Legislature(2023 - 2024)SENATE FINANCE 532
05/02/2024 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB217 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 50 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 217 | TELECONFERENCED | |
SENATE BILL NO. 217
"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."
9:13:27 AM
Co-Chair Olson relayed that the committee heard background
presentations on the bill over the preceding two days, but
this was the initial bill hearing. He acknowledged Senator
Giessel in the gallery.
9:14:02 AM
ANDREW JENSEN, ENERGY POLICY ADVISOR, OFFICE OF THE
GOVERNOR, mentioned he also worked on issues of food
security. He discussed a presentation entitled "SB 217:
Integrated Transmission Systems" (copy on file). He
explained that the legislation was designed to incentivize
energy development and allow for power at the lowest cost
to move throughout the system, regardless of where it is
generated.
9:14:47 AM
Mr. Jensen showed slide 2, "The Railbelt Electrical Grid,"
which showed a map of the state indicating the area served
by the grid and the area served by the Copper Valley
Electric Association. He noted that the area was about 700
miles long and served about 75 to 80 percent of the states
population. He relayed that much of the Railbelt had few
alternative pathways for power, which resulted in
congestion, capacity constraints, and single points of
failure that impacted the entire system.
9:15:37 AM
Co-Chair Olson invited Mr. Jensen to take his time with his
presentation.
Mr. Jensen continued that because of the multiple owners of
the system and diverse ownership of assets, there were some
issues in the way the system was connected. He described a
wheeling charge power moved from one system to another,
which resulted in a fee somewhat like a toll road. He
noted that costs were passed down to the rate payer and
could prevent the lowest cost power from being transmitted.
He stressed the wheeling rate and current cost recovery
practices were a barrier to project development and low-
cost power.
9:17:11 AM
Mr. Jensen showed slide 3, "Independent Power Producers,"
which showed a map of the transmission lines and service
areas.
Co-Chair Olson asked who set the wheeling rate.
Mr. Jensen responded that the rate was set by the utility
and had to be approved by the Regulatory Commission of
Alaska (RCA).
Mr. Jensen continued to discuss Slide 3. He used the Swan
Lake fire as an example of how a breakdown on the line
affected others down the line and increased power cost for
users. He stressed that the Bradley Lake project would
greatly assist with system constraints.
9:20:16 AM
Co-Chair Olson asked whether the project was fully
federally funded.
Mr. Jensen explained that the project was funded through
revenue bonds that Alaska Energy Authority (AEA) had sold
in 2022. He furthered that the bonds were retired in 2021,
and the utilities still owed excess payments. He said that
the excess payments totaled approximately $12.5 million per
year, collectively among the utilities. He said that the
utilities borrowed as much as they could for as long as the
payments were owed he believed until 2048. He stated that
the utilities got approximately $166 million, $90 million
of which would be used for the upgrade on the SSQ line. The
financing meant that rates would not be raised for users.
9:21:23 AM
Mr. Jensen advanced to slide 4, "Independent Power
Producers," and relayed that the bill would add a new
section to statute regarding independent power producers.
He said that, currently, member or municipality owned
cooperatives do not pay local property or sales taxes, or
state corporate taxes. The legislation would give
independent power producers selling only wholesale power to
a utility the same treatment. He noted that taxes impacted
cost competitiveness and timing of projects. He reiterated
that the exemption would go only to producers wholesaling
power to utilities. He said that the exemptions applied to
any source of power generation.
9:24:16 AM
Senator Kiehl asked about new power producers, and whether
they would be for profit or not for profit.
Mr. Jensen replied that they would be for profit entities.
He added that the bill required that the tax exemption be
reflected in the contract.
Senator Kiehl asked who regulated the contracts.
Mr. Jensen explained that the RCA would review and approve
all contracts.
Senator Kiehl thought the economics Mr. Jensen described,
including impacted property taxes and the effects of low
power rates on local economies, also applied in places
where there were regulated utilities were not for profit.
He asked why some utility structures had not been included.
Mr. Jensen said that the goal was to create an equal
playing field. He said that if an investor-owned utility
that subject to local and state taxes, and another project
was not, it would create inequality.
9:27:45 AM
Senator Kiehl commented that exempting some for-profits and
not others created an unequal playing field.
Co-Chair Olson agreed.
Mr. Jensen appreciated the comments and relayed that it was
the intent of the sponsor to incentivize development to
alleviate the gas situation in the Railbelt. He said that
if the taxes were the barriers from keeping new energy from
being developed then the barriers must be delt with.
