Legislature(2019 - 2020)BARNES 124
03/04/2020 01:00 PM House RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| Presentation(s): the State of Alaska's Unsung Economic Powerhouse | |
| HB151 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | HB 151 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 151-ELECTRIC RELIABILITY ORGANIZATIONS
2:09:19 PM
CO-CHAIR LINCOLN announced the final order of business would be
CS FOR HOUSE BILL NO. 151(ENE), "An Act relating to the creation
and regulation of electric reliability organizations; relating
to participation of electric utilities in electric reliability
organizations; relating to duties of electric reliability
organizations; providing for integrated resource planning;
requiring project preapproval for certain interconnected large
energy facilities; and providing for an effective date."
[Before the committee was CSHB 151(ENE), Version G, reported out
of the House Special Committee on Energy and referred to the
House Resources Standing Committee on 2/26/20.]
2:09:27 PM
REPRESENTATIVE HOPKINS, prime sponsor, introduced HB 151. He
paraphrased the sponsor statement [included in the committee
packet], which read as follows [original punctuation provided]:
In the 2014 capital budget, the Legislature requested
that the Regulatory Commission of Alaska examine how
to best foster "effective and efficient electrical
transmission" among the six interconnected electrical
utilities of Alaska's Railbelt. The RCA's
recommendations included the formation of an Electric
Reliability Organization, an independent entity that
would create and enforce reliability standards and an
integrated resource plan for the interconnected
utilities.
The RCA crafted proposed legislative language which
was put out for public comment. Utilities, power
producers, municipal leaders, consumer advocates, and
rate payers all provided input and feedback, helping
to hone language to move Alaska's interconnected
electric utilities towards greater cooperation and
resource-sharing. Within the last six months, the
Railbelt utilities have signed a Memorandum of
Understanding establishing the reliability
organization envisioned by this legislation
demonstrating their willingness to work together on
future planning, reliability, and transmission
standards.
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. House Bill 151 reflects these
recommendations and, if enacted, would support the
utilities' voluntary work to date.
Fostering greater cooperation will help ensure
ratepayers from Fairbanks to Homer will ultimately
benefit from the efficient and effective operation of
the Railbelt electric system.
REPRESENTATIVE HOPKINS noted that HB 151, Version G, was
referred from the House Special Committee on Energy and is
identical to it's companion bill in the Senate, SB 123. He
explained that the committee revised the bill to balance the
interests of stakeholders, including the Regulatory Commission
of Alaska (RCA).
2:13:53 PM
JOE HARDENBROOK, Staff, Representative Grier Hopkins, Alaska
State Legislature, on behalf of Representative Hopkins, prime
sponsor of HB 151, provided a PowerPoint presentation entitled,
"HB 151: Electric Reliability Organizations." Slide 2 provided
context for the bill with a timeline of events that led to the
creation of HB 151, SB 123 and the coinciding formation of an
Electric Reliability Organization (ERO). The legislation's
overall goal is to improve reliability, security and
efficiencies, resulting in long-term savings to ratepayers.
Slide 3 summarized the sectional analysis [provided in the
committee packet], which read in its entirety as follows
[original punctuation provided]:
House Bill 151 authorizes the Regulatory Commission of
Alaska (RCA) to require and manage electric
reliability organizations (EROs) for interconnected
power networks. The legislation defines participation
in an ERO, as well as the requirements,
responsibilities, and oversight of an organization.
The ERO will be responsible for establishing
reliability standards and conducting integrated
resource planning for the interconnected network.
Large new projects in an ERO network will require pre-
approval by the RCA.
Section 1: Adds a new article and sections to AS
42.05, Alaska Public Utilities Regulatory Act.
New Section 42.05.760: Electric reliability
organizations
Defines participation in an ERO, including application
to become an ERO; exemptions from the requirement to
have an ERO; and RCA certification of EROs.
New Section 42.05.762: Duties of an electric
reliability organization
Describes the duties of an ERO, which the RCA will
consider when deciding whether to certificate an ERO.
New Section 42.05.765: Reliability standards
Describes the process for establishing reliability
standards, including the content of standards and
conflict resolution.
