Legislature(2021 - 2022)BELTZ 105 (TSBldg)
02/15/2021 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| SB69 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 69 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
SB 69-EXEMPT RENEWABLE ENERGY ELECTRIC PLANTS
1:29:27 PM
CHAIR COSTELLO announced the consideration of SENATE BILL NO.
69, "An Act extending an exemption from regulation as a public
utility for plants and facilities generating electricity
entirely from renewable energy resources; and providing for an
effective date."
1:29:52 PM
SENATOR REVAK, speaking as sponsor of SB 69, stated that this
legislation extends a regulatory exemption for renewable energy
produced by independent power producers (IPPs), which has been
in statute since 2010. This exemption encourages private sector
investment in smaller than 65-megawatt renewable energy projects
across the state.
He explained that for the last 10 years Alaska has exempted
small power producers from certain regulations provided they
sell power on a wholesale basis to regulated utilities that
distribute power to local customers. The renewable projects
affected by the exemption cannot have received any state grants
or tax credits. This exemption has been successful; it reduces
cost of entry barriers, provides jobs, and encourages investment
across the state. SB 69 has received little criticism and
overwhelming support; it simply extends the existing exemption
that is due to expire on July 1, 2021.
1:33:18 PM
SENATOR GRAY-JACKSON asked what the criticism has been.
SENATOR REVAK replied there were questions rather than criticism
about the potential to game the system using state grants and
tax credits. The concern is baseless because state law does not
allow renewable projects affected by the exemption to receive
either state grants or tax credits. He reiterated that the
exemption has been in effect for 10 years and no issues have
been identified that relate to any of the questions that have
been asked.
SENATOR GRAY-JACKSON asked if the bill exempts larger projects
than previously.
SENATOR REVAK answered no; SB 69 simply extends the existing
exemption for ten years.
1:35:41 PM
CHAIR COSTELLO asked what regulations are exempted, who has used
this program, and the cost of energy being provided.
SENATOR REVAK deferred to his staff, Dirk Craft.
1:36:10 PM
DIRK CRAFT, Staff, Senator Josh Revak, Alaska State Legislature,
Juneau, Alaska, listed the following renewable projects that
have benefitted from the AS 42.05.711(r)(2) exemption: Fire
Island Wind Project at 17 megawatts is the largest, the Willow
solar project, and Juniper Creek Hydro at Sweetwater Lake. He
deferred to Commissioner Bob Pickett to discuss the specific
regulatory exemptions.
CHAIR COSTELLO asked for a list of everyone who had benefited
from the exemption and reminded him that she also asked about
the cost of the energy the IPPs provide.
MR. CRAFT agreed to provide the list and deferred the discussion
about cost to Commissioner Pickett.
1:37:48 PM
SENATOR STEVENS asked how many times the exceptions have been
granted.
MR. CRAFT offered to follow up with the information.
1:38:18 PM
BOB PICKETT, Commissioner, Regulatory Commission of Alaska
(RCA), Regulatory Commission of Alaska (RCA), Palmer, Alaska,
confirmed that Fire Island was the largest exempted project to
date. He explained that when the commission looks at a power
purchase agreement, they evaluate it essentially in terms of the
avoided fuel costs to the regulated utility. He recalled that
when the RCA approved CIRI's Fire Island Wind Project, the costs
came in relatively close to Chugach Electric's other avoided
costs at the time.
MR. PICKETT added that the RCA economically regulates about 32
of the 128 certificated electric utilities in the state, so the
commission has to approve the power purchase agreements for
those 32 utilities. He said it would be helpful to have a little
legislative clarity about what the commission would be asked to
do for these other non-economically regulated utilities subject
to AS 42.05.711(r)(2). He acknowledged that the commission has a
bit of insight into those through the Power Cost Equalization
Program filings.
CHAIR COSTELLO asked if some of the applicants receive benefit
through the Power Cost Equalization Program.
MR. PICKETT replied that is probably an overstatement. He
explained that when the RCA evaluates Power Cost Equalization
filings, they look at actual fuel costs and non-fuel costs that
the utility incurs. The RCA evaluates the non-fuel costs in
terms of reasonableness compared to a regulated electric
utility.
CHAIR COSTELLO asked what specific regulations are exempted so
that these projects can be viable.
MR. PICKET requested clarification of the question.
CHAIR COSTELLO said the sponsor said regulations are essentially
being waived for these projects.