9:29:10 AM
Co-Chair Hoffman noted that the Bethel utility used to be
owned by a for-profit company. The situation was resolved
by setting up Bethel utilities as a non-profit, which
resulted in a 20 percent reduction in fees for residents.
He asked whether Mr. Jensen could give an example of other
for-profit entities in the state that currently had the
same non-tax status.
Mr. Jensen relayed that he would need more time to
investigate the matter. He understood that there were a
variety of tax incentives that applied to for profit
entities.
Co-Chair Hoffman addressed Senator Kiehl's comments and
thought the way the situation was handled in Bethel was
simpler and resulted in lower rates for users. He mentioned
that non-profits reaped many benefits that were realized by
the people of Bethel.
Co-Chair Olson asked whether Mr. Jensen was familiar with
the transition that Co-Chair Hoffman had described. He
asked whether any other entities in the state fell under
the same model as that of Bethel.
Mr. Jensen reiterated that he did not know.
9:31:33 AM
Mr. Jensen addressed slide 5, What Does Senate Bill 217
(version U) Do?
•Eliminates transmission "wheeling" rates by requiring
the Railbelt utilities to create a new cost recovery
mechanism (SB 217)
•Extends tax relief provisions enjoyed by cooperative
and municipal electric utilities to Independent Power
Producers (IPPs) (SB 217)
•Establishes a Railbelt Transmission Organization
(RTO) within the Alaska Energy Authority (AEA) (SB
257)
•Creates net metering incentives for seven years after
effective date
•Increases revenue to RCA (Regulatory Commission of
Alaska) and the Department of Law's Regulatory Affairs
and Public Advocacy section (RAPA) (HB 313)
•Exempts projects less than 15 megawatts from RCA pre-
approval
•Increases salaries for RCA commissioners
•Changes qualifications for RCA commissioners and
provides for transition (SB 257)
•Creates AEA board (SB 257)
•Moves transmission planning from the Electric
Reliability Organization (ERO) to the new RTO to be
housed within AEA (SB 257)
9:35:12 AM
Mr. Jensen displayed slide 6, "Questions?":
Andrew Jensen, Energy Policy Advisor
(907) 269-0500
[email protected]
Co-Chair Olson asked about net metering and the 7-year
restriction after the effective date.
Mr. Jensen replied that the restriction had been in an
amendment introduced by Senator Claman in the Senate
Resources Committee. He guessed that it had something to do
with expiring federal incentives.
Mr. Olson asked whether the governor supported the
amendment.
Mr. Jensen relayed that the governor was in favor of
incentivizing renewable systems.
9:36:24 AM
Senator Wilson mentioned net metering, and asked how power
would be reimbursed to the customer.
Mr. Jensen offered a breakdown of the current process.
9:38:03 AM
Senator Kiehl asked about the exemption from pre-approval,
and asked Mr. Jensen to provide more details. He asked how
the 15-megawatt number had been derived.
Mr. Jensen recalled that Chugach Electric had come up with
the number in work with Representative Zach Fields. He
thought maybe the 15-megawatt number was somewhere in
statute.
Senator Kiehl was interested in follow-up information. He
said that some things were cheap to install and expensive
to run and vice versa and noted that hydro-dams would not
have fuel costs. He pondered potential impact to rate
payers that would trickle down from tax exemptions.
Mr. Jensen thought a safeguard would be the fiduciary
responsibility of board members who would have the best
interest of their members at heart.
Senator Kiehl asked whether the pre-approval exemption
applied only to coops.
Mr. Jensen relayed that he would get back to the committee
with the information.
9:41:20 AM
Co-Chair Hoffman asked Mr. Jensen to provide his office
with information regarding how much of the workload in
recent history the RCA had spent on projects of 15
megawatts or less.
Mr. Jensen agreed to provide the information.
Co-Chair Olson requested the information be made available
the following morning.
Mr. Jensen agreed to provide the information the following
morning.
9:41:59 AM
Senator Merrick asked for more history about the Swan Lake
Fire, including what happened to the rates for folks who
were still on power at the lake during the emergency.
Mr. Jensen recalled that AEA bought the SSQ from Homer
Electric and one of the first excess payments received went
toward the purchase of the SSQ.
Senator Merrick asked how rates were impacted at Homer
Electric.
Mr. Jensen replied that rates went up - $12 million spread
over rate payers on a per kilowatt basis.
Senator Merrick clarified that she was referencing those
that still had a connection to Bradley Lake.
