Legislature(2019 - 2020)SENATE FINANCE 532

03/03/2020 09:00 AM Senate FINANCE

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Audio Topic
09:01:37 AM Start
09:03:08 AM SB123
10:50:33 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ SB 123 ELECTRIC RELIABILITY ORGANIZATIONS TELECONFERENCED
Heard & Held
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
                 SENATE FINANCE COMMITTEE                                                                                       
                       March 3, 2020                                                                                            
                         9:01 a.m.                                                                                              
                                                                                                                                
9:01:37 AM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair  von  Imhof  called the  Senate  Finance  Committee                                                                    
meeting to order at 9:01 a.m.                                                                                                   
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Natasha von Imhof, Co-Chair                                                                                             
Senator Bert Stedman, Co-Chair                                                                                                  
Senator Click Bishop                                                                                                            
Senator Lyman Hoffman                                                                                                           
Senator Donny Olson                                                                                                             
Senator Bill Wielechowski                                                                                                       
Senator David Wilson                                                                                                            
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Senator John  Coghill, Sponsor; Rena Miller,  Staff, Senator                                                                    
Cathy Giessel;  Senator Cathy Giessel;  Representative Grier                                                                    
Hopkins.                                                                                                                        
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Antony   Scott,  Commissioner,   Regulatory  Commission   of                                                                    
Alaska;   Julie  Estey,   Director   of  External   Affairs,                                                                    
Matanuska      Electric     Association,      Representative                                                                    
Organizational Development  Committee, Palmer;  Jeff Warner,                                                                    
Municipal Light and Power,  Anchorage; Chris Rose, Renewable                                                                    
Energy   Alaska  Project,   Palmer;   Brian  Hickey,   Chief                                                                    
Operating  Officer, Chugach  Electric Association,  Big Sky,                                                                    
Montana.                                                                                                                        
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
SB 123    ELECTRIC RELIABILITY ORGANIZATIONS                                                                                    
                                                                                                                                
          SB 123 was HEARD and HELD in committee for                                                                            
          further consideration.                                                                                                
                                                                                                                                
SENATE BILL NO. 123                                                                                                           
                                                                                                                                
     "An  Act   relating  to  the  regulation   of  electric                                                                    
     utilities and  electric reliability  organizations; and                                                                    
     providing for an effective date."                                                                                          
                                                                                                                                
9:03:08 AM                                                                                                                    
                                                                                                                                
SENATOR JOHN COGHILL, SPONSOR, introduced the legislation.                                                                      
                                                                                                                                
9:09:09 AM                                                                                                                    
                                                                                                                                
RENA  MILLER,  STAFF,   SENATOR  CATHY  GIESSEL,  introduced                                                                    
herself, and  stated that she  was working with  the sponsor                                                                    
on  the  legislation.  She   discussed,  "SB  123:  Electric                                                                    
Reliability Organizations" (copy on file).                                                                                      
                                                                                                                                
Ms. Miller looked at slide 2, "Context for SB 123":                                                                             
                                                                                                                                
     ? 2014: Legislature asked RCA  to evaluate the Railbelt                                                                    
     network                                                                                                                    
     ?  2015:  RCA   delivered  findings/recommendations  to                                                                    
     Legislature                                                                                                                
     ? 2020: RCA delivered progress report to Legislature                                                                       
     ? SB 123 / HB  151   electric reliability organizations                                                                    
     (EROs)                                                                                                                     
                                                                                                                                
     Overall  goal:  Cooperation   to  improve  reliability,                                                                    
     security,  and efficiencies  -  resulting in  long-term                                                                    
     savings to ratepayers                                                                                                      
                                                                                                                                
Ms. Miller pointed to slide 3, "SB 123 -Bill components":                                                                       
                                                                                                                                
     ?Participation (42.05.760 (a); 42.05.772)                                                                                  
     ?How an ERO forms (42.05.760 (b-f))                                                                                        
     ?Framework of an ERO (42.05.762)                                                                                           
          ?ERO   responsibilities   (42.05.765;   42.05.767;                                                                    
          42.05.770; 42.05.775; 42.05.780)                                                                                      
         ?How the RCA will process ERO activities                                                                               
          ?Compliance and enforcement                                                                                           
     ?Project pre-approval (42.05.785)                                                                                          
                                                                                                                                
Ms. Miller discussed slide 4, "Participation in ERO":                                                                           
                                                                                                                                
