Legislature(2023 - 2024)ADAMS 519
04/30/2024 09:00 AM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB260 | |
| HB307 | |
| HB122 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 260 | TELECONFERENCED | |
| += | HB 307 | TELECONFERENCED | |
| += | HB 122 | TELECONFERENCED | |
HOUSE BILL NO. 307
"An Act relating to the taxation of independent power
producers; and increasing the efficiency of integrated
transmission system charges and use for the benefit of
ratepayers."
9:22:44 AM
JOEL GROVES, BOARD CHAIR, RAILBELT RELIABILITY COUNCIL,
ANCHORAGE (via teleconference), explained that one of his
specialties was small hydroelectric systems. He often
worked in the villages and on the railbelt developing small
hydro projects for various communities. He referred to the
PowerPoint presentation "Railbelt Reliability Council"
dated April 29, 2024 (copy on file). In 2020, SB 123 became
law and created electric reliability organizations (ERO)
for applicable portions of the state. The only applicable
portion under the law was the Railbelt Bulk Energy System
(RBES) which ran from the Kenai Peninsula through Anchorage
and the Mat-Su Valley, and up into Fairbanks. Over the past
few years, the Railbelt Reliability Council (RRC) had been
working on becoming an ERO. There had been questions about
RRC's progress and status over the past four years, but the
simple answer was that RRC had been going through a series
of regulatory approvals to receive the authority to perform
the duties of EROs.
Mr. Gloves explained that slide 2 of the presentation
offered a general timeline of the past four years. The blue
bars on the top row represented the higher authorities'
decision-making processes. In May of 2020, SB 123 was
signed into law and over the next two years, the RCA went
through a regulation-making docket to create Section 3 AAC
46 of the Regulatory Commission of Alaska (RCA) regulation,
which was a new regulatory chapter that implemented SB 123.
By the end of 2021, the regulations were in effect, which
began a 90-day application period during which prospective
ERO applicants could submit an application.
Mr. Groves continued that ultimately, RRC became certified
as an ERO in September of 2022. Once the council was
certificated, it was ordered to file its 2023 budget in
accordance with the regulations. The filings were made in
December of 2022, and both were suspended in the docket for
investigation near the beginning of 2023. He explained that
most of 2023 was spent investigating the budget and
investigating the proposed tariff. The investigations
ultimately resulted in an interim nonrefundable inception
surcharge, which was approved and went into effect in April
of 2023. In 2023, the council's budget was filed with the
RCA.
Mr. Groves noted that the orange line on the chart
represented the actions of the RRC itself over that same
time period. The bottom line on the chart was the RRC
mission work to fulfill the mandates of SB 123 and advance
the objectives of the ERO. The mission work had begun in
2023 and the work was continuing in 2024.
Mr. Groves advanced to slide 2 and explained that once the
council was funded in April of 2023, it began searching for
a CEO. Unfortunately, the search was unsuccessful and the
council retained a professional recruiting service in
October of 2023 to find candidates. The recruiting service
had been searching for candidates for about six months. He
added that the council was currently in negotiations with a
preferred CEO candidate and he expected that there would be
board action at the next RRC board meeting on May 6, 2024,
to begin a formal relationship with the CEO. He could not
disclose any more details at the present moment, but he
hoped that the council was close to hiring a CEO.
Mr. Groves relayed that the board authorized a few interim
measures to facilitate mission work, such as hiring a chief
administrative officer on a contract basis and a chief
technical officer on a contract basis to relieve the board
of some of the duties of running the organization. One of
the other actions on the agenda at the next board meeting
was to begin product development of reliability standards,
which was one of the key duties that the RRC had been
tasked with after the implementation of SB 123. He relayed
that the council would begin product development over the
next few months, which would involve developing reliability
standards, running the standards through a stakeholder
process with working groups, requesting approval from the
board, and putting the standards forward to the RCA for its
consideration and approval.
Mr. Groves continued that the key takeaways were that it
had been a long road to receive the necessary regulatory
approvals, but the council had secured the approvals over
the past 15 months. The council was finally past the
starting line and was beginning its mission work. He added
that RCC was also tasked with transmission cost
allocations, transmission open access, and interconnection
standards.
9:30:42 AM
Co-Chair Foster noted that there were two more invited
testifiers.
Representative Hannan asked for the names of the board
members.
Mr. Groves responded that the board was called a balanced
stakeholder and independent board. There were 13 voting
members and two ex-officio members. The thirteen voting
members consisted of one representative for each of the
load-serving entities, which were the five utilities that
served the railbelt consumers, one representative for Doyon
Utilities, and one representative for the Alaska Energy
Authority (AEA). He explained that he filled one of the two
independent power producer seats on the board.
Additionally, there were three consumer seats: one
representing small consumer interests, one representing
large consumer interests, and one representing
environmental consumer interests. The final seat was an
independent director.
Representative Hannan asked if the board had the legal
authority to hire and fire the CEO.
Mr. Groves responded that the board operated autonomously
and had the authority to hire and fire the CEO. The
decision would not have to go back to the stakeholder
entities for approval.
Representative Hannan asked if the board had the authority
to make other governing decisions, like signing contracts.
