Legislature(2019 - 2020)BUTROVICH 205
01/24/2020 03:30 PM Senate RAILBELT ELECTRIC SYSTEM
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| SB123 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| SB 123 | |||
ALASKA STATE LEGISLATURE
SENATE RAILBELT ELECTRIC SYSTEM
January 24, 2020
3:31 p.m.
MEMBERS PRESENT
Senator John Coghill, Chair
Senator Elvi Gray-Jackson
Senator Peter Micciche
Senator Mike Shower
Senator Cathy Giessel
MEMBERS ABSENT
All members present
OTHER LEGISLATORS PRESENT
Representative Grier Hopkins
COMMITTEE CALENDAR
SENATE BILL NO. 123
"An Act relating to the regulation of electric utilities and
electric reliability organizations; and providing for an
effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 123
SHORT TITLE: ELECTRIC RELIABILITY ORGANIZATIONS
SPONSOR(s): RAILBELT ELECTRIC SYSTEM
05/14/19 (S) READ THE FIRST TIME - REFERRALS
05/14/19 (S) RBE, FIN
01/24/20 (S) RBE AT 3:30 PM BUTROVICH 205
WITNESS REGISTER
RENA MILLER, Staff
Senator Cathy Giessel
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Delivered the sectional analysis for SB 123.
ANTONY SCOTT, Commissioner
Regulatory Commission of Alaska (RCA)
Anchorage, Alaska
POSITION STATEMENT: Delivered a PowerPoint relating to the role
of the RCA in the context of SB 123.
ACTION NARRATIVE
3:31:50 PM
CHAIR JOHN COGHILL called the Senate Railbelt Electric System
meeting to order at 3:31 p.m. Present at the call to order were
Senators Giessel, Micciche, Gray-Jackson, and Chair Coghill.
SB 123-ELECTRIC RELIABILITY ORGANIZATIONS
i
3:32:30 PM
CHAIR COGHILL announced the consideration of SENATE BILL NO.
123, "An Act relating to the regulation of electric utilities
and electric reliability organizations; and providing for an
effective date."
CHAIR COGHILL introduced SB 123 speaking to the following
sponsor statement:
In 2014, the Legislature sought the Regulatory
Commission of Alaska's recommendations to improve
effective and efficient electrical transmission among
the six interconnected utilities in the Railbelt
region, home to a majority of Alaska's population.
Among the RCA's recommendations was formation of a
reliability organization, which would write and
enforce common standards for safe and reliable
operation of the interconnected utilities.
The Railbelt electric utilities have made significant
progress toward collaboration and cooperation. Most
recently, all six entered into an agreement to work
together to establish a reliability organization.
The RCA, in updating the Legislature on the utilities'
progress, has recommended statutory changes that would
affirm the RCA's authority to regulate a reliability
organization; define the basic structure,
responsibilities and authorities of a reliability
organization; and empower the RCA to require pre-
approval of large generation and transmission projects
undertaken by utilities that are part of an
interconnected network. Senate Bill 123 reflects these
recommendations and, if enacted, would support the
utilities' voluntary work to develop a reliability
organization.
On behalf of electric utility customers from Fairbanks
to the Matanuska and Susitna valleys, from Anchorage
through the Kenai Peninsula to Homer and Seward, the
state should foster cooperation among the
interconnected utilities and ensure consumer needs are
efficiently and reliably met.
3:36:12 PM
SENATOR GIESSEL advised that Senator Shower was in the VPSO
Working Group meeting and would join the committee thereafter.
CHAIR COGHILL asked Ms. Miller to walk through the sectional
analysis.
3:36:46 PM
RENA MILLER, Staff, Senator Cathy Giessel and the Railbelt
Electric System Committee, Alaska State Legislature, Juneau,
Alaska stated that SB 123 establishes the Regulatory Commission
of Alaska's (RCA) clear authority over an electric reliability
organization (ERO). It defines participation in an ERO, talks
about the requirements of the organization regarding the
business it is to conduct, and outlines some of the powers and
oversight between the RCA and the electric reliability
organization.
3:37:36 PM
MS. MILLER delivered the following sectional analysis for SB
123:
Section 1. Adds new sections to AS 42.05, Alaska
Public Utilities Regulatory Act.