     ?Interconnected networks must have an ERO (some                                                                            
     exceptions)                                                                                                                
     ?Public utilities in the network must participate in                                                                       
     the ERO                                                                                                                    
     ?All users, owners, operators in the network must                                                                          
     comply with reliability standards set by the ERO                                                                           
     ?Railbelt primary need; legislation has general                                                                            
     applicability                                                                                                              
     ?'Release valves' to accommodate future                                                                                    
                                                                                                                                
9:15:07 AM                                                                                                                    
                                                                                                                                
Senator Hoffman  queried the reason for  the requirement for                                                                    
the RCA to  act when a facility wanted to  acquire a waiver.                                                                    
He suggested that language be included for an "opt in."                                                                         
                                                                                                                                
Ms. Miller clarified the question.                                                                                              
                                                                                                                                
Senator  Hoffman recalled  that a  required ERO  would allow                                                                    
for the  RCA to exempt  them from that process.  He wondered                                                                    
why  there was  not an  attempt  to reverse  that effort  to                                                                    
allow for a utility to participate in the ERO.                                                                                  
                                                                                                                                
Ms. Miller replied  that the RCA felt that  it was important                                                                    
when  different utilities  may have  different positions  on                                                                    
whether the  entities should be  working together.  She felt                                                                    
that  the  benefit  came   from  applying  network-wide,  so                                                                    
everyone has compliance.                                                                                                        
                                                                                                                                
Senator  Hoffman felt  that  it should  be  a public  policy                                                                    
decision, so RCA should not be making that policy decision.                                                                     
                                                                                                                                
Senator Bishop wondered who participated in the ERO.                                                                            
                                                                                                                                
Ms. Miller  replied that within the  Railbelt network, those                                                                    
entities would be subject to that standard.                                                                                     
                                                                                                                                
Senator Bishop  wondered whether those communities  that had                                                                    
their own power  or were not connected to the  grid would be                                                                    
a part of the standard.                                                                                                         
                                                                                                                                
Senator Coghill  replied that  they would not  be a  part of                                                                    
it.  He   explained  that  the   standard  applied   to  the                                                                    
interconnected utilities.                                                                                                       
                                                                                                                                
9:20:13 AM                                                                                                                    
                                                                                                                                
Senator  Wilson  surmised  that there  were  six  utilities,                                                                    
which could possibly be reduced to five utilities.                                                                              
                                                                                                                                
Ms. Miller replied that those  were the six public utilities                                                                    
on the  Railbelt network.  She noted  that there  were other                                                                    
power  providers that  fed into  the network  that would  be                                                                    
subject to the standards set by the ERO.                                                                                        
                                                                                                                                
Senator Wilson requested a list of those providers.                                                                             
                                                                                                                                
Ms. Miller agreed to provide that information.                                                                                  
                                                                                                                                
Senator  Wilson wondered  whether there  was a  kilowatt per                                                                    
hour minimum.                                                                                                                   
                                                                                                                                
Ms.  Miller  replied  that there  was  no  minimum  kilowatt                                                                    
production standard. She stressed  that it was about uniform                                                                    
standard and security of the entire grid.                                                                                       
                                                                                                                                
Senator  Wielechowski  wondered  how  this  might  affect  a                                                                    
smaller company to provide renewable energy sources.                                                                            
                                                                                                                                
Ms. Miller  replied that there was  support from independent                                                                    
power  producers. She  stressed  that  those business  would                                                                    
need to comply with the ERO standards.                                                                                          
                                                                                                                                
Senator  Wielechowski  responded   that  the  more  dominant                                                                    
utilities might  not be  supported of  smaller organizations                                                                    
coming online.                                                                                                                  
                                                                                                                                
Ms.  Miller  remarked  that  the   bill  required  that  the                                                                    
governing board  of an ERO have  a very specific make  up of                                                                    
members. She stressed  that it was designed to  be an entity                                                                    
that  was  not  only  made  up of  the  specific  major  six                                                                    
utilities.                                                                                                                      
                                                                                                                                
Co-Chair von Imhof  stressed that there were  high costs due                                                                    
to unfettered  capital projects built  on the  Railbelt. She                                                                    
noted that the larger  companies had a specific constituency                                                                    
representing  specific boundaries.  She felt  that the  bill                                                                    
would create  streamlined operations over  approximately 500                                                                    
miles  in  the  event  of  a  natural  disaster  for  backup                                                                    
transmission. She  did not  believe that  it would  keep the                                                                    
small  alternative  energy  providers  out  of  the  market,                                                                    
rather it  would do the  opposite, because it  would control                                                                    
the   cost  of   the  specific   members  in   the  specific                                                                    
boundaries.                                                                                                                     
                                                                                                                                
