Legislature(2023 - 2024)BUTROVICH 205

03/13/2024 03:30 PM Senate RESOURCES

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Audio Topic
03:31:19 PM Start
03:31:51 PM SB217
04:24:44 PM Presentation: Alaska Energy Authority (aea)
05:10:57 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SB 217 INTEGRATED TRANSMISSION SYSTEMS TELECONFERENCED
Heard & Held
-- Public Testimony --
+ Presentation: Alaska Energy Authority (AEA) TELECONFERENCED
Update by Curtis Thayer, Executive Director
+ Bills Previously Heard/Scheduled TELECONFERENCED
**Streamed live on AKL.tv**
             SB 217-INTEGRATED TRANSMISSION SYSTEMS                                                                         
                                                                                                                              
3:31:51 PM                                                                                                                    
CO-CHAIR GIESSEL  announced the consideration of  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."                                                                                                                    
                                                                                                                                
3:32:20 PM                                                                                                                    
CO-CHAIR GIESSEL announced invited testimony on SB 217.                                                                         
                                                                                                                                
3:32:11 PM                                                                                                                    
SENATOR DUNBAR joined the meeting.                                                                                              
                                                                                                                                
3:32:39 PM                                                                                                                    
ANTONY  SCOTT,   Director,  Economic  and   Regulatory  Analysis,                                                               
Renewable  Energy  Alaska   Project  (REAP),  Anchorage,  Alaska,                                                               
presented SB 217 on behalf  of the administration. He stated that                                                               
he  is an  economist and  former commissioner  at the  Regulatory                                                               
Commission  of  Alaska  (RCA),  with  decades  of  experience  in                                                               
economics and  policy analysis  in the state.  REAP is  a member-                                                               
based  organization. Its  membership  includes public  utilities,                                                               
independent power  producers, labor groups,  Native associations,                                                               
consumer groups,  and others.  He moved to  slide 2  and detailed                                                               
REAP support for SB 217.                                                                                                        
                                                                                                                                
[Original punctuation provided.]                                                                                                
                                                                                                                                
     REAP supports SB 217                                                                                                     
                                                                                                                              
        • Creates favorable economic conditions for new                                                                         
          investment that will create ratepayer value by                                                                        
          solving two significant existing problems:                                                                            
          1. Inefficient   cost   recovery   mechanism   for                                                                  
             transmission system infrastructure costs impede                                                                    
             economic development and raise rates paid by                                                                       
             consumers                                                                                                          
          2. Inefficient and inequitable local tax burdens                                                                    
             for Independent Power Producers (IPP) increase                                                                     
             their investment costs and raise rates to                                                                          
             utility customers                                                                                                  
        • It offers a simple and understandable approach                                                                        
        • It does so with a minimum of overhead costs and                                                                       
          institutional disruption                                                                                              
        • It refrains from using overly prescriptive                                                                            
          mechanisms                                                                                                            
                                                                                                                                
3:34:42 PM                                                                                                                    
MR. SCOTT moved to slide 3 and explained wheeling charges:                                                                      
                                                                                                                                
[Original punctuation provided.]                                                                                                
                                                                                                                                
     Inefficient Transmission System Cost Recovery                                                                            
     (current "toll-road" system)                                                                                             
                                                                                                                              
        • Significant portion of transmission system costs                                                                      
          are currently  recovered through  "wheeling rates"                                                                    
          Example:  for Homer  Electric Assoc  to buy  power                                                                  
          from a  wind producer  in Fairbanks, HEA  pays for                                                                    
          both  cost  of  generating   the  power  plus  the                                                                    
          combined  costs to  "wheel" the  power across  the                                                                    
          various  components of  the Railbelt  transmission                                                                    
          system:                                                                                                               
          o  $0.00531/kWh to  Golden  Valley Electric  Assoc                                                                    
             (GVEA) to use its transmission system                                                                              
          o  $0.00512/kWh to  Alaska Energy  Authority (AEA)                                                                    
             to use the Intertie,                                                                                               
          o  $0.00415/kWh to Matanuska Electric  Assoc (MEA)                                                                    
             to use its transmission system                                                                                     
          o  $0.01412/kWh to Chugach Electric Assoc (CEA) to                                                                    
             use its transmission system                                                                                        
     Total transmission wheeling charges = $0.0287/kWh                                                                        
        • The actual costs of transmission are not                                                                            
          increasing with this use, but                                                                                         
        • These additional "toll" charges can prevent an                                                                        
          otherwise economic  generation project  from being                                                                    
          built                                                                                                                 
                                                                                                                                
