03/06/2020 01:00 PM House RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| HB151 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 138 | TELECONFERENCED | |
| += | HB 151 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
March 6, 2020
1:06 p.m.
MEMBERS PRESENT
Representative John Lincoln, Co-Chair
Representative Geran Tarr, Co-Chair
Representative Grier Hopkins, Vice Chair (via teleconference)
Representative Sara Hannan
Representative Chris Tuck
Representative Ivy Spohnholz
Representative George Rauscher
MEMBERS ABSENT
Representative Dave Talerico
Representative Sara Rasmussen
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
01/23/20 (H) Heard & Held
01/23/20 (H) MINUTE(ENE)
01/27/20 (H) ENE AT 3:30 PM SENATE FINANCE 532
01/27/20 (H) Heard & Held
01/27/20 (H) MINUTE(ENE)
01/29/20 (H) ENE AT 3:30 PM SENATE FINANCE 532
01/29/20 (H) Heard & Held
01/29/20 (H) MINUTE(ENE)
02/11/20 (H) ENE AT 10:15 AM CAPITOL 17
02/11/20 (H) Heard & Held
02/11/20 (H) MINUTE(ENE)
02/20/20 (H) ENE AT 10:15 AM CAPITOL 17
02/20/20 (H) Heard & Held
02/20/20 (H) MINUTE(ENE)
02/25/20 (H) ENE AT 10:15 AM CAPITOL 17
02/25/20 (H) Moved CSHB 151(ENE) Out of Committee
02/25/20 (H) MINUTE(ENE)
02/26/20 (H) ENE RPT CS(ENE) NT 5DP 1NR
02/26/20 (H) DP: RAUSCHER, FIELDS, SPOHNHOLZ,
ZULKOSKY, HOPKINS
02/26/20 (H) NR: PRUITT
02/26/20 (H) LETTER OF INTENT WITH ENE REPORT
03/04/20 (H) RES AT 1:00 PM BARNES 124
03/04/20 (H) Heard & Held
03/04/20 (H) MINUTE(RES)
03/06/20 (H) RES AT 1:00 PM BARNES 124
WITNESS REGISTER
JULIE ESTEY, Senior Director
External Affairs and Strategic Initiatives
Matanuska Electric Association; Spokesperson
Organizational Development Team
Palmer, Alaska
POSITION STATEMENT: Provided a PowerPoint presentation
entitled, "Railbelt Reliability Council and Enabling
Legislation," dated 3/4/20, and answered questions during the
hearing on HB 151.
ANTONY SCOTT, PhD, Commissioner
Regulatory Commission of Alaska
Anchorage, Alaska
POSITION STATEMENT: Provided a PowerPoint presentation
entitled, "Economic Dispatch and HB 151/SB 123," dated 3/6/20,
and answered questions during the hearing on HB 151.
JOMO STEWART, Project Manager
Energy
Fairbanks Economic Development Corporation
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 151.
CHRIS ROSE, Executive Director
Renewable Energy Alaska Project
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 151.
VERI DI SUVERO, Executive Director
Alaska Public Interest Research Group
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 151.
BRIAN HICKEY, Chief Operating Officer
Chugach Electric Association, Inc.
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 151.
ACTION NARRATIVE
1:06:05 PM
CO-CHAIR JOHN LINCOLN called the House Resources Standing
Committee meeting to order at 1:06 p.m. Representatives Tuck,
Hannan, Tarr, Spohnholz, Hopkins (via teleconference), and
Lincoln were present at the call to order. Representative
Rauscher arrived as the meeting was in progress.
HB 151-ELECTRIC RELIABILITY ORGANIZATIONS
[Contains discussion of SB 123]
1:06:47 PM
CO-CHAIR LINCOLN announced the only order of business would be
CS FOR HOUSE BILL NO. 151(ENE), "An Act relating to the creation
and regulation of electric reliability organizations; relating
to participation of electric utilities in electric reliability
organizations; relating to duties of electric reliability
organizations; providing for integrated resource planning;
requiring project preapproval for certain interconnected large
energy facilities; and providing for an effective date."
[Before the committee was CSHB 151(ENE).]
1:07:53 PM
JULIE ESTEY, Matanuska Electric Association (MEA), said she was
speaking on behalf of the Organizational Development Team which
is comprised of the members from each of the six utilities and
is working to put together an electric liability organization
(ERO) called the Railbelt Reliability Council (RRC). She began
a PowerPoint presentation entitled, "Railbelt Reliability
Council and Enabling Legislation." Slide 2 was an outline of
the presentation. She turned to slide 3, entitled "What is the
Railbelt Electric System?" As shown on the map on slide 3, she
relayed that the railbelt electric system goes from Homer to
Fairbanks and in the east to Delta Junction and Glacier View,
through MEA service territory. [Slide 3 shows the six utilities
are: Chugach Electric Association ("Chugach"); City of Seward;
Golden Valley Electric Association ("Golden Valley"); Homer
Electric Association; Matanuska Electric Association (MEA); and
Municipal Light & Power (ML&P).] Ms. Estey said these six
utilities are public power, which means either member-owned
cooperatives or "uni-led" and organized. She said the benefits
of this are lower costs and the ability to align with the
interests of local members. Ms. Estey stated, "Our load is
about 800 megawatts." Rather than a grid, this is an
interconnectivity of different groups of utilities working
together to keep one system aligned. She said there is a lot of
infrastructure for few members, so there is constant focus on
how to balance the cost. There are large sections where
infrastructure is needed for critical functions but in which
there are no members. She stated, "And so, a lot of times we'll
solve some of the reliability issues with generation instead of
additional transmission, because the transmission between all of
us can be great. We also primarily are fueled by natural gas,
aside from Golden Valley up in Fairbanks, and ... we pay two to
three times the cost for natural gas." The goal, she said, is
to burn less fuel.
1:11:52 PM
MS. ESTEY directed attention to slide 4, which read as follows
[original punctuation provided]:
What Problems Are We Trying To Solve?