Ms. Miller looked at slide 5, "Forming an ERO":                                                                                 
                                                                                                                                
     ?Interested players form an organization                                                                                   
     ?Organization applies to the RCA                                                                                           
     ?RCA evaluates, certifies the organization as the ERO                                                                      
     ?One ERO per network                                                                                                       
     ?If no one applies, RCA shall form an ERO                                                                                  
                                                                                                                                
9:30:46 AM                                                                                                                    
                                                                                                                                
Ms. Miller highlighted slide 6, "ERO framework":                                                                                
                                                                                                                                
     ?Required structure in SB 123:                                                                                             
          ?Governed by independent or balanced board, or a                                                                      
          combination                                                                                                           
          ?Open, inclusive processes                                                                                            
          ?Balancing interests                                                                                                  
          ?Abilities to develop standards, integrated                                                                           
          resource plans                                                                                                        
     ?Applicant will build on that structure                                                                                    
          ?Per RCA regulations for SB 123                                                                                       
                                                                                                                                
Senator Hoffman  wondered whether there was  a structure for                                                                    
the board representative of the existing utilities.                                                                             
                                                                                                                                
Ms. Miller  looked at page  3 of  the bill, which  said that                                                                    
the governing  board needed to have  the ex-officio members,                                                                    
and must  be formed as an  independent balanced stakeholder,                                                                    
or a combination board.                                                                                                         
                                                                                                                                
Senator Hoffman surmised that it  would depend on the entity                                                                    
that  submitted  its  ERO  plan,  and  would  be  ultimately                                                                    
applied by the RCA.                                                                                                             
                                                                                                                                
Ms. Miller replied in the affirmative.                                                                                          
                                                                                                                                
Ms. Miller discussed slide 7, "ERO responsibilities":                                                                           
                                                                                                                                
     ?RCA delegates certain work to the ERO                                                                                     
     ?RCA maintains oversight, authority, assigns tasks to                                                                      
     ERO                                                                                                                        
     ?Bottom-up approach from the network players who know                                                                      
     best                                                                                                                       
     ?ERO sets and enforces reliability standards                                                                               
     ?ERO develops integrated resource plan                                                                                     
                                                                                                                                
Ms. Miller addressed slide 8, "Responsibilities, cont.":                                                                        
                                                                                                                                
     ?Reliability standards for the network                                                                                     
          ?Subject to RCA approval                                                                                              
          ?ERO to enforce standards, RCA back-up                                                                                
          ?ERO or RCA can penalize violations                                                                                   
          ?Conflict resolution                                                                                                  
                                                                                                                                
9:36:54 AM                                                                                                                    
                                                                                                                                
Senator Coghill remarked that the issue was related to a                                                                        
balance of authority. He stressed that there was a question                                                                     
of how much authority would be granted to RCA.                                                                                  
                                                                                                                                
Senator Hoffman requested the requirements and the                                                                              
membership of the current RCA board.                                                                                            
                                                                                                                                
Ms. Miller agreed to provide that information.                                                                                  
                                                                                                                                
Ms. Miller continued to discuss slide 8:                                                                                        
                                                                                                                                
     ?Integrated resource planning for the network                                                                              
          ?How to meet needs at greatest value, consistent                                                                      
          with public interest                                                                                                  
          ?Subject to RCA approval                                                                                              
          ?Items in an approved plan are 'necessary'                                                                            
                                                                                                                                
Senator Bishop wondered whether the section provided buy-in                                                                     
from the independent power providers.                                                                                           
                                                                                                                                
Ms. Miller replied that it was a provision that was brought                                                                     
by one of the utilities supported by the group, and was                                                                         
heavily endorsed by the independent power providers.                                                                            
                                                                                                                                
9:42:01 AM                                                                                                                    
                                                                                                                                
Ms. Miller pointed to slide 9, "Project pre-approval":                                                                          
                                                                                                                                
     ?For large new generation and transmission                                                                                 
     ?Protects utilities and ratepayers                                                                                         
     ?Certifies necessity and cost-effectiveness                                                                                
     ?Presumption for projects in an integrated resource                                                                        
     plan                                                                                                                       
     ?Some exemptions                                                                                                           
                                                                                                                                
