00 HOUSE BILL NO. 259 01 "An Act relating to large energy use facilities; relating to electric and gas utilities; 02 relating to community benefit agreements with municipalities; and relating to the duties 03 of the Regulatory Commission of Alaska." 04 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 05  * Section 1. AS 42.05.381 is amended by adding a new subsection to read: 06 (r) Costs incurred by an electric utility or gas utility that would not have been 07 incurred but for the utility furnishing service to a large energy use facility may not be 08 included in any rates or charges of the utility unless the rates or charges are designed 09 to recover those costs solely from the large energy use facility. During a rate 10 proceeding, the portion of the utility's revenue requirement associated with the costs to 11 serve the large energy use facility shall be assigned to the facility. In this subsection, 12 "electric utility," "gas utility," and "large energy use facility" have the meanings given 13 in AS 42.05.435. 14  * Sec. 2. AS 42.05 is amended by adding a new section to read: 01 Sec. 42.05.435. Contracts for large energy use facilities. (a) An electric 02 utility or gas utility that furnishes service to a customer with a large energy use facility 03 shall enter into a contract with the customer for the service. The utility shall submit the 04 proposed contract to the commission. The commission shall review the contract terms 05 and approve the contract if the commission determines that the contract meets the 06 requirements of this section. Notwithstanding AS 42.05.371, the terms of an approved 07 contract govern the terms and conditions under which the utility offers its services and 08 facilities to the large energy use facility. 09 (b) A contract must 10 (1) specify the duration of the contract and be for a duration of at least 11 12 years, with an optional initial ramp-up period of up to five additional years when 12 the large energy use facility may purchase less electricity or gas than the full 13 contracted amount for the remainder of the contract period; 14 (2) state the expected purchase amounts during the contract period and 15 the ramp-up period, if any; 16 (3) after any ramp-up period, require the large energy use facility to 17 pay at least 80 percent of the contracted amount each year, regardless of actual 18 purchases; and 19 (4) require the large energy use facility to pay a fee to the utility if the 20 facility exits the contract before the end of the contract term in the amount of the total 21 minimum payments for the remainder of the contract term or the amount necessary to 22 cover all costs to the utility, whichever is greater, and provide for collateral equal to 23 the potential exit fee. 24 (c) A large energy use facility and a utility may agree to modify the contracted 25 purchase amount if the commission determines that the modification will not increase 26 costs to other customers. The utility shall submit the proposed modification to the 27 commission. A modification may not take effect until the modification is approved by 28 the commission and at least 12 months have elapsed since the modification was 29 submitted to the commission. 30 (d) A contract may not increase the risk of inadequate fuel supplies for any 31 public utility in the state, including utilities not party to the contract. 01 (e) The terms of a contract must include an accounting of all costs for 02 infrastructure primarily used by an electric utility or gas utility to furnish service to a 03 large energy use facility and directly assign those costs to the facility for the duration 04 of the contract. If an infrastructure component is primarily used to furnish service to 05 both the large energy use facility and other customers, the contract must specify the 06 portion of infrastructure costs to serve the large energy use facility and assign that 07 portion to the facility. If, during the contract period, an infrastructure component is no 08 longer primarily used to furnish service to the large energy use facility, the utility may 09 submit a proposed contract modification to the commission that includes evidence to 10 support the modification. Infrastructure costs may be recovered from the large energy 11 use facility by the facility constructing its own infrastructure, contributions in aid of 12 construction, or utility rates. 13 (f) Transmission infrastructure built specifically to serve a large energy use 14 facility may not initially be considered part of a backbone transmission system for the 15 purpose of allocating backbone transmission system costs under a nondiscriminatory 16 open access transmission tariff. If a review at the end of the contract term finds that 17 the transmission infrastructure is also used for other customers, the infrastructure may 18 be evaluated for consideration as part of a backbone transmission system. In this 19 subsection, "backbone transmission system" has the meaning given in AS 44.83.720. 20 (g) A contract must include a detailed analysis of all variable costs that will 21 change when an electric utility or gas utility furnishes service to a large energy use 22 facility and assign those costs directly to the large energy use facility using a separate 23 customer-specific cost of power adjustment or gas cost adjustment methodology. A 24 contract must ensure that furnishing service to a large energy use facility does not 25 increase the cost of power adjustment or gas cost adjustment for other customers. 