Legislature(2023 - 2024)BARNES 124
02/27/2024 11:00 AM House ENERGY
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| Audio | Topic |
|---|---|
| Start | |
| HB368 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 368 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 368-ELECTRICAL ENERGY & ENERGY PORTFOLIO STDS
11:01:49 AM
CHAIR RAUSCHER announced that the only order of business would
be HOUSE BILL NO. 368, "An Act relating to clean energy
standards and a clean energy transferable tax credit; and
providing for an effective date."
11:03:31 AM
CHAIR RAUSCHER introduced HB 368 on behalf of the House Special
Committee on Energy, sponsor. He spoke from the sponsor
statement included in the committee packet, which read as
follows [original punctuation provided]:
In the wake of a looming gas availability shortage in
the Cook Inlet basin, critical for powering Alaska's
Railbelt from Homer to Fairbanks, this Committee Bill
on Clean Energy Standards and a Clean Energy
Transferable Tax Credit serves as a cornerstone for
our energy policy. It is an urgent and needed measure,
pivotal for steering Alaska towards a sustainable and
secure energy future amidst these challenges.
This legislation not only signals a shift to a more
diversified and resilient energy mix but also
establishes a strategic framework for economic growth
and sustainable stewardship. By setting forth clean
energy standards we are crafting a blueprint for
innovation and transition, guiding our state towards
needed energy solutions that will broaden and help
diversify energy, and will keep Alaska economically
viable.
The introduction of a clean energy transferable tax
credit is a key feature of this bill, designed to act
as a catalyst for clean energy projects. This
initiative is of paramount importance, as it opens
avenues for leveraging both federal and private
investment in Alaska's energy sector. It creates a
fertile environment for public-private partnerships,
ensuring that the path to energy independence is both
collaborative and multifaceted. Additionally, this
bill acknowledges the role of existing low-sulfur coal
facilities, incorporating them into the broader
framework of clean energy solutions to enhance their
contribution to Alaska's energy portfolio.
As a conservative advocate, I highlight this bill's
crucial role in stabilizing the market, essential for
investors across sectors including Cook Inlet gas,
clean energy, manufacturing, and heavy industry. By
establishing a consistent policy framework, we
mitigate investment risks and ensure ratepayers aren't
burdened by costs. This legislation instills
confidence among stakeholders, showcasing our
dedication to a predictable market that attracts
investment, advancing Alaska's energy transition and
economic prosperity.
I call upon my colleagues and partners from all
sectors to support this vital legislation. Together,
we can establish a stable, diversified energy market
that benefits all Alaskans, ensuring our state remains
a beacon of innovation, economic strength, and
sustainable growth for generations to come.
11:07:15 AM
CRAIG VALDEZ, Staff, Representative George Rauscher, Alaska
State Legislature, provided a PowerPoint presentation, "House
Bill 368 ELECTRICAL ENERGY & ENERGY PORTFOLIO STANDARDS," and
sectional analysis of HB 368 on behalf of the House Special
Committee on Energy, sponsor, on which Representative Rauscher
serves as chair. He displayed the map on slide 2, "House Bill
368, Alaska's Energy Landscape," and related that the
geographical area being talked about is the Railbelt, which
includes Homer, Southcentral Alaska, and Golden Valley Electric
Association. The bill focuses primarily on the Railbelt, he
said, but the tax credit portion is statewide.
MR. VALDEZ addressed the graph on slide 3, "Combined Utility
Annual Demands." He said the higher risk uncontracted demand
going forward begins in 2029 [depicted in red], while ENSTAR
predicts the undesignated gas supply gap will begin in 2025
[slide numbered 14, "ENSTAR Gas supply Forecast 2024-2034"].
MR. VALDEZ displayed the graphic on slide 5, "Historical Demand
and Uses." He noted that today's [gas] uses still include
electric power, commercial, and oil and gas field operations,
but the fertilizer plant and the export of Kenai liquified
natural gas (LNG) are no longer uses.
MR. VALDEZ turned to slide 6, "ENSTAR Presentation, Key
Considerations," and related that of the considerations provided
in ENSTAR's presentations, none of the options meet the LNG
demands for the 4-year milestone of fourth quarter 2027 when the
gas gap starts to accelerate. He further related that another
key consideration in ENSTAR's presentation was that the second
worst thing for Alaska is to import LNG and the worst thing is
to do nothing.
