03/15/2016 01:00 PM Senate SPECIAL CMTE ON ENERGY

         SB 193-EXTEND EXEMPTION FOR SMALL POWER PLANTS                                                                     
                                                                                                                                
1:53:28 PM                                                                                                                    
CO-CHAIR MICCICHE announced the consideration of SB 193.                                                                        
                                                                                                                                
1:53:38 PM                                                                                                                    
JESSE LOGAN, Chief of Staff, Senator McGuire, Alaska State                                                                      
Legislature, Juneau, Alaska, Provided an overview of SB 193 as                                                                  
follows:                                                                                                                        
                                                                                                                                
     SB  193 seeks  to extend  the regulatory  exemption for                                                                    
     power plants that utilize  renewable resources under 65                                                                    
     megawatts. The  original exemption  "sunsetted" January                                                                    
     1  and we  are looking  to  extend that  to January  1,                                                                    
     2025.                                                                                                                      
                                                                                                                                
     The  electrical  demand  of the  relatively  small  and                                                                    
     dispersed population  of Alaska is generally  served by                                                                    
     regulated  utilities. RCA  is  charged with  clarifying                                                                    
     utilities,  regulating rates,  resolving disputes,  and                                                                    
     protecting customers; however, Alaska  has also seen an                                                                    
     increase   in   private   sector  investment   in   the                                                                    
     development  of  renewable  energy systems  across  the                                                                    
     state and I think the last bill helps exemplify that.                                                                      
                                                                                                                                
     Previously, Alaska  has exempted small  power producers                                                                    
     from  regulations if  they sell  power  on a  wholesale                                                                    
     basis to regulated utilities  who then distribute power                                                                    
     to local customers. The system  of exemption lowers the                                                                    
     barrier  cost  of  entry  and  reduces  the  regulatory                                                                    
     overreach and  regulatory cost borne  by the  state and                                                                    
     it helps  small-power producers that  develop brand-new                                                                    
     financing   for  renewable   systems.  This   exemption                                                                    
     expired on January 1. Regulation  can increase the cost                                                                    
     of a project and pose  barriers to investment, but also                                                                    
     increases the cost of government through the RCA.                                                                          
                                                                                                                                
     SB  193 continues  to put  Alaska on  the middle-ground                                                                    
     between a  thoroughly deregulated  market and  a highly                                                                    
     regulated market  that we have currently  in Alaska for                                                                    
     most   utilities.   This  arrangement   maintains   RCA                                                                    
     oversight on the Power  Purchasing Agreements (PPA) and                                                                    
     thereby continues to provide  a layer of protection for                                                                    
     rate payers.                                                                                                               
                                                                                                                                
     One of the  most valuable projects to  come to fruition                                                                    
     from the previous exemption is  CIRI's Fire Island Wind                                                                    
     Project  just  outside  of  Anchorage.  The  negotiated                                                                    
     offtake agreement  and private-risk  investment dollars                                                                    
     have now provided long-term  flat priced renewable wind                                                                    
     power to  Chugach Electric Association  for the  last 2                                                                    
     years and have another 22 years to go on their PPA.                                                                        
                                                                                                                                
     This bill  helps to maintain  an open-door  to Alaska's                                                                    
     electrical   market  and   encourages  private   sector                                                                    
     investment    in    renewable   energy    and    energy                                                                    
     infrastructure  across  the  state  in  general,  which                                                                    
     during this  time of fiscal  downturn is  probably much                                                                    
     needed.  It is  the belief  of the  sponsor that  it is                                                                    
     important   to  extend   the  sunset   so  that   other                                                                    
     independent   projects   can   also   have   regulatory                                                                    
     certainty  and  continue  to  develop  Alaska's  energy                                                                    
     potential and at no cost to the state.                                                                                     
                                                                                                                                
CO-CHAIR  BISHOP   asked  what  fits  under   the  definition  of                                                               
renewable energy under SB 193.                                                                                                  
                                                                                                                                
MR. LOGAN  answered that in  statute there  was a full  list that                                                               
included:  wind  power,  solar,  geothermal,  hydro-electric.  He                                                               
assumed that heat-pump  transfer would be listed, but  he did not                                                               
know the entire list.                                                                                                           
                                                                                                                                
CO-CHAIR BISHOP asked if the  federal government had decided that                                                               
hydropower was renewable.                                                                                                       
                                                                                                                                
MR. LOGAN  revealed that  U.S. Senator  Murkowski was  working on                                                               
the renewable listing for hydropower.                                                                                           
                                                                                                                                
