HB 31-NET ENERGY METERING  4:30:29 PM CO-CHAIR MILLETT announced that the next order of business would be HOUSE BILL NO. 31, "An Act relating to net energy metering for retail electricity suppliers and customers; and providing for an effective date." 4:30:46 PM REPRESENTATIVE KURT OLSON, Alaska State Legislature, informed the committee that the proposed amendment to HB 31 would be presented by his aide, Jennifer Senette. 4:31:11 PM JENNIFER SENETTE, Staff, Representative Kurt Olson, Alaska State Legislature, began by reviewing HB 31 for the committee. She noted that the Regulatory Commission of Alaska (RCA) has been working on a net metering docket for over one year and closed the docket in October. Representative Olson, sponsor of HB 31, has incorporated the regulations adopted by the RCA into an amendment to the bill because the regulations are a good compromise for all of the interests involved: customers who net meter, customers who do not net meter, and the utilities that serve them. 4:33:09 PM The committee took an at-ease from 4:33 p.m. to 4:34 p.m. 4:34:07 PM REPRESENTATIVE RAMRAS moved to adopt Amendment 1, A.1, Kane, 1/27/10. CO-CHAIR MILLETT objected for purposes of discussion. 4:34:26 PM REPRESENTATIVE RAMRAS advised that the regulations recommended by the RCA were put in amendment form. He referred to a document that embeds the recommendations made by Mr. Pickett, RCA chairman. 4:35:04 PM CO-CHAIR MILLET requested copies of the document for the committee. She then asked Ms. Senette to review the sectional analysis on Amendment 1. 4:35:46 PM MS. SENETTE emphasized that Amendment 1 codifies Chairman Pickett's testimony word-for-word. Subsections (a), (b), and (d) address the applicability and the waiver opportunity of the net metering requirement. Generally speaking, the net metering requirement applies to all utilities subject to economic regulation by the RCA with the two exceptions set out on page 2, lines 8-13: (1) utilities that are 100 percent supplied by renewable sources; (2) independent systems with retail sales of less than five million kilowatt hours during the previous fiscal year. For example, the Alaska Power & Telephone Company (AP&T) serves twenty-one communities, five of which sold over five million kilowatt hours during FY 2007. Thus, the only portion of AP&T that would be required to provide net metering would be in those five communities that have sold over five million kilowatt hours. Ms. Senette called attention to page 2, line 13, and pointed out that if a utility demonstrates that limiting net metering installations is necessary due to operational constraints or liability issues, the utility would not be required to provide net metering. 4:37:59 PM REPRESENTATIVE RAMRAS recognized the value of renewable energy sources, but because they are intermittent sources, they can only be a portion of the utility's portfolio. He opined that this provision of the amendment must be perceived as something that protects the ratepayer base of a small utility, because a smaller utility cannot absorb the net metering kilowatts in the way large producers can. MS. SENETTE agreed. She continued with her sectional analysis and said subsections (e)-(i) set an overall capacity limit on net metering. Subsection (f) allows a utility to opt out if its overall nameplate capacity of all net metering systems interconnected with the utility exceeds 1.5 percent of the utility's average annual retail demand. Furthermore on page 3, line 9, subsection (i), she noted a utility can actually request an increase to that 1.5 percent capacity. Continuing to subsection (g), Ms. Senette explained that this subsection precludes a utility from disconnecting existing net metering customers should the cumulative nameplate capacity of the net metering systems interconnected with the utility exceed the cap as a result of average demand going down. 4:40:44 PM MS. SENETTE continued to page 3, subsection (h), that requires a utility to annually publish in its tariff the number of kilowatt hours that are equivalent to that 1.5 percent of average retail demand. Subsection (l) specifies the eligibility criteria for the consumer generation facilities, including a generation capacity limit of 25 kilowatts. Subsection (m) describes net metering and that the utility must measure the energy consumption and generation of a net metering consumer to determine net consumption, and to determine bill credits. Page 5, [paragraph] (2), indicates that compensation is based on the utility's non-firm purchase power rate-typically on an avoided cost basis-and that credits can be carried forward and do not expire. She emphasized that if a renewable energy generation facility is built and it contributes more power than it consumes, credits are issued instead of a payment, but the credits never expire. Subsection (n) allows the utilities to charge a net metering consumer for non-generation related consumer charges if those charges are authorized in the utility's tariff. Subsection (p) allows the utility to request a change to its rate design to incorporate a net metering customer class; however, the utility must demonstrate an adverse material rate impact on those who do not net meter. 4:43:16 PM MS. SENETTE then advised that the remainder of Amendment 1 is definitions. She introduced expert witnesses. 4:44:01 PM CO-CHAIR MILLETT asked whether the RCA supports codifying its recommendations in statute, or if it wishes to keep the recommendations under regulations. MS. SENETTE said she did not know. However, there are advantages to moving the recommendations into statute because statute trumps regulations and is not subject to a change in leadership. 4:45:06 PM CO-CHAIR EDGMON understood that the RCA chairman preferred the recommendations not be put into statute, and he expressed his interest in hearing whether the RCA supports the [amendment]. REPRESENTATIVE TUCK agreed. He pointed out that the amendment codifies language, but questioned the purpose of also giving the commission allowances to make changes. 4:46:45 PM RICH GAZAWAY, Advisory Section Manager, Alaska Regulatory Commission (RCA), Department of Commerce, Community, & Economic Development (DCCED), advised the committee that he was the administrative law judge who conducted the hearings and process for net metering regulations. CO-CHAIR MILLETT asked whether there is a benefit to the RCA to not have these regulations in statute. 