Legislature(2015 - 2016)CAPITOL 17
02/26/2015 10:15 AM House ENERGY
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| Audio | Topic |
|---|---|
| Start | |
| Presentation: Alaska Housing Finance Corporation | |
| HB58 | |
| HB78 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 58 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 78 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
HB 78-REGULATORY COMMISSION OF ALASKA
11:20:50 AM
CO-CHAIR VAZQUEZ announced that the next order of business would
be HOUSE BILL NO. 78, "An Act bearing the short title of the
'Alaska Competitive Energy Act of 2015'; and relating to the
Regulatory Commission of Alaska."
11:21:47 AM
JAMES BERTRAND, Law Partner, Stinson Leonard Street, informed
the committee he is also the co-chair of the Energy Division at
the law firm of Stinson Leonard Street, and his testimony was on
behalf of Chugach Electric Association, Inc. (CEA), an
electrical cooperative in Anchorage. He provided brief
background information on his experience in electrical energy
issues, including the restructuring of transmission systems and
the impacts of universal system operators (USOs) and independent
system operators (ISOs) on utilities and independent power
producers (IPPs). Mr. Bertrand stated he is familiar with the
proposed regulations under consideration by the Regulatory
Commission of Alaska (RCA) to bring Alaska regulations into
compliance with the federal structure, and offered to answer
questions in this regard.
11:24:54 AM
CAROLYN ELEFANT, Owner, Law Office of Carolyn Elefant, speaking
on behalf of the Alaska Independent Power Association (AIPPA),
informed the committee her firm focuses on energy regulatory
issues. She provided a brief background of her experience
working at the Federal Energy Regulatory Commission (FERC) in
the field of the regulation of transmission and wholesale power
sales for utilities that are connected to the interstate grid.
Ms. Elefant stated that the Public Utility Regulatory Policies
Act (PURPA) and the emergence of open access transmission have
transformed the electric utility industry. In fact, in the
Lower 48, a trend is to move to a further modernization of the
utility industry which includes power supplied by IPPs and self-
generation through net metering. She said she has been involved
with regulatory proceedings before RCA related to its
implementation of PURPA. Regarding the proposed legislation,
Ms. Elefant said the changes she has observed in the electric
industry in the Lower 48, resulting from PURPA and open access
transmission policies, differ somewhat from Alaska where there
is a harsh climate and rural and remote communities; however,
Alaskan ratepayers pay some of the highest electricity rates, in
spite of Alaska's sources of power such as wind, hydropower,
marine hydrokinetic and solar. She opined that marketing the
state's alternative power sources would reduce rates, diversify
power supply, and foster competition. Furthermore, competitive
energy markets would attract financing for new technologies, and
competition depends on the availability of access, opportunities
for IPPs and non-utility generators, and transparency.
11:29:38 AM
MS. ELEFANT continued to explain that in the Lower 48, PURPA
opened competition by requiring utilities to purchase power from
smaller non-utility generators - which are known as qualifying
facilities (QFs) - at the same price as power from another
utility, or as self-generated power. This price is known as the
avoided cost. The two goals of PURPA are: to stimulate
competition and to be ratepayer neutral. For example, using
avoided cost ensures that ratepayers are not paying any more for
power than if the utility generated the power. In addition,
PURPA addressed the question of open access to transmission by
implementing regulations directing states to develop robust
interconnection policies to ensure QFs have access to
interconnection. Ms. Elefant stressed that PURPA also fosters
private investment, thus projects must be economically feasible,
and to this end, a utility is required to provide information on
its avoided cost for the perusal of IPPs. In 35 years PURPA has
had some opposition; however, after some changes were made in
2005, PURPA continues to apply in areas where there is no
competitive market, such as Alaska. In addition, other laws
apply in Alaska that provide open access to the grid for IPPs;
FERC regulates the nation's transmission grid, and in 1996
issued Order No. 888 which required all utilities to provide
open access to their transmission lines on a non-discriminatory
basis. Federal Energy Regulatory Commission Order No. 888 was a
landmark order and as a result robust power markets have evolved
along with new technologies and economic development.
MS. ELEFANT observed that the proposed legislation would have
Alaska enjoy the benefits of competition and the characteristics
of access, opportunity, and transparency that have benefitted
other jurisdictions. The bill provides: opportunity by
ensuring IPPs can sell power into the grid; non-discriminatory
access to transmission; transparency on avoided,
interconnection, and integration costs. She concluded that the
proposed legislation would promote competition and diversity,
and lower rates for consumers.
11:37:25 AM
CO-CHAIR COLVER asked for the differences between Alaska's
transmission systems and those of the Lower 48
MS. ELEFANT answered that in the Lower 48, transmission is
regulated on the federal level because there is interstate
interconnection; however, distribution systems are regulated by
the states. In Alaska, the state has full control from
transmission to the user. In parts of the Lower 48, there are
problems with power congestion, which must be managed in an
equitable manner.