MR. VALDEZ moved to slide 7, "HB 368, a Legislative Response,"
which read as follows [original punctuation provided with some
formatting changes]:
HB 368 is a proactive legislative measure aiming to
establish a Clean Energy Portfolio Standard &
Introduce Clean Energy Tax Credits to leverage private
funding and close production gaps.
Diversifying Alaska's energy portfolio with clean
energy sources not only extends the life of Cook
Inlet's natural gas reserves for critical heating
needs but also offers gas producers a definitive
roadmap for the future, enhancing their capacity for
strategic planning and investment.
MR. VALDEZ paraphrased from the first two paragraphs on the
eighth slide, "Bill Overview, HB 368," which read as follows
[original punctuation provided]:
1. Clean Energy Standards: HB 368 sets forth a
legislative framework to establish clean energy
standards for electric utilities in Alaska. It
mandates a phased increase in the use of clean energy
sources, aiming for utilities to achieve specific
targets of their net electricity sales from renewable
or carbon-neutral sources by certain deadlines.
2. Clean Energy Transferable Tax Credits: Introduces a
mechanism for clean energy transferable tax credits to
incentivize investments in clean energy infrastructure
and production.
11:14:23 AM
MR. VALDEZ spoke from the sectional analysis for HB 368 outlined
on slides 9-21, which read as follows [original punctuation
provided with some formatting changes]:
Section 1: Uncodified Law
Adds a new section to the uncodified law of Alaska,
which establishes the purpose of this Act, which is to
set a clean energy portfolio standard for electric
utilities, mandating increasing percentages of their
net electricity sales from renewable or carbon-neutral
sources.
Section 2: AS 42.05.381 is amended by adding a new
subsection (p)
Introduces a new subsection (p) under AS 42.05.381,
mandating a uniform service rate for the transmission
of clean energy generated after July 1, 2024.
Section 3: AS 42.05.780(a) is amended
Amends AS 42.05.780(a) by mandating that an integrated
resource plan must now identify the most cost-
effective strategies for the energy network to satisfy
the clean energy standard.
Sec. 4. AS 42.05.785(a) is amended to read
Amends AS 42.05.785(a) by adding subsection (4)
stipulating the construction of large energy
facilities may not be detrimental to a load-serving
entities ability to meet the CES.
Section 5: AS 42.05 Article 11A. Clean Energy
Portfolio Standard.
Sec. 42.05.900(a)-(i) Clean Energy Portfolio Standard
a) Adds section (a) to AS 42.05, establishing the clean
energy portfolio standard and detailing requirements
and percentages for clean energy sources. Specifies
the minimum percentages of clean energy sources in
the utilities' sales portfolio, with a gradual
increase over a specified timeline.
b) Allows a power purchase agreement to be included
when calculating CES percentages. And requirements
for such.
c) Allows for distributed energy systems to satisfy the
CES.
d) Bases the clean energy standard compliance on
historical data, and industry standards, set by
Regulatory Commission of Alaska.
e) Mandates accounting system to track use of clean
energy, verify compliance, and to track energy
consumption displaced by energy efficiency
investments.
f) Sets requirements for the RCA to develop a proxy for
net energy from displaced energy systems.
g) Allows for clean energy standards to be met by
energy efficiency investments, including in consumer
efficient upgrades.
h) Directs the RCA to establish regulations for a load-
serving entity to opt-out of the clean energy
standard under certain requirements, and denies
eligibility for a utility to receive clean energy
transferable tax credits if it does.
i) Directs the RCA to adopt a minimum standard for
transmission lines before the clean energy standards
are required. 10 years for step one after lines are
complete and 25 years, with the transmission lines
built out to encompass the road system, for step 2.
Sec. 42.05.905(a)-(c) Reporting
a) Details the reporting requirements for utilities,
including the submission of annual reports
demonstrating compliance.
b) Assigns a role to the regulatory commission in
monitoring and verifying compliance with the
standard.
c) Empowers the RCA to investigate compliance with the
standard
Sec. 42.05.910.(a)-(e) Clean Energy Transferable Tax
Credits
1. Allows for a load-serving entity to apply for the
clean energy transferable tax credits, sets the
credit amount to 0.2 cents per kilowatt-hours.