4:47:39 PM MR. GAZAWAY confirmed that having the recommendations in regulations provides the RCA with a greater level of flexibility to amend standards. However, as a staff member, he could not speak to what position the five commissioners would take. 4:48:26 PM REPRESENTATIVE TUCK observed that the amendment allows the RCA to make changes in Section 1. Therefore, he asked whether there are limitations to the RCA's flexibility to make changes. 4:49:01 PM MR. GAZAWAY explained that the waiver provision allows the commission to exercise its discretion. He concluded that the language would provide some flexibility, and is modeled on RCA regulatory language. 4:49:38 PM REPRESENTATIVE RAMRAS defended the language in Amendment 1, saying it codifies the legislature's intent for net metering. Because net metering in Alaska is brand new, he cautioned against the use of rigid language. In fact, the use of the word "may" provides sufficient direction to the RCA from the legislature, and sufficient latitude for the RCA to interpret what works for the utilities across the state. 4:51:24 PM REPRESENTATIVE TUCK clarified that he was not suggesting the use of the word "shall." He re-stated his inquiry as to the effect of the amendment and why it was necessary to codify decisions that the RCA is authorized to make. 4:52:09 PM CO-CHAIR MILLETT withdrew her objection to Amendment 1. There being no further objection, Amendment 1 was adopted, and HB 31, as amended, was before the committee. She opened public testimony. 4:52:58 PM JIM STIMPFLE said he could not tell from the bill or the amendment whether this is a two meter or a one meter system. In a one meter system, one meter reads the power going in and if consumers are using their own renewables, the meter runs backwards. CO-CHAIR MILLETT opined the legislation does not address how net metering takes place because that is a "utility to consumer" issue. 4:54:02 PM MR. STIMPFLE referred to Amendment 1, page 4, line 15, and recommended the addition of a provision to allow a small business owner, in a rural area, an offsite grid connection as a way to "credit back" the power usage at another site. He then asked whether the Alaska Village Electrical Cooperative (AVEC) produces less than five million kilowatts and has a waiver against compliance with net metering. 4:54:56 PM CO-CHAIR MILLETT said she believed that to be the case. 4:55:08 PM MIKE O'MEARA, Homer Spokesman, Homer Electric Association Member's Forum, informed the committee the Homer Electric Association Member's Forum is a ratepayers' group. He said his organization questions the need to codify the RCA net metering regulations into law; however, HEA Member's Forum participants would be supportive of the bill, as amended, if it goes forward. Consensus among the participants is that the RCA did a pretty good job of balancing the demands from various interests. The organization remains interested in seeing that nothing is done to diminish the regulations, and he urged that changes not be made to affect what the RCA has regulated. Also, his organization discourages any language that would limit the ability of ratepayer groups' participation in future RCA deliberations on this issue. 4:58:04 PM CO-CHAIR MILLETT clarified that the amendment was adopted and is now part of the bill. 4:58:21 PM PETER McKAY informed the committee he has participated with the RCA proceedings on net metering since 10/06. He stated he was comfortable with Appendix A to RCA Order 09-1, Order Number 3; however, there are differences between the order and Amendment 1 offered by Representative Ramras in the language and in the structure. Mr. McKay said he could not be comfortable that the issues worked out by the regulatory commission are intact in the amendment, and he stated his desire for a line-by-line comparison, or a cross reference that identifies identical language, different language with the same intent, and differences and omissions when compared to RCA Appendix A, Article 3, Section 900, of the Alaska Administrative Code. He urged that the committee make this comparison prior to the bill moving forward. 5:00:32 PM CO-CHAIR MILLETT asked Mr. McKay to send his concerns in writing. 5:01:13 PM MARILYN LELAND, Executive Director, Alaska Power Association (APA), informed the committee her organization is the statewide trade association representing electric utilities that supply power to 500,000 Alaskans. Ms. Leland provided a history of net metering regulation in Alaska from 2006. She stated that her organization believes that the RCA process that is now completed was a success. Public participation in the workshops and opportunities for public testimony were well attended; in fact, during the workshops RCA staff, utility representatives, and members of the public came to agreements that "all who participated could live with." 5:03:40 PM CO-CHAIR MILLETT asked whether APA supports this legislation. MS. LELAND responded that the bill and amendment have not gone to the membership; however, APA issued a resolution that supported leaving net metering to the RCA regulatory process. 5:04:37 PM DEAN THOMPSON, Attorney, Alaska Power Association (APA), began his testimony by saying that APA actively participated in the RCA process and does not oppose the substance of the regulations; however, APA has administrative concerns about codifying RCA regulations in statute. The main concern is that it may create inconsistencies between statute and regulation. The regulations adopted by the RCA are not legally effective or final, and will not be until reviewed by the Department of Law (DOL) and certified by the lieutenant governor. Furthermore, the review could result in substantive changes that require the RCA to re-notice the regulations. In either case, codifying the most recent RCA regulations in statute may create inconsistencies. Secondly, the risk increases if the DOL suggests changes to the regulations. Mr. Thompson warned that those are the problems that could result in codifying regulations that are not yet final. Regarding the waiver language in Section 1, subsection (b) of Amendment 1, he pointed out that the standard for the waiver is that "no legitimate public interest would be served by enforcing the requirement." He opined the commission is given some flexibility, but not complete flexibility or discretion. 5:09:26 PM MR. THOMPSON assured the committee that APA worked hard with the RCA and other stakeholders on the regulatory process and, although members are not completely pleased with the regulations, they determined the regulations were good enough and worked well enough for everyone to move ahead. He commended the parties in this regard. 5:10:45 PM CO-CHAIR MILLETT ascertained that no one else wished to testify, but left public testimony open for further comments. HB 31 was held in committee.