Mr. Groves responded in the affirmative. The RRC was
organized as a nonprofit and it was an autonomous, fully
independent organization. There was an expectation that
each of the board members would coordinate with their
stakeholder group to ensure the actions of the board
members were aligned with stakeholder interests; however,
board members also had a duty of loyalty, a duty of care,
and a fiduciary duty to the RRC as well. He acknowledged
that there was the potential for conflict when stakeholder
interests were not aligned with the RRC's interests. Each
board member was responsible for independently navigating
the issues.
Representative Hannan asked if the RRC would have the
authority to act if it decided that it needed a docket
before the regulatory commission. She wondered if the RCC
would need to ask for a docket of referral.
Mr. Groves responded that RCC had the authority to request
or petition for a docket. As the mission work advanced,
plans would be approved by the board and passed on to the
commission.
9:34:57 AM
CHRIS ROSE, EXECUTIVE DIRECTOR, RENEWABLE ENERGY ALASKA
PROJECT, explained that he would be testifying on behalf of
the Renewable Energy Alaska Project (REAP) but disclosed
that he was also an RRC board member. He relayed that REAP
was a statewide non-profit coalition of over 60 diverse
members, including both urban and rural utilities, project
developers, non-governmental organizations (NGOs), Alaska
Native entities, and educational institutions. All of the
members shared the mission of increasing the development of
renewable energy and promoting energy efficiency across the
state through education, collaboration, training, and
advocacy. The members had been working together to develop
good policies in the state that lowered costs and
diversified energies. One of REAP's first successes was the
development and creation of the Renewable Energy Fund (REF)
in 2008. The members believed that HB 307 would solve two
important problems involving the railbelt: firstly, it
would eliminate the wheeling tariffs in the railbelt,
allowing electricity to move more economically up and down
the system; secondly, it would establish tax parity for
independent power producers (IPP) that were currently
subject to local property taxes when electric cooperatives
were not. He thought that HB 307 solved the problems
without the controversial provisions that were included in
the Senate's version of the bill.
Mr. Rose explained that the bill would create a more level
playing field for private sector investment into
diversifying the railbelt's energy mix. Currently, over 40
percent of the power that was produced in the United States
came from IPPs which took on all the financial and
development risks of the projects. The IPPs then signed
power purchase agreements with utilities. The electricity
prices were known well in advance. One of the important
advantages of renewable power was that there were no fuel
prices associated with the contracts. He added that IPPs
often brought specific expertise on certain technologies.
The current percentage of IPP power was less than 5
percent. The state of Alaska had no standard that signaled
to investors in the rest of the country that the state was
open for business, but even without a standard, HB 307
could attract more private investment into building and
operating renewable generation.
Mr. Rose relayed that the first provision in the bill gave
IPPs the same exemption from local property taxes that not-
for-profit local co-ops and municipal utilities enjoyed.
The policy rationale for exempting co-ops was to avoid
passing the costs on to consumers. Currently, the property
taxes added unnecessary costs to the power purchase
agreements that the IPPs were offering to utilities, and it
stifled private sector participation in the railbelt
electric sector. He thought that passing 307 in the current
year would give IPPs and utilities that were currently in
talks about renewable development certainty about whether
the property taxes would need to be paid. He noted that
REAP supported the provision.
Mr. Rose continued that the second provision of the bill
also took away a commercial barrier that was currently
applied to the railbelt, which was known as the pancaking
transmission tariffs. There were five owners in the
railbelt system who were all able to charge a wheeling fee
when the electricity entered each owner's part of the
system. He explained that when electricity was moved from a
home base to Fairbanks, for example, it could become
expensive. The transmission fees stacked up like pancakes,
which was the origin of the term. He understood that the
committee had heard from testifiers that the cost of owning
and operating the transmission system did not increase with
more use. Conversely, the fixed costs could be spread over
more kilowatt-hours as usage increased. It was beneficial
to consumers for there to be more activity in the system.
9:39:42 AM
Mr. Rose continued that HB 307 aimed to eliminate
transmission cost recovery through wheeling tariffs and
instead recover all the costs through rates. The mechanism
described in the bill would task a new association of
transmission owners to agree on the total cost of the
transmission system and ask the owners to split the costs
amongst themselves. The association would meet to discuss
issues like ancillary services, which were services that
generation facilities could supply to facilitate
transmission. The generation facilities would propose to
the RCA a tariff or a rule that explained the cost of the
system and the suggested way of splitting the costs amongst
the five owners. The RCA would then approve or disapprove
the transmission cost recovery tariff. He clarified the
bill would simply reallocate the cost of transmission and
it would not necessarily change the cost of the
transmission system.
Mr. Rose continued that instead of recovering transmission
costs through rates and wheeling fees, the costs would be
recovered through rates. Removing wheeling fees would also
enable more bilateral transactions among the utility
companies because the utilities were all subject to each
other's fees as well. The removal of the fees would also
incentivize IPPs to build more projects. In the past, other
proposed projects had failed because the cost of moving
electrons had exceeded the cost of generating the
electrons, which was not good for consumers. He suggested
that more IPPs in the system was better as it would
introduce more competition.
Mr. Rose explained that Cook Inlet Gas was already
expensive and all utility companies were already paying
between $7.75 and $8 per thousand cubic feet (MCF), which
was five times the typical cost of natural gas in the
continental U.S. Additionally, the utility companies were
predicting that the state would soon experience an increase
of about 50 percent. The companies were preparing to import
natural gas and the consultants that both Chugach Electric
and NSTAR had retained expected that prices would increase
to around $12 per MCF for gas. Rates were likely to
increase significantly for electricity, which would raise
the floor for power cost equalization (PCE). The increase
would also impact heating consumers because the cost would
be a direct pass-through for heating.