26 Variable costs include 27 (1) new fuel contracts; 28 (2) changes in purchased power amounts or prices; 29 (3) changes in dispatch order that modify system heat rates; 30 (4) changes in losses; 31 (5) changes in fuel storage requirements, including amounts and 01 deliverability; 02 (6) increased use of less efficient generating units to meet increased 03 load; 04 (7) use of more expensive fuels to meet increased load; 05 (8) changes to meet increased reliability requirements for a larger load; 06 and 07 (9) changes in variable operations and maintenance. 08 (h) Rates in a contract may be based on a utility's existing rate schedule or 09 negotiated for a specific customer, as long as the rates satisfy the requirements in this 10 section, fully compensate the utility for all costs to serve the large energy use facility, 11 including generation, transmission, distribution, and ancillary service costs, and do not 12 cause the utility to shift costs to other customers. The contract may include rate 13 reductions or credits reflecting verifiable system benefits provided by the large energy 14 use facility, including peak shaving, demand response, curtailment, and load 15 flexibility, as long as the reductions or credits are not greater than the measurable 16 benefits provided to other customers and the costs attributable to the large energy use 17 facility are assigned before applying any benefit-related reductions or credits. During 18 any rate proceeding, the portion of the utility's revenue requirement associated with 19 the costs to serve the large energy use facility must be assigned to the facility. 20 (i) An electric utility or natural gas utility shall uniquely identify the costs and 21 revenue for each large energy use facility served by the utility within the utility's 22 books and records to support periodic reporting as ordered by the commission. 23 (j) If geographically dispersed buildings, equipment, structures, and other 24 stationary infrastructure are used for the same purpose and owned or operated by the 25 same person or by any person who controls, is controlled by, or is under common 26 control with the person, the commission may determine that the infrastructure is a 27 single facility for the purposes of this section. 28 (k) A municipality shall enter into a community benefit agreement with a large 29 energy use facility within the municipality before the commission approves the 30 contract between an electric utility or gas utility and the large energy use facility. The 31 municipality may address any community benefits related to the large energy use 01 facility in the agreement based on the municipality's unique needs, including 02 emergency response, local hire, use of waste heat, decommissioning, and any other 03 concerns and priorities of the municipality. If the large energy use facility has not 04 entered into a community benefit agreement with the municipality before construction 05 of the large energy use facility begins, a municipality may obtain 06 (1) an injunction to stop construction of the large energy facility or to 07 prevent the large energy facility from operating; and 08 (2) any other appropriate relief. 09 (l) This section does not apply to an electric utility or gas utility when the 10 utility is furnishing service to another public utility. 11 (m) In this section, 12 (1) "contract" means a contract between an electric utility or gas utility 13 and a customer with a large energy use facility for the utility to furnish service to the 14 large energy use facility; 15 (2) "electric utility" means a public utility that furnishes electrical 16 service; 17 (3) "facility" means all buildings, equipment, structures, and other 18 stationary infrastructure that are owned or operated by the same person or by any 19 person who controls, is controlled by, or is under common control with the person and 20 that are 21 (A) located on a single site or on contiguous or adjacent sites, 22 including sites with multiple metering points; or 23 (B) geographically dispersed, if the commission determines the 24 sites should be considered a single facility under (j) of this section; 25 (4) "gas utility" means a public utility that furnishes natural or 26 manufactured gas by transmission or distribution; 27 (5) "large energy use facility" means a facility that will consume 28 (A) 20 megawatts or more of peak power demand from an 29 electric utility or 20 percent of the total kilowatt-hours of electricity sold by the 30 utility in the previous year; or 31 (B) 2,000,000,000 or more standard cubic feet of gas annually 01 from a gas utility or 20 percent of the total gas sold by the utility in the 02 previous year, whichever is smaller; 03 (6) "municipality" has the meaning given in AS 29.71.800. 04  * Sec. 3. The uncodified law of the State of Alaska is amended by adding a new section to 05 read: 06 APPLICABILITY. (a) This Act applies to an electric utility or gas utility when the 07 utility furnishes service to a customer with 08 (1) a large energy use facility that obtains service from an electric utility or 09 gas utility for the first time on or after the effective date of this Act; or 10 (2) a facility that becomes a large energy use facility on or after the effective 11 date of this Act. 12 (b) In this section, "electric utility," "facility," "gas utility," and "large energy use 13 facility" have the meanings given in AS 42.05.435, enacted by sec. 2 of this Act.