MR. SCOTT  stated that the inefficiencies  in transmission system                                                               
cost recovery are a significant  issue. A portion of transmission                                                               
system costs  are recovered not  from a utility's  own ratepayers                                                               
but  through  wheeling charges.  When  one  utility uses  another                                                               
utility's transmission  system, they  pay a $1  per kilowatt-hour                                                               
charge  for moving  electricity  over  that transmission  system.                                                               
These charges  essentially function as  a tax on  the transaction                                                               
of power generated in one area  and consumed in another, and this                                                               
tax is quite inefficient.  It can be likened to a  toll paid on a                                                               
road because the  costs of the transmission system  do not change                                                               
even when it  is being used. The result is  that these individual                                                               
wheeling charges can render  an otherwise economically beneficial                                                               
project uneconomic,  preventing the project from  proceeding. The                                                               
example  on  the  slide  illustrates  that  if  Homer  wished  to                                                               
purchase  wind power  from a  development north  of the  range in                                                               
Fairbanks, it would  have to pay for the cost  of generating that                                                               
power to  the Independent  Power Producer  (IPP). Even  if Golden                                                               
Valley built the wind power  themselves, they would still have to                                                               
pay  for the  power's generation  cost and  the combined  cost of                                                               
wheeling that  power across various  components of the  rail belt                                                               
transmission  system. These  combined  charges  amount to  almost                                                               
three cents  per kilowatt-hour,  which is  enough to  prevent the                                                               
transaction  from  happening.  This   would  be  unfortunate  for                                                               
economic development in the Fairbanks  region and a loss of value                                                               
for  Homer ratepayers.  It also  increases Homer's  difficulty in                                                               
incorporating  more  wind power  into  the  system, as  having  a                                                               
geographically  diverse source  of renewables  is beneficial  for                                                               
overall  system  reliability.  The   cost  reallocation  in  this                                                               
example, specifically  the nearly three cents  per kilowatt-hour,                                                               
raises concerns.                                                                                                                
                                                                                                                                
3:38:11 PM                                                                                                                    
SENATOR WIELECHOWSKI asked  how the wheeling charges  are set and                                                               
what   exactly   differentiates   these   rates.   He   expressed                                                               
appreciation for  slide 3, noting that  it was the first  time he                                                               
had seen the information broken down in this way.                                                                               
                                                                                                                                
3:38:29 PM                                                                                                                    
MR. SCOTT replied  that wheeling charges are  set through general                                                               
rate cases.  Each utility, excluding AEA,  determines their rates                                                               
through a rate proceeding at  the Regulatory Commission of Alaska                                                               
(RCA).  Utilities  calculate  their  total  system  costs,  which                                                               
include   their   transmission,  generation,   and   distribution                                                               
infrastructure.  For  example,  Chugach  Electric's  transmission                                                               
system is  used by other  parties. In its rate  case proceedings,                                                               
Chugach allocates  a portion  of their  transmission costs  to be                                                               
recovered  from these  other parties.  This  allocation is  often                                                               
contentious, but once  determined, it is converted  into a dollar                                                               
per  kilowatt-hour or  cents  per  kilowatt-hour rate.  Chugach's                                                               
total  transmission costs  are divided  based on  the agreed-upon                                                               
allocation percentage,  and this  amount is  then applied  to the                                                               
projected power transmitted over their lines by third parties.                                                                  
                                                                                                                                
3:40:46 PM                                                                                                                    
SENATOR WIELECHOWSKI  noted that  Chugach might argue  that their                                                               
ratepayers have paid  higher bills to cover the  cost of building                                                               
their  transmission systems,  and that  the wheeling  charges are                                                               
their way of recovering those  costs. He questioned how one would                                                               
respond  to  Chugach's position  if  the  company says  they  are                                                               
losing revenue  for each kilowatt-hour transmitted  through their                                                               
system, which their ratepayers have already funded.                                                                             
                                                                                                                                
3:41:30 PM                                                                                                                    
MR. SCOTT replied  that it is entirely reasonable  for Chugach to                                                               
argue for  cost recovery.  However, the  allocation of  costs and                                                               
benefits of transmission  infrastructure is inherently arbitrary.                                                               
As a former regulator, he  explained that while there are various                                                               
mechanisms  for determining  the appropriate  split, the  process                                                               
often involves  considerable debate  and negotiation,  similar to                                                               
choosing between  different types  of cuisine.  If a  utility can                                                               
build  transmission infrastructure  for  the benefit  of its  own                                                               
customers and  have others  partially cover  the costs,  it might                                                               
not   incentivize  the   construction  of   the  most   efficient                                                               
transmission systems. All users  benefit significantly from being                                                               
part  of an  interconnected grid.  This interconnection  improves                                                               
reliability and  increases opportunities for  power transactions.                                                               
The current system of wheeling  charges, which turns a fixed cost                                                               
into a  variable cost, acts  as a  tax and reduces  these overall                                                               
benefits. Moving to a lump  sum collection system would allow for                                                               
a fairer  allocation of system  costs without treating them  as a                                                               
tax on  the movement  of electricity.  This approach  would still                                                               
involve  debate over  the best  allocation method,  but it  would                                                               
recover  costs  based  on  fair system  usage  rather  than  per-                                                               
kilowatt-hour charges.                                                                                                          
                                                                                                                                