Defines what entities would qualify.
2. Defines facilities that would qualify
Sec. 42.05.915.(a)-(d) Waiver
a) Allows for and sets standards for the RCA to waive
the requirement to meet the CES.
b) Sets out the standards for events or circumstances
outside of a load-serving entities reasonable
control.
c) Sets standards for good cause of non-compliance.
d) Restricts eligibility to apply for clean energy
transferable tax credits while under a waiver.
Sec. 42.05.920.(a)-(b) Exemptions
a) Exempts individual load-serving entities from
compliance if the overall grid is meeting the Clean
Energy Portfolio Standards.
b) Allows for exemption for a load-serving entity from
its first noncompliance period.
Sec. 42.05.925.(a)-(b) Net Billing
a) Sets standards for net billing and an export rate
credit.
b) Charges the RCA to establish regulation to set the
ERC annually based on seasonal and time variations,
and other relevant factors.
Sec. 42.05.930 Additional Energy Resources
a) Requires the AEA to submit a report at least every 5
years to the legislature to recommend if any new
technologies are to be added to the definition of
Clean Energy.
Sec. 42.05.935. Definitions
1. "Clean Energy"
2. "Clean Energy Standard"
3. "Compliance Period"
4. "Distributed Energy Systems"
5. "Interconnected Electric Energy Transmission
Network"
6. "Load- Serving Entity"
7. "Railbelt"
8. "Renewable Energy Resource"
9. "Transmission Network Constraint"
Section 6: AS 42.45.110(a) Costs used to Calculate PCE
This section amends AS 42.45.110(a) to stipulate that
revenue from Clean Energy Credits or recovered heat is
not to be included.
Section 7: AS 43.98 is amended by adding a new
section.
Clean Energy Transferable Tax Credit, Article 5
a) Sets the foundation for the clean energy
transferable tax credit, sets transparency standards
for those provided the tax credit.
b) Allows clean energy transferable tax credits to be
sold, assigned, exchanged, conveyed, or otherwise
transferred in whole or in part.
c) Allows the credit to be used to offset taxes in AS
10.25 and Title 43.
d) Instructs the department of revenue to adopt
regulations necessary for administrating the Tax
Credits
e) Sets the requirement that a clean energy
transferable tax credit be used within 5 years.
f) Restricts a clean energy transferable tax credit
from reducing a person's tax liability below zero.
g) Allows holders of clean energy tax credit
certificates to combine or split their credits for
transactions like sales or transfers. The Department
must issue new certificates for combined or split
credits, detailing their amounts and expiration
dates. This process doesn't extend the credits'
validity period.
Sec. 8. AS 44.83.940 is amended by adding a new
subsection:
Section (b) mandates that the authority must submit an
annual report to the legislature's first regular
session, detailing progress on rural clean energy
development. This report should evaluate current
initiatives, identify needed infrastructure, and
assess the feasibility and costs of future projects.
Section 9: Effective Date Clause
This Act takes effect July 1, 2024.
11:20:46 AM
MR. VALDEZ concluded his presentation on slide 22, "Bottom Line:
HB 368's Impact on Alaska's Future," which read as follows
[original punctuation provided with some formatting changes]:
Energy Security: Strengthens Alaska's energy
independence by diversifying supply sources, reducing
reliance on Cook Inlet gas.
Economic Growth: Stimulates the economy by creating
jobs in the clean energy sector and attracting
industries seeking sustainable operations.
Public-Private Partnerships: Encourages innovative
collaborations, driving both clean energy initiatives
and broader industrial development.
Legislative Leadership: Showcases Alaska's proactive
approach in energy policy, setting a benchmark for
sustainable and forward-thinking legislation.
11:20:53 AM
CHAIR RAUSCHER, responding to Representative Prax, stated that
today is an overview of HB 368, and the bill will be heard
again.
11:21:58 AM
REPRESENTATIVE SCHRAGE observed that [the Department of Revenue
(DOR) fiscal note, OMB Component Number 2476] states that the
revenue impacts of the bill are not yet determined and that the
bill will have an indeterminant negative impact on overall tax
revenue. He expressed his hope that DOR will be able to provide
the committee with a more accurate fiscal note, so it is known
whether the figures are hundreds of thousands of dollars or
millions of dollars.