New Section 42.05.767: Rules
Requires the ERO to file its internal rules of
operation and governance with the RCA and gives the
RCA oversight of an ERO's rules.
New Section 42.05.770: Regulations
Directs the RCA to write regulations addressing EROs
and reliability standards. Mandates regulations to
require an ERO tariff include standards for
nondiscriminatory open access transmission and
interconnection, and for a method of recovering
transmission system costs. Regulations must also
articulate a process for resolving conflicts between
standards and other obligations and allow an ERO to
recover its operational costs through the rates of
each load-serving entity.
New Section 42.05.772: Duties of load-serving entities
Subjects all load-serving entities in a network,
including those that are not subject to RCA
regulation, to an ERO's tariff.
New Section 42.05.775: Penalties
Enables the ERO and the RCA to enforce compliance with
reliability standards among everyone connected to a
network with an ERO. Proscribes a process for imposing
and appealing penalties. Requires that penalties be
commensurate with the seriousness of a violation.
New Section 42.05.780: Integrated resource planning
Tasks an ERO with integrated resource planning,
articulates required contents of a plan, provides a
process for RCA approval of a plan, addresses recovery
of costs associated with a plan, and requires the RCA
to write regulations related to a plan.
New Section 42.05.785: Project preapproval for large
energy facilities
Requires and sets standards for RCA pre-approval for
large new projects proposed by a utility in a network
with an ERO. Offers a presumption of necessity for
projects that were included in an integrated resource
plan and supplies a backstop for the RCA to overcome
that presumption if necessary. Exempts certain
projects from the need for pre-approval, directs the
RCA to write regulations related to pre-approval, and
defines the type of projects that are subject to
preapproval.
New Section 42.05.790: Definitions
Defines seven terms within the new article for
electric reliability organizations: cybersecurity
incident, electric reliability organization, electric
utility, interconnected bulk-electric system,
interconnected electric energy transmission network,
load serving entity, and reliable operation.
Section 2: Adds a new section to uncodified law
requiring the RCA to adopt regulations implementing
the bill. The regulations will take effect on the
effective date of the bill (July 1, 2021, per Section
4)
Section 3: Sets an immediate effective date for
Section 2, enabling the RCA to proceed with writing
regulations implementing the bill.
Section 4: Sets an effective date of July 1, 2021, for
all other sections
MR. HARDENBROOK directed attention to slide 5, which addressed
ERO participation. Slide 5 read as follows:
? Interconnected networks must have an ERO (some
exceptions)
? Public utilities in the network must participate in
the ERO
? All users, owners, operators in the network must
comply with reliability standards set by the ERO
? Railbelt primary need; legislation has general
applicability
? 'Release valves' to accommodate future
MR. HARDENBROOK, referencing the last bullet point, noted that
several 'release valves' were included in the legislation to
accommodate future expansion or development in Alaska; for
example, "if all load serving entities petition the RCA, the RCA
may grant a waver for forming an ERO in the future; and also,
the inverse, if you have a network but not quite a system and
you want an ERO, utilities can petition the RCA to form one."
2:18:09 PM
MR. HARDENBROOK turned attention to slide 5, which highlighted
the process for forming an ERO: interested players form an
organization; the organization applies to the RCA; RCA evaluates
and certifies the organization as an ERO; one ERO per network;
if no one applies, the RCA shall form an ERO. Slide 6
illustrated the ERO framework required under HB 151: governed by
an independent, balanced board, or a combination thereof; open,
inclusive processes; balance interests of utilities and
stakeholders; develop standards and integrated resource plans
for the Railbelt. He noted that an ERO is required to file
rules and changes with the RCA, as specified on page 5 of the
bill. Slides 7 and 8 listed ERO responsibilities, as follows:
? RCA delegates certain work to the ERO
? RCA maintains oversight, authority, assigns tasks to
ERO
? Bottom-up approach from the network players who know
best
? ERO sets and enforces reliability standards
? ERO develops integrated resource plan
? Reliability standards for the network
? Subject to RCA approval
? ERO to enforce standards, RCA back-up
? ERO or RCA can penalize violations
? Conflict resolution
? Integrated resource planning for the network
? How to meet needs at greatest value, consistent
with public interest
? Subject to RCA approval
? Items in an approved plan are 'necessary'
MR. HARDENBROOK noted that there is a caveat that allows Doyon
Utilities to follow U.S. Department of Defense reliability
standards when serving military installations if they conflict
with state regulations put forwards by the RCA.