Sec. 42.05.292: Electric reliability organizations
Requires interconnected utilities in a network served
by a certificated reliability organization to
participate in the reliability organization. Provides
standard for RCA approval of a reliability
organization. Directs reliability organization
governance. If no entity applies as a reliability
organization by October 2020, the RCA must form one.
Subsection (b) talks about how a person can apply for
certification as an ERO. The commission may certify
one ERO for each interconnected network. The RCA must
ensure some things are in place in order to certify an
ERO. These are listed on page 2. The ERO must
demonstrate it has the ability to take on the two core
functions of an ERO. First, develop reliability
standards and second, develop an integrated resource
plan. Those will be discussed later in the bill.
The ERO must show the RCA it has established rules
regarding how it will conduct business as an ERO. The
ERO must act independently from the directors who are
contemplated to be members of entities that would be
subject to the standards of the ERO. The board must
show it will fairly allocate costs involved. It needs
to have established fair procedures for enforcing the
standards it puts out. It also needs to show it can
provide reasonable notice and involve the public in
its process.
The legislation requires the board to look a certain
way, although it still leaves a lot to be determined
by the applicant that wants to be the ERO. The
governing board must include two nonvoting members: an
RCA commissioner and the attorney general or designee,
likely the assistant attorney general assigned to the
regulatory affairs and advocacy section that works
with the RCA.
3:40:17 PM
CHAIR COGHILL recognized that Representative Grier Hopkins had
joined the meeting and noted that he chairs the House committee
that is hearing similar legislation.
MS. MILLER continued the sectional. She explained that the board
needs to be an independent board or a balanced stakeholder board
or a combination.
3:40:45 PM
Subsection (c) establishes that if nobody applies to
be an ERO within a certain time, the RCA shall create
one.
Subsection (d) talks about the business the ERO will
undertake upon certification. The ERO must file its
reliability standards with the RCA as part of a
tariff. The RCA would use the existing process in
public utility regulatory statutes that is used for
tariffs to process these standards. There are existing
provisions for public noticing and review. The RCA has
the ability to enforce the standards the ERO puts
forth.
The bill discusses what reliability standards the ERO
needs to provide for. These are standards that ensure
that the interconnected system and facility is
operating reliably. They can address things such as
cybersecurity and facility security, but the standards
may not require enlargement or new construction of
transmission and generation. She noted that this is
outlined on page 3, lines 13-14.
Subsections (e)-(f) establishes how the RCA can
address the standards the ERO files with the RCA. The
commission can approve, amend, or reject the
standards. The RCA can require certain standards it
believes are necessary.
Subsection (g) discusses how the reliability
organization can enforce the standards the RCA has
accepted. The ERO can assess penalties, if necessary.
Subsection (h) provides that the RCA may also enforce
standards, if necessary.
Subsection (i) lays out an appeals process if
penalties are assessed for noncompliance. The
commission must expedite any appeals related to fines.
Subsection (j) establishes that any penalties must be
reasonable in relation to the seriousness of the
violation.
Subsection (k) states that the RCA may direct the
electric reliability organization to assess the
reliability of the bulk-power system.
Subsection (l) provides that if a reliability standard
is adopted that conflicts with a tariff provision
already in place, the utility must comply with the
tariff until the RCA resolves the conflict.
Subsection (m) requires an ERO to file with the RCA,
their rules and any changes to their rules regarding
fairness, process and public notice.
3:44:41 PM
CHAIR COGHILL asked if the RCA is able to request changes to the
rules the ERO has put forward or if it simply ratifies what is
put forward. [A committee member pointed out the language that
allows the RCA to propose changes.]
SENATOR MICCICHE asked if the RCA is able to establish rules if
the ERO hasn't put them forward by October 2020.
MS. MILLER directed attention to the October 1, 2020 date in
subsection (c) on page 2. She explained that the bill was
drafted in May 2019 so all the dates in the bill will need to be
changed. The intention is to give the RCA a year to write the
regulations before it takes applications from somebody to be an
ERO. If nobody has applied for certification to be an ERO during
the application period, the RCA must form an electric
reliability organization.