9:45:46 AM                                                                                                                    
                                                                                                                                
Ms.  Miller noted  a Letter  of Intent  (copy on  file). She                                                                    
explained  that   the  letter  navigated   some  challenging                                                                    
terrain.                                                                                                                        
                                                                                                                                
Senator Hoffman  looked at slide  11, which said  that there                                                                    
were  six  utilities  and other  participants.  He  wondered                                                                    
whether  the six  utilities were  part of  the organization,                                                                    
and the rest contemplated by the legislation ex-officio.                                                                        
                                                                                                                                
Ms.  Miller replied  that the  legislation  did not  require                                                                    
participation by any particular entity.                                                                                         
                                                                                                                                
Senator   Bishop   wondered    whether   the   program   had                                                                    
similarities  with the  North American  Energies Reliability                                                                    
Council groups in the Lower 48.                                                                                                 
                                                                                                                                
Senator Coghill replied in the  affirmative, but it fit into                                                                    
Alaska's needs. He  explained that it gave  new authority to                                                                    
a reliability organization and to RCA.                                                                                          
                                                                                                                                
9:51:03 AM                                                                                                                    
                                                                                                                                
ANTONY SCOTT, COMMISSIONER,  REGULATORY COMMISSION OF ALASKA                                                                    
(via teleconference), (RCA)  discussed the presentation, "SB
123" (copy on file). He looked at slide 2, "RCA's Purpose":                                                                     
                                                                                                                                
     ? Effectively competitive  markets produce economically                                                                    
     efficient outcomes  that generally reflect  the "public                                                                    
     interest                                                                                                                   
                                                                                                                                
     ? Public  utilities are  "natural monopolies"  that are                                                                    
     not,  and cannot  generally  be,  subject to  effective                                                                    
     competition (it is a technology issue)                                                                                     
                                                                                                                                
     ? RCA's  statutes are intended  to enable us  to ensure                                                                    
     that  prices,  quality,  and  other  terms  of  service                                                                    
     reflect the  results of  a would  result if  the market                                                                    
     were fully, effectively competitive                                                                                        
                                                                                                                                
     ? Big  stakes: Railbelt consumers spent  more than $880                                                                    
     million in 2018                                                                                                            
                                                                                                                                
9:55:54 AM                                                                                                                    
                                                                                                                                
Commissioner Scott highlighted slide 3, "How We Got Here":                                                                      
                                                                                                                                
     ?  In   2014  the  Legislature  directed   the  RCA  to                                                                    
     investigate:                                                                                                               
                                                                                                                                
          "whether creating  an independent  system operator                                                                    
          or similar  structure for electrical  utilities in                                                                    
          the  Railbelt   area  is   the  best   option  for                                                                    
          effective and efficient electrical transmission"                                                                      
                                                                                                                                
     ? In 2015 RCA made  Findings and Recommendations to the                                                                    
     Legislature                                                                                                                
                                                                                                                                
     ?  Just before  this session  Chairman Pickett  updated                                                                    
     the Legislature  on progress to date  towards the RCA's                                                                    
     original recommendations                                                                                                   
                                                                                                                                
          o  Letter was  unanimously  endorsed and  reflects                                                                    
          the views of the Commission                                                                                           
                                                                                                                                
     ? SB 123  is an outgrowth of learnings  and progress to                                                                    
     date                                                                                                                       
                                                                                                                                
     ? Commission has twice unanimously  voted to support SB
     123                                                                                                                        
                                                                                                                                
Commissioner Scott addressed slide 4, "RCA's 2015                                                                               
Findings":                                                                                                                      
                                                                                                                                
     ?  Balkanized Railbelt  ownership across  six utilities                                                                    
     creates inefficiencies                                                                                                     
                                                                                                                                
          o   Insufficient  coordination   across  utilities                                                                    
          results    in   inconsistent,    inadequate,   and                                                                    
          unenforceable electric reliability standards                                                                          
                                                                                                                                
          o   Insufficient  integration   between  utilities                                                                    
          curtails  ability  to  ensure  that  planning  and                                                                    
          construction  of new  generation and  transmission                                                                    
          assets  within one  service  territory is  optimal                                                                    
          for the system as a whole                                                                                             
                                                                                                                                
          o   Interconnected   transmission   infrastructure                                                                    
          benefits  everyone,  but  there   is  not  a  good                                                                    
          business model to ensure cost recovery                                                                                
                                                                                                                                
          o   Insufficient   coordination  and   integration                                                                    
          across  utilities  hinders   ability  to  maximize                                                                    
          efficient  operation  of  existing  generators  to                                                                    
          meet load                                                                                                             
                                                                                                                                