? Address the June 2015 Letter from the Regulatory
Commission of Alaska (RCA) to the Alaska State
Legislature.
? Identify and tackle reliability needs of the system,
including cybersecurity threats.
? Plan and execute future infrastructure projects that
benefit the system.
? Develop a mechanism to equitably allocate costs for
improvements that create system benefits.
? Prepare for the changing needs of the utility
industry, including integration of new technology and
other generators.
? Maintain each individual utility's ability to
address specific local needs as appropriate.
MS. ESTEY noted that the June 15 letter communicated that there
are a lot more benefits that could be achieved through enhanced
coordination from the utilities, as well as a recommendation
that "utilities do that first." She said, "As you all know from
a follow-up letter that was sent earlier this session, the RCA
applauded the efforts that had happened - the accomplishment
that we were able to achieve - but indicated that we need help
getting some of these things over the line." She said the needs
for the system are changing dramatically, and she urged
integration as a means to being less vulnerable to the constant
attacks on the system. Ms. Estey, regarding liability
expectation, emphasized the increasing need for power to operate
cell phones and provide medical care, for example. She said
reliable and reasonably priced power is necessary in attracting
business and economic development. She said a combined effort
is more effective in addressing the integration of new
technologies, such as battery storage, renewables, and carbon
reduction goals. Combined efforts help, also, in considering
development costs. She expressed the importance of continuing
to support local issues while working together regionally. She
said the true value of the structure being put in place is the
development of trust and having a forum in place for critical
conversations. She said this does not just encompass trust and
conversations among the utilities but also other voices, such as
independent power producers, the Alaska Energy Authority, and
other affiliated stakeholders and advocacy groups. She stated,
"What we're finding as we go through this process is even though
it takes longer when we widen the circle, the product is always
better."
1:15:58 PM
REPRESENTATIVE HANNAN asked whether the ERO would be responsible
for a cybersecurity system used by each of the producers in a
cooperative.
MS. ESTEY said she would touch on that issue in an upcoming
slide. She said cybersecurity is presently included in
liability standards, and "some of the outputs of this ERO will
help us have [a] common set of integrated standards around
cybersecurity." She added that cybersecurity landscape changes
daily, thus "the more ... we can be in contact of what we're
seeing on the system," the quicker action can be taken.
1:17:33 PM
MS. ESTEY returned to the PowerPoint, to slide 5, which read as
follows [original punctuation provided]:
Progress - Consistent Railbelt Reliability Standards
In 2014 the Intertie Management Committee (IMC)
adopted open access rules for the Alaska Intertie
In April 2018 the Railbelt electric utilities and
Alaska Energy Authority (AEA) filed consensus Railbelt
Reliability Standards with the Regulatory Commission
of Alaska (RCA)
Compliance with reliability standards is mandated no
later than one year after the Electric Reliability
Organization (ERO) is established, until then
compliance is voluntary
MS. ESTEY explained that reliability means redundancy; however,
redundancy is expensive and there must be a balance of how much
redundancy is "nice to have" versus how much is essential. She
related that typically, discussion of reliability in the Lower
48 centers around transmission and creating a more robust grid.
In Alaska, the topic of liability centers around generation; the
need for excess generation to maintain equilibrium when a piece
of equipment at a power plant fails means extra generation
online and in reserve.
1:19:57 PM
REPRESENTATIVE SPOHNHOLZ recounted that approximately $1.5
billion had been recently spent in creating new generation, and
50 percent of the rate charged to users was going toward that
new generation. She questioned whether more reliability was
necessary and suggested instead that more economic dispatch and
careful management of the resource may be what was needed.
MS. ESTEY replied that the target for that "new generation
suite" was not all directed to increased liability but to
burning less fuel. She said the Beluga Power Plant was carrying
one-third of the railbelt load for decades. It was old and
needed upgrade or replacement. She said in looking at alternate
options, MEA determined that it could burn 30 percent less fuel
per megawatt if it upgraded to new generation. She said the gas
cost for MEA members is 40 percent of their electric bill.
Burning less fuel is where MEA can save its members money. The
generation suite was built in order to stop burning as much
natural gas. Burning less fuel is all-around good, in terms of
cost, the environment, and energy security. She noted that at
the time [the generation suite] was built, the health of the
Cook Inlet gas fields was in question; therefore, the ability to
limit the amount of gas that would be burned was critical. In
terms of dispatch, she said a lot is being done to use the
generation suite more effectively. Now that there is more
diversity in the suite, sharing power and making better economic
decisions is easier.
1:22:49 PM
REPRESENTATIVE SPOHNHOLZ said she hoped attention would be given
to economic dispatch and carbon emissions, and she expressed
concern that without focus on reduction of fuel consumption and
the carbon footprint, "we will continue to move forward in sort
of spending a lot of money on assets which cost rate payers a
lot of money." She said she is trying to understand the
tradeoffs and to consider "those details and that nuance" when
making policy decisions.
MS. ESTEY agreed. She said there are many people in each of the
utilities that "spend most of their day trying to figure out how
to burn less fuel." She said, "While we need the reliability
and the redundancy to make sure that we can meet the basic
criteria of providing this essential service, doing that in a
reasonably priced manner is really where that fuel supply comes
in, and that's really at the heart of utility operations." She
said that with the new structure, all involved are planning and
making decisions together. She stated that she is encouraged
that the new system "will achieve those goals in a way that was
never possible before."
1:26:56 PM
REPRESENTATIVE TUCK asked Ms. Estey whether she has ever seen
rates decrease for consumers or whether they always remain
static or increase.
MS. ESTEY answered that MEA rates decreased last quarter due to
fuel savings. She said she cannot speak for the other
utilities, but noted they were available for comment. She said
over the last few years, MEA has had more quarters than not
where the rates decreased.
1:28:05 PM
MS. ESTEY moved on to slide 6 of the PowerPoint presentation,
which read as follows [original punctuation provided]:
Progress - Coordinated Cyber Security Rules
All utilities engaged a nationally recognized
cybersecurity consultant and developed cyber security
standards that went into effect January 1, 2020,
starting a 3-year compliance clock.