CHAIR COGHILL related that he made the decision to introduce the
bill knowing that the dates would need to be changed. He said he
wanted to get the structure laid out before the discussion about
implementation.
SENATOR MICCICHE referenced subsection (e) in Section 1 and
asked if there is an appeal process for the RCA's action on
amending the proposed reliability standard.
MS. MILLER said she believes the existing appeals process on
tariffs would apply but she would defer to RCA Commissioner
Scott to provide the details.
CHAIR COGHILL reiterated that he wanted the structure laid out
before any details are addressed.
3:47:28 PM
SENATOR GRAY-JACKSON asked when the application period ends.
CHAIR COGHILL replied the law is not in effect at this point,
just a memorandum of understanding (MOU) that the Railbelt
utilities have signed.
SENATOR GRAY-JACKSON responded that when she read the bill, she
was pleased to see that the application process started.
CHAIR COGHILL reiterated that, at this point, the bill is a
template for codifying the process.
3:48:39 PM
MS. MILLER advised that the utilities are taking applications
from interested parties to work together to form an
organization. Once the RCA begins taking applications, those
groups could apply to be an ERO.
MS. MILLER continued to review the sections of SB 123.
Subsection (n) on page 5 requires the RCA to adopt
regulations governing electric reliability
organizations, reliability standards, and
modifications to standards. The regulations require an
ERO applicant to obtain a certificate of public
convenience and necessity; may provide for open access
transmission tariffs to an ERO; must provide a process
to resolve conflicts; and must allow an ERO to recover
its costs associated with the organization.
CHAIR COGHILL clarified that this provides a template for the
existing Railbelt utilities to work together under a reliability
standard they agree on to benefit ratepayers.
MS. MILLER continued to review Section 1 of SB 123.
Sec. 42.05.293. Integrated resource planning.
Subsection (a) requires an ERO to file an integrated
resource plan for a given network. It discusses the
structure of integrated resource planning and
establishes that the network must meet the customers'
needs at the lowest cost, consistent with the public
interest. Because the lowest cost is not always in the
public interest, the equation must be balanced.
Subsection (b) provides the commission the authority
to approve, reject, or modify an integrated resource
plan submitted by an ERO.
Sec. 42.05.294. Project preapproval.
Subsection (a) clarifies that a public utility that is
interconnected with a bulk-power system must receive
RCA approval that the facility is necessary to the
entire system. The RCA will ensure that the facility
complies with all reliability standards and meets the
needs of a load-serving entity that is substantially
served by the facility in the most cost-effective
manner.
Subsection (b) provides a connection between an
integrated resource plan and the project preapproval.
If a new project is part of an approved integrated
resource plan, that facility is presumed approved,
unless the RCA finds otherwise by clear and convincing
evidence.
CHAIR COGHILL suggested that the committee may want to ask the
RCA how that standard is applied.
3:54:25 PM
MS. MILLER continued to describe the sections of SB 123.
Section 2 adds new definitions to AS 42.05.990, the
Alaska Public Utilities Regulatory Act. It defines
bulk power system; cybersecurity incident; electric
reliability organization; electric utility;
interconnected electric energy transmission network;
load-serving entity; and reliable operation.
Section 3 adds to uncodified law requiring the RCA to
adopt regulations and be ready for an application from
a perspective electric reliability organization.
Section 4 provides direction to the RCA to write
regulations to implement the bill immediately.
Section 5. Establishes an effective date of July 1,
2020, for all other sections. As discussed earlier,
the effective dates must be adjusted. The intent was
that the RCA would have a year to write the
regulations and then begin to take applications to
become an electric reliability organization.
CHAIR COGHILL asked if the definition of "interconnected
electric energy transmission network" in paragraph (18) has been
described in law previously.
MS. MILLER replied she didn't know.
CHAIR COGHILL said he'd ask the RCA to find out if the
definition is new or Railbelt utility specific.
MS. MILLER said that reminded her of an important point about
the definition for "bulk-power system." The language on lines 4
and five says that at least one of the two or more
interconnected utilities is subject to the provisions of AS
42.05.291. That language is intended to ensure the ERO formed
under the bill only applies to Railbelt utilities, not
interconnected utilities in other areas of the state.
CHAIR COGHILL invited Commissioner Antony Scott to testify.