3:44:24 PM                                                                                                                    
SENATOR WIELECHOWSKI asked if a  levelized rate, such as seven or                                                               
eight cents  per kilowatt-hour,  would result in  other utilities                                                               
receiving a bit  more for their transmission  while Chugach might                                                               
receive a  bit less. He inquired  about how much this  might cost                                                               
Chugach's customers.                                                                                                            
                                                                                                                                
3:44:53 PM                                                                                                                    
MR. SCOTT replied that SB  217 wouldn't replace multiple wheeling                                                               
rates with  a single wheeling  rate; instead, it  would eliminate                                                               
wheeling  rates altogether.  However,  he  acknowledged that  the                                                               
question of  cost responsibility and  the best way to  address it                                                               
remains. The  bill recognizes the  need for a  gradual transition                                                               
to this new  cost recovery mechanism, though it  does not specify                                                               
the  pace of  this transition.  This  will be  determined by  the                                                               
interested  parties  before  the  RCA. SB  217  acknowledges  the                                                               
current  historical  arrangements   that  produce  specific  cost                                                               
responsibilities and  revenue streams. A gradual  transition over                                                               
a period, such as one to  three years or five, might be sensible.                                                               
In the  interim, the  hope is to  build new  transmission assets,                                                               
partly  with federal  support.  REAP supports  this  and aims  to                                                               
ensure  that new  transmission is  used efficiently  for economic                                                               
development  and  ratepayer benefits.  Over  time,  the lump  sum                                                               
approach to allocating costs is  expected to benefit the greatest                                                               
number of people through the  integrated planning process managed                                                               
by the RRC. This process  will involve broad stakeholder input to                                                               
determine  which  transmission  projects  are  needed,  the  cost                                                               
responsibilities, and  the methods for cost  recovery, ultimately                                                               
leading to a more efficient and fair system.                                                                                    
                                                                                                                                
3:47:48 PM                                                                                                                    
CO-CHAIR BISHOP  asked if debt  is included in the  cost recovery                                                               
equation.                                                                                                                       
                                                                                                                                
3:48:05 PM                                                                                                                    
MR.  SCOTT replied  that  debt  is absolutely  part  of the  cost                                                               
recovery equation.  He explained  that cost  recovery encompasses                                                               
the   entire   cost   of  service,   including   debt   payments,                                                               
depreciation,  and  operation  and  maintenance  (O&M)  expenses.                                                               
Therefore, the full cost of  service associated with transmission                                                               
will be recovered.                                                                                                              
                                                                                                                                
3:48:32 PM                                                                                                                    
SENATOR CLAMAN  asked if  the importance  of Grid  Resilience and                                                               
Innovation  Partnerships (GRIP)  funding, which  provides federal                                                               
support  for  building   additional  transmission  infrastructure                                                               
without  requiring utilities  to finance  it themselves  and pass                                                               
those  costs to  their ratepayers,  is a  significant reason  why                                                               
this approach makes sense today.                                                                                                
                                                                                                                                
3:49:07 PM                                                                                                                    
MR.  SCOTT replied  that transitioning  from  the current  system                                                               
makes sense  regardless of  the situation,  but it  is especially                                                               
important  given  the  need  to enhance  the  robustness  of  the                                                               
transmission system, which  will involve significant expenditures                                                               
from  ratepayers,  the  state, and  the  federal  government.  He                                                               
emphasized   the  importance   of  ensuring   that  these   large                                                               
investments  provide the  greatest  value  for Alaska  consumers.                                                               
While there is a  strong reason to focus on this  now, due to the                                                               
new transmission  projects, he suggested that  the current system                                                               
of wheeling  charges should  be fixed and  eliminated even  if no                                                               
new transmission were ever built.                                                                                               
                                                                                                                                
3:50:21 PM                                                                                                                    
SENATOR CLAMAN  asked if  SB 217 would  create a  structure where                                                               
wheeling rates  are eliminated for  transmission. He  inquired if                                                               
the bill mandates that, in the  absence of federal funds, any new                                                               
transmission built  will have  its rates  evaluated at  a system-                                                               
wide  level,  ensuring  that the  transmission  cost  is  uniform                                                               
regardless  of where  electricity  enters the  grid. He  wondered                                                               
whether this approach is necessary  even without federal funding,                                                               
to ensure an equal transmission rate across the system.                                                                         
                                                                                                                                
