03/31/2009 03:00 PM House ENERGY

HB  66-NET ENERGY METERING                                                                                                    
                                                                                                                                
CO-CHAIR EDGMON announced that the  final order of business would                                                               
be HOUSE  BILL NO. 66,  "An Act  relating to net  energy metering                                                               
for retail electricity suppliers and customers."                                                                                
                                                                                                                                
3:41:06 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  PAUL SEATON,  Alaska State  Legislature, speaking                                                               
as  one of  the  joint  prime sponsors  of  HB  66, informed  the                                                               
committee  the  bill  will  promote  alternative  energy  use  by                                                               
establishing a  net metering  policy for  Alaskan utilities.   He                                                               
explained that  net metering is  a measurement of  the difference                                                               
between  electricity purchased  from a  utility, and  electricity                                                               
produced from  a customer's private  generating equipment.   Home                                                               
and business owners who install  renewable energy equipment, such                                                               
as solar  panels or windmills,  get to use their  own electricity                                                               
and will  receive a  credit for  their excess  energy generation.                                                               
The  credit  is in  kilowatt  hours  and reduces  the  customers'                                                               
electrical billing  the following  months.  This  "carry forward"                                                               
of credits  from renewable energy generation  allows the customer                                                               
to harvest excess energy during  peak renewable production times,                                                               
such as  the summer  for solar,  or wind  in winter,  and benefit                                                               
from  this  production  during  the  following  months.    A  net                                                               
metering  policy  encourages  private investment  by  allowing  a                                                               
customer/generator to  calculate the pay-down of  their equipment                                                               
cost  through  the calculation  of  the  potential annual  solar,                                                               
wind,  or hydro  production. Representative  Seaton stressed  the                                                               
importance of  this concept in encouraging  individuals to invest                                                               
in  capital projects,  as they  can  estimate their  costs on  an                                                               
annual basis.   He then explained how the  utilities will benefit                                                               
under this legislation:   Utilities can gain about  10 percent in                                                               
sales from  distributed generation as  there is little  line loss                                                               
to  the  point of  sale,  although  the  utility charges  for  an                                                               
anticipated line loss of 7 percent.                                                                                             
                                                                                                                                
REPRESENTATIVE SEATON then reviewed  the document entitled "HB 66                                                               
provisions   and    rationale."          The   bill    allows   a                                                               
customer/generator to  have a  renewable energy  system producing                                                               
up to 25  kilowatts.  Participation in net metering  can reach up                                                               
to  1 percent  of the  retail system  peak demand.   Moreover,  a                                                               
utility  may  limit net  metering  installations  due to  special                                                               
circumstances such as long transmission lines.                                                                                  
                                                                                                                                
3:48:33 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  continued to explain that  the bill allows                                                               
a customer/generator  to receive  a credit  of kilowatt  hours if                                                               
they generate more  electricity than they consume.   He clarified                                                               
that the  receipt of a kilowatt  hour credit is not  considered a                                                               
business transaction  by the Internal Revenue  Service (IRS) thus                                                               
potential problems  are avoided.   Customers of a  small utility,                                                               
that generates  fewer than  one million  kilowatts per  year, may                                                               
vote to  exempt the utility from  the provisions of the  bill.  A                                                               
default  uniform statewide  utility  interconnection standard  is                                                               
established  by   the  bill.     Furthermore,  HB   66  prohibits                                                               
additional fees for  net metering.  The bill does  not prohibit a                                                               
utility   from  concurrently   offering  a   Sustainable  Natural                                                               
Alternative Program (SNAP)  to its customers nor  does it prevent                                                               
negotiations between  a utility  and a customer/generator  for an                                                               
individual  power purchase  agreement for  excess customer  power                                                               
generation.                                                                                                                     
                                                                                                                                
3:54:46 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  opined the legislature has  been proactive                                                               
in  exploring alternative  energy and  renewable energy,  but has                                                               
focused on the scale of  programs for utilities; this legislation                                                               
is  for  individuals who  wish  to  support renewable  energy  by                                                               
investing  in   their  own  systems   and  contributing   to  the                                                               
generation  of electricity.   He  then  described three  proposed                                                               
amendments.                                                                                                                     
                                                                                                                                
3:56:05 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  offered an amendment  to page 2,  line 21,                                                               
that inserts a new (d) which read:                                                                                              
                                                                                                                                
         (d) A customer-generator owns the tax credits                                                                          
       associated with the equipment and renewable energy                                                                       
     credits associated with the electricity it generates.                                                                      
                                                                                                                                