Utilities are currently conducting internal cyber
security audits to identify gaps between the current
practices and the new standards.
The Railbelt Cyber Security Working Group (RCWG),
comprising IT subject matter experts from the six
Railbelt utilities and Doyon Utilities, meets monthly
to execute standards implementation.
MS. ESTEY emphasized not only is it critical to keep the
security of the system a secret, but it is also imperative to
secure member information. She remarked, "We're actually
pleased with the bill of health that we're receiving, but
there's always more that we can do. And, as I said, the
landscape is always changing."
1:30:06 PM
CO-CHAIR TARR noted Ms. Estey had talked about constant attacks
to cyber security, and she asked whether that compared to
typical e-mail threats from malware or whether there has been
indication of suspected interference on a national security
level.
MS. ESTEY answered the threats are both typical and on a bigger
scale; the latter which she could not talk about except to say
that "we are working with the different federal and state
agencies ... as much as we can to provide whatever information
we have and to follow their advice if there's anything we could
be doing further."
CO-CHAIR TARR said she is glad this issue is being considered.
1:32:26 PM
CO-CHAIR LINCOLN asked whether the integration of utilities
proposed under HB 151 would result in any further cybersecurity
threats.
MS. ESTEY offered to research to provide a more detailed answer.
That said, she offered that the system is already integrated,
and she allowed that any additional software needed may result
in more vulnerability to the system and measures taken to
address that.
1:34:18 PM
MS. ESTEY continued to slide 7, which read as follows [original
punctuation provided, with some formatting changes]:
Progress - Power Pool Development
A tight power pool is a contractual structure that
pools generation resources and loads to facilitate
economic dispatch for efficiency and cost savings.
Chugach, ML&P and MEA drafted preliminary dispatch
protocols, financial settlement procedures, and other
processes. GVEA and HEA have been engaged in this
development.
Power pool development process was put on hold due to
the Chugach/ML&P acquisition, expected to achieve
approximately 75% of anticipated pool savings.
Utilities will return to power pool discussions after
the Chugach/ML&P acquisition docket has been
adjudicated.
MS. ESTEY talked about economic dispatch. She explained, "As
the next increment of load comes online, anywhere in the system,
it is met with the next most efficient generator on the system -
anywhere." The idea is to use the most efficient power plant at
any given time, which means using less fuel "to create that
megawatt." This, in turn results in lower costs and better use
of resources. She said, "Currently what the utilities are doing
is what's called a loose power pool." She explained that any
excess power of one utility is offered to other utilities at a
cost. This results in a benefit to the utility selling and the
one gaining the excess, and it happens daily. She offered some
examples of how it works. She said, "We're finding that we're
achieving about 80 percent of the value just by this informal
action." She noted this is voluntary.
MS. ESTEY said the next step is called a "tight power," which is
contractual and automatic. Consideration is being made to do
this with the utilities in Southcentral Alaska: ML&P, Chugach,
and MEA. Analysis showed most of the benefits are in that small
area. She said Golden Valley in Homer was invited. She stated,
"We've really come close to bringing that across the finish
line." She said once the outcome of the sale is known from RCA,
the hope is "that we can begin moving toward that tight power
pool, which looks a lot more like economic dispatch." Ms. Estey
said more consideration needs to be made to determine whether
this could benefit Homer members, "but it's something that the
utilities are very interested in doing, and we hope to get that
back on track as soon as ... we know the outcome of the sale."
1:39:46 PM
REPRESENTATIVE TUCK asked whether the merger of MEA and Chugach
has restricted the loose power pool.
MS. ESTEY answered no. She clarified that Golden Valley has
been one of the utilities on the loose power pool. She said,
"We call those 'economy energy sales,' and they are constantly
trying to get as much gas-fired generation up the intertie as
possible." She said this varies from hour to hour depending on
how the load profile looks. She reiterated that the goal is for
more economical energy. She said, "We need that as a backup,
but what we don't need to do is produce power from it if we can
help it." In response to a follow-up question from
Representative Tuck regarding equity, she offered her
understanding that who has the cheapest power at any given
moment changes; therefore, not just one utility has all the
power. Further, she relayed that all the savings that come from
this are split evenly.
REPRESENTATIVE TUCK asked why the tighter power pool was
necessary if the loose power pool is working and the merger is
not adversely affecting that.
MS. ESTEY responded, "There are still benefits that we can eke
out, if this is automatic, if somebody's doing this constantly."
She said she thinks another opportunity lies in the different
shares of the hydro projects. Each of the utilities currently
has a certain percentage of those projects and uses those
increments in different ways. She deferred to those with more
information to expound on the answer. She spoke of working with
contracts, using automatic software systems, and ensuring the
viability on a long-term basis. She said the goal is to have
these structures in place so that they work no matter what is
happening politically and to ensure commitment from "all of us."
1:45:08 PM
The committee took an at-ease from 1:45 p.m. to 1:46 p.m.
1:46:13 PM
ANTONY SCOTT, PhD, Commissioner, Regulatory Commission of Alaska
(RCA), said he would discuss HB 151 in relation to economic
dispatch. He provided a PowerPoint presentation entitled,
"Economic Dispatch and HB 151/SB 123" [hard copy included in the
committee packet], and directed attention to slide 2, which read
as follows [original punctuation provided, with some formatting
changes]:
Economic Dispatch
? Economic dispatch minimizes operating expenses of a
system
? Economic dispatch is the optimal, most efficient use
of existing generation and transmission resources to
meet the needs of end-use customers in an
interconnected electric utility network, subject to
necessary reliability constraints
o Economic dispatch is accomplished by ignoring
who owns which generation and transmission assets
("you built it, you bought it")
o Because the fixed (or capital) costs of
generation and transmission ownership must be paid for
by the owners of those assets, no matter what, there
should be mutual gains from trade (for both buyer and
seller) if the most efficient assets are deployed
DR. SCOTT said it makes a lot of sense to do economic dispatch,
and to do it requires institutions. He moved on to slide 3,
which read as follows [original punctuation provided]:
Toy Example
? Two utilities
? Utility A has enough generation to meet both Utility
A and Utility B's load
? Utility A's generation is more efficient than
Utility B's generation
? With economic dispatch only Utility A's generation
would run, and the two utilities engage in a
transaction
DR. SCOTT said in this scenario, Utility B would buy all its
power from Utility A. The real system is more complicated,
because each utility owns multiple generators and load comes on
in different increments. He said the basic idea is that costs
are minimized by operating the most efficient generation to meet
the total pool's load, and the operational expenses are divvied
up later. He said HB 151 would help minimize the future capital
cost of the system.