3:58:15 PM
ANTONY SCOTT, Commissioner, Regulatory Commission of Alaska
(RCA), Anchorage, Alaska, delivered a PowerPoint relating to the
role of the RCA in the context of SB 123. He said people have
been talking about reform in Railbelt utilities for more than 30
years and he was pleased that while SB 123 won't create an
ideally efficient Railbelt system, it is an important first
step. He opined that most of the parties agree on the broad
framework of what is proposed, which will help build trust,
understanding, and cooperation moving forward.
He said his goal is to discuss what the RCA does, the process
leading to the bill, and what the bill does and does not do.
4:00:16 PM
MR. SCOTT began the PowerPoint presentation with an explanation
of the RCA's purpose. He explained that public utilities tend to
be natural monopolies and are not necessarily competitive if
there is just one within a given service area. Left to its own
devices, a natural monopoly would raise prices or allow service
quality to degrade. Because of this, the quasi-judicial
Regulatory Commission of Alaska is charged with setting rules
through tariffs and regulations to ensure that the services a
public utility offers reflect efficient market outcomes. Their
prices are to reflect a competitive market that is in the public
interest.
He said because a great deal of value is at stake, the RCA's
work is important. For example, Railbelt consumers spent about
$880 million on electrical service in 2018. Also, increasing the
efficiency of operations through tighter inter-utility
coordination is similar to a tax cut because it puts money in
consumer's pockets. Even a two percent increase in efficiency
would translate to savings of more than $17 million per year. He
also pointed out that reliable service can be a matter of life
and death. Lack of reliability can, at a minimum, involve
substantial economic losses.
MR. SCOTT agreed with Senator Coghill that focusing on
reliability in no way suggests that the Railbelt utilities are
providing inadequate service. He said having efficient and
enforceable standards is comparable to having an insurance
policy and SB 123 is about providing insurance for consumers
moving forward. He said the need for enforceable reliability
standards is heightened when trying to ensure that the physical
infrastructure meets the needs of consumers in all service
areas.
4:04:04 PM
CHAIR COGHILL pointed out that technologies such as wind power
have also changed the dynamics.
MR. SCOTT agreed and added that institutional innovation is
important as new technologies develop.
4:04:40 PM
MR. SCOTT discussed the process to get to SB 123. 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." The RCA held public
hearings to assess whether there was room for improvement and
what the path forward might be. In 2015, the RCA presented its
findings and recommendations to the legislature. He said the
record was voluminous. Last week Chairman Pickett updated the
legislature on its progress toward the original recommendations.
He noted that the Commission unanimously endorsed the letter
that supports SB 123 as the preferred vehicle for institutional
reform. He described the bill as an outgrowth of the learnings
and progress to date.
4:06:33 PM
MR. SCOTT said the RCA's 2015 findings diagnosed the problem
which was that the ownership and operation of the Railbelt
utilities was fragmented. Six utilities served a number of
customers that would be served by a single utility in the Lower
48, which creates inefficiencies. For example, the
interconnected transmission infrastructure is not a good
business model to ensure cost recovery outside a service area;
the lack of integration across utilities makes it difficult to
ensure that construction of new generation and transmission
assets in one service area is optimal to the system as a whole;
lack of coordination and integration across utilities hinders
efficient operation of existing generators to meet load; and
lack of coordination has resulted in inconsistent, inadequate
and unenforceable electric reliability standards.
He noted that under existing statute the Commission could remedy
the lack of reliability standards. AS 42.05.291 charges the RCA
with ensuring adequate quality of service so it could order
utilities to do certain things. The RCA has not done this but
Chair Picket has started a process for promulgating regulations
if there is no institutional reform. However, this is not the
best approach because it takes a long time to establish a new
standard by regulation and the Commission is not the best party
to know how and what is needed for the system overall. Deeper
expertise for the best operation of the system is within the
utilities. SB 123 seeks to outsource those responsibilities,
with public participation, and the RCA provides oversight. The
intent is that the RCA will not exercise its authority under
.291. Things that come to the RCA will be subject to a 45 day
public notice period like all other tariff filings.
4:13:00 PM
SENATOR MICCICHE asked if there is an appeals process under Sec.