2:22:07 PM
REPRESENTATIVE TUCK asked for the current number of networks and
EROs in Alaska.
MR. HARDENBROOK said the RCA anticipates the Railbelt to be the
only interconnected network system that would benefit from an
ERO. He noted that there are specific "carveouts" for some
interconnected utilities in Southeast Alaska; for example, the
Southeast Alaska Power [Agency] (SEAPA) is established by
statute and exempted from RCA oversight.
REPRESENTATIVE TUCK questioned whether an ERO can exist within
an ERO.
MR. HARDENBROOK said according to the legislation, each
interconnected network would be served by one ERO.
REPRESENTATIVE TUCK asked whether Doyon Utilities provides its
own power generation.
MR. HARDENBROOK offered his understanding that Doyon Utilities
manages the coal-fired power plants at Eielson Air force Base
and Fort Wainwright. He explained that Doyon Utilities produces
its own power and is interconnected to the grid; however, the
exemption allows them to comply with USDOD standards. He
further noted that the University of Alaska (UA) also maintains
independent power generation and is interconnected to the grid,
but UA is required to comply with the legislature's reliability
standards.
REPRESENTATIVE HANNAN asked whether all Railbelt utilities are
members of the working group.
MR. HARDENBROOK answered yes, all six interconnected electrical
utilities are members of the organizational development team and
helped craft the legislation.
REPRESENTATIVE HANNAN sought clarification as to whether there
are independent utilities that are within the same geographic
area but are not interconnected.
MR. HARDENBROOK said that Doyon Utilities, for example, is
interconnected and is not considered a public utility or subject
to RCA regulation.
REPRESENTATIVE HANNAN returned attention to slide 8 and surmised
that large, new projects already require [RCA] approval.
MR. HARDENBROOK offered his understanding that, currently, if a
utility proposes a large-scale project that is approved by its
board, it can move forward.
REPRESENTATIVE HOPKINS added that $1.5 billion in new generation
infrastructure has been built on Alaska's Railbelt in the last
10 years.
MR. HARDENBROOK resumed his presentation on Slide 9, which
addressed project pre-approval. Slide 9 read as follows:
? For large new generation and transmission
? Protects utilities and ratepayers
? Certifies necessity and cost-effectiveness
? Presumption for projects in an integrated resource
plan
? Some exemptions
MR. HARDENBROOK informed the committee that the House Special
Committee on Energy forwarded the bill with a letter of intent
[included in the committee packet]. He explained that the
letter navigates some of the challenging terrain related to
the Bradley Lake project and associated transmission
infrastructure, which has been under litigation for several
years. He conveyed that the intent language covers the
continuing differences and interpretations of the Bradley Lake
contracts. The letter states that the legislature will not
interfere; additionally, that HB 151 the standards, integrated
resource plan, and project pre-approval shall apply to the
Bradley Lake project and its transmission lines. Further, that
the legislature will honor the exemption from RCA review until
debt from the project has been paid.
2:28:51 PM
MR. HARDENBROOK directed attention to slide 11, which was an
organizational chart of relationships under HB 151. He
explained that the RCA would continue in its primary role at the
top of the chart, followed by the ERO, or "Railbelt Reliability
Counsel." He indicated that the Railbelt Electric Network was
underneath the ERO.
REPRESENTATIVE TUCK questioned whether project pre-approval for
large energy facilities includes decommissioning the project.
MR. HARDENBROOK deferred to Antony Scott.
REPRESENTATIVE HANNAN asked if independent power producers
(IPPs) require approval from the ERO board to join the ERO.
MR. HARDENBROOK said the legislation allows for additional power
producers to enter the system. He added that the ERO would be
charged with developing the regulations that govern how the
power producers fit into the network. He stated that the ERO
board would be responsible for drafting the rules with RCA
oversight that would allow those projects to gain access to the
grid.
