Legislature(2023 - 2024)BELTZ 105 (TSBldg)
03/04/2024 01:30 PM Senate LABOR & COMMERCE
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| SB154 | |
| SB102 | |
| SB257 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 154 | TELECONFERENCED | |
| *+ | SB 102 | TELECONFERENCED | |
| + | SB 44 | TELECONFERENCED | |
| *+ | SB 257 | TELECONFERENCED | |
SB 257-ELECTRIC UTILITY REGULATION
2:05:44 PM
CHAIR BJORKMAN reconvened the meeting and announced the
consideration of SENATE BILL NO. 257, "An Act relating to the
Regulatory Commission of Alaska; relating to public utilities;
relating to electric reliability organizations; relating to the
Alaska Energy Authority; relating to the Railbelt Transmission
Organization; and providing for an effective date."
2:06:09 PM
SENATOR CATHY GIESSEL, District E, Alaska State Legislature,
Juneau, Alaska, presented SB 257 as Co-Chair of the Senate
Resources Standing Committee. She paraphrased from the sponsor
statement:
[Original punctuation provided.]
SENATE BILL 257
Railbelt Transmission Organization
SPONSOR STATEMENT
Critical to Alaska's future is the need for low-cost,
reliable energy throughout the entire state. A
reliable and efficient transmission system supports
economic growth by ensuring a stable, affordable power
supply for businesses and communities, and it
encourages investment in new industries and
infrastructure development.
Senate bill 257 seeks to establish a strong,
resilient, and open-access transmission network. It
will provide sound long-term governance and planning
to make it stronger and better over time. The network
will enable and accelerate the energy transition in
Alaska a revolution in how we generate, store,
distribute, and consume electricity.
The electric transmission system that provides
electricity from Homer to Fairbanks serves more than
70 percent of our population along a 700-mile-long
corridor. This system, however, is challenged with
insufficient transfer capacity, outdated technology,
and inefficient pricing, all of which threaten
reliability and prevents new, diverse generation
sources from serving ratepayers at the lowest possible
cost.
2:08:33 PM
SENATOR GIESSEL continued to paraphrase the sponsor statement:
[Original punctuation provided.]
As we enter into a new era of energy management and
sustainability, it is imperative we take bold steps
toward modernizing our Railbelt's electricity
transmission system. Our current energy infrastructure
is outdated and fragmented, resulting in
inefficiencies, vulnerabilities, and obstacles to a
more efficient adoption of alternatives and lower-cost
electric generation sources. Larger transmission lines
and more efficient modern equipment will enable the
seamless integration into our new energy mix with
clean and renewable energy sources such as advanced
nuclear, hydro, solar, and wind power. Planning and
building that new energy mix will drive innovation and
create high-wage jobs. By truly integrating and
upgrading our electric grid and pricing it fairly for
all users, we can unlock a host of benefits, including
increased reliability, enhanced flexibility, and
greater resilience against disruptions and natural
disasters.
An upgraded Railbelt electric grid is an improvement
for all Alaskans. The Power Cost Equalization program
helps pay the cost of electricity in rural and remote
parts of the state with an aim to equalize electricity
rates by reducing the economic burden of high energy
costs. The offset is based on the difference between
the actual cost of electricity and the target rate
which is the weighted average retail residential rate
of electricity in Anchorage, Fairbanks, and Juneau.
Lowering the cost of electricity in Anchorage through
an upgraded grid provides a commensurate lower cost of
electricity for residents in rural and remote Alaska.
2:11:03 PM
GWEN HOLDMANN, Director, CEM INE Alaska Center of Energy Power,
University of Alaska Fairbanks, Fairbanks, Alaska, gave the
presentation, "The Railbelt Transmission Grid (now and future)."
She said that there is urgency around the railbelt system. She
added that at this point, the system can either advance or slip
backward.
2:11:41 PM
MS. HOLDMANN advanced to slide 2:
[Original punctuation provided.]