Mr. Jensen believed those users rates had remained the same
as before the fire.
9:44:35 AM
Senator Wilson asked whether, under the bill, if a utility
were to be islanded due to ongoing upgrades, would the
utility be rightly compensated because of the one-way power
utilization.
Mr. Jensen believed that when utilities went through the
process to create the new transmission mechanism the
situation would be addressed within the tariff.
Senator Wilson thought there would clearly be winners and
losers in the situation. He asked whether there was
something that could be done in the legislation to ensure
that there was equity.
Mr. Jensen said that in the initial phase there would be a
reallocation of cost. He thought it was important to
remember how the costs compared to the overall revenue
requirement for the utilities. He said that the utilities
and the Regulatory Commission of Alaska would have to come
up with a plan to relay to rate payers. He said that
meetings were ongoing to understand what the transmission
cost recovery mechanism would look like, and an agreement
was expected within the next year. He believed that in the
long run all rate payers would benefit.
9:48:08 AM
Senator Wilson asserted that the legislation would mandate
an initial loss of revenue for utilities and wondered how
utilities would find that attractive.
Mr. Jensen responded that the money would be recovered. He
said that the intention was not to take from utilities and
that there would be safeguards in place to minimize the
initial impact.
9:49:45 AM
Senator Kiehl noted that the issue of fairness had always
been at play and that the RCA had traditionally acted as a
referee. He asked whether there were elements of the
current bill that were decided only by the new organization
without RCA review.
Mr. Jensen relayed that the transmission cost recovery
tariff was the primary thing under the RCA's purview, which
encompassed anything brough forward to justify cost. He
said that the economic regulation of the project gave the
RCA considerable oversight. He said that through regulation
of the tariff the commission would have broad insight into
the cost.
9:52:07 AM
Senator Wilson had a question related to Section 18, page
12, line 7, section (d), and the language surrounding new
work and maintenance. He asked how collective bargaining
agreements would be applied in the different areas of the
work along the line.
Mr. Jensen deferred the question to Senate Resources
Committee staff.
Senator Wilson understood that Mr. Jensen had no
interpretation on how the bargaining agreements would work.
He expressed concern that no one could answer the question.
Co-Chair Olson thought that the question could be asked of
the appropriate person.
Mr. Jensen understood Senator Wilson's concern. He
mentioned concern that some of the incoming federal funds,
the possibility of workers from out-of-state, and the
preservation of in-state union contract agreements.
9:54:39 AM
Co-Chair Stedman thought there might be some confusion
about what the administration supported in the current
legislation.
Mr. Jensen relayed that the governor had some over-arching
policy goals for the legislation. The governor supported
open access, non-discriminatory consortium generation so
that power could move from anywhere to anywhere. He said
that the governor wanted the lowest cost power to be moved
without any economic barriers. He said that the governor
wanted as broad of support as possible to achieve his
energy objectives.
Co-Chair Stedman hoped for more definitive answers
surrounding the governor's support of the current bill.
Mr. Jensen believed there was wide alignment for the tax
exemption provision. He considered things without wide
alignment and thought that those would be areas where the
legislature would need to give input.
9:57:33 AM
Co-Chair Stedman commented that at the end of the day the
governor had to sign the bill or the legislatures time
will have been wasted. He reiterated that a clearer
understanding of which parts of the bill the governor
supported would be helpful to the discussion.
Mr. Jensen replied that there was nothing in the current
bill that the administration considered a red line.
9:58:43 AM
Senator Wilson asked whether that meant that the
administration supported everything, as written, in the
current bill.
Mr. Jensen responded that the governor supported the
legislation that originally had been introduced.
9:59:16 AM
Co-Chair Hoffman commented that he did not know of anyone
or any industry that would object to being tax exempt.
10:00:09 AM
SENATOR CATHY GIESSEL, noted that the bill had been
intensely worked over the past eight months. The genesis of
the bill was a trip that several legislators from both
bodies along with utility companies, to Iceland, where they
researched how a similar sized entity there had done to
lower renewable energy costs while creating a robust
economy.
Senator Giessel described the similarities between Iceland
and Alaska and how what happened there could be beneficial
to the state. She listed the various stakeholders involved
in the conversation during the crafting of the bill.