Mr. Rose relayed that solar and wind were the lowest-cost
electricity on the planet and the systems could also be
developed relatively quickly. There were currently multiple
renewable projects being proposed by IPPs to the utilities
in the state. One developer was proposing two wind projects
that could increase the amount of renewable electricity on
the railroad grid from 15 percent today to over 40 percent
in a few years. The projects could be built in four years.
If other proposed solar and wind projects were also built,
it was conceivable that the entire railroad grid could have
upwards of 50 percent of its electricity coming from
renewable sources by 2030. Implementing other forms of
electricity would displace billions of cubic feet of
natural gas that could be reserved for heating and save
Alaskan consumers hundreds of millions of dollars. He
relayed that in the prior month, the National Renewable
Energy Laboratory (NREL) finished a study that found that
if the railbelt grid were to move to over 75 percent
renewable electricity by 2040, Alaskan consumers would save
$1.3 billion.
Mr. Rose continued that the state would be facilitating
local development of local resources and local jobs and
attracting industry rather than repelling it. He concluded
by stating that the two discrete problems that could be
solved by HB 307 should be considered significant wins if
this bill were to pass.
9:44:54 AM
Co-Chair Foster appreciated the testimony and thought it
was explained well in layman's terms.
Representative Coulombe recalled that Mr. Rose stated that
solar and wind were the lowest-cost energies. She was
confused how the system would work if the state offered a
property tax break or other tax credits to IPPs. She asked
for clarification that Mr. Rose was stating that solar and
wind were the lowest cost options alongside the tax breaks
and subsidies.
Mr. Rose replied that all energy was subsidized, which
included both fossil fuels and renewable energy. He noted
that fossil fuels were subsidized more stringently than
renewable energies. The state could receive 40 percent tax
credits because Alaska was considered an energy community
under the Inflation Reduction Act. An analysis accomplished
by the Energy Information Agency found that solar and wind
were coming in cheaper than any new natural gas plants in
the country. Over the last year, 85 percent of all new
energy generation in the U.S. was in solar, wind, and
batteries. The bill offered taxpayer-independent power
producers a tax provision, which was another local benefit
that the state could provide to level the playing field
between an IPP and a utility company.
Mr. Rose explained that for instance, a utility might find
that it could build a project cheaper than an IPP because
utility companies would not have to pay property taxes if
it was a cooperative or municipality. He argued the same
policy rationale should apply to co-ops, which was to avoid
passing property taxes onto consumers. If an IPP had to pay
property taxes, the costs would be passed on to consumers.
Representative Coulombe explained that her concern was that
solar and wind would not be as reliable as gas. She
acknowledged that all energy types were subsidized. She
understood that the local property tax was affected and
there would be a negative impact on the local governing
unit. She understood that solar farms required a large
amount of acreage. She asked if Mr. Rose knew the position
of the local municipalities on exempting the property tax.
Mr. Rose responded that he was aware that Fairbanks was in
support of the bill. He was not aware of the position of
other municipalities, but he knew that the other
municipalities were apprised of the bill. He had not heard
any testimony against the bill. He added that the
aforementioned NREL study took into account the cost of
batteries and gas storage to make sure that the whole
system was reliable, 24 hours a day, 365 days a year, and
still found that consumers would save over $100 million a
year, even after spending $45 million to integrate variable
resources. He added that Alaska had enviable fast-ramping
natural gas plants and hydro systems, and the state would
never eliminate such assets. The assets would facilitate
the integration of solar and wind resources, but it would
cost money to accomplish. Despite all of the costs, the
state would still save $100 million per year.
9:50:17 AM
Representative Hannan understood that Mr. Rose had said
that the state was not renewable in relation to IPPs. She
did not think anything in the bill restricted the IPPs from
being reliable. She asked if the bill should require a
definitional change to incentivize renewable development.
Mr. Rose responded that he did not think there should
necessarily be a change. The market would favor renewables
because they were less expensive than fuel-based resources.
He reiterated that natural gas resources in the Cook Inlet
were five times higher than the same resources in the
continental U.S. He thought it was a policy call if the
legislature wanted to make a definitional change.
Representative Hannan commented that the utility in Juneau
was investor-owned. Many of the utilities in Southeast were
small, local utilities that were investor-owned and not co-
ops or municipal. She asked if it would be better if the
words "cooperative" or "municipal" were deleted from the
bill and instead the bill stated that the IPP tax advantage
was only applicable when it sold to a utility. In
Southeast, there was no incentive for an IPP to come online
and help an investor-owned utility because there would be
no tax advantage.
Mr. Rose responded that he would not oppose the change.
9:52:06 AM
Representative Galvin asked Mr. Rose to help the everyday
Alaskan consumer understand how consumer prices would be
impacted over the next five years. She asked if there would
be movement toward 40 percent tax credits. She imagined
that wind and solar would contribute to savings but she was
unsure about battery readiness.
Mr. Rose responded that most of the activity would likely
come from wind followed by solar. He stressed the
importance of preventing prices from increasing. The state
needed to reserve the gas it still had for heating. He
explained that NSTAR had no other business model but to buy
gas and sell gas and NSTAR would want a long-term contract.