A Vision for our Railbelt
We want a system that:
• Allows cheapest cost power to get to end-users
wherever it is produced, whatever the source is,
and wherever that generation is located.
• Facilitates clean energy projects at scale for
energy security and diversification.
2:12:54 PM
MS. HOLDMANN advanced to slide 3:
[Original punctuation provided.]
Realities of the Railbelt Today
• Railbelt politics are inherently local
• Our energy sources are becoming more diverse
• Projects are more economical when built at scale
• The Railbelt transmission system needs to be
upgraded. We have an opportunity for federal
funding to help defray those costs.
• Alaska has avoided transmission deregulation
because we are not grid connected (thus not
subject to FERC)
• Finding analogous correlatives to Alaska can be
challenging
MS. HOLDMANN said that the markets in Iceland, Texas, and Hawaii are
most similar to Alaska's market and SB 257 includes elements of best
practices from these three jurisdictions.
2:16:04 PM
MS. HOLDMANN advanced to slide 5:
[Original punctuation provided.]
Three Goals:
• Eliminate pancaking wheeling rates and establish
a framework for how transmission costs will be
recovered and allocated
• Create an organization that can oversee, manage
and develop backbone transmission assets and that
is subject to appropriate regulation
• Re-imagining a planning process that uses a
whole-system approach (transmission, generation,
and distribution)
2:17:31 PM
SENATOR MERRICK asked whether Grid Resilience and Innovation
Partnerships (GRIP) fund payouts would be better made in a lump sum
or made over several years.
2:17:49 PM
MS. HOLDMANN replied that while she is not prepared to speak to this
issue, it is important to signal to the federal government that
Alaska is serious about matching these types of federal funds. She
stated that she would like to see Alaska benefit as much as possible
from these types of federal opportunities and not having a clear path
and process to match these funds makes the state less competitive in
this area. She expressed concern about this and added that GRIP
funding is not the only funding source. She listed several types of
energy sources and stated that Alaska must show that it is serious
about developing these types of projects in partnership with the
federal government.
2:19:07 PM
SENATOR MERRICK commented that she and Senator Bishop would likely
dig deeper into this when SB 257 is heard in the Senate Finance
Committee.
2:19:18 PM
MS. HOLDMANN advanced to slide 6:
[Original punctuation provided.]
Goal # 1: Remove pancaking wheeling rates
• Decisions about investment in projects or
economic dispatch should not be inhibited by the
cost of transmission, or the need to move power
across transmission lines with different
ownership
2:20:58 PM
MS. HOLDMANN advanced to slide 7:
[Original punctuation provided.]
Goal 1: Remove pancaking wheeling rates and establish
a framework for how costs will be recovered and
allocated
• "Pool backbone transmission system costs and
allocate those costs based on a coincident peak
or load share ratio basis" (Adapted from Texas
Substantive Rule 25.192)
• Coincident peak demand - period when electricity
usage (demand) is at its highest across the
entire system
• Load share ratio - considers users' overall
energy consumption over a specific period
• Transmission lines (like highways) are typically
built for peak demand, not how much energy
(traffic) flows through the system.
• Texas operates as an electrical "island" and
because power generated in Texas is not sent
outside of the state, Texas is exempt from
federal FERC regulation (like Alaska and Hawaii)
2:22:51 PM
SENATOR DUNBAR commented that Texas has become notorious for failures
of the energy grid system that led to freezing deaths. He asked for
reassurance that SB 257 would not cause the kinds of problems that
Texas has experienced.
2:23:40 PM
MS. HOLDMANN agreed that there are many challenges associated with
Texas's grid; however, the issuing being referenced was not an issue
with the grid but with the energy generation sources, which were not
able to operate in the cold temperatures and weather conditions that
Texas experienced. She stated that this is a separate issue and
pointed out that Texas is an open market, and this is one example of
why Alaska is not completely analogous to any other jurisdiction. She
explained that Texas is two orders of magnitude larger than Alaska's
railbelt grid in terms of the number of kilowatt hours sold on an
annual basis. Therefore, the open grid system does not easily
translate to use in Alaska. She said that the Railbelt Reliability
Council (RRC) - Alaska's electric reliability organization (ERO) - is
an important piece of the bigger picture in Alaska, where the need is
not only cheap power but also ensuring that the power is reliable.