10:04:04 AM
ANGELA RODELL, STAFF TO SENATOR GIESSEL, addressed a
presentation entitled "CS for Senate Bill 217 -
(RES)Integrated Transmission Systems - Sectional Analysis"
(copy on file). She addressed slide 2, " Improvements to
the Regulatory Commission of Alaska (RCA)":
Section 1:
Amends AS 42.04.020 (a) to clarify and update the
qualifications of individuals nominated to serve as a
commissioner for the Regulatory Commission of Alaska
(RCA) by requiring at least 5 years of experience in
the field associated with the degrees, a member of the
Alaska Bar Association in good standing with at least
5 years of experience, or a professional engineer
registered under AS 08.48.
Section 2:
Amends AS 42.04.020 (f) by increasing the salary of
the RCA chair and commissioners to Range 29.
Section 3:
Amends AS 42.05.254 (a) by increasing the surcharge
paid by regulated entities to pay for the operations
of the RCA.
Section 4:
Amends AS 42.05.381 by clarifying that the RCA may
consider diversity of energy supply, promotion of load
growth or enhanced energy reliability or security in
determining if an electric utility's rate is just and
reasonable.
10:05:58 AM
Co-Chair Hoffman referred to Section 2 of the bill and
asked whether the increase from a Range 27 to a Range 29
been requested by the Regulatory Commission of Alaska board
and how much the increase equated to monetarily.
Ms. Rodell understood that the sponsor of the amendment
thought the increase in salary had been commensurate with
the increase in qualifications. She said that the increase
was from $113,000 per year to $120,000 per year.
Co-Chair Olson assumed that the increase had been needed to
attract candidates.
Ms. Rodell replied in the affirmative.
10:07:20 AM
Senator Bishop commented on Section 2 and the salary
increase. He recounted a previous conversation during an
Energy Security Taskforce meeting about employees leaving
the Regulatory Commission of Alaska to seek higher paying
jobs.
Co-Chair Hoffman asked about the surcharge at the increased
rate lines out in Section 3.
Ms. Rodell replied that she would get back to the committee
with an actual dollar amount.
Co-Chair Olson understood that the increase was necessary
to meet the expenses of the Regulatory Commission of
Alaska.
10:08:45 AM
Ms. Rodell showed slide 3, "Establishing a Net Metering
Program":
Section 5:
Amends AS 42.05 to provide for retail customers to
receive a monthly credit at the full retail rate per
kilowatt-hour, of electric energy supplied by the
customer.
After each 12-month period as of March 31, any unused
credits will expire.
After 7 years, customers enrolled in this program will
no longer be allowed to participate and receive
credits.
10:09:31 AM
Senator Wilson asked how billing worked after the 7-year
period.
Ms. Rodell responded that payment would be at the regular
rate, without the credits.
st
Senator Wilson asked about the March 31 deadline.
Ms. Rodell said she would get back to the committee with an
answer.
Senator Kiehl understood that after a seven-year surplus
electricity could not be sold bac to utilities, at any
price.
Ms. Rodell answered affirmatively.
Senator Kiehl wondered who would make the decision.
Ms. Rodell replied that it would be up to the utility.
10:11:17 AM
Senator Giessel relayed that the reason for the time
limited period was to deter overbuilding such as putting
so many solar panels up that it resulted in excess power.
She explained that net metering was reimbursed at a retail
rate, while net billing reimbursed at a wholesale rate that
was much less. She referenced a piece of legislation passed
on the Senate floor that related to net metering.
Co-Chair Olson asked whether the provision stifled
entrepreneurship.
Senator Giessel responded that the utility would have to
reimburse at a retail rate and there were multiple other
avenues for free enterprise to thrive.
10:13:08 AM
Senator Bishop thought there were only so many kilowatts on
the Railbelt that could be absorbed by renewables. He
mentioned the renewable revolution occurring in
California.
10:14:43 AM
Senator Merrick asked whether it would make sense to move
to a net billing model after seven years.
Senator Giessel thought the matter would be up to the
utilities. She said that the Railbelt Reliability Council
would have jurisdiction over generational planning. She
said that the council would assess whether too much power
was being generated and would make sure there was stable
regenerable power.
10:15:59 AM
Ms. Rodell addressed slide 4, "Transparency in Power
Purchase Agreements":
Section 6:
Amends AS 42.05.431 (b) to require that power purchase
agreements between public utilities or between a
public utility and an independent power producer
reflect the tax benefits provided to the independent
power producers or utilities.
Ms. Rodell showed slide 5, "Streamline Regulation of
Independent Power":
Section 7:
Amends AS 42.05 by exempting construction of energy
facilities producing 15,000 kilowatts (15 Mw) or less
from preapproval by the RCA.