1:49:35 PM
DR. SCOTT covered the information on slide 4, which read as
follows [original punctuation provided, with some formatting
changes]:
HB 151/SB 123 and Economic Dispatch
? Helps minimize the future capital cost additions of
a system
o Focus is on ensuring efficient investment in
utility plant to reliably meet demand (about half of
the overall system cost)
? Does not mandate economic dispatch ? Does facilitate
economic dispatch by addressing barriers
o Facilitates new transmission build, if that's
efficient, by providing a business model for same
(lack of transmission can reduce efficient exchange of
power across service territories)
o Facilitates new competitive entrants into the
system by enabling a one-stop shop for open access
interconnection agreements
o Lays the groundwork for rationalizing total
transmission tariffs
DR. SCOTT, during his coverage of slide 4, interjected a
response to Representative Spohnholz' previous remarks about
potential tradeoffs between costs and reliability and who makes
those decisions. He said historically utility management has
made those decisions in each service territory and has done a
good job in "keeping the lights on." He said the tradeoff
between cost and liability is a social question, one that
everyone should have a hand in evaluating. He emphasized that
there is "ongoing, broader input in these sorts of technical
questions" which includes the expertise of utility executives
and engineers, the view of independent power producers, and
feedback from consumer groups, the Office of the Attorney
General, renewable energy advocates, and the public at large.
1:54:05 PM
DR. SCOTT directed attention to slide 5, which read as follows
[original punctuation provided]:
Transmission Rates and Economic Dispatch
? Remember previous example ? Now imagine that there
is a per-MWh charge for moving power from Utility A to
Utility B
? If the 'toll road' cost is too high, and paid for by
each MWh, then the power transaction does not take
place
? Conversely, if the cost of the transmission (road)
is paid on a fixed basis then the power transactions
do take place
DR. SCOTT added, "If we can come up with another way of paying
for that transmission rather than each megawatt hour (MWh)
paying a certain fixed fee, then ... again, it reduces the
barriers to the free flow of electrons, and it allows the
overall system itself to achieve more efficient economic
outcomes."
DR. SCOTT moved on to slide 6, the final slide, which read as
follows [original punctuation provided]:
Appendix: Different Types/Scopes of Economic Dispatch
? Each utility on its own engages in "economic
dispatch" within their own service territories
? A "Tight Pool" among two or more utilities is a
wholesale power contract that ensures economic
dispatch among those utilities
? A "Unified System Operator" for the Railbelt would
be a non-profit, independent entity that performs
economic dispatch across all entities within the
Railbelt according to specified transaction/commercial
terms
? An "Independent System Operator" for the Railbelt
would be a non- profit, independent entity according
to generation market bids by all Railbelt participants
DR. SCOTT, regarding the last bullet point, remarked that he
does not think anybody believes that "we would have an
independent system operator as that term is applied elsewhere."
He offered to answer questions.
1:58:34 PM
REPRESENTATIVE TUCK asked whether, under the proposed
legislation, the RCA would have the oversight of a tight power
pool that was adopted contractually or whether the oversight
would be between the parties.
DR. SCOTT answered that HB 151 would not require a tight power
pool. He said a tight power pool involves a wholesale power
contract, which must be brought to the RCA for approval via a
petition. He said, "We would probably suspend that into a
docket so that we fully understood what it was that we were
approving, and we'd go from there."
REPRESENTATIVE TUCK offered his understanding from what he had
heard that HB 151 is not necessary for someone to have a tight
power pool. He added, "If they were to tighten up this power
pool contractually, there would be some RCA oversight, but
currently ..., with the loose power pool, there is no RCA
oversight." He asked whether his summarization was correct.
DR. SCOTT confirmed yes. He added that these power pool
transactions, which are called a "common energy transaction,"
take place under existing tariff terms. He said the RCA
approves them "at high levels" and leaves it up to the parties
"to engage in transactions that make sense to their members."
2:00:47 PM
REPRESENTATIVE HANNAN, regarding a unified system operator (USO)
and an independent system operator (ISO), asked, "Are those both
things that currently two utilities could engage in, and if EROs
are formed, is one of them presumed to be needed under an ERO?"
DR. SCOTT answered, "An ERO is intended to establish damage for
the system, to help determine needed additions to the system to
ensure reliability and the ability of the system to efficiently
meet demand, but the ERO itself will not operate the system."
REPRESENTATIVE HANNAN asked what the effect on the remaining
partners would be if one of the entities does not want to join
the ERO or at some point in the future decides it wants to
remove itself from the ERO.
DR. SCOTT answered that the ERO will help establish and enforce
reliability standards; the RCA will ultimately be the party that
approves those standards and tariffs. The tariffs will apply to
any user, owner, or operator within the interconnected system.
He said this is because the Railbelt is considered "one
interconnected, very complicated machine." All of the parts of
the machine must be "singing to the same ... music, so to
speak."
REPRESENTATIVE HANNAN concluded that even if a utility wanted to
remove itself, it would still be subject to the tariff
established by the ERO.
DR. SCOTT answered that's correct. He added that under HB 151,
an electric utility "shall" participate. Participation is not
defined in the ERO. It does not necessarily mean membership on
the board, but it does mean "you can't just fold your arms, not
participate in the process, and then complain to the commission
when you don't like the results."
2:05:00 PM
REPRESENTATIVE RAUSCHER asked whether the MOU would put a
moratorium on "acting the way ... that the utilities normally
did" while a decision is being made regarding HB 151.