10:01:51 AM                                                                                                                   
                                                                                                                                
Commissioner   Scott   addressed    slide   5,   "Regulatory                                                                    
Commission of Alaska 2015 Recommendations":                                                                                     
                                                                                                                                
     ?  Need   consistent  and  enforceable   operating  and                                                                    
     reliability standards                                                                                                      
                                                                                                                                
     ?  Need an  independent  transmission  company to  own,                                                                    
     finance  and  operate   a  single  transmission  tariff                                                                    
     (facilitates  economic dispatch,  ensures adequate  and                                                                    
     efficient transmission infrastructure)                                                                                     
                                                                                                                                
     ?  Clarify   RCA's  authority  to   require  integrated                                                                    
     resource  planning,   and  large   project  preapproval                                                                    
     ("siting    authority"),    to   ensure    major    new                                                                    
     infrastructure  is most  efficient for  the benefit  of                                                                    
     all                                                                                                                        
                                                                                                                                
     ?  Need  new  institutions   to  provide  for  security                                                                    
     constrained    economic   dispatch    (most   efficient                                                                    
     generators run regardless of ownership                                                                                     
                                                                                                                                
     ? Allow time for voluntary efforts to succeed                                                                              
                                                                                                                                
Commissioner Scott addressed slide 6, "Progress to Date":                                                                       
                                                                                                                                
     ?Voluntary  efforts   have  laid  the   groundwork  for                                                                    
     institutional reform                                                                                                       
                                                                                                                                
          o Greater  understanding among all the  parties of                                                                    
          issues, barriers,  and potential solutions  to the                                                                    
          suite of issues the RCA described                                                                                     
                                                                                                                                
          o Railbelt utilities reached  consensus in 2018 to                                                                    
          form  an  electric reliability  organization  that                                                                    
         includes non-utility stakeholder members                                                                               
                                                                                                                                
     ? Voluntary efforts have  not resulted in institutional                                                                    
     reform                                                                                                                     
                                                                                                                                
          o Although  the two  sets of  Railbelt reliability                                                                    
          standards were  reconciled, enforcement mechanisms                                                                    
         are lacking, and areas of concern remain.                                                                              
                                                                                                                                
          o Efforts to form an independent transmission                                                                         
          company have failed                                                                                                   
                                                                                                                                
          o Progress on an Anchorage based "tight pool",                                                                        
          let alone Railbelt wide security constrained                                                                          
          merit order dispatch, have stalled                                                                                    
                                                                                                                                
10:05:39 AM                                                                                                                   
                                                                                                                                
Commissioner Scott highlighted slide 7, "SB 123: Cements                                                                        
and ensures progress":                                                                                                          
                                                                                                                                
      Utility MOU in 2018 contemplated role for RCA that                                                                        
     was not possible                                                                                                           
                                                                                                                                
          ? SB 123 enables the MOU's intent by enhancing                                                                        
          RCA jurisdiction, consistent with RCA's 2015 and                                                                      
          2020 recommendations                                                                                                  
                                                                                                                                
          ?   Bill   substantially    modeled   on   Federal                                                                    
          legislation                                                                                                           
                                                                                                                                
          ? Substantively addresses:                                                                                            
                                                                                                                                
               o Consistent and enforceable reliability                                                                         
               standards                                                                                                        
                                                                                                                                
               o Integrated resources planning to identify                                                                      
               optimal new infrastructure needs                                                                                 
                                                                                                                                
               o Requires RCA preapproval for large                                                                             
               infrastructure projects                                                                                          
                                                                                                                                
               o  Provides  a  pathway towards  solving  the                                                                    
               'business    model'     problem    for    new                                                                    
               transmission,  and  would  improve  prospects                                                                    
               for economic dispatch                                                                                            
                                                                                                                                
Commissioner Scott pointed to slide 8, "SB 123: Ensures                                                                         
Institutional Reform":                                                                                                          
                                                                                                                                
     ? Defines the ERO as a public utility, subject to RCA                                                                      
     regulation                                                                                                                 
                                                                                                                                