1:57:26 PM                                                                                                                    
DUFF  MITCHELL,  Executive  Director,  Alaska  Independent  Power                                                               
Producers Association  (AIPPA), Juneau Hydropower,  Inc., Juneau,                                                               
Alaska,  detailed   that  AIPPA   represents  a  wide   range  of                                                               
independent power  producers that could be  called non-utilities.                                                               
He set  forth that SB  193 extends  the exemption of  small power                                                               
producers  to the  federal government's  lower level  and removes                                                               
some  state-overreach   in  RCA   regulations.  He   opined  that                                                               
regulation  was  costly in  terms  of  time, money,  and  project                                                               
delays if the  exemption was not extended. He  summarized that SB
 allows independent power producers  to continue the exemption                                                               
at the  federal standard.  He added  that SB  193 would  keep the                                                               
"open  for  business"  sign  and  encourage  private  capital  in                                                               
Alaska's renewable  energy. He  noted that SB  193 had  no fiscal                                                               
impact  to  the  state,  avoided  added work  for  the  RCA,  and                                                               
lessened the  barrier for smaller independent  power producers to                                                               
enter the market.                                                                                                               
                                                                                                                                
SENATOR  EGAN asked  Mr.  Mitchell to  address  the Alaska  Power                                                               
Association's claim that the 65  megawatt size restriction within                                                               
the exemption was too high.                                                                                                     
                                                                                                                                
MR.  MITCHELL  revealed that  the  federal  size restriction  was                                                               
actually  80 megawatts.  He remarked  that  Alaska's 65  megawatt                                                               
size restriction was  a unique case where  the federal regulation                                                               
was less that  the state's regulation. He summarized  that SB 193                                                               
simply asks that  the 65 megawatt restriction  match the previous                                                               
bill.                                                                                                                           
                                                                                                                                
CO-CHAIR MICCICHE opened public testimony.                                                                                      
                                                                                                                                
2:00:49 PM                                                                                                                    
MIKE  CRAFT,  President/CEO,  Delta Wind  Farm,  Delta  Junction,                                                               
Alaska, stated  that he  supported the  extension proposed  in SB
. He  asserted that developing  renewable energy  projects was                                                               
difficult and  adding the uncertainty in  obtaining a certificate                                                               
of  public convenience  or  getting permission  of  a utility  or                                                               
anybody  else in  Alaska would  be  a barrier.  He revealed  that                                                               
being exempt  allowed the  Delta Wind Farm  to bring  $54 million                                                               
worth of  development capital to  the Delta Junction area  in the                                                               
upcoming 2 years.  He remarked that the federal  exemption was 80                                                               
megawatts and the  majority of renewable energy  projects will be                                                               
well under 65 megawatts.                                                                                                        
                                                                                                                                
CO-CHAIR MICCICHE  asked Commissioner Wilson  from the RCA  if SB
 had any potential negative  impacts to ratepayers in the long                                                               
run.                                                                                                                            
                                                                                                                                
JAN WILSON, Commissioner, Regulatory  Commission of Alaska (RCA),                                                               
Anchorage, Alaska,  replied that RCA  had no position on  SB 193.                                                               
She added that a public meeting  and vote by the commission would                                                               
be required for the RCA to take an official position on SB 193.                                                                 
                                                                                                                                
CO-CHAIR  MICCICHE  asked  in  what   ways  ratepayers  might  be                                                               
negatively  affected  by the  bill's  extension  for small  power                                                               
plants.                                                                                                                         
                                                                                                                                
MS. WILSON answered that her  personal position as a commissioner                                                               
was that ratepayers would not  be affected. She asserted that her                                                               
personal position was not the position of the RCA.                                                                              
                                                                                                                                
CO-CHAIR MICCICHE  asked her  to confirm that  the RCA  could not                                                               
provide  the committee  with advice  on key  issues regarding  SB
.                                                                                                                            
                                                                                                                                
MS. WILSON  specified that  the RCA would  require an  inquiry to                                                               
the RCA's  chairman in  order to  have a  public meeting  for the                                                               
commission to discuss the bill and take a position.                                                                             
                                                                                                                                
CO-CHAIR  MICCICHE asked  Ms. Wilson  to suggest  a state  agency                                                               
that might be more helpful to the committee.                                                                                    
                                                                                                                                
MS.  WILSON replied  that  the RCA  has  five commissioners  with                                                               
differing  opinions.   She  reiterated  that  the   RCA  has  not                                                               
discussed SB 193 in order to  provide a position. She stated that                                                               
the RCA  would be  happy to address  SB 193 and  get back  to the                                                               
committee.                                                                                                                      
                                                                                                                                
CO-CHAIR  MICCICHE  announced  that  SB  193  would  be  held  in                                                               
committee.                                                                                                                      
                                                                                                                                
He set  forth that  he personally  supported both  SB 192  and SB
.  He  asserted that  without  projects  that move  the  state                                                               
forward,  the  state begins  to  die.  He  addressed SB  192  and                                                               
recommended that  testimony should  also stress why  the projects                                                               
are  important   rather  than  strictly  focusing   on  jobs.  He                                                               
specified  that  explaining  why capital  infrastructure  was  so                                                               
important  was a  good  way  to reach  out  and communicate  with                                                               
Alaskans.