All of the electric utilities had alternatives; in fact,
most utilities around the world were moving towards
renewables. He was not suggesting that rates would
immediately decrease, but simply that the rates would not
continue to increase as they had over the last decade.
Mr. Rose shared that Anchorage railbelt consumers were
currently paying 60 percent higher prices for electricity
than the national average. The increases were mainly due to
gas prices. The largest wind and solar projects in the
railbelt were much smaller than the projects being built in
the continental U.S. Due to the small population in the
state, it was likely to not receive large projects, but
some entities in the state were researching ways to use
renewables to provide energy straight to manufacturers. The
state was fortunate to have tremendous renewable energy
resources. He concluded that removing barriers to
renewables would help the state acquire larger-scale
projects and introduce more competition. The state had four
monopoly utilities and no current incentives for IPPs to
build relationships and make transactions in the state. He
had talked with many large developers who told him that if
a standard was set in Alaska, the developers would come.
Representative Galvin understood that the ERO project
within the bill would help motivate developers to come to
Alaska. The introduction of competition would help prevent
utility costs from rising and move the state towards a plan
to implement renewables.
Mr. Rose replied that HB 307 did not address the ERO or
RRC. He explained that REAP created an association of
transmission owners that would propose a transmission cost
recovery tariff to RCA. The transmission owners could
determine the current costs of the transmission system and
examine existing contracts, among other considerations, and
propose how to divide the costs. The transmission owners
were the only entities that would be able to charge the
consumers to recover transmission costs. Currently,
charging most of the transmission cost was done through
consumers' bills, but a portion was derived from wheeling
fees. Eradicating the wheeling fees would remove a
transactional barrier and allow more utilities and IPPs to
use the system.
9:57:54 AM
Representative Josephson noted that Mr. Rose had mentioned
the 40 percent tax credits for renewables. He thought that
the 45Q tax credit in carbon capture utilization and
storage would be an example of such a credit. He asked if
he was correct.
Mr. Rose responded in the affirmative.
Representative Josephson understood that investors had not
observed enough goal setting in Alaska. He understood that
the state could have 50 percent renewable energy by 2030.
He asked if Alaska should "go big or go home."
Mr. Rose responded that many places around the world were
already far over 50 percent. His home state of Iowa was at
almost 60 percent using wind energy, South Dakota was over
50 percent, and Portugal was over 61 percent. He relayed
that fuel prices were not worrisome in locations that were
using high levels of renewable energy. Stable prices were
desired and fossil fuel prices offered very little
certainty in price. He shared that 29 states had
implemented renewable portfolio standards, but the
standards could only exist if there was a compliance
penalty if standards were not met.
Representative Stapp was confused which bill was being
discussed.
Representative Josephson thought that the committee was
discussing HB 307.
10:01:00 AM
Representative Josephson thought that the House version of
HB 307 had a lot of catching up to match all of the items
included in the Senate version of the bill [SB 217].
Mr. Rose replied that although there were good provisions
in the Senate version, there were also some concerning
provisions. He stressed that REAP preferred the House
version of the bill and he thought that passing HB 307
would be a significant win. He explained that Chugach
Electric Association (CEA), the governor's office, and REAP
were all concerned about separating the planning function
and giving transmission planning to a new entity and taking
it away from the current RRC.
Representative Josephson asked if it was concerning because
the new planning function would be a distraction from
legislation passed in 2020.
Mr. Rose replied that he thought it created confusion and
redundancy. All of the relevant entities already had a seat
on the RRC and were already part of the transmission
planning. There was no need to request another body to do
the transmission planning; however, there may be a need for
another body to manage the transmission system. He
explained that the Senate version would allow a new entity
to plan transmission and build transmission without being
subject to the pre-approval project provision. The lack of
supervision meant that hundreds of millions of dollars
could be spent on the transmission build with no RCA
oversight and consumers could be responsible for the
funding, even if the federal government paid for half of
it.
10:03:41 AM
Co-Chair Johnson referred to page 2, lines 1 through 7 of
HB 307, which defined IPPs. She understood that SB 217 was
significantly different than HB 307. She asked Mr. Rose to
provide an overview of the differences between the two
bills and why he thought that the House version was better.
Mr. Rose responded that there was not a significant
difference between the two bills when it came to IPPs. The
difference he was concerned about was that separate
legislation, SB 257, was essentially rolled into SB 217. He
explained that SB 257 would create the Railbelt
Transmission Organization (RTO) and REAP's concerns were
around the proposed organization.
Representative Cronk thought that the committee should
focus on the House bill and not the Senate bill.
Co-Chair Foster had considered scheduling the Senate
version of the bill during a House Finance Committee
meeting to better understand what was happening. He thought
Representative Cronk made a fair point and the committee
should usually try to focus on the appropriate bill.
Co-Chair Johnson understood Representative Cronk's point
and she thought that the bills would be combined at some
point. She had been trying to understand IPPs and thought
Mr. Rose could help provide more information. She
understood that the House bill was less complicated than
the Senate version.
Co-Chair Foster explained that one potential avenue was
that the House might send over HB 307 to the Senate and the
Senate might roll into it several other bills, then send it
back to the House.
10:08:07 AM
Representative Stapp understood that the renewable energy
companies did not want to invest in the state due to a lack
of set standards. He asked for clarification.