3:51:08 PM                                                                                                                    
MR. SCOTT  replied that the legislation  would eliminate wheeling                                                               
rates  entirely. Instead  of a  unified transmission  charge, the                                                               
bill proposes  that transmission  costs be allocated  directly on                                                               
an annual basis to each  load-serving entity. At the beginning of                                                               
each  year,   each  utility  would   receive  a  bill   from  the                                                               
association  detailing  their transmission  cost  responsibility,                                                               
such as $25 million for one  utility and $35 million for another.                                                               
These costs would then be  recovered from the load customers. For                                                               
example, Chugach would receive a  bill for its total transmission                                                               
cost responsibility and  would recover these costs  from its load                                                               
customers.   This  would   replace  the   current  system   where                                                               
transmission costs are  embedded in energy and  demand charges on                                                               
customer bills, even though no  separate transmission charges are                                                               
itemized. The  issue with  the current system  is not  that third                                                               
parties  contribute,   but  how  they  contribute.   The  $1  per                                                               
kilowatt-hour or cents per kilowatt-hour  wheeling charges act as                                                               
a tax on the movement of electricity.                                                                                           
                                                                                                                                
3:53:36 PM                                                                                                                    
MR. SCOTT moved to slide 4 and spoke to the new freeway system:                                                                 
                                                                                                                                
[Original punctuation provided.]                                                                                                
                                                                                                                                
     SB 217 Eliminates wheeling rates                                                                                         
     (Creates a new "freeway" system)                                                                                         
                                                                                                                              
     Steps                                                                                                                    
                                                                                                                                
             1. Adds up all transmission system costs                                                                           
               ("ownership")                                                                                                    
             2. Allocates those costs on an annual lump-sum                                                                     
               basis to each loadserving entity (i.e.                                                                           
               utilities) based on their proportionate load                                                                     
               ("cost responsibility")                                                                                          
             3. Utilities then recover those costs from                                                                         
               their rate-payers                                                                                                
                                                                                                                                
MR. SCOTT  noted that all  transmission system costs  would first                                                               
be pooled  into a single bucket.  The total costs in  this bucket                                                               
would then  be apportioned to  each load-serving  utility, though                                                               
the exact  method for  proportionality is  not fully  detailed in                                                               
the legislation. SB  217 would direct the  commission to allocate                                                               
costs   based  on   each   utility's  proportionate   electricity                                                               
consumption relative  to the total system  consumption. Every end                                                               
user  benefits  from being  part  of  an integrated  grid,  which                                                               
enhances reliability and  provides opportunities for transactions                                                               
that improve  ratepayer value.  In the  final step,  each utility                                                               
would  recover  its allocated  transmission  costs  from its  own                                                               
customers.  Essentially,  this   replaces  the  per-kilowatt-hour                                                               
wheeling  charge for  electricity movement  with a  per-kilowatt-                                                               
hour  charge included  in the  utility's overall  billing to  its                                                               
ratepayers.  The  rate  may  vary   depending  on  how  the  cost                                                               
responsibility is ultimately apportioned.                                                                                       
                                                                                                                                
3:56:10 PM                                                                                                                    
CO-CHAIR  BISHOP  asked  for an  explanation  of  the  difference                                                               
between ownership and cost responsibility.                                                                                      
                                                                                                                                
3:56:34 PM                                                                                                                    
MR. SCOTT  replied that the  percentages shown for  ownership and                                                               
cost responsibility are hypothetical, as  he did not have time to                                                               
review filings for the current  actual numbers. He explained that                                                               
entities like  AEA, Chugach,  MEA, Golden  Valley, and  Homer own                                                               
various  transmission assets,  such as  the Alaska  Intertie. The                                                               
costs  associated  with  owning  these  assets  include  interest                                                               
payments,  depreciation,  and  operation  and  maintenance  (O&M)                                                               
expenses.  These  ownership costs  make  up  the annual  cost  of                                                               
maintaining  the  assets.  If  SB   217  becomes  law,  the  cost                                                               
responsibility for the entire system  would be allocated based on                                                               
percentages  determined through  a  regulatory proceeding.  These                                                               
percentages  would  be  based  on load  ratio  shares  and  other                                                               
factors reviewed during the regulatory process.                                                                                 
                                                                                                                                
3:58:47 PM                                                                                                                    
MR. SCOTT  moved to slide  5 and  spoke to the  transmission cost                                                               
allocation approach:                                                                                                            
                                                                                                                                
[Original punctuation provided.]                                                                                                
                                                                                                                                