42.05.292(e) once the RCA amends an agreement. He added that he
assumes that the public process just mentioned isn't a formal
appeal process.
MR. SCOTT replied the concept in SB 123 is to have reliability
standards filed in a tariff. Tariffs are subject to several
existing provisions in statute for such things as
nondiscrimination, public notice, and timelines. He recounted
that when a tariff comes in, it is public noticed and the
Commission has 45 days to accept the tariff, reject it according
to form, or suspend it into a docket of investigation. He noted
that the majority of cases are accepted. A tariff that is
rejected according to form is deficient in some technical
respect. A tariff suspended according to form elicits a
proceeding in which there are parties and a record is created.
When the RCA makes a ruling on a tariff that has been suspended
into a docket for investigation, the first point of appeal is to
request reconsideration. Once reconsideration is past or the
Commission doesn't take it up, the ruling may be appealed to
superior court.
4:15:38 PM
SENATOR MICCICHE commented that subsection (e) isn't clear that
the process would be the same as the tariff process. Noting that
the bill allows the Commission to amend, he said it seems that
it could potentially become a legal process if an amendment
isn't acceptable.
MR. SCOTT agreed. He explained that under existing statutes, the
RCA can only modify a tariff after there is a public process and
a decision is made based on a sound record. If the affected
parties believe the commission got it wrong, the matter goes to
superior court.
SENATOR MICCICHE pointed out that a proposed modification [to a
reliability standard] that takes effect upon approval by the
Commission is a little different than a tariff adjustment.
MR. SCOTT said RCA staff suggested that the sentence that
Senator Micciche identified on page 3, lines 20-21, could be
read as potentially in conflict with the Commission's normal
procedure and he and Ms. Miller discussed changing that language
when the bill is amended. He recommended removing the sentence
entirely so it is clear that it doesn't create conflict with
existing statute.
4:18:27 PM
MR. SCOTT turned to slide 6 that lists the substantive
recommendations for reform that the RCA made in 2015. He said SB
123 addresses some, but not all, of the recommendations. The
first was the need for consistent and enforceable operating and
reliability standards, which is a primary focus of SB 123. The
RCA also identified a need for new institutions to provide for
security-constrained economic dispatch. He said that means that
the most efficient generators, regardless of ownership, are used
to meet load. SB 123 does not address that recommendation.
Third, the RCA identified the need for an independent
transmission company to own, finance and operate a single
transmission tariff. Currently there is no business model for
this. There has been considerable effort in the last five years
to create consensus with an interested company from Wisconsin.
That company initially made an application with the Commission
to certify what is called a TRANSCO, but subsequently withdrew
the filing. He said he would provide more explanation later but
there is a small provision in SB 123 to achieve the same result
without creating an independent transmission company. The fourth
substantive recommendation was for the legislature to clarify
the RCA's authority to require integrated resource planning and
large project preapproval to ensure major new infrastructure is
most efficient for the benefit of all. He reported that more
than 33 states in the nation have integrated resource planning
processes within utilities. The RCA does not have clear
authority to regulate coordination across utilities, but SB 123
provides that process.
4:22:27 PM
MR. SCOTT reviewed the list of the RCA's 2015 process
recommendations. First is to allow time for these voluntary
efforts to work among the parties but have a stopping point.
Second, return to the legislature if the voluntary efforts fail.
He said it's been more than five years now so it's time to do
something. The third suggestion is for the legislature to
recognize that the RCA has an increased need to fund specialized
talent to manage its share of these activities. Last session the
legislature addressed this need when it passed SB 83 authorizing
the Commission to hire up to five utility master analysts.
4:23:31 PM
He said the Railbelt utilities have reached consensus to form an
electric reliability organization that would include non-utility
stakeholders and the parties have educated one another so there
is greater understanding of the issues, barriers, and how to
proceed. These voluntary efforts have laid the groundwork for
institutional reform but have not resulted in such. There has
been progress in some areas and disappointment in others, he
said.