     "Renewable  energy  credit"  is a  tradable  instrument                                                                    
     that   includes   all   renewable   and   environmental                                                                    
     attributes   associated   with    the   production   of                                                                    
     electricity from a renewable energy generation system.                                                                     
                                                                                                                                
REPRESENTATIVE SEATON  called attention  to page  24 of  the book                                                               
included in the  committee packet titled Freeing the  Grid, for a                                                             
discussion  of  renewable energy  credits.    He noted  that  the                                                               
federal program  would have to be  adopted by the state  in order                                                               
to credit those  who install renewable energy  systems.  Proposed                                                               
Amendment 2 addresses page 2,  line 25, and replaces "annual peak                                                               
energy  usage"   with  "peak  demand".     Proposed  Amendment  3                                                               
addresses page 3,  lines 23 and 24, and  replaces "an alternative                                                               
energy  system, as  the term  is  defined in  AS 46.11.900"  with                                                               
"alternative energy as identified in section 1 of this act".                                                                    
                                                                                                                                
4:00:27 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  PETERSEN recalled  a resident  in Dillingham  who                                                               
had  two wind  generators with  two meters.   One  meter measured                                                               
what he took off the grid and  one measured what he put back onto                                                               
the grid.  He asked whether this was a typical installation.                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON described  the  meters in  Alaska, all  of                                                               
which are capable of running  backwards and registering a credit.                                                               
The  meter goes  forward for  usage, slows  when the  consumer is                                                               
generating electricity, and turns  backwards when the consumer is                                                               
generating  excess electricity;  this is  the net  meter fashion.                                                               
There is  another type  of meter that  meters electricity  in and                                                               
out at a  certain price under a power sale  agreement.  This type                                                               
of meter is  used for participants in the  SNAP program available                                                               
in Fairbanks and  Homer.  Representative Seaton  pointed out that                                                               
although  there are  alternatives such  as the  SNAP program,  42                                                               
states have adopted  net metering as the best way  to promote the                                                               
use  of  renewable resources.  In  fact,  the federal  government                                                               
mandated  that all  public utility  commissions had  to review  a                                                               
national  metering   program  and   adopt,  or  not   adopt,  the                                                               
recommended  standards.    The Regulatory  Commission  of  Alaska                                                               
(RCA) chose  not to adopt the  national standards, but is  in the                                                               
process of developing  state standards for Alaska.   He explained                                                               
that  the  worst case  scenario  for  a  utility  would be  if  a                                                               
customer generated  exactly the  amount of electricity  that they                                                               
used  in   a  year;  however,   if  a  customer   generates  more                                                               
electricity  than  they  use,  that  excess  is  donated  to  the                                                               
utility.    Representative  Seaton  compared the  impact  to  the                                                               
utility  with  conservation    and  said,  "It's  just  like  the                                                               
customer had  insulated his  house, or  put in  new windows.   He                                                               
reduced his apparent  usage...."  He concluded that  most of time                                                               
net  metering  will  only  offset   a  portion  of  a  customer's                                                               
electrical usage;  in fact, often  electrical usage  increases as                                                               
customers choose  to use electricity  instead of diesel  fuel for                                                               
home heating.                                                                                                                   
                                                                                                                                
4:05:37 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   PETERSEN   recalled  that   the   aforementioned                                                               
resident in Dillingham was paying  $.42 per kilowatt hour and was                                                               
receiving $.28  per kilowatt  hour; this rate  would pay  off the                                                               
expense of  the installation  of the wind  generators in  four to                                                               
five years.                                                                                                                     
                                                                                                                                
4:06:28 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHANSEN  referred to page  3, lines 25-31  of the                                                               
bill.  He  noted that an exemption is created  for utilities that                                                               
sell smaller  amounts of  electricity; however,  there is  not an                                                               
exemption  for municipal-owned  utilities such  as in  Ketchikan.                                                               
He  asked whether  the municipal  utility in  Ketchikan would  be                                                               
forced to accept windmills, for example.                                                                                        
                                                                                                                                
REPRESENTATIVE  SEATON  advised  a community  could  have  height                                                               
limits  or  prohibit  the  installation of  windmills  if  it  so                                                               
desired;  the proposed  legislation addresses  net metering,  but                                                               
does  not include  requirements for  all municipalities  to waive                                                               
their planning  and zoning rights.   Regarding the  exemption, he                                                               
pointed  out  this  is  a  benefit to  the  utility  as  a  small                                                               
consumer/generator  of power  does not  receive payment  from the                                                               
utility,  but  only  receives  credits  against  the  amount  the                                                               
consumer/generator used during the year.                                                                                        
                                                                                                                                
4:09:00 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHANSEN surmised  the  community would  "locally                                                               
legislate their way around this mandate from the state statute."                                                                
                                                                                                                                
