA) over an
electric reliability organization (ERO). The bill
defines participation in a reliability organization as
well as the requirements, responsibilities, powers and
oversight of a reliability organization.
Section 1 Adds new sections to AS 42.05, Alaska
Public Utilities Regulatory Act.
New Sec. 42.05.292: Electric reliability
organizations
Requires interconnected utilities in a network served
by a certificated reliability organization to
participate in the reliability organization. Provides
standard for RCA approval of a reliability
organization. Directs reliability organization
governance. If no entity applies as a reliability
organization by October 2020, the RCA must form one.
Charges a reliability organization for developing
standards for reliable operation of the power system.
Standards must be filed with the RCA as a tariff; the
RCA may approve standards if they are just,
reasonable, not unduly discriminatory, and in the
public interest. The RCA retains enforcement powers.
Allows the RCA to require certain standards or
changes.
Enables the reliability organization to impose
penalties as necessary and describes the process for
penalties. Establishes a process for the RCA to
require compliance with standards and to hear appeals
of penalties.
Requires the RCA to write regulations, including for
conflict resolution and organization cost recovery.
Regulations may be written to require the organization
obtain a certificate of public convenience and
necessity, and for issuing an open access transmission
tariff to a reliability organization.
New Sec. 42.05.293: Integrated resource planning
Charges a reliability organization with creating a
plan for reliable, cost-effective operations. The plan
must cover generation, transmission, and conservation.
After a hearing, the RCA can approve, reject, or
modify a plan, and can allow utilities to recover
planning costs in their rates. The cost of resources
and other expenditures reflected in the approved plan
may also be recovered in utility rates.
New Sec. 42.05.294: Project preapproval
Requires RCA approval for public utilities
interconnected with a bulk power system to construct
large generation and transmission facilities.
RCA approval would require findings that the facility
is a necessary component of the system it would
connect with; complies with reliability standards; and
is the most cost-effective way to serve connected
utilities that would be substantially served by the
facility.
A facility included in the most recent RCA-approved
integrated resource plan is presumed approved, unless
the RCA finds otherwise with clear and convincing
evidence.
MR. HARDENBROOK continued his presentation of the Sectional
Analysis, which read:
Section 2 Adds new paragraphs to AS 42.05.990, Alaska
Public Utilities Regulatory Act, Definitions.
Defines bulk power system; cybersecurity incident;
electric reliability organization; electric utility;
interconnected electric energy transmission network;
load-serving entity; and reliable operation.
Section 3 Adds a section to uncodified law requiring
the RCA to adopt regulations to implement the bill by
July 1, 2020.
Section 4 Sets an immediate effective date for
Section 3, enabling the RCA to proceed with
regulations to implement the bill.
Section 5 Sets an effective date of July 1, 2020, for
all other sections.
Thank you, Mister Chairman. This concludes my
presentation.
10:29:13 AM
ROBERT PICKETT, Chair, Regulatory Commission of Alaska (RCA),
offered some background and context to bring the committee up to
date, and stated that, at the direction of the Alaska State
Legislature in 2014, the Regulatory Commission of Alaska (RCA)
was told to take a year-long look at the Railbelt Electric
System and then offer recommendations. He reported that there
were many contentious relationships among the utilities, which
were balkanized and fragmented. He said that even with $1.5
billion of new Railbelt generation in a short period, there was
concern that the system was not being operated as efficiently
and effectively as it could. He noted that Alaska was not under
the jurisdiction of the North American Energy Reliability
Corporation (NAERC) which created some concerns regarding
enforceable liability standards. In the June 30, 2015 report to
the Alaska State Legislature, he pointed out that there were two
competing full liability standards in the Railbelt. He reported
that the RCA came up with five findings and five recommendations
which were articulated in the 2015 letter. He noted that the
letter from the RCA to Senator Giessel and Representative
Edgmon, dated January 15, 2020 [Included in members' packets]
repeated those recommendations and what progress had been made.
He paraphrased those recommendations and the progress on each,
which read [original punctuation provided]:
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.
Progress on Recommendation No. 1:
Since the submission of the 2015 RCA report to the
Alaska Legislature, the Railbelt electric utilities
have over the past four years worked toward the
creation of a Railbelt transmission company (Transco).