     ? Provides definitive timetable for the RCA to                                                                             
     designate an applicant to be an ERO, which would:                                                                          
                                                                                                                                
          o Develop reliability standards to be considered                                                                      
          by the Commission                                                                                                     
                                                                                                                                
          o Enforce reliability standards, subject to                                                                           
          appeal to the Commission                                                                                              
                                                                                                                                
          o Draft Integrated Resource Plans to be                                                                               
          considered by the Commission                                                                                          
                                                                                                                                
     ?  If an  ERO has  not applied  for designation  SB 123                                                                    
     gives  the  RCA  power  to form  one,  consistent  with                                                                    
     regulations that it will promulgate                                                                                        
                                                                                                                                
          o Backstop to ensure timely and certain progress                                                                      
                                                                                                                                
10:10:33 AM                                                                                                                   
                                                                                                                                
Commissioner Scott looked at slide 9, "SB 123: Incentives                                                                       
for Collaborative Efforts":                                                                                                     
                                                                                                                                
     ? The RCA  would not delegate authority to  the ERO for                                                                    
     reliability and planning.                                                                                                  
                                                                                                                                
     ? The  RCA would  instead assign most  of this  work to                                                                    
     the ERO and would generally follow the EROs lead, but:                                                                     
                                                                                                                                
     ? RCA  could impose  remedy in  the event  of inaction,                                                                    
     insufficient   progress,   disputes,  or   insufficient                                                                    
     attention to the public interest.                                                                                          
                                                                                                                                
     ? Imposition of  project preapproval requirements, with                                                                    
     presumption of  necessity for projects  consistent with                                                                    
     an IRP,  creates incentives to participate  in and take                                                                    
     seriously the planning process.                                                                                            
                                                                                                                                
Commissioner Scott looked at slide 10, "SB 123 Builds on                                                                        
and Meshes with Utility Act":                                                                                                   
                                                                                                                                
     ? Reliability  standards would be filed  as tariffs for                                                                    
     approval, which trigger (among other things):                                                                              
                                                                                                                                
          o Nondiscrimination requirements                                                                                      
          o Public notice requirements                                                                                          
          o Timeline for action requirements                                                                                    
          o A process for the commission to further                                                                             
          investigate and adjudicate contentious issues if                                                                      
          necessary                                                                                                             
                                                                                                                                
     ?  The overwhelming  majority  of  tariff filings  made                                                                    
     with  the  commission   are  summarily  approved  after                                                                    
     public notice and without  investigation, 45 days after                                                                    
     filing.                                                                                                                    
                                                                                                                                
     ? Timelines and processes for IRP and large project                                                                        
     preapproval are also clearly defined, consistent with                                                                      
     existing commission practice.                                                                                              
                                                                                                                                
Commissioner  Scott  replied  to  some  questions  from  the                                                                    
committee members.                                                                                                              
                                                                                                                                
10:16:48 AM                                                                                                                   
                                                                                                                                
Commissioner  Scott   addressed  a  question   from  Senator                                                                    
Wielechowski   about   independent   power   producers.   He                                                                    
explained  that  the  bill would  normalize  the  grid,  and                                                                    
should not affect the independent power producers.                                                                              
                                                                                                                                
Commissioner  Scott  replied  to  a  question  from  Senator                                                                    
Wilson  about whether  the program  would affect  individual                                                                    
homeowners who  may have  rooftop solar.  He stated  that it                                                                    
would  not affect  those individuals.  He stressed  that the                                                                    
ERO would set  standards for the market  participants on the                                                                    
system.                                                                                                                         
                                                                                                                                
10:21:57 AM                                                                                                                   
                                                                                                                                
JULIE  ESTEY,   DIRECTOR  OF  EXTERNAL   AFFAIRS,  MATANUSKA                                                                    
ELECTRIC    ASSOCIATION,    REPRESENTATIVE    ORGANIZATIONAL                                                                    
DEVELOPMENT   COMMITTEE,    PALMER   (via   teleconference),                                                                    
discussed,  "Railbelt   Reliability  Council   and  Enabling                                                                    
Legislation, Senate Finance Committee,  March 3, 2020" (copy                                                                    
on file). She addressed slide 2, "Presentation Outline":                                                                        
                                                                                                                                
     ?What are we trying to accomplish?                                                                                         
     ?Progress to date                                                                                                          
     ?The Railbelt Reliability Council (RCC)                                                                                    
     ?Next steps for the RRC                                                                                                    
     ?Our request of the legislature                                                                                            
     ?Thoughts on SB123 and HB151                                                                                               
                                                                                                                                