     SB 217 Transmission Cost Allocation Approach                                                                             
        • An "Association" made up of all transmission-                                                                         
          owning entities calculates total system ownership                                                                     
          costs and files a tariff to be regulated by the                                                                       
          RCA                                                                                                                   
        • The "Association" is essentially an accounting                                                                        
          construct   established   to   manage   the   cost                                                                    
          allocation process                                                                                                    
        • Alaska's telecom industry employs a similar kind                                                                      
          of association currently  the Alaska Exchange                                                                         
          Carriers Association (AECA)      created via AS                                                                       
          42.05.850                                                                                                             
        • AECA has just one paid employee                                                                                       
                                                                                                                                
MR. SCOTT addressed the cost  allocation process and ownership of                                                               
the  transmission tariff  under  SB 217.  He  clarified that  the                                                               
tariff would  not be  levied on a  cents per  kilowatt-hour basis                                                               
but  as a  lump sum  to each  utility, which  would then  recover                                                               
these costs from their customers.  The proposed association would                                                               
comprise  all  transmission-owning  entities. Although  it  might                                                               
initially  seem  intimidating,  he   likened  it  to  the  Alaska                                                               
Exchange  Carriers  Association   (AECA),  established  under  AS                                                               
42.05.850.  AECA,  an  industry association  of  intra-state  and                                                               
interstate inter-exchange  carriers, performs a similar  cost and                                                               
revenue  allocation  exercise.  He  noted  that  AECA's  role  is                                                               
essentially   an  accounting   exercise   managed  with   minimal                                                               
overhead, as it operates with  just one employee and files annual                                                               
tariffs with  the Commission. The  members, who are  the affected                                                               
inter-exchange carriers,  handle the necessary  accounting tasks.                                                               
He  emphasized that  the  intent behind  SB 217  is  to create  a                                                               
straightforward,    low-overhead    organization    focused    on                                                               
bookkeeping, similar to AECA.                                                                                                   
                                                                                                                                
4:01:17 PM                                                                                                                    
MR. SCOTT moved to slide 6 and spoke to the taxation process:                                                                   
                                                                                                                                
[Original punctuation provided.]                                                                                                
                                                                                                                                
    SB   217   Addresses   Inequitable   Tax   Burden   For                                                                   
     Independent Power Producers (IPP)                                                                                        
        • Municipal and Cooperative Electric utilities are                                                                      
          exempt from state income and local property taxes                                                                     
        • This helps ensure lowest cost of energy, as                                                                           
          property taxes are passed along to consumers in                                                                       
          their utility rates                                                                                                   
        • IPPs must recover all costs in the rates they                                                                         
          negotiate   with    purchasing   cooperatives   or                                                                    
          municipal utilities                                                                                                   
        • Property taxes can be a very substantial portion                                                                      
          of those rates                                                                                                        
        • Existing property tax rates can and do prevent                                                                        
          IPP projects from progressing, which ultimately                                                                       
          impact ratepayer costs                                                                                                
        • No property taxes can be collected from unbuilt                                                                       
          or failed power projects                                                                                            
                                                                                                                                
MR. SCOTT  said that municipally or  cooperatively owned electric                                                               
utilities are  exempt from  state income  tax and  local property                                                               
taxes.  The policy  rationale is  that without  these exemptions,                                                               
such  taxes  would  be  passed on  to  consumers  through  higher                                                               
utility rates. Independent power  producers (IPPs), however, must                                                               
recover all  their costs  through the  rates they  negotiate with                                                               
purchasing cooperatives  and municipalities. This means  that any                                                               
taxes  imposed  on  IPPs can  significantly  increase  the  rates                                                               
charged   to   consumers,   potentially  making   some   projects                                                               
economically  unfeasible. This  creates an  uneven playing  field                                                               
that  can  hinder  project   development  and  negatively  impact                                                               
ratepayers in two ways: by  increasing costs for projects that do                                                               
proceed and  by preventing many  projects from moving  forward at                                                               
all.  MR. SCOTT  suggested that  if  it is  reasonable to  exempt                                                               
cooperatives  from property  taxes  on their  own generation  and                                                               
transmission  assets, it  would also  make sense  to extend  this                                                               
exemption   to  IPPs   selling  power   to  cooperatively   owned                                                               
utilities. Addressing  both issues would alleviate  a significant                                                               
burden on  project development in  the state,  delivering greater                                                               
value to  consumers, creating jobs,  and fostering a  more robust                                                               
state economy.                                                                                                                  
                                                                                                                                
4:04:01 PM                                                                                                                    
CO-CHAIR GIESSEL  concluded invited  testimony and  opened public                                                               
testimony on SB 217.                                                                                                            
                                                                                                                                