Mr. Rose replied that renewable energy was a huge business
around the world and companies had to decide how to
allocate resources. There needed to be some type of
standard to attract companies, particularly considering
Alaska's small population. For example, there might be a
standard that the state would reach 75 percent renewable
electricity by 2035 or 2040, which would send a signal that
many projects needed to be built to achieve the goal. A
company was unlikely to invest in Alaska, build offices,
and remain in the state for 15 to 20 years unless there was
a standard.
Representative Stapp understood that even if it was cheaper
to invest in renewables, the economic investment in
renewables was cheaper than what the railbelt currently
had, and the railbelt would still need a forced transition
in order to properly communicate to outside companies that
the state was a sound investment.
Mr. Rose responded that it was possible that some
developers could come to the state without a forced
transition. There were some IPPs in the state already, but
there was little competition among the IPPs. He relayed
that REAP wanted to attract as many competitors as possible
to offer consumers the best price. The larger companies
were not going to bother to invest in a state with a small
population unless there was a set standard. Potential
projects in Alaska were insignificant compared to projects
in the rest of the country. The combined aggregate load of
the railbelt was about half a power plant in the
continental U.S. All of the utilities in the state combined
equaled about 500 megawatts per year, which was half of a
one-gigawatt power plant in the rest of the nation. The
comparison was another reason why Alaska needed to set
standards and offer certainty to companies that there would
be more projects going forward.
Representative Tomaszewski asked what the two most reliable
energy sources in Alaska were.
Mr. Rose responded that baseload resources like hydro and
natural gas were usually reliable, but not always. Natural
gas was the most reliable in the state, but there had still
been problems with the state's natural gas facilities in
the past.
Co-Chair Foster noted that the committee had a stacked
agenda and there was an additional meeting scheduled at
10:00 a.m. The meeting was one of the committee's last
opportunities to send bills over to the Senate.
10:13:25 AM
JOHN BURNS, CEO, GOLDEN VALLEY ELECTRIC, explained that he
brought staff with him to respond to the committee's
questions. He noted that there was a meeting that examined
transmission cost recovery in governance in terms of
transportation and he brought with him an individual who
was helping to facilitate the efforts.
Mr. Burns continued by thanking the legislature for its
focus on energy issues. He relayed that railbelt utilities
were not-for-profit, member-owned cooperatives that were
singularly focused on the best interest of the members. He
agreed that the state needed to attract IPPs. The railbelt
utilities had a fiduciary obligation to the ratepayers. The
utilities had been trying to join ERO while continuing to
provide safe, reliable electricity. He appreciated the
governor's focus on energy and thought the results that
came from the Energy Security Task Force were compelling.
Mr. Burns agreed with Mr. Rose that HB 307 should be passed
over SB 217. He stressed that the state needed to attract
larger companies. He urged that HB 307 be slightly tweaked
to ensure that the tax benefit would be received by the
consumer. The ultimate objective was to lower the cost of
energy to the consumer.
Mr. Burns explained that for Golden Valley Electric (GVE),
the process was that every megawatt of power that came from
Bradley cost $1.02 in wheeling fees to send to Homer. He
added that GVE also paid $8.90 to Chugach Electric
Association (CEA) for wheeling, then the megawatt would
flow through the Matanuska Electric Association (MEA)
system and cost GVE $0.46 per megawatt, and then it would
go to the Alaska Intertie transmission line and GVE would
pay $12.32. By the time a single megawatt arrived in
Fairbanks, $22.70 had been added to the total price. The
additional fees impacted the ability to lower the cost of
energy.
10:18:49 AM
Mr. Burns continued that the single objective of having an
efficient transmission system was to ensure that the
lowest-cost electron could be transmitted to the necessary
location without constraint and at a single flat rate. He
relayed that past testifiers had shared with the committee
that the rail belt was constrained and the provisions in HB
307 would help reduce economic constraint. Another
important issue was physical constraint. The current system
was undersized and needed significant improvement.
Mr. Burns relayed that the third important constraint was
institutional. All power needed to be transmitted and, in
Alaska, there was often congestion. For example, there were
often significant traffic delays on the Glenn Highway.
There needed to be a free flow of energy. He explained that
70 megawatts generated about 8 percent in line loss, which
was simply vaporizing money into the atmosphere because of
friction in the molecules. He stressed that the current
system needed to be upgraded in order to bring on renewable
energy and maximize it.
Mr. Burns shared that GVE was hoping to soon enter into a
power purchase of 36 megawatts of wind in Delta Junction
and 150 megawatts of wind in Shovel Creek. He explained
that GVE was currently not able to bring all 150 megawatts
into the system because it could not use it all, which was
why it was so it was critical to transport energy south.
The difference between a 150-megawatt project and a 60-
megawatt project was significant. He added that renewable
energy needed to be regulated, particularly because wind
and solar energies were not always accessible. The goal was
to maximize the efficiency of renewable energy.
Mr. Burns relayed that GVE was examining a 150-megawatt
wind project and a large-scale solar project as well. He
thought that energy diversity was critical. He thought the
most reliable energy in the state was the Healy Power Plant
which was a 26 megawatt coal plant. The plant had been
producing for around 40 years.
Mr. Burns continued that the shortcoming of HB 307 was that
it only handled the economic constraint. He urged the
committee to also consider SB 217 because he thought
aspects of the bill should be rolled into HB 307. Different
utility companies had different interests, financial
concerns, and different opportunities, which made it
complicated to manage the best interests of all of the
utilities. He argued that the function of the proposed RTO
should be to manage the transmission assets that already
existed.