10:17:21 AM
Senator Kiehl asked whether the section had limited
applicability to the Railbelt region only or whether it
applied statewide.
Ms. Rodell noted that the provision applied statewide.
Senator Kiehl thought there could be potential or sizeable
impact on rates due to variation of project size. He
wondered whether the baseplate exemption could be based on
utility size.
Ms. Rodell thought Senator Kiehl's concept could be offered
as an amendment. She considered that the discouragement of
building something too large would be the inability to sell
it. She suggested that a developer of energy would not
build a utility so large that the utilities surrounding it
would not be able to absorb the power.
Senator Kiehl said that the Regulatory Commission of Alaska
looked at several categories, including projects
financials. He said that the pre-approval process reduced
the risk to a utility building a new generation project
from spending too much or taking on too much debt to be
deemed prudent by the Regulatory Commission of Alaska to
qualify for recoverable rates. He said he would like to
discuss the matter further with the sponsor.
10:20:37 AM
Senator Wilson asked whether the 15,000 kilowatts
referenced in Section 7 would be the standard for temporary
sites.
Senator Giessel relayed that she had asked the same
question and noted that the section had been brought up by
Chugach Electric. She noted that the project at Willow was
17,000 kilowatts and 12,000 kilowatts at Fire Island. She
thought the idea was that the smaller projects would be
made more economic by not having to go through an extensive
and expensive review by RCA. She said the council would be
monitoring the projects. She stated that the bill could be
amended to have the section only apply to the Railbelt
area.
10:22:26 AM
Co-Chair Stedman thought one of the advantages of the
intertie in Southeast was generation could occur nearly
anywhere. He asked whether there was an expectation that
there would be many smaller independent projects generating
5 and 10 megawatts and tying into the system.
Ms. Rodell had not seen a forecast for supply, but thought
the expectation was that given the diversity of the
Railbelt, large and small projects would be accommodated.
Co-Chair Olson handed the gavel to Co-Chair Hoffman.
10:23:40 AM
Ms. Rodell reviewed slide 6, "Improvements to the Electric
Reliability Organization (ERO)":
Section 8:
Amends AS 42.05.762 by repealing the requirement that
an electric reliability organization (ERO) must
develop integrated resource plans and adding the
requirement that the ERO must participate in an
integrated transmission plan conducted by the Railbelt
Transmission Organization.
Additionally, the ERO will be required to prioritize
reliability and stability of the system served by the
ERO while also taking into account cost to the
consumer.
Ms. Rodell clarified that the slide was wrong. She
clarified that the section would amend the integrated
resource plan to not include transmission planning.
Co-Chair Hoffman handed the gavel back to Co-Chair Olson.
Senator Giessel added that there were numerous terms in the
document. She stated that Electric Reliability Organization
(ERO) was the same entity as the Railbelt Reliability
Council (RRC). She shared that the entity had been in
existence for over four years and had a 14-member board.
10:25:43 AM
Senator Bishop mentioned a presentation by the council the
previous day.
10:26:09 AM
Ms. Rodell advanced to slide 7, " Conforming the ERO Tariff
to Streamlined ERO Duties":
Section 9:
Amends and repeals AS 42.05.770 (1) which is the
requirement that an ERO tariff include standards for
nondiscriminatory open access transmission and
interconnection and standards for transmission system
cost recovery.
Sec. 42.05.770. Regulations. The commission shall
adopt regulations governing electric reliability
organizations, reliability standards, and
modifications to reliability standards consistent with
this section. Regulations under AS 42.05.760
42.05.790 must(1) require that an electric reliability
organization's tariff include(A) standards for
nondiscriminatory open access transmission and
standards for interconnection;(B) standards for
transmission system cost recovery;
10:26:49 AM
Ms. Rodell showed slide 8, "Streamlining the ERO's
Responsibilities":
Section 10:
Amends AS 42.05.772 by adding that a load-serving
entity that would otherwise be exempt from regulation
under this chapter, shall adhere to the ERO's
reliability standards, coordinate with the ERO, and if
applicable, coordinate with the Railbelt Transmission
Organization to integrate reliability standards into
the load-serving entity's operational procedures.
10:27:29 AM
Ms. Rodell referenced slide 9, "Administrative Needs -
Conformity
Section 11:
Amends AS 42.05.790 by adding that the definition of
"Railbelt" has the same meaning given in AS 44.83.750
and "Railbelt Transmission Organization" means the
transmission organization established by AS 44.83.700.