REPRESENTATIVE SEATON said,                                                                                                     
                                                                                                                                
     That's correct  if ... they  didn't want  windmills. If                                                                    
     you're talking  about that  they didn't  want renewable                                                                    
     energy ... [or] net metering,  then they ... would have                                                                    
     to exercise some  kind of other option  because if they                                                                    
     wanted to also prevent micro  hydro, and they wanted to                                                                    
     also  prevent   solar,  that  would  be   real  tricky.                                                                    
     Because under  this bill  it's just  like most  of our,                                                                    
     RCA  or  most of  our  ...  interconnect standards  for                                                                    
     Alaska....                                                                                                                 
                                                                                                                                
4:10:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  asked for confirmation  that only  one meter                                                               
is  necessary because  when a  resident is  supplying power,  the                                                               
resident is receiving credit as the  meter slows down or comes to                                                               
a stop.   When the  meter runs backward,  the credit goes  to the                                                               
utility because  the utility provides the  transmission lines and                                                               
infrastructure.                                                                                                                 
                                                                                                                                
REPRESENTATIVE SEATON  agreed.   He restated  that all  meters in                                                               
Alaska can be  used in conjunction with net  metering; however, a                                                               
utility could  require a second meter  in order to know  how much                                                               
electricity is being produced by the consumer/generator.                                                                        
                                                                                                                                
4:11:49 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHANSEN asked for  the fiscal implications of net                                                               
metering.  For  example, a bond may be floated  based on how much                                                               
money flows in and out of a utility.   He asked for an example of                                                               
how net metering affects a utility's cash flow.                                                                                 
                                                                                                                                
REPRESENTATIVE   SEATON  related   a  discussion   with  Flathead                                                               
Electric  Cooperative  in Montana.    It  is a  rural  electrical                                                               
cooperative with  a somewhat similar  system to that  proposed by                                                               
HB 66.  According the  Representative Seaton, the cooperative did                                                               
not  see  any [negative]  impact;  in  fact, it  reported  better                                                               
customer relations and satisfaction.   He added that if a utility                                                               
uses renewable energy,  such as hydro, for its  main power source                                                               
and uses carbon-based  fuel only as a  supplemental power source,                                                               
the proposed legislation  would not apply.  The goal  of HB 66 is                                                               
not to displace  a municipality's renewable energy  source, or to                                                               
make it  less cost-effective, but  to replace  carbon-based high-                                                               
cost fuels. As a matter  of fact, Cordova is slightly problematic                                                               
because 100 percent  of its summer demand is  satisfied by hydro,                                                               
but hydro provides only a portion of its winter demand.                                                                         
                                                                                                                                
4:15:08 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  PETERSEN   asked  whether  a   local  electricity                                                               
company  would  have  the  independent  option  to  require  that                                                               
consumer/generators  install two  meters, pay  a negotiated  rate                                                               
for what the consumer/generator  produces, and charge a different                                                               
rate for the power the utility sells.                                                                                           
                                                                                                                                
REPRESENTATIVE SEATON explained that HB  66 applies to all of the                                                               
areas  [with  utilities] that  do  not  exempt themselves.    The                                                               
utility  can  put  in  two   meters  and  have  a  purchase  sale                                                               
agreement;  furthermore,  the  SNAP program  would  allow  higher                                                               
power generation.   However, a  big utility would not  be allowed                                                               
to  restrict  the development  of  renewable  fuels by  paying  a                                                               
consumer/generator  the avoided  cost  of $.02  per kilowatt  and                                                               
charging $.14  per kilowatt. A  consumer/generator is  allowed to                                                               
produce  power and  offset their  usage.   He concluded  that net                                                               
metering is a valuable means  to stimulate renewable energy usage                                                               
because  a consumer/generator  who is  paying avoided  cost, will                                                               
never reach a pay-back on their system.                                                                                         
                                                                                                                                
4:17:55 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  PETERSEN asked  for  the  difference between  net                                                               
metering  and  net billing  that  is  proposed by  other  pending                                                               
legislation.                                                                                                                    
                                                                                                                                
REPRESENTATIVE   SEATON  explained   that   the  other   proposed                                                               
legislation will take  away the authority of  the cooperatives in                                                               
the  state to  offer  net metering  without a  vote  of the  full                                                               
membership.   In addition, the power  from the consumer/generator                                                               
is computed on a monthly  billing cycle;  therefore, excess power                                                               
in any given  month will be paid by the  utility at the wholesale                                                               
cost, which constitutes a business  transaction complete with IRS                                                               
involvement.                                                                                                                    
                                                                                                                                