A number of filings have been made with the RCA that
describe the voluntary efforts toward creating a
Transco. The Alaska Railbelt Transmission, LLC, a
proposed new investor owned Transco, filed an
application for a certificate of public convenience
and necessity (certificate) on February 25, 2019. The
RCA received notice from the Alaska Railbelt
Transmission, LLC that it would be withdrawing its
certificate application on June 20, 2019. The more
than four year voluntary efforts to create an
independent, certificated Transco in the Rail belt was
not successful.
Recommendation No. 2:
System-wide merit order economic dispatch of the Rail
belt's electrical generation units will bring the
maximum benefit to ratepayers. The RCA 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
toward 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 RCA. These
reports will be analyzed and reviewed to assess the
organizational and governance structure needed for an
independent consolidated system operator. If voluntary
efforts fail, the RCA will work with the Legislature
and the Administration to develop and implement
specific action steps to institutionalize system-wide
merit order dispatch.
Progress on Recommendation No. 2:
Some limited progress was made toward the
establishment of a tight power pool between Chugach
Electric Association, Inc. (Chugach) and the
Municipality of Anchorage d/b/a Municipal Light &
Power Department (ML&P). This effort was halted in the
fall of 2018, pending the outcome of the proposed
acquisition of ML&P's assets by Chugach. The
opportunity to realize $10 million in annual natural
gas savings from more efficient generation dispatch
between the two utilities was suspended. Voluntary
commercial settlement arrangements could not be
reached. Additional savings were not realized by
incorporating Matanuska Electric Association, Inc.
into the tight pool.
Recommendation No. 3:
Though history strongly indicates that the current
voluntary transmission restructuring and economic
dispatch efforts by the utilities may fail, the RCA
believes the utilities must be given the opportunity
to succeed. Failure of the voluntary efforts and
initiatives will trigger the compulsory steps
identified in Recommendation Nos. 1 and 2.
Progress on Recommendation No. 3:
Voluntary efforts by the Railbelt electric utilities
have failed to produce sustainable institutional
change under Recommendation Nos. 1 and 2. On March 15,
2019, the RCA issued an order seeking input on
possible statutory changes: We invite comment on
legislative language that would provide express
statutory authority for this agency to certificate and
regulate an electric reliability organization, and to
oversee integrated resource planning and project pre-
approval of large electric generation and transmission
facilities. After the receipt of public comments on
the proposed statutory language by the RCA, several
bills were introduced in the Alaska Legislature. On
May 3, 2019, the House Committee on Energy introduced
HB 151. On May 14, 2019, the Senate Special Committee
on the Railbelt Electric System introduced SB 123.
Both bills were titled "An Act relating to the
regulation of electric utilities and electric
reliability organizations; and providing for an
effective date. " Both bills are very similar in
language and intent. At the Public Meeting of the RCA
held December 11, 2019, the RCA voted unanimously to
support SB 123.
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 lntertie Management Committee and Homer Electric
Association, Inc. 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.
Progress on Recommendation No. 4:
The area with the most progress is the adoption of
mandatory consensus reliability standards. The RCA's
June 2015 recommendation noted that reliability
standards were voluntary and not all electric
utilities had adopted the same standards.3 Railbelt
electric utilities agreed to a single set of mandatory
electric reliability standards for the Railbelt,
filing consensus reliability standards with the RCA on
April 17, 2018, that bridged inconsistencies between
the existing reliability standards of the IMC and
HEA/RRO. The Rail belt electric utilities proposed
that implementation of the consensus standards be
delayed until a year after adopted by a reliability
organization. The reliability organization proposed
by Railbelt electric utilities is the Rail belt
Reliability Council (RRC), with functions that include
(1) adopting and enforcing standards regarding system
reliability, cybersecurity, and physical security; (2)
conducting integrated resource planning for the
Railbelt; (3) adopting and enforcing system-wide
interconnection protocols; and (4) evaluating
security-constrained economic dispatch. The Railbelt
electric utilities proposed that the RRC be
certificated and regulated by the RCA. The RRC is in
the formative stages, with the Rail belt electric
utilities anticipating filing a certificate
application once the RRC business plan and supporting
documents are completed.
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 RCA is selfsupporting through RCCs and
does not rely upon state undesignated general funds.
If the RCA receives the necessary Legislative and
Administration support, the RCA budget will require
the necessary RCC funded resources to implement these
proposed recommendations.
Progress on Recommendation No. 5:
The passage of SB 83, signed into law on August 29,
2019, with an effective date of November 27, 2019,
amended Section 39.25.110 concerning Exempt Service
and the RCA Chair's authority under AS 42.04.050 (a).