DR. SCOTT replied his observation was that "there has been no
slacking of their efforts to work together." Further, the bill
has helped spur much tighter collaboration. He said the reason
is that the bill would provide a mandate for an ERO, and if
passed, utilities hope to be represented on that ERO. He
explained there is a parallel effort associated with the MOU to
create the Railbelt Reliability Council, which would be an
applicant to the ERO.
REPRESENTATIVE RAUSCHER clarified he wanted to know whether
infrastructure could be put into place while waiting for
proposed legislation to be passed.
DR. SCOTT answered yes. He noted that the proposed effective
date of HB 151 is not for another year, which means "needed
capital investments that they identify on their own can and are,
indeed, being made."
2:07:48 PM
REPRESENTATIVE TUCK asked whether the merger would result in one
entity or in two entities owned by a parent company.
DR. SCOTT answered that assuming the acquisition is approved, it
would be a single entity operated as a single load.
2:08:40 PM
CO-CHAIR LINCOLN questioned how fixed and marginal capital costs
vary with loads on a system and impact incentive to participate
in economic dispatch. He queried as to whether broader
cooperative effort across the railbelt would make it impossible
for utilities to overinvest in capital, thus leading to better
incentives for economic dispatch overall.
DR. SCOTT looked back at a plant built by Chugach some years
ago, a portion of which is owned by ML&P. He said ML&P knew it
needed new generation and "went in on a portion of Chugach's
ongoing effort." He said it is possible for coordinated action;
it happens, but there is room for improvement. In terms of
economic dispatch, he said the power that is picked up in a
trade does not pick up any of the fixed costs of the system; it
takes up incremental operating costs and pays a little bit of a
profit margin. He said, "It already exists more efficiently."
He said moving forward with a structure that would "lock these
guys in a room together on an ongoing basis," the opportunities
for determining the best ways to make new investments would
become clearer and cooperative efforts would be facilitated.
2:12:30 PM
MS. ESTEY returned attention to the PowerPoint she had
previously begun, to slide 8, which read as follows [original
punctuation provided, with some formatting changes]:
Railbelt Reliability Council - ODT Process
An Organizational Development Team (ODT), comprised of
representatives from the six Railbelt utilities, was
established to begin building the RRC.
The ODT's focus was to develop consensus among
utilities and other stakeholders in forming an
Implementation Committee that would develop
foundational documents and stand up the RRC.
The ODT representatives met with utility and non-
utility stakeholders, including the RCA, AEA, REAP,
AkPIRG, IPPs, and others.
On December 18, 2019, six Railbelt utilities signed
the MOU for the creation of the RRC.
The signed MOU was filed with the RCA on December 20,
2019.
MS. ESTEY added that the RRC is like the ERO imagined in
legislation. She spoke about learning from what has been done
in the Lower 48 and adjustments made to get things right. She
emphasized the importance of the proposed legislation.
MS. ESTEY directed attention to the information on slide 9,
which read as follows [original punctuation provided]:
Railbelt Reliability Council Signed MOU
The RRC will be an applicant for the role of ERO with
a balanced utility/non-utility board focused on
accomplishing the following tasks:
1. Establish, administer and enforce reliability
standards
2. Develop, adopt and administer open access rules,
system cost allocation procedures, and interconnection
protocols
3. Develop and adopt an Integrated Resource Plan
(IRP) for the entire Railbelt electric system
4. Perform a definitive cost-benefit analysis of
Railbelt-wide or regional security constrained
economic dispatch.
2:16:02 PM
MS. ESTEY directed attention to slide 10, which read as follows
[original punctuation provided]:
Railbelt Reliability Council -Governance
Initially, the RRC will be governed by a twelve-member
Board with the CEO providing a tie-breaking vote.
6 Railbelt utilities
Alaska Energy Authority
2 Independent Power Producers
1 organization advocating for consumer interests
2 independent, non-affiliated members
RCA and RAPA will hold non-voting, ex-officio
seats on the Board
The RRC will hire a CEO and staff
MS. ESTEY said if one utility is sold to another, the balance
would still be maintained.
2:17:18 PM
CO-CHAIR LINCOLN offered his understanding that Ms. Estey's
organization approves of the change, but it is still subject to
RCA approval.
MS. ESTEY answered yes. She said this is the model toward which
utilities and other stakeholders are working. It is a parallel
path alongside the proposed legislation and the subsequent
regulations that would be created by the RCA. The end goal is
the ability to apply to the ERO "when the commission is ready to
make that happen."
2:18:16 PM
REPRESENTATIVE HANNAN recalled that Ms. Estey had delineated two
independent power producers in relation to the independent
governance council. She asked whether there were only two
independent power producers or several, in which case they would
have to choose two to serve on the governance council.
MS. ESTEY answered that there is a variety of independent power
producers; the [Alaska] Independent Power Producers
[Association] (AIPP) will select the board members. She said
out of 17 applications, 5 were from independent power producers.
She continued:
One of the stipulations in the MOU was to have those
independent power producers all have active projects
on the system; and so, of the five, four met that
criteria, and we've asked for the ... AIPPA to resend
all the applications to them and ask for a response by
March 20 on ... the two people that they would like to
fill their seats.
2:20:11 PM
CO-CHAIR TARR referred to "organization advocating for
consumers" and wondered whether the Alaska Public Interest
Research Group (AkPIRG) would be "the likely participant." She
asked for clarification as to who the nonaffiliated members
would be. She asked whether "any of this should be referenced
in the legislation" or was "specifically intended to be outside
the legislation through this MOU" rather than being governed by
the legislation.
MS. ESTEY replied that AkPIRG has been an active and
constructive member in the process and was the only consumer
advocacy group that applied. There were 11 applicants for the
nonaffiliated seats. She noted that this information can be
found on alaskapower.org. She said there are subcommittees that
will decide among the applicants, hopefully by mid-May. The
legislation states that it could be either a balanced board or
an independent board.