1:42:36 PM
MR. PICKETT replied the sponsor was probably referring to the
fact that the independent power producers would not have to
secure a certificate of public convenience and necessity (CPCN),
which takes time and effort, and they would be exempted from
other filing requirements and annual reporting to the
commission.
CHAIR COSTELLO asked for a list of the other exempted
regulations that apply to the IPPs.
MR. PICKETT agreed to provide the information.
1:43:23 PM
SENATOR STEVENS asked if the majority of the IPPs are much
smaller than the 17 megawatt Fire Island projet.
MR. PICKETT agreed that most are quite small. Fire Island is 17
megawatts but originally it had the ability to expand to 55
megawatts, he said.
SENATOR STEVENS restated his question.
MR. PICKETT said they largely seem to be less than 10 megawatts,
although project sponsors would like something larger.
1:44:49 PM
SENATOR GRAY-JACKSON asked if the bottom line to qualify is less
than 65 megawatts.
MR. PICKETT replied that is correct.
CHAIR COSTELLO asked how anybody would know if the IPP expanded
beyond 65 megawatts.
1:45:25 PM
MR. PICKETT explained that the RCA would know because the
economically regulated utility would have to file an amended
power purchase agreement with that information in the filing.
SENATOR HOLLAND asked for the length of the exemption.
SENATOR REVAK answered that this is about the regulations
related to start up such as the ones that Mr. Pickett mentioned.
1:46:41 PM
CHAIR COSTELLO asked for the estimated cost to apply for the
certificate of public convenience and necessity (CPCN) and the
other filings. She said her impression was that it was a costly
and time-consuming process and she was trying to understand the
benefit of exempting these small IPPs from these requirements.
MR. PICKETT responded that the complexity of a CPCN filing is
tied directly to the complexity of what the entity is asking to
be allowed to do. By statute, the RCA must make a finding that
the applicant is fit willing and able to do everything they say
they will do in the filing. The evaluation covers a range of
things and the package must be well supported technically,
legally, and for engineering; there is time and money invested
in putting these packages together.
1:48:25 PM
CHAIR COSTELLO asked if it would better serve the public purpose
to require every project to be deemed fit willing and able.
MR. PICKETT explained that when a regulated utility submits a
power purchase agreement to the commission, their certificate is
on the line. They have the ultimate responsibility to perform
adequately, safely, and responsibly to not affect the
reliability of their system.
SENATOR STEVENS asked if a regulated utility could get a portion
of their power from an unregulated utility.
MR. PICKETT answered yes. For example, Chugach Electric has been
receiving power from the Fire Island Wind Project for 8-9 years.
It is Chugach's responsibility to blend that power into their
system and ensure there are no reliability or adequacy issues
associated with doing that.
SENATOR REVAK explained that when this exemption became law ten
years ago, Alaska was the only state that extended the
regulatory authority of the RCA to independent power producers
(IPPs). In other states, it is the utilities that purchase power
from IPPs that are subject to the regulatory commission
oversight.
1:51:57 PM
CHAIR COSTELLO opened public testimony on SB 69.
1:52:19 PM
BERNIE KARL, representing self, Fairbanks, Alaska, said he is
with Chena Power and while they do not use the exemption, he
sees the benefit. He opined that extending the exemption will
enhance investment in Alaska for renewable energy.
1:53:06 PM
DUFF MITCHELL, Executive Director, Alaska Independent Power
Producers Association (AIPPA), Juneau, Alaska, said AIPPA is a
diverse group of many IPPs. He pointed out that IPPs represent
about 39 percent of the electrical generation in the US, but it
is less than 10 percent in Alaska. Alaska ranks last nationally
in IPP power supply and it has the second highest cost of
electricity. He said IPPs are not successful unless they can
meet or beat the cost of an incumbent utility. As commissioner
Pickett mentioned, the RCA must approve all power sales
agreements, which means that they review the IPP contract
through the incumbent utility.
MR. MITCHELL pointed to the research from Legislative Research
Services that queried other states and found that Alaska is the
only state that extends regulatory oversight to IPPs. The
federal government exempts IPPs up to 65 megawatts from Federal
Energy Regulatory Commission (FERC) regulations.
MR. MITCHELL highlighted that the U.S. Energy Administration
projects that the renewable energy mix in the U.S. will double
by 2050. He emphasized that Alaska has more renewable energy
resources than any state in the nation and it needs to be on the
right glide path to be part of that projection. He said SB 69
sends a strong signal to the energy investment market that
Alaska supports private capital investment in developing its
renewable energy resources with the regulatory consistency of
other states.