Ms.  Estey  pointed  to  slide  3,  "What  is  the  Railbelt                                                                    
Electric System?" She  stated that the slide  showed the map                                                                    
of the electric system, which  was an 800 megawatt load. She                                                                    
said it was the largest  interconnected system in the state.                                                                    
She  shared that  it was  a series  of interconnected  grids                                                                    
that  had hurdles  in implementation.  She  felt that  there                                                                    
were  things that  could be  done to  better function  as an                                                                    
interconnected system. She stated  that there was 4300 miles                                                                    
of  line,  so  decisions  were done  with  respect  for  the                                                                    
numbers of miles, cost, and electric levels.                                                                                    
                                                                                                                                
10:26:34 AM                                                                                                                   
                                                                                                                                
Ms. Estey highlighted slide 4,  "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.                                                                                       
                                                                                                                                
10:30:34 AM                                                                                                                   
                                                                                                                                
Ms.  Estey  pointed  to  slide  5,  "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. Etsey highlighted slide 6, "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. Etsey  spoke about reserves  and how much power  to have                                                                    
on   reserve.   She   replied  to   a   previous   question.                                                                    
Accountability  was  voluntary  at  present.  She  mentioned                                                                    
cyber security.  The working group  was working  together to                                                                    
find solutions together.                                                                                                        
                                                                                                                                
10:34:41 AM                                                                                                                   
                                                                                                                                
Ms. Etsey looked at slide 7, "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 and 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  and P acquisition, expected  to achieve                                                                    
     approximately 75 percent of anticipated pool savings.                                                                      
                                                                                                                                
     Utilities will  return to power pool  discussions after                                                                    
     the  Chugach/ML  and  P  acquisition  docket  has  been                                                                    
     adjudicated.                                                                                                               
                                                                                                                                
Ms. Etsey pointed to slide  8, "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. Etsey talked about meeting  with all of the stakeholders                                                                    
and an  MOA was renegotiated  and all 60 members  signed the                                                                    
agreement. She talked about acting  differently by coming to                                                                    
the  table  with all  vulnerabilities  and  things began  to                                                                    
change.                                                                                                                         
                                                                                                                                
10:40:07 AM                                                                                                                   
                                                                                                                                
Co-Chair  von   Imhof  reminded   Ms.  Etsey  of   the  time                                                                    
limitation of the hearing.                                                                                                      
                                                                                                                                
Ms. Etsey  discussed slide 9, "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.                                                                                                    
                                                                                                                                
Ms. Etsey highlighted slide 10, "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. Etsey addressed slide 11, "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. Etsey reported the next steps on slide 12, "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                                                                                         
                                                                                                                                
10:43:47 AM                                                                                                                   
                                                                                                                                
Ms. Etsey highlighted slide 13, "The Railbelt utilities                                                                         
support SB 123 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.   Etsey  emphasized   that  the   group  supported   the                                                                    
legislation.  She  revisited the  benefits  of  the bill  as                                                                    
listed  on  the slide.  She  provided  closing comments  and                                                                    
asked the committee to support  the passage of the bill. She                                                                    
hoped  that the  project would  stay focused  on a  positive                                                                    
solution.                                                                                                                       
                                                                                                                                
                                                                                                                                
10:46:02 AM                                                                                                                   
                                                                                                                                
Co-Chair von Imhof OPENED Public Testimony.                                                                                     
                                                                                                                                
10:46:33 AM                                                                                                                   
                                                                                                                                
JEFF  WARNER,  MUNICIPAL  LIGHT AND  POWER,  ANCHORAGE  (via                                                                    
teleconference),  spoke in  support  of the  bill. The  bill                                                                    
would provide liability. He thanked the committee                                                                               
                                                                                                                                
10:47:27 AM                                                                                                                   
                                                                                                                                
CHRIS  ROSE, RENEWABLE  ENERGY ALASKA  PROJECT, PALMER  (via                                                                    
teleconference),  spoke  in  support   of  SB  123.  He  had                                                                    
submitted written testimony to the committee.                                                                                   
                                                                                                                                
10:48:02 AM                                                                                                                   
                                                                                                                                
BRIAN  HICKEY,  CHIEF  OPERATING OFFICER,  CHUGACH  ELECTRIC                                                                    
ASSOCIATION,   BIG   SKY,  MONTANA   (via   teleconference),                                                                    
supported  the  legislation.  The cooperative  believed  the                                                                    
bill would be beneficial. He concluded his testimony.                                                                           
                                                                                                                                