2:31:40 PM
ANTONY SCOTT, PhD, Commissioner, Regulatory Commission of Alaska
(RCA), provided a PowerPoint presentation, entitled "HB 151."
He informed the committee that he would address three things in
today's presentation: the RCA's purpose; inefficiencies within
the Railbelt electric system; and how HB 151 remedies those
defects. He directed attention to slide 2, which highlighted
the RCA's purpose. He explained that by regulating the terms of
service that utilities use to interact with their customers, the
RCA engages in economic regulation. He explained that economic
regulation occurs because the electric utilities like all
public utilities - are natural monopolies and therefore, lack
the possibility of effective competition. Without effective
competition, the utilities in this sector operate within their
franchise and strive to provide safe, reliable and affordable
power. The RCA's statutes, he said, are designed to ensure that
the utilities' terms of service offer realized outcomes that
reasonably emulate competitive market results. He noted that in
2018, consumers within the interconnected Railbelt spent $880
million on electric utility service, over half of which was for
fixed system costs. Regarding the regulation of interconnected
public utilities on the grid, he explained that each one has a
separate certificate and "we regulate each separate set terms of
service for those entities," which creates the opportunity for
less than efficient results.
2:36:10 PM
DR. SCOTT surmised that in 2014, the legislature recognized
those inefficiencies when they asked the RCA to investigate ways
of innovating and calculating better efficiencies between the
utilities and the work that they do. He turned attention to
slide 4, which highlighted the RCA's 2015 findings. Slide 4
read as follows [original punctuation provided]:
? Balkanized Railbelt ownership across six utilities
creates inefficiencies
O Insufficient coordination across utilities results
in inconsistent, inadequate and unenforceable electric
reliability standards
O Insufficient integration between utilities curtails
ability to ensure that planning and construction of
new generation and transmission assets within one
service territory is optimal for the system as a whole
O Interconnected transmission infrastructure benefits
everyone, but there isn't a good business model to
ensure cost recovery
O Insufficient coordination and integration across
utilities hinders ability to maximize efficient
operation of existing generators to meet load
DR. SCOTT explained that HB 151 addresses the first three
inefficiencies by providing structure for consistent, adequate,
and enforceable reliability standards; ensuring new
infrastructure is built efficiently; and providing an avenue for
ensuring that people contribute towards and equitably pay for
transmission infrastructure. Dr. Scott noted that one of the
RCA's 2015 recommendations to the legislature was to allow for a
period for voluntary efforts by the stakeholders and utilities
to solve problems on their own time, to which there has been
significant progress in the intervening five years. Slide 6
illustrated the progress to date and read as follows [original
punctuation provided]:
? Voluntary efforts have laid the groundwork for
institutional reform
O Greater understanding among all the parties of
issues, barriers, and potential solutions to the suite
of issues the RCA described
O Railbelt utilities reached consensus in 2018 to form
an electric reliability organization that includes
non-utility stakeholder members
? Voluntary efforts have not resulted in institutional
reform
O Although the two sets of Railbelt reliability
standards were reconciled, enforcement mechanisms are
lacking, and areas of concern remain.
O Efforts to form an independent transmission company
have failed
O Progress on an Anchorage-based "tight pool", let
alone Railbelt-wide security constrained merit order
dispatch, have stalled
2:40:28 PM
DR. SCOTT continued to slide 7 and explained that HB 151 cements
existing progress and ensures results in rural institutions that
deliver efficiencies and savings to consumers through
enhancement of the commission's current jurisdiction. The bill
also addresses enforceable reliability standards which, in
addition to cyber security, are about ensuring adequate
generation and transmission capacities to instantaneously match
the supply and demand of electricity. For cost effectiveness,
the bill requires integrated resource planning to ensure
efficiencies between and across utilities are captured. Lastly,
this legislation provides a method for solving transmission
infrastructure business model problems to ensure that utilities
and consumers can pay for new transmission as its needed. Dr.
Scott turned attention to slide 9 and noted that the bill
ensures that the ERO will perform the coordinating function
between both the utilities and a broader range of stakeholders
and users of the interconnected system. He said because the RCA
is a backstop to any potential failings in the ERO process, the
bill creates powerful incentive for the ERO to get the work done
correctly so the commission can approve it. He directed
attention to slide 10 and noted that HB 151 builds on and meshes
with current statutory framework wherein ERO actions are
approved by the RCA and subject to public notice, and the
unresolved problems are suspended into dockets for commission
investigation and subsequent adjudication.