2:23:00 PM
REPRESENTATIVE TUCK asked what the RRC "group" can do now and
what it can do after establishment of the ERO.
MS. ESTEY responded that there has been consideration of what
would happen if the legislation failed to pass. She said she
thinks there is a lot the RRC could still do; however, it is
unclear what the RCA's jurisdiction over that body would be.
She noted that "it's very clear about what that looks like for
load-serving entities." She said, "One of the reasons why this
legislation is critical is so that the RCA does have
jurisdiction over this body and that the actions of this body
can stick." The governing council can be formed without the
legislation, but it may not be as effective, she noted.
REPRESENTATIVE TUCK asked how members were solicited.
MS. ESTEY answered that notice included: a two-month
application process posted on the website; posting on the RCA
listserv; quarter-page advertisements in each of the regional
newspapers; and a press release. She opined that the efforts
were successful, because the applicants include "a lot of folks
... that aren't necessarily a part of the family, that we don't
see every day."
REPRESENTATIVE TUCK asked whether the operator of the railbelt
transmission line would be unified or independent.
MS. ESTEY responded that the council would make that decision,
and having a broader group answer these types of questions would
be beneficial. In response to a follow-up question, she said
MEA is committed to making the tight pool happen, and she
reemphasized the benefits of working with more utilities to
determine what can be achieved and make it happen.
2:28:46 PM
MS. ESTEY, in response to a question from Representative
Spohnholz, restated that the applicants are listed on the
previously mentioned webpage, and she read the list.
2:30:44 PM
MS. ESTEY returned to the PowerPoint and discussed slide 11,
which read as follows [original punctuation provided]:
Why Is The Railbelt Reliability Council Important?
Regulatory compact (contractual commitment) with the
State of Alaska.
Commitment that the utilities will be bound by the
decisions of the RRC.
Commitment of the utilities to support statutory
language to provide the RCA authority to regulate the
RRC as described in the MOU.
Commitment of the utilities to be inclusive of a
variety of perspectives in decisions relating to the
Railbelt bulk electric system.
Commitment of the utilities to participate with one
another and non-utility stakeholders to achieve
benefits for ratepayers across the Railbelt region.
MS. ESTEY stated, "We've all recognized the need to think
regionally and be able to act in a more coordinated manner."
She said this is an historic agreement.
MS. ESTEY moved on to slide 12, which read as follows [original
punctuation provided]:
Next Steps for the RRC - Timeline
? January 2-Feb 1 Thirty-day public notice for
applications to fill the non-utility seats
? January 17 Utility, AEA, RCA and RAPA delegates
named
? February 17 All other non-utility applications due
? March 20 IPP seats selected by Alaska Independent
Power Producer Association
? March 25 (est.) Firm retained to conduct review of
applications
? May 11 Consumer advocacy seat selected
? May 15 Independent, unaffiliated seats selected
? May 30 Implementation Committee Kick off
? December 2020 Complete foundational documents and
stand up the organization
MS. ESTEY said this information is in the MOU, which is on the
web page. She noted that the Implementation Committee does the
foundational documents, one of which is "the code of conduct,"
which ensures "we're not acting in our own best interest, but in
the interest of the RRC." She stated, "We also know that if we
fail, the RCA can establish ... their own, so we were very
motivated to be part of the process in a constructive way."
2:34:06 PM
CO-CHAIR LINCOLN asked, "Who does the selection?"
MS. ESTEY answered that a subcommittee comprising the two IPPs,
the AEA, and one of the utilities select who will fill the
consumer advocacy seat. Once that seat is selected, a new
subcommittee comprising one of the IPPs, the AEA, and the
consumer advocacy seat will pick the two independent,
unaffiliated seats. She remarked on the time this process
takes.
2:35:10 PM
MS. ESTEY moved on to slide 13, which read as follows [original
punctuation provided]:
The Railbelt utilities support HB151 and SB123 as
enabling legislation
Establish a statutory framework for the RRC to operate
under the RCA's regulatory authority.
Provide a mechanism to enforce consistent reliability,
facility and cyber security standards developed by the
RRC.
Authorize the RRC to execute a robust, transparent
Integrated Resource Planning process and support
resulting outcomes.
Provide for RCA pre-approval of projects that are
consistent with the Integrated Resource Plan and/or
reliability standards.
Allow the RRC time to accomplish its goals but provide
discrete timelines.
MS. ESTEY said she thinks utilities are rule followers that can
follow a deadline. She said there is unprecedented alignment
happening, and she urged the committee to support HB 151. In
conclusion of the presentation, she showed slide 14, which
provides contact information.
2:37:57 PM
CO-CHAIR LINCOLN opened public testimony on CSHB 151(ENE).
2:38:26 PM
JOMO STEWART, Project Manager, Energy, Fairbanks Economic
Development Corporation, testified in support of HB 151. He
noted that the Fairbanks Economic Development Corporation (FEDC)
had sent a letter of support for HB 151 and SB 123 [included in
the committee packet]. He spoke of the need for coordination
among utilities and related groups to have "a more robust,
reliable, cost-effective, and efficient system for the greater
railbelt region on a move-forward basis." He explained that
each utility has taken care of its utility area, but that does
not necessarily mean what is best for the broader region.
2:40:41 PM
CHRIS ROSE, Executive Director, Renewable Energy Alaska Project
(REAP), testified in support of HB 151. As in his written
testimony [included in the committee packet], he related that
REAP was established in 2004 and is a statewide, nonprofit
coalition with over 75 dues-paying energy stakeholders,
including large and small Alaska electric utilities, clean
energy developers, and nongovernmental organizations (NGOs) that
"share the mission of increasing the development of renewable
energy and promoting energy efficiency across the state."
MR. ROSE paraphrased the first segment of his written testimony,
which read as follows [original punctuation provided]:
REAP notes that there have been efforts to reform the
Railbelt grid to gain better efficiencies since at
least 1986 when the Railbelt Energy Fund was
established. Though the Railbelt utilities do a
terrific job keeping the lights on, REAP believes that
the new electric reliability organization (ERO) for
the region contemplated in the legislation will bring
new benefits to electric consumers, and help set the
stage for more stably priced, local renewable energy.