4:04:39 PM                                                                                                                    
MATTHEW PERKINS, representing  self, Anchorage, Alaska, testified                                                               
in support of SB 217. He  introduced himself as the CEO of Alaska                                                               
Renewables  and said  the  company is  working  on several  large                                                               
power plants aimed at providing  low-cost, reliable energy to the                                                               
Railbelt. He  sought support for two  critical policies: property                                                               
tax  exemptions for  independent power  producers (IPPs)  and the                                                               
elimination of  tariffs between  electric cooperatives  and IPPs.                                                               
These  changes  would  help  reduce  rates,  remove  barriers  to                                                               
collaboration, and  increase competition. The  difference between                                                               
export resource  financing and  domestic renewable  energy market                                                               
financing. IPP contracts are  structured as long-term fixed-price                                                               
agreements with  financial inputs contracted upfront,  making any                                                               
taxes  a  pass-through  cost  to consumers.  He  also  noted  the                                                               
importance   of   removing   barriers  to   collaboration   among                                                               
utilities, citing the  pooling of projects like  Shovel Creek and                                                               
Little  Mount  Susitna as  an  example  that could  significantly                                                               
reduce no-wind periods. He raised  concerns about specific issues                                                               
in  the  bill's  wording:  a   redundant  tax  on  kilowatt-hours                                                               
generated  by  IPPs  and  ambiguity   regarding  the  removal  of                                                               
wheeling  rates.  He  requested  support  for  these  free-market                                                               
principles  and limited  government intervention,  and asked  for                                                               
amendments to  the bill  to eliminate the  double tax  and ensure                                                               
the full removal of wheeling tariffs.                                                                                           
                                                                                                                                
SENATOR  CLAMAN asked  that  Mr. Perkins  be  allowed to  briefly                                                               
address Senator Wielechowski's question.                                                                                        
                                                                                                                                
4:07:32 PM                                                                                                                    
MR.  PERKINS  said that  in  response  to Senator  Wielechowski's                                                               
question about the benefits to  Chugach's members or any electric                                                               
cooperative  members,  the  numbers  are  indeed  calculable.  He                                                               
mentioned that  he is working  with the dispatch  and engineering                                                               
teams  to determine  specifics.  He emphasized  that the  broader                                                               
economic  benefit  comes  from   allowing  more  arbitrage  among                                                               
markets, aligning  with fundamental  free market  principles. The                                                               
benefit, as  shown by  their modeling  and other  reviewed models                                                               
related to energy on the  Railbelt, is significantly greater than                                                               
minor differences in  individual gains, such as  one group making                                                               
10 cents versus  another making 11 cents. In  response to Senator                                                               
Claman's question about transmission  costs, he explained that it                                                               
is most  likely that  for each  project, transmission  lines will                                                               
need to  be built, increasing  the associated costs.  These costs                                                               
would be  included in  the total  Power Purchase  Agreement (PPA)                                                               
for the project and recovered  through the sale of electricity to                                                               
participating utilities.                                                                                                        
                                                                                                                                
4:09:02 PM                                                                                                                    
CO-CHAIR   BISHOP  asked   if  he   is   referring  to   building                                                               
transmission lines, meaning constructing  a line from the project                                                               
to the substation.                                                                                                              
                                                                                                                                
MR. PERKINS replied yes.                                                                                                        
                                                                                                                                
4:09:37 PM                                                                                                                    
PENNY GAGE,  representing self,  Anchorage, Alaska,  testified in                                                               
support  of  SB  217.  She introduced  herself  as  the  Managing                                                               
Director for  Launch Alaska, a nonprofit  focused on accelerating                                                               
the  energy transition  by  integrating  the latest  technologies                                                               
into  Alaska's energy,  transportation,  and industrial  sectors.                                                               
Launch Alaska  works with  a portfolio  of 32  for-profit startup                                                               
companies from  around the  world, addressing  climate challenges                                                               
and  creating economic  opportunities  in  Alaska. She  expressed                                                               
support for SB  217, particularly the provision  that would grant                                                               
independent power  producers (IPPs) the same  local tax exemption                                                               
received  by non-profit  electric cooperatives.  Gage noted  that                                                               
Launch  Alaska's CEO,  Isaac Vanderburgh,  who  was appointed  by                                                               
Governor Dunleavy to  the Alaska Energy Security  Task Force, co-                                                               
chaired  the  incentives  and subsidies  subcommittee.  This  tax                                                               
provision change was a key  recommendation in the final report of                                                               
that task force, which Mr.  Vanderburgh championed. The provision                                                               
would  attract private  investment,  support energy  development,                                                               
and  lower energy  costs for  Alaskans. However,  according to  a                                                               
Department  of Energy  (DOE) report,  less than  five percent  of                                                               
Alaska's electricity  is generated by  IPPs, compared to  over 40                                                               
percent in lower  48 states. SB 217 would send  a positive market                                                               
signal to investors and developers,  accelerate the deployment of                                                               
low-cost  renewable energy,  level the  playing field,  diversify                                                               
the electricity mix, and support job creation.                                                                                  
                                                                                                                                