10:27:55 AM
Ms. Rodell spoke to slide 10, "Improvements to Regulatory
Commission of Alaska":
Section 12:
Amends AS 42.06.286(a) by increasing the surcharge
paid by pipeline carriers to fund operations of the
Regulatory Commission of Alaska.
10:28:17 AM
Ms. Rodell showed slide 11, "Incentivize Diversity of
Generation":
Section 13:
Adds a new section AS 43.98.100 to provide a tax
exemption to state and local ad valorem, income and
excise taxes to any independent power producer that
only sells wholesale power to cooperative and public
utilities.
10:28:53 AM
Co-Chair Hoffman asked to go back to slide 10 and asked
about who the pipeline carriers were.
Ms. Rodell requested time to research the question.
Co-Chair Hoffman asked whether there was any industry
objection to the provision in Section 12.
Ms. Rodell replied in the negative.
10:29:53 AM
Senator Bishop noted that there was an Regulatory
Commission of Alaska manager available to answer questions.
10:30:20 AM
Co-Chair Hoffman asked who the pipeline carriers were that
would fund the surcharge and how much the surcharge would
be. He wondered whether there was any objection by pipeline
carriers to the provision.
REBECCA ALVEY, ADVISORY SECTION MANAGER, REGULATORY
COMMISSION OF ALASKA (via teleconference), relayed that the
carriers included Hilcorp, ConocoPhillips, the TAPS
carriers that did intra-state business. She mentioned a
proposal to increase the statutory cap of the Regulatory
Cost Charge (RCC). She noted that currently, as the cap was
set, there was potential for the RCA's budget may exceed
the current cap and not allow for the commission to collect
through the RCC the amount necessary to fund operations.
She did not know the number. She said she would get back to
the committee with a number. She stated that she had heard
no opposition to the provision.
Co-Chair Hoffman inquired as to whether the pipeline
carries had been asked directly whether they supported the
provision.
Ms. Alvey relayed that the RCA had not asked the question
to any pipeline carriers.
Co-Chair Hoffman asked that pipeline carriers be asked the
question and that the Regulatory Commission of Alaska
return to the committee with a response.
Ms. Alvey agreed.
10:34:01 AM
Ms. Rodell discussed slide 12, "Board of Directors -Alaska
Energy Authority":
Section 14:
Amends AS 44.83.030 to provide for an 8-member,
independent board for the Alaska Energy Authority
(AEA)
Section 15:
Amends AS 44.83.030 to allow commissioners to delegate
to a deputy or director and provides that each public
members serves a 3-year term.
Section 16:
Amends AS 44.83.030 to require the board to elect a
chair and vice-chair every 2 years and provides that a
quorum of 5 is needed to meet along with an
affirmative vote of 5 to take any action.
Co-Chair Olson asked whether all eight members of the board
would be voting members.
Ms. Rodell replied in the affirmative.
Co-Chair Olson asked how a tie would be avoided.
Ms. Rodell noted that a tie would result in a failed
vote. An affirmative vote of five would be needed for
anything to pass.
10:35:10 AM
Ms. Rodell spoke to slide 13, " Powers & Duties Alaska
Energy Authority":
Section 17:
Amends AS 44.83.080 to add to the duties of the AEA to
allow AEA to provide staff and administrative services
for the Railbelt Transmission Organization and to also
allow AEA to acquire energy storage systems.
10:35:36 AM
Co-Chair Stedman thought there needed to be a policy
discussion regarding AEAs expanding ownership of
transmission lines and other energy assets.
Senator Giessel noted that the goal was to ensure electric
power. She said that AEA acquiring the energy storage
systems would assist utilities. She said that new energies
required significant investment, which AEA could assist
with.
10:37:26 AM
Senator Bishop added that the previous day AEA had shown
three potential acquisitions on battery storage for three
different utilities.
10:37:45 AM
Co-Chair Hoffman noted that the committee would be looking
at the question raised by Co-Chair Stedman, and that of AEA
and AIDEA. He thought it seemed that the powers and
authorities of AEA and AIDEA needed to be reviewed.
Co-Chair Olson agreed with Co-Chair Hoffman's comments.
Co-Chair Stedman understood the benefits of having a state
organization assist with funding. He believed that further
discussion should be had about which entities held the
power lines the utilities or a consortium outside of
state entities.
10:39:51 AM
Senator Kiehl recognized the diversity of the electrical
infrastructure in Alaska. He thought the AEA fiscal note
was to the first version of the bill and did not address
the question of additional staff and how they would be
paid.