4:24:24 PM
MR. SCOTT stated that the legislation is modeled on the 2006
amendment to the Federal Power Act. That bill created a similar
relationship between the Federal Energy Regulatory Commission
(FERC) and the North American Electric Reliability Corporation
(NERC), the designated ERO. He explained that SB 123 would
enhance the RCA's jurisdiction, consistent with the Commission's
2015 and 2020 recommendations to the legislature. It
substantively addresses: consistent and enforceable reliability
standards; integrated resource planning to identify optimal new
infrastructure needs; the requirement for the RCA to preapprove
large infrastructure projects; and creation of a potential path
to allow zonal transmission rates and cost responsibility for
new transmission identified as necessary that would enhance
prospects for security constrained economic dispatch.
He described SB 123 as a vehicle to create certainty towards
institutional reform. It defines an electric reliability
organization as a public utility subject to the RCA's
jurisdiction. Statutory change is needed because an ERO
currently does not provide electric utility service. The RCA's
jurisdiction over EROs would be similar to FERC's jurisdictional
authority over the NERC. The bill creates a definitive timetable
and deadline for the RCA to designate an applicant to be an ERO.
He highlighted the backstop which is that the RCA shall create
an ERO and find somebody to run it if nobody has come forward in
the relevant timeframe. He emphasized that the Commission does
not want to be the entity to form an ERO.
4:27:28 PM
SENATOR MICCICHE observed that under AS 42.05.291(c), the RCA
has had similar authority since 1970. He asked if there was a
reason it's taken 40-some years to move forward.
MR. SCOTT responded that he didn't recall the exact provisions
in subsection (c) but .291 does give the Commission authority to
impose corrective measures after a hearing. That being said, the
RCA interprets its statutory authority to apply to each
certificate holder individually, not necessarily to coordination
among several certificate holders. He added that while the
Commission has authority under .291 to oversee reliability, it
has not traditionally had the staff and expertise to step in and
manage those sorts of activities.
4:29:20 PM
SENATOR MICCICHE said he thinks the voluntary approach is more
effective and likely to be less confrontational than if the RCA
imposed standards. He reiterated that he finds it interesting
that it's taken 49 years to get to this point.
CHAIR COGHILL pointed out that the desire for renewable energy
and independent operators has driven many of the discussions
whereas before it was a survival mode.
4:30:16 PM
MR. SCOTT turned to slide 11 relating to the bill's incentives
for collaborative efforts. He reiterated that the RCA will only
step in to create an ERO if nobody steps forward. Further, the
Commission would not delegate its authority for reliability and
planning to the ERO because the ERO itself is not accountable.
Under AS 42.05.291, the Commission is accountable for things
like service quality. As with the federal model, the RCA would
assign most of this work to the ERO and generally follow the
ERO's lead. It would be a rare circumstance, but the Commission
has the authority to impose remedy in the event of inaction,
insufficient progress, disputes, or insufficient attention to
the public interest. This is similar to the federal legislation;
FERC maintains its jurisdiction for reliability but assigns
certain responsibilities to the NERC to carry out. He said the
RCA also maintains its authority regarding reliability standards
and the Integrated Resources Planning (IRP) process.
4:32:31 PM
MR. SCOTT advised that the standards would be filed for approval
as tariffs, which would trigger existing statutory construct for
things like timelines for approval and public notice. Tariff
filings are subject to a 45 day notice as opposed to the more
cumbersome and lengthy process for a regulation project. The
Commission will participate as an ex officio member so it will
be aware of the proceedings and can raise concerns timely if
required. He reiterated that, most frequently, tariff filings
are approved in 45 days and not suspended into a docket.
He offered to answer questions.
CHAIR COGHILL summarized that the experts that are part of this
new working group will be looking for solutions before they come
to the RCA.
MR. SCOTT replied that is the intent and it is also the intent
to have technical expertise and broader public involvement. He
explained why by talking about the relationship between
reliability standards, integrated resource planning, and project
approval.
He explained that electrical supply and demand have to match at
all times or there will be outages. This means that
infrastructure needs to be sufficient to ensure that supply and
demand match for reliable service. The planning process
considers capital intensive additions which are large
investments. For example, ML&P's plant 2A (their replacement
generation stock) is a $330 million plant. For these large
investments it is appropriate to have a broad array of
stakeholders to weigh in on what is sufficient reliability and
what is too much cost for that reliability. These discussions
and decisions aren't just technically driven. They also involve
values and questions about renewable power, how much
conservation is appropriate to meet load, where load is going
and if it is growing or shrinking. He said submitting these
sorts of questions for robust interest-group discussion tends to
produce better answers than just leaving it to a narrow group of
experts. So an Integrated Resource Planning (IRP) process is
tied to the reliability process.