4:20:51 PM                                                                                                                    
                                                                                                                                
DAVID  GARDNER,  Vice  President, Marketing  &  Member  Services,                                                               
Golden   Valley  Electric   Association   (GVEA),  informed   the                                                               
committee GVEA  has successfully promoted  consumer participation                                                               
in its SNAP  program;  in fact, the SNAP  program meets the needs                                                               
of GVEA  members and  the cooperative  better than  net metering.                                                               
The SNAP program is voluntary  and self-supporting, therefore, it                                                               
does not  cross-subsidize costs for [consumer/generators]  by the                                                               
members  who  choose  not  to  participate.    Furthermore,  SNAP                                                               
producers  share  the  funds   collected,  and  GVEA  compensates                                                               
[consumer/generators] at  a higher rate  than they  would receive                                                               
through  a  net  metering  program.   Nevertheless,  Mr.  Gardner                                                               
assured  the committee  GVEA is  participating in  the RCA's  net                                                               
metering  and interconnection  standards  workshops and  believes                                                               
that  the   RCA  should   be  tasked   with  the   oversight  and                                                               
administration  of  the  program   should  the  state  adopt  net                                                               
metering and  interconnection standards  legislation.   On behalf                                                               
of GVEA, he  encouraged the committee to  delay the consideration                                                               
of net metering  legislation while the RCA  is investigating this                                                               
issue.                                                                                                                          
                                                                                                                                
4:22:28 PM                                                                                                                    
                                                                                                                                
MARILYN  LELAND,  Executive  Director, Alaska  Power  Association                                                               
(APA),  stated that  the Alaska  Power Association  (APA) is  the                                                               
statewide  trade  organization  representing  electric  utilities                                                               
that supply  power to  500,000 Alaskans  from Barrow  to Unalaska                                                               
and the  Inside Passage.  She   recalled that the  RCA considered                                                               
net  metering in  its docket  on the  adoption of  regulations to                                                               
amend  the Public  Utilities Regulatory  Policies Act  (PURPA) of                                                               
1978.   The RCA did not  adopt federal standards for  Alaska, but                                                               
opened  a docket  to consider  Alaska-specific  standards on  net                                                               
metering.   Ms. Leland opined  there has been  good participation                                                               
from the  interested parties and the  RCA on this subject  and an                                                               
agreement on  a regulation is  promised.   On behalf of  APA, she                                                               
recommended  that the  legislature  not take  action  on any  net                                                               
metering legislation  this year.   The utilities are  not opposed                                                               
to    renewable   generation,    to    purchasing   power    from                                                               
[consumer/generators],  or  to  consumers  generating  their  own                                                               
power;   however, the issue is  agreeing on a fair  and equitable                                                               
rate to all rate-payers.                                                                                                        
                                                                                                                                
4:24:33 PM                                                                                                                    
                                                                                                                                
PHIL  STEYER, Director,  Government  & Corporate  Communications,                                                               
Chugach Electric Association, Inc.,  (CEA), said the CEA believes                                                               
the RCA  is the proper  venue for a  discussion of the  issues of                                                               
net metering.   The RCA has  begun the process that  will lead to                                                               
an appropriate decision  on net metering.  On behalf  of the CEA,                                                               
he  suggested  that rather  than  advancing  legislation at  this                                                               
time, the committee  should allow the RCA to  complete its docket                                                               
on net metering.                                                                                                                
                                                                                                                                
4:25:25 PM                                                                                                                    
                                                                                                                                
ROBERT REAGAN,  Representative, Municipal  Light &  Power (ML&P),                                                               
Municipality  of  Anchorage,  on  behalf of  ML&P,  informed  the                                                               
committee that  net metering would  be a massive subsidy  paid by                                                               
rate-payers  of  utilities  to  a  few customers  who  are  in  a                                                               
position to own  and operate net meter generation.   He urged the                                                               
committee not to  take action on net metering prior  to the RCA's                                                               
completion of  its work on  the subject.   Mr. Reagan  opined net                                                               
metering  is  not  a  simple  beneficial  idea,  but  requires  a                                                               
commercial  relationship between  utilities  and their  customers                                                               
that is  generally considered  unsustainable in  other industries                                                               
and that  may cause  catastrophic harm  in the  utility industry.                                                               
He  assured   the  committee   that  the   depth  of   the  RCA's                                                               
investigation  has   a  better  chance  of   avoiding  unintended                                                               
consequences than action by the legislature.                                                                                    
                                                                                                                                
4:27:18 PM                                                                                                                    
                                                                                                                                
CO-CHAIR EDGMON, upon determining no  one else wished to testify,                                                               
announced that  HB 66  would be held  over with  public testimony                                                               
open.