With these statutory changes, the Chair of the RCA was
given authority to employ up to five utility master
analysts. Highly specialized and technically trained
individuals can now be employed to assist in the
implementation of these Railbelt electric system
changes. The public interest protection of ratepayers
can now be better balanced with the needs of the
utilities.
10:35:27 AM
REPRESENTATIVE FIELDS asked whether storage had been addressed
in the project pre-approval per AS 42.05.294.
MR. PICKETT offered his belief that this was currently being
discussed, and that the intent was for storage to be part of
this, past a certain scale. He suggested that it was necessary
for the various utilities and parties to figure that line, as
the RCA did not want to "get down into the weeds" on smaller
projects.
REPRESENTATIVE FIELDS asked whether there was contemplation for
having a Railbelt Utility go through RCA approval for a smaller
scale storage.
MR. PICKETT explained that it was necessary to separate what had
a system wide impact versus just for the utility itself. He
pointed out that each utility had the authority to make the
decisions for what they needed to run their utility. He noted
that Golden Valley Electric once had the largest battery system
in the world.
REPRESENTATIVE FIELDS asked for elaboration to the meaning for
complying with reliability standards, and if that would ever
give RCA the ability to not pre-approve a program for a lack of
substantial reliability within the grid.
MR. PICKETT offered his belief that the current standards were
just operational standards and did not address physical or cyber
security. He stated that participation with the various IPPs
and renewable energy wanted to ensure the grid was operated on
an open, transparent basis where it was known what needed to be
done. He suggested that reliability standards would not
preclude this.
REPRESENTATIVE FIELDS asked whether an intermittent power supply
would be unreliable.
MR. PICKETT replied that this would depend on the size of a
supply and where it was plugging into the grid.
10:38:29 AM
REPRESENTATIVE RAUSCHER asked why this change was now moving
quickly.
MR. PICKETT offered his belief that there were going to be
mandatory, enforceable reliability standards in the Railbelt.
Whether or not the RCA was initiating a rule making docket, RCA
wanted a system in which the operators would first see what was
necessary and not have RCA to try to operate the plant as a
regulator. He reported that the operators were working to
figure out the best cyber security industrial control system
approach.
10:40:11 AM
CHAIR HOPKINS asked whether there was any concern for
discrimination against any type of power produced along the
Railbelt and should this be covered in legislation.
MR. PICKETT opined that the Railbelt was already adequately
covered with new generation over the last five years. He added
that, with declining loads, it would be several years before
there was substantial new generation, although there could be a
level of renewables coming into the system. He noted that wind
power would make sense in some areas, and he referenced the
solar farm in Willow.
CHAIR HOPKINS asked about the similarities to reliability
standards in the Lower 48 and how those worked. He asked about
the lack of those reliability standards in interconnection
transmission systems in Alaska.
MR. PICKETT opined that the state political leadership through
Senator Stevens, Representative Young, and Senator Murkowski
were reluctant for the NAERC to expand its jurisdiction to
Alaska. He shared that he had studied many of the systems
throughout the United States in very large markets, and the
NAERC would create too much of an administrative overhead and
burden for the relative handful of utilities in Alaska. He
reported that there was an attempt to craft something that made
sense for Alaska.
CHAIR HOPKINS asked whether there was now a stronger need for
this reliability standard.
MR. PICKETT pointed out that the power grid was a target of
cyber-security. He noted that both the military and the
utilities had concerns, adding that "the grid is an attractive
target." He offered his belief that it was a major
accomplishment for the utilities to merge the two competing
reliability standards. He reiterated that physical security was
a concern.
10:44:21 AM
CHAIR HOPKINS pointed out that the CS had adopted identical
language to SB 123, which was unanimously endorsed by the RCA
and it was the intent of the committee to hold the bill.
10:46:09 AM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Energy meeting was adjourned at 10:46 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 2020-01-17 - RCA Recommendation to the Legislature - 2020.pdf |
HENE 1/23/2020 10:15:00 AM |
HB 151 |
| 2020-01-23 - HB 151 Sectional Analysis - Version U.pdf |
HENE 1/23/2020 10:15:00 AM |
HB 151 |
| 2019-12-19 - RRC MOU.pdf |
HENE 1/23/2020 10:15:00 AM |
HB 151 |
| HB0151U.pdf |
HENE 1/23/2020 10:15:00 AM |
HB 151 |
| 2020-01-23 - HB 151 Bill Overview - Version U.pdf |
HENE 1/23/2020 10:15:00 AM |
HB 151 |