10:25:27 AM
Mr. Burns relayed that the RTO was necessary because it
would force all of the railbelt utilities into the
"sandbox" and would communicate to utilities that the
companies' single focus was to manage and operate the
transmission system for the best interest of the railbelt
as a whole. The model already existed in the form of the
Bradley Project Management Committee (BPMC). He explained
that the Bradley project was signed into law around 20
years ago and was thought to be too expensive; however, the
project had saved ratepayers a tremendous amount of money
and was one of the lowest-cost assets available.
Mr. Burns reiterated that he would appreciate if HB 307 and
SB 217 were rolled into one piece of legislation because it
would address both economic and institutional reform. He
explained that there was a structure within BPMC that
ensured that all voices were heard and that the decisions
that were made were in the best interest of the railbelt as
a whole. No single individual utility had the ability to
override the opinions of the other utilities. Ultimately,
AEA made the final decisions because it was a state asset
and had bond governance. He stressed that there needed to
be transformative change.
Mr. Burns urged that the committee fold SB 217 into HB 307
because the railbelt needed to diversify and had a
fiduciary obligation to do so. He shared that GVE recently
had the single highest increase in its cost of power in the
history of the company and it was now the most expensive on
the railbelt. He relayed that it was difficult to share the
news of the increase. The upward trajectory of costs needed
to be arrested. He hoped that the governor would sign into
law a bill that introduced transformative change on the
railbelt. The economic health of the railbelt would be an
economic driver for the rest of the railbelt and the rest
of the state. Costs of energy needed to be stabilized and
lowered without sacrificing reliability and security.
10:31:11 AM
Co-Chair Foster appreciated Mr. Burn's testimony and
perspective.
Representative Stapp thought that based on previous
testimony, there were many entities in the "sandbox" that
were willing to run at the first sign of adversity. He
agreed that the bill was foundational and important. He
noted that there was a dispute regarding Bradley Lake and
he had asked CEA about the dispute. He was told that CEA
members paid less money for the power generated by Bradley
Lake than GVE members. He did not believe that the
statement could be true based on wheeling fees. He asked if
Mr. Burns could speak to the issue.
Mr. Burns replied that he did not know. He had talked to
the CEO of CEA and discussed the issue but the question of
whether the 10 percent discount existed still remained. He
understood that there was apparently an amendment in the
Bradley power agreement that outlined the discount. He did
not know why or how the discount came to be. He could share
that the issue would be examined and that the fundamental
objective was to be fair and reasonable. Once the
evaluation was completed, the information would be
transmitted to the RCA, which would be the regulating body.
10:34:49 AM
Representative Galvin appreciated the testimony and the
historical insight. She noted that there was a larger
project called the Susitna Hydro Project and she understood
that it would provide all of the necessary energy for the
railbelt. She asked for Mr. Burns to share his thoughts on
the project.
Mr. Burns remarked that the project would require vision
and long-term thinking. There had been a number of studies
that had been compiled over the years, such as a study from
around 2015 by AEA that included a list of the prospective
projects that would take about 15 years. He relayed that
had the projects from the study been instituted years ago,
the state would not be in its current predicament. The
state and the Railbelt utilities needed to examine all of
the options available in order to stabilize, lower rates,
and ensure reliable, secure, and lower-cost energy. He
thought it would likely need to be funded through a general
obligation bond. He explained that GVE had 36,199 members
and the members had to bear the expenses of the projects.
The state needed to be forward-thinking, which could not be
accomplished without the legislature or the governor. He
urged that the legislation be the first step in the
transformational process. He went on a recent educational
trip to Iceland that illustrated a possible future for
Alaska. He shared that Iceland faced similar problems 20
years ago as the problems Alaska was currently facing,
including high prices and a disconnected and undersized
transmission system. He explained that Iceland had
coalesced around a vision and the country had transformed.
10:40:06 AM
Representative Galvin understood that both SB 217 and HB
307 would set up the state well to address challenges and
institutional constraints. She asked if her understanding
was correct.
Mr. Burns responded in the affirmative and added that the
state also needed to eradicate wheeling and pancaking and
the ultimate rate needed to be fair and reasonable. Some
utilities were fearful of changing rates but under no
circumstance should a transmission system that served as an
electron highway be used as a revenue-generating source.
The cost must be fair and reasonable. He asked the
legislature to be trusting because the Railbelt utilities
were in the process of working on the issue. The utilities
were committed to submitting the transmission cost recovery
methodology to the RCA as expeditiously as possible. Once
submitted, the RCA would review the methodology and if
deemed appropriate, the cost would get built into the rates
moving forward. He relayed that the GVE system could not
absorb the new 150-megawatt project. He would be pleased to
have lower-cost renewable energy enter the system, such as
CEA's wind project.
Co-Chair Foster noted that the committee had a hard stop in
50 minutes.
Representative Cronk appreciated the testimony. He agreed
that the state had a lack of vision, but argued that it
needed to be ready to spend money and could not expect to
borrow money because the costs would come back to the
ratepayers. The state needed to pay money in a way that
would benefit the ratepayer. There were many potential
renewable resources in the Copper Valley but there needed
to be a transmission line in order to take advantage of the
resources. He did not think the state was currently fully
taking advantage of its resources. He thought resource
development was amazing and could impact an entire city. He
wondered what would happen if mining corporations were shut
down. He thought people in Fairbanks would be struggling to
pay electric bills and there would be serious issues. He
stressed that resource development was not bad.