4:12:06 PM                                                                                                                    
DOUG JOHNSON, representing self,  Anchorage, Alaska, testified in                                                               
support  of SB  217. He  introduced  himself as  the Director  of                                                               
Development  for  Ocean  Renewable  Power Company  and  said  the                                                               
company  has  been  actively  developing  hydrokinetic  power  in                                                               
Alaska since  2006. SB 217  would provide a  thoughtful, elegant,                                                               
and  workable solution  to  two key  problems  facing the  energy                                                               
industry.  The  first problem  as  the  inequity in  taxation  of                                                               
independent  power producers  (IPPs),  requiring the  need for  a                                                               
level playing field for all  power producers. The second issue is                                                               
the  application  of wheeling  charges  across  the Railbelt.  He                                                               
highlighted the  need for a  standardized and  proportionate cost                                                               
recovery mechanism  as envisioned  in SB 217.  The bill  offers a                                                               
straightforward approach to  addressing these industry challenges                                                               
in  Alaska. He  expressed a  desire for  the swift  resolution of                                                               
these  issues through  the  passage of  SB  217, emphasizing  its                                                               
critical importance to the future of the emerging industry.                                                                     
                                                                                                                                
4:13:46 PM                                                                                                                    
KEN  HUCKEBA, representing  self, Wasilla,  Alaska, testified  in                                                               
opposition to SB  217. He stated that much of  the support for SB
217 is based  on fictitious claims. He characterized  the bill as                                                               
a 'gold  rush grab'  for Inflation Reduction  Act (IRA)  funds by                                                               
opportunists seeking to advance the  transition to green New Deal                                                               
policies.  SB  217  focuses solely  on  eliminating  transmission                                                               
charges,  particularly  benefiting  independent  power  producers                                                               
(IPPs) of  solar and wind  energy. However, he argued  that these                                                               
energy  sources are  unreliable, with  wind farms  producing only                                                               
around  30  percent of  their  capacity  even  on good  days.  On                                                               
windless,   snow-covered    days,   they    contribute   nothing,                                                               
exacerbating  costs for  utilities and  ratepayers who  must back                                                               
them up  with reliable power  sources. Existing  utilities, owned                                                               
by ratepayers  and cooperatives,  are forced  to cover  the costs                                                               
associated with  the poor performance  of these  renewable energy                                                               
sources.  He criticized  the bill  for allowing  IPPs to  operate                                                               
without contributing  to the costs  of maintaining  and upgrading                                                               
the  legacy energy  system. The  tax savings  touted by  the bill                                                               
come from  taxpayers and  existing infrastructure  owners, rather                                                               
than some  external source. He  rejected the idea  that renewable                                                               
energy sources are truly lower  in cost. Their affordability is a                                                               
result  of  subsidies   and  the  absence  of   charges  for  the                                                               
additional impacts they cause. He  described SB 217 as a takeover                                                               
of infrastructure  by special interests.  He also  criticized the                                                               
use of the term 'stakeholders,'  asserting that these entities do                                                               
not represent  ratepayers or  taxpayers. The  United States  is a                                                               
representative republic  that should prioritize the  interests of                                                               
its citizens, not special interest groups or nonprofit NGOs.                                                                    
                                                                                                                                
4:16:27 PM                                                                                                                    
DAVID BRAILEY, representing self,  Eagle River, Alaska, testified                                                               
in support of  SB 217. He noted  that he is one of  the owners of                                                               
the Juniper  Creek hydroelectric  system in  Eagle River,  a 300-                                                               
kilowatt facility with  a 60 percent capacity  factor, meaning it                                                               
operates  at   full  capacity   60  percent   of  the   year.  He                                                               
acknowledged  that he  could not  improve on  former Commissioner                                                               
Scott's explanation of  why the bill is beneficial  for the grid,                                                               
independent power  producers, and ratepayers. He  emphasized that                                                               
because the  bill is good  for ratepayers, it is  also beneficial                                                               
for cooperative utilities. He shared  his experience, noting that                                                               
he has been working on his  project for about 13 years, though it                                                               
has  not  produced  electricity  for the  past  three  years.  He                                                               
expressed that  the Alaska rail  belt market  is one of  the most                                                               
disadvantageous  for independent  power producers  in the  United                                                               
States.  He believes  that SB  217 would  help level  the playing                                                               
field between independent power  producers and utilities, turning                                                               
things around in favor of a more balanced energy market.                                                                        
                                                                                                                                