MR. ROSE said he agrees with Ms. Estey's assessment that these
are unprecedented times. He continued paraphrasing the next
portion of his written testimony, which read as follows
[original punctuation provided]:
REAP has been involved in efforts to make the Railbelt
more efficient since 2011, when I served as a member
of the Citizen Advisory Committee for a failed state
effort to develop a Railbelt Integrated Resource Plan.
REAP became more involved after the legislature
appropriated money for the Regulatory Commission of
Alaska (RCA) to study the issue of Railbelt reform and
the Commission opened docket I-15-001 in 2015. In
2015, REAP urged the legislature to introduce HB 187
to create an independent system operator (ISO). That
effort was repeated in 2018 with the introduction of
HB 382. Both bills were designed to establish an
entity governed by an independent board of directors
that would operate the region's generation assets in
the most cost-efficient manner. Over the last year and
a half, REAP has been working with the utilities to
develop a memorandum of understanding (MOU) to form an
electric reliability organization called the Railbelt
Reliability Council (RRC) that would carry out
mandatory functions and be governed by a board that
includes non-utility stakeholders. All six utilities
signed that MOU in December 2019.
2:43:22 PM
REAP believes HB 151 does at least six important
things. The legislation:
1. Gives the RCA the authority to oversee the new
RRC if it is successfully established voluntarily via
the process the utilities have outlined in the MOU;
2. Gives the RCA the authority to establish an
ERO on its own, if the voluntary efforts to form the
RRC fail;
3. Gives the RCA authority to oversee regional
integrated resource planning led by the ERO that would
allow a public process to decide the future generation
and transmission needs for the Railbelt;
4. Gives the RCA the authority to preapprove all
large new generation and transmission projects to
protect Railbelt consumers;
5. Requires the new ERO to develop regional,
nondiscriminatory interconnection standards and;
6. Requires the new ERO to develop a methodology
to recover the costs of the transmission system.
REAP notes that the bill does not require the kind of
regional economic dispatch that an independent system
operator would perform. However, the MOU that the
utilities have executed requires the new RRC, once it
is stood up, to study the benefits and costs of
economic dispatch. REAP supports that effort.
MR. ROSE said REAP would like to see the railbelt function as
"one single load balancing area for the entire railbelt." He
said that would facilitate more renewable energy because it is a
lot easier "to integrate variable electrons into a larger area."
Regarding the governance structure of the MOU, he said he thinks
there may be some disagreement between REAP and other
stakeholders as to whether another utility would be added if the
acquisition of ML&P is approved by the commission. He said REAP
sees AEA as more of a utility than an independent power producer
and would like to discuss that; however, he indicated that is
not an issue that would be addressed through legislation.
2:46:11 PM
MR. ROSE returned to paraphrasing another portion of his written
testimony, which read as follows [original punctuation
provided]:
REAP sees electric grid reform as risk management.
Establishing an ERO will help the Railbelt address
existing challenges in the region that are associated
with fuel price volatility, climate risk, technology
innovation, changing customer needs and desires, and
grid resiliency and security.
Today, just one producer in Cook Inlet controls
approximately 85 percent of the natural gas production
the region relies on, creating a virtual monopoly
situation. In addition, there is flat demand for
electricity and a small market for gas in the
Railbelt. The utilities have no leverage. The gas
infrastructure is aging and the production costs for
the gas are high. Furthermore, even the high prices
that Railbelt utilities pay for natural gas relative
to Lower 48 utilities have been subsidized by the
state. All these factors are a risk for the region
that can better be addressed by a new, regional
entity.
The region is also at risk for higher prices that will
inevitably occur when the federal government puts a
price on carbon emissions. The oil companies
themselves have been asking for a price on carbon for
five years in order to have more certainty for their
business model, and the threat of climate change is
likely to eventually result in a carbon tax that will
make the region's high dependence on natural gas for
electric generation even more expensive. The Railbelt
already has some of the highest electricity costs in
the nation, and those costs are not attracting
investors.
Meanwhile, renewable energy is getting cheaper and
cheaper. According to Lazard's annual comparison of
the unsubsidized cost of electric generation, land-
based wind and utility solar are already the cheapest
ways to generate electricity in the world. Lazard
reports that over the last decade, wind energy prices
have fallen 70 percent, and solar photovoltaic prices
have fallen an astounding 89 percent, on average. In
2020, the U.S. Energy Information Administration (EIA)
expects that 76 percent of all new additional electric
generation capacity in the United States will be wind
and solar. These precipitously falling prices, along
with technology innovation, are a disruption that the
Railbelt can better address through a regional entity
like an ERO. When combined with other disruptive
technologies such as battery energy storage and
electric vehicles that are advancing rapidly, Railbelt
reform cannot happen too soon.
Customer needs and desires are also changing quickly.
People in the Railbelt are installing solar on their
roofs and demanding cleaner sources of energy. Even
more important, more than 60 percent of Fortune 500
companies have set their own climate and clean energy
targets which require the purchase of renewable
electricity. This means the Railbelt will not be able
to attract a company like Apple, Google, Facebook or a
host of others unless the region can provide those
businesses with 100 percent renewable electricity.
A new ERO will also allow the Railbelt to better
address issues of reliability, cyber security and grid
resiliency.
Finally, REAP believes that the establishment of a
regional electric reliability organization has
statewide benefit. As the average cost of electricity
in the Railbelt has risen almost 50 percent over the
last decade, the floor for Power Cost Equalization
(PCE) has also risen. That is, the difference between
the average electric prices in Fairbanks, Anchorage
and Juneau and the rest of the state has narrowed.
More efficient and affordable electricity in the
Railbelt means more PCE support for rural communities
that still rely primarily on expensive, imported
diesel fuel to generate electricity.
MR. ROSE requested that the House Resources Standing Committee
pass HB 151, and he expressed his appreciation for the
committee's consideration of the matter.