REPRESENTATIVE CLAMAN asked for a description of the differences
between HB 78 and PURPA.
MS. ELEFANT explained that HB 78, along with regulatory changes,
would bring Alaska in alignment with PURPA. The bill does not
replace PURPA, but ensures compliance with components of PURPA;
for example, HB 78 requires utilities to make their avoided cost
available to IPPs and their investors for competitive purposes.
Regarding interconnection, PURPA recognizes the importance of
non-discriminatory interconnection and integration costs, as
does HB 78, although HB 78 goes further regarding integration
costs. In addition, HB 78 gives QFs access to transmission,
which differs slightly from PURPA.
11:42:53 AM
REPRESENTATIVE CLAMAN recalled hearing that Alaska may be sued
for noncompliance, but PURPA has been in effect for 35 years and
there has been no lawsuit against Alaska. Alaska does not have
an interstate commerce issue, and is quite a distance from the
Lower 48.
MS. ELEFANT clarified that PURPA does apply to states and
territories that are not interconnected to the grid such as
Alaska, Hawaii, Texas, Puerto Rico, and the Virgin Islands.
Alaska is exempt from some of the federal requirements like open
access because the source of Order No. 888 is found in the
Federal Power Act and it applies to interstate transactions.
She remarked:
The fact that Alaska is not regulated under the
Federal Power Act, I don't think would enable it to
make a case ... for not being subject to PURPA. But
that said, certainly a lawsuit or an enforcement
action is, is a very extreme step. ... Parties will go
to FERC and they will say to FERC, 'Hey, this state
isn't complying with PURPA ...' and FERC will issue a
ruling ... and then FERC has the option of actually
bringing the suit in federal court.
MS. ELEFANT advised that FERC has brought action once under
unusual circumstances, and lawsuits happen infrequently.
11:46:28 AM
REPRESENTATIVE CLAMAN surmised the risk of a lawsuit is
unlikely.
MS. ELEFANT said yes.
CO-CHAIR VAZQUEZ asked for an explanation of avoided cost.
MS. ELEFANT said a utility supplies power by self-generation or
by buying power from another utility. Under PURPA, if a utility
buys power from an IPP QF, the utility is "avoiding" the cost of
paying the other utility or of producing power. The purpose is
to ensure ratepayer neutrality whether power comes from a QF or
is self-generated. In further response to Co-Chair Vazquez, she
said transparency means the information on what a utility pays
to self-generate power is made public. With this information, a
QF can evaluate whether a project is economically feasible.
CO-CHAIR VAZQUEZ asked about integration cost.
MS. ELEFANT said integration costs are the costs incurred when
introducing power into the system; for example, an intermittent
power source, such as wind, may require payment to keep a back-
up generator on standby service.
CO-CHAIR VAZQUEZ asked how HB 78 adds transparency to
integration costs.
11:53:50 AM
REPRESENTATIVE TAMMIE WILSON, Alaska State Legislature, sponsor
of HB 78, informed the committee a local attorney was available
to answer questions on Alaska issues.
REPRESENTATIVE WOOL surmised that PURPA is a set of federal
regulations and FERC is the agency that enforces the
regulations.
MS. ELEFANT stated that PURPA is a federal law that encourages
federal and state cooperation. The Federal Energy Regulatory
Commission put in place regulations that set federal parameters
for PURPA; for example, FERC has a regulation that reinforces
that utilities have to pay avoided cost, but each state is
responsible for implementing its own PURPA programs. In fact,
if there is a contract between a utility and a QF, the state,
but not FERC, would look at the contract. A state can adopt
regulations to implement PURPA as long as the regulations are
consistent with the parameters set by FERC.
REPRESENTATIVE WOOL expressed his understanding that FERC is a
federal regulatory agency, but because Alaska is not connected
to the Lower 48, its regulations don't apply.
MS. ELEFANT said there are two main categories that FERC
administers. The first is the Federal Power Act, which gives
FERC authority over power transactions on the interstate grid,
and which does not apply to Alaska and Hawaii. The second
category, those regulated by PURPA, do apply to Alaska and
Hawaii by direction from Congress.
11:58:32 AM
REPRESENTATIVE WOOL then asked whether FERC determines whether
there is congestion, and no further power is needed for a
certain area.
MS. ELEFANT said FERC would not manage the aforementioned issue
in Alaska. In the Lower 48, some areas are governed by a
regional transmission organization (RTO); on the other hand, in
Idaho, or parts of the country without RTOs, the utilities make
these decisions.
12:01:09 PM
CO-CHAIR VAZQUEZ said public testimony on HB 78 remained open.
HB 78 was held over.
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