He described the project preapproval process as a backstop to
the planning process. It creates incentives for people to take
the planning process seriously. If the project is consistent
with a plan, then the project is presumed to be needed and that
presumption will be very difficult to overcome.
4:38:06 PM
CHAIR COGHILL asked if the broad makeup of the ERO that's
envisioned by the bill should be narrowed or broadened even
further. He said one consideration when the bill was drafted was
that with an organization a lot of input would be submitted.
MR. SCOTT responded that the RCA thought it was wise to borrow
from the federal model that has those three governance measures.
Right now, the efforts to form a Railbelt Reliability Council
(RRC) (that will be an applicant for the role of ERO) is
consistent with one of the structures permissible under the Act.
However, it's important that it isn't the only possible
structure because one of the backstops in the bill is that the
RCA can propose one if nobody comes forward.
CHAIR COGHILL said this committee and the House Energy Committee
will meet jointly on the 27th to hear from eight different
groups. The committees will hear about the requirements from
both the regulatory and organizational perspectives.
MR. SCOTT observed that the current proposal for the governance
of the Railbelt Reliability Council (RRC) is consistent with the
bill in broad terms. However, it does raise some concern about
independence when each of the Railbelt utilities felt it was
important to have a seat on the RRC board. He emphasized that
when someone is working for the ERO, their fealty to the ERO
should come first. He advised that there will be rules in the
code of conduct standards that will try to bolster that. He
cited the Electric Reliability Council of Texas (ERCOT) Board
that is focused on ensuring that the wholesale power market runs
independently and properly.
4:42:44 PM
SENATOR SHOWER joined the committee.
CHAIR COGHILL welcomed Senator Shower and noted that he wasn't
able to arrive earlier because of a conflict with another
meeting.
MR. SCOTT continued to explain that ERCOT has just one
representative for the each of the following: all the investor
owned utilities, all the co-ops, all municipals, all the
independent powers, all residential consumers, all commercial
consumers, and all the industrial consumers. That board also has
five at-large members so it is a more representative body of all
interest groups. He said the current proposal from the RRC is to
be applauded because the parties have agreed to something, which
is progress.
CHAIR COGHILL said the reason for having each of the utilities
represented on the RRC is that regulation will be across
utilities whereas ERCOT is operating within a utility. He asked
if that was incorrect.
4:47:00 PM
MR. SCOTT replied ERCOT governs the market of Texas across
utilities, but it's such a large state that it would be
unworkable for each company to have a representative on the
governing board. The idea is to have the various interest groups
represented within the governing body. He offered his
perspective that, in some ways, the individual Railbelt
utilities see themselves as their own interest groups. For
example, Golden Valley Electric Association's (GVEA) view of its
needs is very different than any other Railbelt utility's view
of their particular needs, which is why they've come together in
the particular approach.
CHAIR COGHILL agreed that Texas is not a single grid; it
operates within the U.S. grid. In Alaska, the Railbelt utilities
have huge geographic and economic differences. He noted the
unique challenges in the Interior associated with having power
plants on several military bases, in downtown Fairbanks, in
Healy, in North Pole, and at the university, as well as wind
power coming in from both directions. He said these various
plants serve just 100,000 people and it would be nice to
streamline things. However, that will take time, he said.
MR. SCOTT expressed gratitude for being invited to the meeting
and excitement about the opportunity to be part of nudging
reform to a next step.
CHAIR COGHILL opined that the legislature has the opportunity to
codify "a solution that has percolated up over a huge amount of
discussion between the utilities and those of us in the state
that want to watch out for the consumers but still grow our
economy."
4:49:09 PM
SENATOR GRAY-JACKSON expressed excitement about this effort and
reported that she participated in an earlier effort when she
worked for Municipal Light and Power.
[SB 123 was held in committee.]
4:50:54 PM
There being no further business to come before the committee,
Chair Coghill adjourned the Senate Special Committee on Railbelt
Electric System meeting at 4:50 p.m.