Senator Giessel relayed that the next section of the bill
went into depth about the RTO that was being created and
the upcoming section would address the question about the
ownership of assets. She said that AEA was a part of the
RTO in the same way that the AEA and four utilities made up
the Bradley Lake Management Council. She said that revenue
mechanisms and construction and operation details would be
discussed in the next sections.
10:42:39 AM
Ms. Rodell advanced to slide 14, "Creation of the Railbelt
Transmission Organization":
Section 18
Amends AS 44.83 by adding a new subsection creating
the Railbelt Transmission Organization (RTO).
44.83.700
• establishes the RTO under the Alaska Energy
Authority for the purpose of developing a backbone
transmission system for the Railbelt
• establishes the governance structure that provides
for oversight of the RTO, creating a management
committee that is composed of members representing:
•each of the utilities
•the executive director of the Alaska Energy
Authority
the CEO of the ERO
an individual from an independent power producer
an individual from a labor union
requires the RTO to establish a conflict resolution
process
facilitates public participation in the operations of
the RTO
44.83.710
sets out the powers and duties of the RTO
gives the authority to purchase, lease or acquire
backbone transmission assets
gives the authority to construct, own, and operate
new transmission assets
establish tariffs subject to the approval of the RCA
Provides that no assets may be sold, exchanged,
donated or otherwise conveyed without the express
approval of the Legislature
Ms. Rodell specified that that organization was within the
AEA. She noted that the governance structure had bene
amended in Senate Resources Committee.
Senator Giessel highlighted that under AS 44.83.700, the
RTO would manage but not mandate the transition of assets
from utilities to the RTO. She stressed that the RTO was
placed within AEA for transition purposes. She said that
the RTO was not a board but a governing structure. She
cited Line 21 of the bill and stressed that the AEA was
there for administrative purposes only. She referred to
Section 18, page 10, line 28 of the bill, which related to
the governance structure:
(C) the chief executive officer of the applicable
electric reliability organization, or the chief
executive officers designee;
Senator Giessel highlighted that in the original
legislation the CEO of the ERO had been a non-voting
member, which was amended in Senate resources Committee.
She shared that other changes made in that committee could
be found on Page 10, lines 30-31; and continuing to Page
11, lines 1-3, and had been deemed by AEA as unacceptable,
per Curtis Thayer. She said that the committee would need
to amend the bill to remove items (C), (D), and (E) to
protect AEAs bonding authority.
10:47:47 AM
Co-Chair Stedman asked for an idea of how many employees
the organization would have and whether they would be
considered state employees.
Ms. Rodell relayed that that the design mirrored the
Bradley Lake Management Committee, which had no direct
employees but used the employees of the utilities and the
AEA.
Co-Chair Stedman pondered the possibility of the utilities
deciding to work together and merge to lower rates. He
wondered if such action would be limited under the
legislation.
Ms. Rodell responded that the action would not be
restricted.
Co-Chair Hoffman referenced Section 18 on page 11, line 26.
He asked how many times the Senate Resources Committee
addressed the word may versus the word shall when
writing the bill.
Senator Giessel replied that it had always been may
because the bill did not mandate that they construct, own,
and operate, or that they take possession of any of the
assets. She commented on utilities working together. She
reminded the committee that the Bradley Lake Management
Council had been functioning for more than 40 years, with a
conflict resolution process in place. She recalled that the
word "may" on line 26, had always been part of the bill.
Co-Chair Hoffman thought that with the legislation there
was a change in that the entities would be tax exempt,
which was an issue. He thought the committee should look at
the issue and talk to the members of the utilities
regarding the ownership and operation of the transmission
lines.
10:51:33 AM
Ms. Rodell thought Co-Chair Hoffman raised a very important
point about how the legislation tried to address several
complex pieces about what was currently constraining the
Railbelt grid. The legislation created a coordination of
planning, a coordination of transmission assets, and an
open access tariff, allowing independent power producers to
enter into power purchase agreements that would be RCA
reviewed and regulated, and would go into a new
transmission system to service wherever there was demand.
Co-Chair Stedman noted that the committee had asked AEA to
review the grant data on the Grid Resilience and Innovation
Partnerships (GRIP) funding that would be discussed in
winter 2025, to determine when AEA could divest itself of
power line assets. He said that the information was
necessary to make the final determination of how ownership
would be established.
Ms. Rodell referenced AS 44.83.710 on the bottom of slide
14, which addressed the powers and duties of the RTO. She
noted that no assets could be sold, exchanged, donated or
otherwise without the direct approval of the legislature.