10:49:08 AM                                                                                                                   
                                                                                                                                
Co-Chair von Imhof CLOSED Public Testimony.                                                                                     
                                                                                                                                
Senator  Wilson asked  about one  of the  fiscal notes  that                                                                    
appeared to  be zero, because  he thought there would  be an                                                                    
associated cost.                                                                                                                
                                                                                                                                
Co-Chair von Imhof would take up  the issue at a later time.                                                                    
She  reviewed   the  agenda  for  the   following  day.  She                                                                    
indicated the  committee would be  taking up  amendments for                                                                    
the supplemental bill.                                                                                                          
                                                                                                                                
SB  123  was  HEARD  and   HELD  in  committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
ADJOURNMENT                                                                                                                   
10:50:33 AM                                                                                                                   
                                                                                                                                
The meeting was adjourned at 10:50 a.m.                                                                                         

Document Name Date/Time Subjects
SB 123 Sponsor Statement 2.25.2020.pdf HRES 3/11/2020 1:00:00 PM
SFIN 3/3/2020 9:00:00 AM
SB 123
SB 123 Sectional Analysis v.O 2.25.2020.pdf HRES 3/11/2020 1:00:00 PM
SFIN 3/3/2020 9:00:00 AM
SB 123
SB 123 Explanation of Changes v. O.pdf HRES 3/11/2020 1:00:00 PM
SFIN 3/3/2020 9:00:00 AM
SB 123
SB 123 - RCA Presentation 3.3.20.pdf SFIN 3/3/2020 9:00:00 AM
SB 123
SB 123 - RCA Letter to Leg 1-17-2020 Appendix D.pdf SFIN 3/3/2020 9:00:00 AM
SB 123
SB 123 - RCA Letter to Leg 1-17-2020 Appendix B.pdf SFIN 3/3/2020 9:00:00 AM
SB 123
SB 123 - RCA Letter to Leg 1-17-2020 Appendix C.pdf SFIN 3/3/2020 9:00:00 AM
SB 123
SB 123 - RCA Letter to Leg 1-17-2020 Appendix A.pdf SFIN 3/3/2020 9:00:00 AM
SB 123
SB123-Capital Appropriation to RCA in SB 119 2014 Session.pdf SFIN 3/3/2020 9:00:00 AM
SRBE 1/24/2020 3:30:00 PM
SB 119
SB 123
SB123-RCA Recommedations to Legislature June 30 2015.pdf SFIN 3/3/2020 9:00:00 AM
SRBE 1/24/2020 3:30:00 PM
SB 123
SB123-Railbelt Reliability Council Letter of Filing to RCA of MOU Dec 20 2019.pdf SFIN 3/3/2020 9:00:00 AM
SRBE 1/24/2020 3:30:00 PM
SB 123
SB123-RCA Letter to Leg 1-17-2020.pdf SFIN 3/3/2020 9:00:00 AM
SB 123
SB 123 - Acronyms 2.29.2020.pdf HRES 3/11/2020 1:00:00 PM
SFIN 3/3/2020 9:00:00 AM
SB 123
SB 123 REAP Public Testimony.pdf HRES 3/11/2020 1:00:00 PM
SFIN 3/3/2020 9:00:00 AM
SB 123
SB 123 Sponsor Presentation 3.3.2020.pdf HRES 3/11/2020 1:00:00 PM
SFIN 3/3/2020 9:00:00 AM
SB 123
SB 123 Presentation RRC ODT 3.3.20.pdf HRES 3/11/2020 1:00:00 PM
SFIN 3/3/2020 9:00:00 AM
SB 123
SB 123 Public Testimony AKPIRG.pdf HRES 3/11/2020 1:00:00 PM
SFIN 3/3/2020 9:00:00 AM
SB 123
SB 123 - Public Testimony - Laing.pdf HRES 3/11/2020 1:00:00 PM
SFIN 3/3/2020 9:00:00 AM
SB 123
SB 123 AIPPA RRC presentation 1-29-20.pdf HRES 3/11/2020 1:00:00 PM
SFIN 3/3/2020 9:00:00 AM
SB 123
SB 123 Intent Statement 2.24.2020.pdf HRES 3/11/2020 1:00:00 PM
SFIN 3/3/2020 9:00:00 AM
SB 123
SB 123 - Response to S FIN questions 3.6.2020.pdf HRES 3/11/2020 1:00:00 PM
SFIN 3/3/2020 9:00:00 AM
SB 123