Mr. Burns responded that the load needed to grow if rates
were to be lowered. He relayed that GVE was fortunate that
it served four military bases because the bases were
critical to national defense. The bases were becoming more
reliant on GVE, but the company needed to have the capacity
to transition. There were also mines in the interior of the
state and the cost of energy was a limitation of the mines'
capacity. He stressed that it was important to move forward
responsibly and appropriately with a goal in mind. He
understood that the utilities were often vilified for being
a monopoly, but there was a reason for the monopoly. The
utilities were responsible for providing safe, reliable,
low-cost energy. He relayed that GVE had around $1.5
billion in assets that needed to be recovered over time. He
remarked that Alaska had to operate differently than states
in the continental U.S. The total load on the intertie was
about 750 megawatts and the load needed to grow
responsibly, but growth would take time.
10:47:36 AM
Co-Chair Johnson commented that it was interesting to hear
different perspectives. She thought it was exciting to
watch the vision form as she did not think there was a
vision at the beginning of the year. The state would need
transmission to be upgraded whether it chose renewables or
gas. She had always been supportive of the upgrade and she
thought it was a good project. She appreciated that a
significant amount of hard work had gone into the project.
She asked if Mr. Burns knew how the 10 percent figure came
about and if he could expand on the methodology and
capacity. She asked if there was anything particular in the
bill that affected GVE that Mr. Burns would like to expand
upon.
Mr. Burns responded that there were two provisions in HB
307 regarding tax parity. He thought the bill needed to be
tweaked slightly to ensure that the intended benefit was
achieved. He urged that SB 217 be folded into HB 307. He
thought that the RTO should be enacted and all rRilbelt
management should be done by RTO. The Railbelt assets were
owned individually by different entities and that
management was done by the railbelt utilities. He was at a
hearing recently and heard recommendations that a couple of
additional ex-officio non-voting members should be added to
RTO.
Mr. Burns explained that the Transmission Cost Recovery and
Governance Committee was focused on identifying the cost
methodology, which included evaluating whether the 10
percent discount would be appropriate. He was not aware of
the justification behind the discount and he would not
opine on it, but he agreed that the discount should be
examined. He noted that the RTO meetings would be subject
to the open meetings act to ensure that there would be
nothing hidden in the process. He shared that GVE had
applied for a number of grants, but it was a convoluted
process. He reiterated that the load needed to grow and
that the utilities should have the flexibility to manage
it. He agreed that utilities companies had an obligation to
residents to provide energy and he hoped that the
legislature would trust the companies to do so.
10:55:03 AM
Representative Tomaszewski asked what the two most reliable
sources of our power in the state were and the two most
affordable.
Mr. Burns responded that the most affordable and most
reliable overall was likely Bradley Lake. He relayed that
GVE had 16.9 percent interest in Bradley's hydropower
project and CEA had about 53 percent interest. Each system
was slightly different and reliability looked slightly
different depending on the utility company. He thought that
the most reliable source of power for GVE specifically was
Healy. He shared that his dream would be that there would
be generation sources all along the Railbelt, which was why
the resource planning by the ERO was important. The most
money should be deployed to the location with the best
resources. He emphasized that the system needed to change
and it was no longer affordable. The utilities companies
had a fiduciary obligation to continue to supply energy to
service territories. The benefits that were saved on the
railbelt helped the PCE as well as the entire state.
Representative Tomaszewski asked how the line loss was
calculated. He wondered if the line loss would be reduced
when the high-voltage direct current line was implemented.
Mr. Burns responded that there was a meter at each end of
the line. Once the energy traveled from one end to the
other, the meter would determine how much energy was
actually received; however, the energy was purchased
upfront. The difference between the energy that had been
received and the energy that was purchased was the line
loss. He explained that as the load on a line increased,
the friction increased as well, which meant higher line
loss. For example, a load of 70 megawatts would bring about
8 percent line loss. He explained that line loss could be
prevented by essentially splitting the load into another
line. Overall, reducing friction on a line reduced the line
loss.
Representative Tomaszewski understood that the line loss in
a direct current (DC) cable would be less than line loss in
the alternating current (AC) lines that were currently
operating.
11:00:51 AM
TRAVIS MILLION, COO, GOLDEN VALLEY ELECTRIC, responded that
line loss was typically lower for DC lines than AC lines.
He agreed that line loss was generated based on the
friction and heat generated within the line. If a line was
pushed to its maximum rating, the heat and line loss would
increase. If a load was split between two lines, the
maximum load would be cut in half and less heat and
friction would be generated. Line loss would be
considerably reduced by implementing a redundant second
line.
Representative Stapp noted that there was a possibility
that nuclear power could be coming to Eielson Air Force
Base at some point. He asked Mr. Burns to speak about the
potential for nuclear power and the future of the Railbelt.
Mr. Burns replied that GVE was open to every possibility.
He deferred the question to Mr. Million because he had
firsthand knowledge of nuclear power. He asked Mr. Million
to speak about nuclear opportunities.
Mr. Million shared that GVE had not seriously began to
consider nuclear since he came on board. He agreed that GVE
was open to any options that would reduce costs and
increase reliability for members. He had personally looked
into micro nuclear reactors and had testified before the
legislature on micro modular reactor legislation. He was
particularly intrigued by nuclear power and the
opportunities it presented.