4:18:11 PM                                                                                                                    
SENATOR WIELECHOWSKI asked what  recommendations could be made to                                                               
improve  the  situation  so  that  the  state  is  more  open  to                                                               
independent power  producers (IPPs)  and other  potential utility                                                               
generation options.                                                                                                             
                                                                                                                                
4:18:28 PM                                                                                                                    
MR.  BRAILEY replied  that Alaska's  Railbelt is  one of  the few                                                               
places  in  the United  States  where  capacity has  zero  value,                                                               
despite being allowed  by regulation. He noted  that no renewable                                                               
energy  producer or  independent  power producer  (IPP) has  ever                                                               
been paid  for capacity  in the  Alaska Railbelt.  Zero emissions                                                               
have no  value in  Alaska, as  there is  no market  for renewable                                                               
energy credits.  He explained that all  power purchase agreements                                                               
between IPPs and utilities in the  state require the IPPs to give                                                               
away  at least  50  percent  to 100  percent  of their  renewable                                                               
energy credits. He  questioned why a private  business would give                                                               
away  something of  value  and explained  that  the condition  of                                                               
interconnection,   particularly  with   his  utility,   Matanuska                                                               
Electric,  forces  the  IPP  to  cover  all  interconnection  and                                                               
integration costs,  including building the  interconnecting power                                                               
line. Despite these costs, the  utility still takes the renewable                                                               
energy credit. He described the  situation as a monopsony system,                                                               
where utilities hold all the cards.  If an IPP disagrees with the                                                               
terms of the agreement, they are  told to find another buyer, but                                                               
that option is blocked by  pancaking charges that prevent selling                                                               
to  another  utility.  The  system  is rigged  in  favor  of  the                                                               
utilities.                                                                                                                      
                                                                                                                                
4:20:41 PM                                                                                                                    
JENN  MILLER, representing  self, Houston,  Alaska, testified  in                                                               
support of  SB 217. She stated  that she is the  CEO of Renewable                                                               
IPP,  an  Alaska-grown  small  business  focused  on  developing,                                                               
constructing, and operating renewable  energy projects in Alaska.                                                               
She mentioned their Willow and  Houston projects and spoke to the                                                               
company's  dual  commitment  to advancing  renewable  energy  and                                                               
suppressing  energy prices  for Alaskans.  She said  she recently                                                               
served  on  the  governing  Energy  Security  Task  Force,  which                                                               
aligned  with  their  mission  to  diversify  energy  generation,                                                               
improve  affordability,  and  maintain  reliability.  Independent                                                               
power   producers   (IPPs)   play   a  crucial   role   in   this                                                               
diversification   and    affordability,   while    also   meeting                                                               
reliability standards.  For their projects to  advance, they must                                                               
agree  on power  purchase  agreements with  utilities and  remain                                                               
competitive with  current generation  costs. The  Houston project                                                               
is  currently  10  to  20  percent below  the  existing  cost  of                                                               
generation, making  it essential to  have a level  playing field.                                                               
SB  217 would  equalize their  cost base  by addressing  property                                                               
taxes and  eliminating pancaking charges. This  would help reduce                                                               
their  power  purchase  prices  and, in  turn,  lower  costs  for                                                               
utility members.  Additionally, having an established  tax policy                                                               
for IPPs  would reduce uncertainty for  investors and incentivize                                                               
private investment in new generation  projects. This would aid in                                                               
deploying  various energy  sources,  including  wind, solar,  and                                                               
hydro,  contributing   to  a  more  stable   energy  supply.  She                                                               
emphasized  the  urgency  of passing  this  bill  to  incorporate                                                               
reduced cost bases into power  purchase agreements and pass those                                                               
savings onto members.                                                                                                           
                                                                                                                                
4:24:24 PM                                                                                                                    
CO-CHAIR GIESSEL closed public testimony on SB 217.                                                                             
                                                                                                                                
4:24:41 PM                                                                                                                    
CO-CHAIR GIESSEL held SB 217 in committee.                                                                                      
                                                                                                                                

Document Name Date/Time Subjects
SB 217 Letter of Support 3.12.24.pdf SRES 3/13/2024 3:30:00 PM
SB 217
AEA Update SRES Presentation 3.13.24.pdf SRES 3/13/2024 3:30:00 PM
SB 217 REAP SRES Presentation 3.13.24.pdf SRES 3/13/2024 3:30:00 PM
SB 217
AEA Responses to Senate Resources-Wheeling Charges.pdf SRES 3/13/2024 3:30:00 PM