She said that the assets would be owned by AEA, through
funding and construction, and it would not be up to the AEA
how to dispose of the assets.
10:54:30 AM
Co-Chair Stedman explained that he was concerned with the
handling of the project after construction and funding. He
felt that AEA might expand their ownership after funding
and construction. He believed that other entities should
own the assets and AEA should only fund through
construction.
Senator Giessel relayed that the section being discussed
related to the RTO, and not AEA. She continued that AEA was
a part of the plan but that utility companies were another
part. She said that stakeholders requested that the assets
would not be sold without the approval of the legislature.
10:56:10 AM
Co-Chair Hoffman thought that Co-Chair Stedmans question
was related to the powers and duties of the organization.
He thought Co-Chair Stedman had questioned whether it
should be required that that utilities shall own and
operate the line and not a state entity. It was a question
about may versus shall written into the legislation.
Senator Giessel thought Co-Chair Hoffman posed a great
question and pondered the setting of a time limit. She
relayed that the "may" was there because utilities had laid
out significant funds to build the assets and were not
willing to relinquish ownership to the RTO. The RTO would
simply manage the transmission of electrons. She considered
that if the committee wanted to set a limit that was the
purview of the committee.
Co-Chair Stedman expressed disinterest in outside interests
monetizing state resources. He thought it was beneficial
for Alaskans that the citizens own the utility. He offered
an example of an outside entity who wanted to purchase a
utility in Sitka.
Senator Giessel believed that there was a situation in King
Cove had built a hydro-electric plant and was now
experiencing a problem related to their rates.
10:59:24 AM
Senator Kiehl referenced 44.83.710(b) and asked for help in
understanding the difference between management and
effective operational control.
Senator Giessel deferred to a utility CEO, if available, or
Gwen Holdmann from the Alaska Center for Energy and Power.
11:01:09 AM
GWEN HOLDMANN, ALASKA CENTER FOR ENERGY AND POWER,
UNIVERSITY OF ALASKA FAIRBANKS, introduced herself and
asked Senator Kiehl to repeat his question.
Senator Kiehl referenced Page 11 of the bill, which
discussed the powers and duties of the organization. He
asked what the difference was between managing and
having effective operational control of and would those
things be a matter of ownership.
Ms. Holdmann thought that the topic of Senator Kiehl's had
been one of the pieces that the utilities had spent the
most time discussing. She shared that there was not a need
to transfer ownership of assets as many of them were tied
up in bonding authority with the individual utilities. She
said that severing those assets from their debt would not
be in the best interest of stakeholders in terms of cost.
She stated that utilities would have the option of selling
their assets into the RTO. She commented that there had
been numerous failed attempts for the utilities to work
together to form an entity outside of the state that would
perform the function of unified system operator, which was
why the state needed to be involved.
Ms. Holdmann noted that Iceland's system was the most
analogous to Alaska's.
11:05:03 AM
Senator Kiehl thanked Ms. Holdmann for the valuable
history. He wanted more information regarding management
and control as defined in the legislation. He referenced
Senator Giessel's comments on changing the controls of the
board to the bond holders.
Ms. Holdmann replied that it was important that the
management committee was made up of the asset owners.
Senator Wilson asked about the cost to ratepayers upon
passage and implementation of the bill.
Ms. Holdmann thought the purpose of the bill was to
organize assets. She said that the assets could be moved
out of state ownership in the future. She said that the
legislation would not result in immediate savings to
ratepayers but would organize assets in such a way to get
the cheapest cost power to consumers wherever they were
located.
Senator Wilson wondered about the direct impact on
ratepayers in the short and long term.
11:07:57 AM
Senator Bishop commented that the bill was looking
prospectively into the future. He thought all the renewable
energy being discussed was pie in the sky without a
system of distribution in place.
Co-Chair Olson suggested pausing the presentation and
returning to the table at 1:30PM.
Ms. Rodell agreed.
11:09:03 AM
Senator Giessel added that Lines 7 and 8 of the bills
stipulated that work must be performed subject to terms and
conditions of any existing collective bargaining agreements
and related to work performed on new construction and
maintenance. The language came at the request of unions
that were currently engaged in collective bargaining
agreements with utilities.
SB 217 was heard and HELD in Committee for further
consideration.
11:09:50 AM
RECESSED
[The meeting was not reconvened, and the presentation was
continued at the 1:30 p.m. meeting the same day].