REPRESENTATIVE SCHRAGE further observed that the third paragraph
in Fiscal Note Number 3 [OMB Component Number 2417] talks about
the bill altering how the Regulatory Commission of Alaska (RCA)
calculates power cost and thus the RCA would need to revise
regulations addressing power cost equalization (PCE)
calculations. He asked whether this would have any impact on
the health of the PCE fund and the payment calculations to
communities. He expressed his hope that it wouldn't be a huge
impact and that he would like to have answers to his questions
before any action is taken on the bill.
CHAIR RAUSCHER replied that OMB Component Number 2417 is saying
that with the new computations someone will have to be hired to
crunch the numbers because they will be different. Regarding
the PCE, he said he thinks anything that happens throughout the
Railbelt has to do with the PCE and the calculations going
forward, so the number will be indeterminant until that can be
vetted, although a solid number for the future may not be
possible.
REPRESENTATIVE SCHRAGE said he understands the short timeframe
has precluded having answers at this time, but he would like to
have them when the bill next comes up.
CHAIR RAUSCHER added that there are also the tax credits and
said coming up with numbers won't be easy.
MR. VALDEZ stated that each of those will be provided when the
committee goes over the relevant sections of the bill.
11:26:06 AM
REPRESENTATIVE PRAX asked how urgent the clean energy standards
are for capturing federal money that will be forthcoming in the
future.
CHAIR RAUSCHER responded that since he isn't the administration
or the Alaska Energy Authority (AEA), he cannot answer the
question. But, he continued, the governor would like a roadmap,
something tangible, that says where the state is going and the
projects within the state for which investors are wanted.
REPRESENTATIVE PRAX surmised that two things need to be sorted
out first whether the gasline from the North Slope and the
intertie [transmission line upgrade] are or are not going to
move forward because those would be main drivers of the
ability to meet the [proposed] standards.
CHAIR RAUSCHER answered that most of it, not all of it, comes
into play for the utility companies after the transmission lines
are built, so the threshold percentages and the years aren't
dependent upon the bill. The bill doesn't dictate who builds
the transmission line, whether it is state, federal, or private
utility companies.
REPRESENTATIVE PRAX asked whether it would be up to the RCA or
whether statute needs to be stipulated to come up with a process
for deciding whether the priority is cost or carbon dioxide
reduction and which projects to adopt.
CHAIR RAUSCHER replied that he would get back with an answer.
11:29:45 AM
CHAIR RAUSCHER announced a deadline of one week for submitting
amendments.
11:30:46 AM
REPRESENTATIVE PRAX expressed his concern that HB 368 would make
the same procedural error as previous legislation that didn't
work out. Responding to Chair Rauscher, he confirmed he has the
part about tax credits.
CHAIR RAUSCHER asked whether Representative Prax finds the
[proposed] tax credits to be similar to the oil tax credits.
REPRESENTATIVE PRAX responded no. He said his concern is the
whole scope of the decision as far as the impact to the state
and that it is somewhat dictating policy or the direction that
things will take. He offered his belief that a week to come up
with amendments isn't enough time to get needed input and to
understand the bill.
REPRESENTATIVE SCHRAGE inquired whether it would be possible to
have a hearing with the RCA and Department of Revenue online
prior to the amendment deadline so questions could be asked.
CHAIR RAUSCHER answered yes, he plans to have many people
testify to provide their opinion on the bill.
11:33:03 AM
REPRESENTATIVE SCHRAGE agreed that that would be good and would
determine whether pushing back the deadline for amendments is
needed.
CHAIR RAUSCHER replied he is willing to push back the deadline
for amendments, if needed.
[HB 368 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 368 Sponsor Statement.pdf |
HENE 2/27/2024 11:00:00 AM |
HB 368 |
| Alaska Energy Authority.pdf |
HENE 2/27/2024 11:00:00 AM |
HB 368 |
| Department of Revenue.pdf |
HENE 2/27/2024 11:00:00 AM |
HB 368 |
| Regulatory Commission of Alaska.pdf |
HENE 2/27/2024 11:00:00 AM |
HB 368 |
| HB 368 Sectional Analysis.pdf |
HENE 2/27/2024 11:00:00 AM |
HB 368 |
| HB 368 Presentation.pdf |
HENE 2/27/2024 11:00:00 AM |
HB 368 |