2:46:25 PM
REPRESENTATIVE HANNAN inquired as to the cost per kilowatt hour
(kWh) for utilities participating in the ERO.
DR. SCOTT said it depends. He explained that generally, the
cost for residential consumers ranges between 17-22 cents per
kWh hour. He noted that rates have increased with the wave of
new infrastructure and the spike in cost of natural gas in the
Cook Inlet.
2:47:43 PM
REPRESENTATIVE HANNAN asked whether an ERO could lower
consumers' utility costs.
DR. SCOTT said there would be no decrease in electric utility
rates in the short term; however, there would over the long term
because the bill will ensure that new additions to the system
are efficient to the system.
REPRESENTATIVE HANNAN addressed the issue of regulating charging
locations for electric vehicles. She asked how an ERO could
benefit that infrastructure over the next 50 years as
transportation becomes primarily electric and bridges different
utilities.
DR. SCOTT he opined that reforming the rate structures within
the Railbelt for fast charging stations is a problem that can be
readily solved. He reported that a technical workshop with
interested stakeholders will be scheduled for scoping and
promulgating regulations around rate reform for fast charging
stations.
REPRESENTATIVE TALERICO asked Dr. Scott to review the process
for starting an ERO.
2:52:13 PM
DR. SCOTT said the bill permits a range of possible and
acceptable governance structures to avoid being overly
prescriptive. If HB 151 were to pass, the RCA would promulgate
regulations to outline minimum requirements for ERO
organization. He said that would be an open rulemaking process
with input from the public and interested stakeholders. Once
the regulations are promulgated, the RCA would expect to receive
applications from utilities.
2:54:21 PM
CO-CHAIR TARR asked how this legislation would have affected
recent Anchorage infrastructure.
2:55:03 PM
DR. SCOTT remarked:
So, I want to be a little bit careful because we still
have a preceding ... potentially returning to us
around the prudence of plant 2A, which was built by
ML&P, and whose prudence in terms of whether ... it
was necessary was challenged by one of its customers.
That is something which ended up in court and then
remanded back to the commission. What the commission
initially found was that plant 2A was prudent, that
ML&P was meeting the needs of its own individual
service territory in a reasonable way. The superior
court ... advised us to go look at that further. The
kinds of things that she felt that needed to be looked
at globally are exactly the sorts of consideration of
alternatives that an integrated planning process would
require. ... if this legislation had been the law ten
years ago, we would have had an open and transparent
planning process, in which ... significant numbers of
millions of ... capital expenditure could have been
avoided.
MR. HARDENBROOK added that in 2018, $880 million in electric
utility bills was paid by consumers on the Railbelt, half of
which went towards capital expenditures. He added that from
2010 to 2015, there was $1.5 billion worth of new transmission
infrastructure built on the Railbelt costs that went on to
credit cards, which consumers of the Railbelt are responsible
for.
REPRESENTATIVE SPOHNHOLZ noted that HB 151 does not reference
economic dispatch or the increased use of renewable energy, each
of which could reduce costs to consumers and potentially
decrease greenhouse gas production. She asked how an ERO could
address those issues.
DR. SCOTT said an ERO will not have operational authority or
direct economic dispatch under this legislation. Nonetheless,
he said the RCA believes that this legislation would create a
structure that ensures all utilities, and a broader range of
stakeholders are regularly meeting and discussing issues. He
opined that such cooperation would help ensure progress towards
economic dispatch. He added that whether economic dispatch
ultimately makes sense will depend on adequate transmission
infrastructure. Regarding renewables, he opined that the bill
clearly defines a pathway for enabling IPPs to interconnect with
the system and to make sales of renewable energy across the
system because under HB 151, the ERO is directed to develop
standards for cost recovery of new transmission, as well as
critical interconnection standards and nondiscrimination access
standards. He offered his belief that this legislation would
help bring new intermittent resources to the system.
[HB 151 was held over.]