11:03:59 AM
Representative Hannan remarked that she was from an area
with many small investor-owned utilities which were
excluded from the IPP incentives in both SB 217 and HB 307.
She asked if it would be a problem if there was a language
change to include co-ops and municipal utilities to the
incentives.
Mr. Burns responded that he would encourage the change if
it was in the best interest of the rate payers. The bottom
line was the cost of energy to rate payers.
Mr. Burns concluded that he appreciated the committee's
time and attention to a complicated topic. Although the
railbelt utilities sometimes disagreed, the utilities all
prioritized the best interests of ratepayers. He asked the
committee to embrace the opportunity for the future.
11:07:11 AM
Co-Chair Foster OPENED public testimony.
11:07:38 AM
KEN HUCKEBA, SELF, WASILLA (via teleconference), relayed
that he had operated nuclear power plants, co-gen
facilities, and lived under IPP rules and contracts. He
commented that there had been focus on the trip to Iceland,
but he wanted to highlight that Iceland had an income tax
rate of 46 percent and a sales tax of 24 percent. He noted
that IPPs were for profit entities. He explained that
treasurers reporting on co-ops always talked about the rate
increases, which were driven by revenues. He did not think
IPPs would help the state operate and maintain the state
system. He thought that if tariffs were to be restructured,
there should be caveats to the change. For example, if
Bradley were to provide 100 percent reliable power, it
should not be subject to wheeling rates at all. Some IPPs
had as low as 11 percent capacity factors, and he thought
IPPs should be responsible for offering a similar capacity
as a coal plant or hydro plant. He argued that it would be
disingenuous to offer anything less to ratepayers. He
thought IPPs should be charged for the necessary upgrades.
Mr. Huckaba added that from his experience working on
turbines rebuilds, gas turbines suffered a heavy operation
and maintenance added load. He thought IPPs should be
paying for the added load because of gas turbine treaties.
The IPP transformers and load suffered less wear and tear
from the heat cycling. He did not think more plants needed
to be built. He added that he also had extensive experience
on high voltage transmission lines and he heard about the
concerning inductive losses. He stressed that the losses
were inductive and not related to friction.
Mr. Huckaba relayed that one of his concerns was how much
money would leave the state and not be recirculated.
Additionally, he was concerned about the state relying on
credits and worried that the state would force its co-ops.
He thought any force in a representative republic was
negative. He remarked that Bradly had extraordinarily good
generation and he did not like that Bradley was being used
as an excuse to support renewables. He thought that any
utilities that had anything less than 100 percent capacity
should incur a surcharge in order to utilize the state's
system to sell power for profit to other states.
Mr. Huckaba remarked that he liked the idea that the state
should build a dam or coal plant instead of letting the
for-profit renewables come into the state and send energy
out of the state. He thought the Iceland trip was not
comparable to the situation in Alaska because Iceland had
much higher tax rates. He argued that profits going out of
state was not good for Alaska.
11:14:30 AM
MIKE JONES, SELF, HOMER (via teleconference), was in
opposition to HB 307. He thought the process should move
slowly. The property tax break was being touted as
important, but he did not agree. He argued that it was not
a tax break, but the burden fell on people with lower
incomes who were paying property taxes. The overall costs
would decrease, but the borough that provided the property
tax break would experience increased costs. He did not
think the process made sense. He noted that he would
provide additional testimony in writing after the meeting.
He thought that one of the flaws with intermittent
renewable energy was the involvement of special interest
groups. He did not think that special interest groups
provided a market competitive solution and used "lawfare"
to block renewable energies like hydro and made renewable
energies more expensive.
Co-Chair Foster asked if Mr. Jones was speaking
specifically to HB 307 or to other legislation.
Mr. Jones relayed that he was also speaking to HB 328.
Co-Chair Foster suggested that Mr. Jones submit his
testimony in writing after the meeting.
11:18:47 AM
Co-Chair Foster set an amendment deadline for Thursday, May
2, at 12:00 p.m.
11:19:59 AM
AT EASE
11:20:14 AM
RECONVENED
Co-Chair Foster CLOSED public testimony on HB 307.
Co-Chair Foster noted that one more testifier had joined
online.
Co-Chair Foster OPENED public testimony on HB 307.
11:21:22 AM
AT EASE
11:22:04 AM
RECONVENED
11:22:27 AM
KASSIE ANDREWS, SELF, ANCHORAGE (via teleconference),
testified in opposition to HB 307. She argued that the bill
was a subsidy on top of a subsidy. She thought local
utilities should provide cost effectiveness and reliability
and she did not think socialism should be part of the
system. There was a reason for the tariffs and the fees to
enter onto the grid. She understood that the state's legacy
generation would pay for the inefficiencies of the wind and
solar IPPs. She argued that central planning groups would
become uninterested in the investments in firm power, which
would result in the collapse of co-ops. The IPPs would not
be held accountable for shortfalls. She urged the committee
not to pass the legislation.
Co-Chair Foster CLOSED public testimony.
Co-Chair Foster restated the amendment deadline.
HB 307 was HEARD and HELD in committee for further
consideration.
11:24:46 AM
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 122 Public Testimony Rec'd by 042924.pdf |
HFIN 4/30/2024 9:00:00 AM |
HB 122 |
| HB 307 Public Testimony Rec'd by 043029.pdf |
HFIN 4/30/2024 9:00:00 AM |
HB 307 |