2:49:51 PM
REPRESENTATIVE TUCK asked for clarification on Mr. Rose's
statements regarding the cost of various energy sources.
MR. ROSE clarified that currently, on a worldwide basis, land-
based wind and utility solar are the first and second cheapest
forms of electricity, respectively. In response to a follow-up
question, he confirmed those two sources are cheaper than
nuclear and hydropower. He qualified that "it's cheaper than
any new plant."
2:50:42 PM
CO-CHAIR LINCOLN asked whether that included the price of
storage necessary to maintain a consistent load.
MR. ROSE answered no. He related that in his home state of
Iowa, 40 percent of all the electricity is generated by wind.
He added, "There is no storage whatsoever, because the grid
itself acts as storage." He said there are lower prices in
larger grids where storage is not required. In response to a
follow-up question, he explained that it is not always necessary
to have storage when there is a large, economically dispatched
grid, where the electrons can move immediately to where they are
needed.
CO-CHAIR LINCOLN asked about the effect of having higher
percentages of penetration regardless of the size of the system.
He surmised that at 70-80 percent, storage becomes more
important with increasing penetration "to provide the next
marginal increment to the load that's being provided by
renewables." He asked whether that was a true statement.
MR. ROSE answered that's correct. He added, "I think that most
experts would say once you get to the 70-80 percent penetration,
that is true."
2:54:25 PM
VERI DI SUVERO, Executive Director, Alaska Public Interest
Research Group (AkPIRG), testified in support of HB 151. She
gave a brief background of AkPIRG, which she said has been
involved in the creation of the MOU for the RRC, as well as
having testified before the legislature. She opined that the
creation of an ERO with oversite by the RCA "cannot happen too
soon." She echoed the testimony of Commissioner Scott regarding
the annual savings to consumer of $17 million annually from just
a 2 percent increase in efficiency. Further, the ability of the
RCA to have project preapproval is an historically recognized
need. She stated that HB 151 would help utilities claim capital
investments more efficiently through integrated resource
planning, as well as cost-saving through increased efficiency
rate payers. She stated that AkPIRG supports HB 151, "as is,"
and encourages the committee to pass it as quickly as possible.
2:56:26 PM
BRIAN HICKEY, Chief Operating Officer, Chugach Electric
Association, Inc. ("Chugach"), offered a brief background of his
experience. He agreed that the alignment happening is historic.
The utility industry is changing. He said Chugach believes the
ERO will help create a grid to adapt to changes in the industry
and add to reliability and security. He emphasized that
mandatory and enforceable adoption of these standards is the
most effective way to ensure a secure electric grid. Mr. Hickey
said electricity is unique in that it must be produced at the
exact moment that it is used or required. A grid such as the
interconnected railroad grid is a single physical machine, which
"operates in near perfect synchronism at all times." Deviations
from that system, as can happen when generators are brought
online or trip offline unexpectedly, or when loads are brought
online or trip offline unexpectedly, result in shutting down all
or portions of the grid. He said, "A machine of this nature
should be planed as a single machine rather than as individual
separate parts of a machine, and we believe that the
[International Registration Plan] (IRP) process and the
preapproval process will assist us in achieving that." Mr.
Hickey said Chugach believes that increasing the diversity of
input into the planning process through the broader stakeholder
governing board envisioned in the RRC "will help us increase
both the scope and the effectiveness of the planning project."
He concluded by stating that Chugach supports both HB 151 and SB
123.
2:59:59 PM
CO-CHAIR LINCOLN, after ascertaining no one further wished to
testify, closed public testimony on CSHB 151(ENE).
3:00:08 PM
CO-CHAIR TARR indicated she was excited at the possibility this
issue may be resolved. She emphasized the importance of a
reliable infrastructure for the state. She expressed gratitude
"for everybody who's worked so hard to get us to this point."
REPRESENTATIVE TUCK recalled the first energy policy for the
state back in 2009 or 2010. He recalled the Greater Railbelt
Energy and Transmission Corporation (GRETC), among other efforts
in the evolution of this effort to work toward an alliance that
would result in "better impacts" and "better efficiencies for
the consumer and for new development of industries ...." He
said this is "a testament of how you just can't rush things."
He expressed appreciation the work of many years "that's brought
us to this point."
3:02:41 PM
CO-CHAIR LINCOLN announced [that CSHB 151(ENE) was held over].
3:02:57 PM
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at 3:03 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 151 Sponsor Statement 2.28.20.pdf |
HRES 3/4/2020 1:00:00 PM HRES 3/6/2020 1:00:00 PM |
HB 151 |
| 2020-02-24 - HB 151 version G.pdf |
HENE 2/25/2020 10:15:00 AM HRES 3/6/2020 1:00:00 PM |
HB 151 |
| HB 151 Sectional Analysis ver. G 2.28.20.pdf |
HRES 3/4/2020 1:00:00 PM HRES 3/6/2020 1:00:00 PM |
HB 151 |
| HB 151 Summary of Changes ver. G 2.28.20.pdf |
HRES 3/4/2020 1:00:00 PM HRES 3/6/2020 1:00:00 PM |
HB 151 |
| HB 151 ODT Presentation 3.3.20.pdf |
HRES 3/4/2020 1:00:00 PM HRES 3/6/2020 1:00:00 PM |
HB 151 |
| HB 151 RCA Presentation 3.3.20.pdf |
HRES 3/4/2020 1:00:00 PM HRES 3/6/2020 1:00:00 PM |
HB 151 |
| HB 151 Sponsor Presentation 3.4.20.pdf |
HRES 3/4/2020 1:00:00 PM HRES 3/6/2020 1:00:00 PM |
HB 151 |
| HB 151 Fiscal Note - DCCED-RCA 2.26.20.pdf |
HRES 3/6/2020 1:00:00 PM |
HB 151 |
| HB 151 Testimony as of 3.6.20.pdf |
HRES 3/6/2020 1:00:00 PM |
HB 151 |
| HB 151 RCA Presentation 3.6.20.pdf |
HRES 3/6/2020 1:00:00 PM |
HB 151 |