He restated the expense of arguably duplicative regulation that
could be onerous to small companies, and reminded members that
AS 42.05.711(r)(2) does not preclude future IPP regulation. He
urged the committee to pass SB 69.
1:58:38 PM
SUZANNE SETTLE, Vice President, Energy, Land and Resources, Cook
Inlet Region, Inc. (CIRI), Anchorage, Alaska, informed members
that CIRI worked with former Senator Lesil McGuire to enact the
initial exemption and they successfully completed construction
of the Fire Island Wind Project in 2012. The exemption
eliminated significant operating and cost uncertainty and made
CIRI's investment in the project feasible. It produces about 4
percent of the energy requirement for Chugach Electric prior to
the acquisition of (ML&P) [Municipal Light & Power].
She stated support for SB 69 to extend the term of the tested
and successful exemption. She confirmed previous testimony that
no other state regulates IPPs that sell power to a regulated
utility. She reminded members that IPP projects are dependent on
successfully negotiating a power purchase agreement with a
regulated utility and RCA approval of that contract.
2:01:22 PM
SENATOR STEVENS asked what time, money, and labor CIRI saved by
not having to go through the regulatory process.
MS. SETTLE replied it would have been expensive to create the
application for a CPCN and the cost of the recurring filings
would have been uncertain and potentially burdensome. "It adds a
huge question mark and I can't put a number on it because I just
don't know," she said.
2:02:53 PM
JENN MILLER, CEO, Renewable IPP, Anchorage, Alaska, stated that
this Alaska-grown small business develops utility-scale solar
farms. She provided information about the Willow solar farm and
the upcoming Houston solar farm to illustrate the benefit of
extending the exemption.
She explained that the 1.2-megawatt Willow solar project was
constructed in 2019 at a cost of $1.5 million. Renewable IPP
worked with Matanuska Electric Association (MEA) to complete
detailed grid studies, an interconnection agreement, and a power
purchase agreement. The RCA reviewed and approved the power
purchase agreement, which sells power at MEA's avoided cost.
This regulatory oversight ensured fair pricing for consumers.
She said this is a simple and efficient operation and the
existing regulatory environment made the investment attractive.
MS. MILLER reported that Renewable IPP is now embarking on the
Houston solar farm, which is roughly 7 times the size of Willow
and will nearly double the solar capacity in the state. They
completed similar steps for this $8-10 million project as the
Willow project with the substantial exception that this project
will come online after the current regulatory exemption expires.
She said they petitioned the RCA to request the exemption and an
expedited decision to facilitate construction in 2021. The RCA
granted the exemption within 90 days. She said she could not ask
for a better outcome, but the unknown regulatory environment
introduced significant uncertainty to the project. The potential
investors in this project are comparing it to projects in other
states, none of which require regulation of IPPs. This makes
projects in Alaska less attractive.
MS. MILLER stated that if the RCA had not granted the exemption
for the Houston project, Renewable IPP would be required to pay
a regulation fee on the energy it sells. They would also be
required to do quarterly filing, which would require additional
legal and support staff. From the investor's perspective, this
makes Alaska projects more complex, expensive, less economic,
and less attractive overall, she said. She pointed out that wind
and solar are the cheapest forms of new energy and that there
will be significant private and federal investment in these
projects in the next decade. She emphasized that extending the
existing regulatory environment will keep Alaska projects on a
level playing field for investments and is critical to diversify
the economy, reduce the carbon footprint, and provide jobs for
Alaskans.
2:07:14 PM
CHAIR COSTELLO closed public testimony on SB 69 and held the
bill in committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 69 v. A.PDF |
SL&C 2/15/2021 1:30:00 PM |
SB 69 |
| SB 69 v. A Sponsor Statement.pdf |
SL&C 2/15/2021 1:30:00 PM |
SB 69 |
| SB 69 v. A Legislative Research IPP's 2.4.2021.pdf |
HL&C 4/26/2021 3:15:00 PM SL&C 2/15/2021 1:30:00 PM |
SB 69 |
| SB69 v. A Fiscal Note DCCED.pdf |
SL&C 2/15/2021 1:30:00 PM |
SB 69 |
| SB 69 Letter of Support CIRI.pdf |
SL&C 2/15/2021 1:30:00 PM |
SB 69 |
| SB 69 Letter of Support Renewable IPP.pdf |
SL&C 2/15/2021 1:30:00 PM |
SB 69 |
| SB 69 Letter of Support Fishhook Renewable Energy.pdf |
SL&C 2/15/2021 1:30:00 PM |
SB 69 |