She said that SB 257 allows RCA to consider actions that will have a
positive long-term impact on Alaska's energy supply.
2:25:44 PM
SENATOR DUNBAR asked if RRC has a specific role in the Railbelt
Transmission Organization (RTO).
2:25:51 PM
MS. HOLDMANN replied yes. She said that SB 257 attempts to clarify
the roles and responsibilities of the two organizations in relation
to one-another. She explained that in most jurisdictions, a
reliability organization is not responsible for planning - it focuses
on reliability and enforcement of reliability standards. She said
they do not want planning to occur in two different places. SB 257
moves planning function to the RTO, though RRC would still play an
important role in the planning process.
2:26:48 PM
CHAIR BJORKMAN asked what work products and outcomes can be expected
from RRC. He questioned the purpose of having an ERO given that RTO
would be responsible for planning.
2:27:22 PM
MS. HOLDMANN replied that reliability is an important component of a
functioning system. She explained that the failure in Texas was not
related to cheap power - which they had. Instead, the failure was a
result of inadequate reliability standards to ensure that the cheap
power was available to consumers. She reiterated that reliability is
an important function and therefore an ERO would be established as
part of this process.
2:28:21 PM
MS. HOLDMANN advanced to slide 8:
[Original punctuation provided.]
Goal 2: Create an organization that can oversee,
manage and develop backbone transmission assets and
that is subject to appropriate regulation
• Iceland provides an interesting analog to
Alaska's Railbelt due to similar transmission
length, population served, and high prevalence of
public power.
• Iceland has a competitive energy market, with
Landsnet as the national transmission system
operator, overseeing the country's transmission
infrastructure. Examining Iceland's governance
and asset management strategies, particularly
their evolution over the past three decades,
presents an invaluable learning opportunity for
Alaska.
• Iceland's electricity sector. Most distribution
utilities also operate generation assets, similar
to the Railbelt utilities.
2:30:39 PM
MS. HOLDMANN advanced to slide 9:
[Original punctuation provided.]
Goal 2: Create an organization that can oversee,
manage and develop backbone transmission assets and
that is subject to appropriate regulation
• Borrow from a simple governance structure that
has passed the test of time (in Alaska)
• The transmission tariff that establishes the rate
that consumers pay should be subject to
regulation (the Bradley Project is exempt)
• The Bradley Lake Project Management Committee
governance structure can be used as a starting
point to design a Railbelt Transmission
Organization
2:32:36 PM
SENATOR DUNBAR asked if existing transmission assets held by
other railbelt utilities would be transferred to RTO and, if so,
how the utilities would be compensated.
2:33:32 PM
MS. HOLDMANN replied that existing assets do not need to be
sold. She surmised that assets owned by the state of Alaska
would be rolled into RTO. She said that assets owned by utility
companies could be sold or leased - this would be decided by the
utility. She noted that this is similar to what was done in
Iceland. She pointed out that oftentimes, these assets are
rolled up in long-term debt held by the utility and separating
these assets would create challenges. She reiterated that each
utility would decide how to interact with RTO in terms of
ownership and management of the assets that they currently hold.
2:34:38 PM
CHAIR BJORKMAN asked who determines the difference between
"transmission" and "delivery" - and what process would be used.
2:35:20 PM
MS. HOLDMANN replied that there are specific rules that are
accepted by the industry to differentiate "backbone transmission
assets" (which is what SB 257 addresses) from "radial assets" -
and to distinguish these from "distribution assets." She said
that SB 257 leaves it to the RCA to define what constitutes the
railbelt backbone grid.
2:35:56 PM
SENATOR BISHOP surmised that there would be a kilowatt number to
define "transmission" and a kilowatt number to define
"distribution."
2:36:30 PM
MS. HOLDMANN replied that this is true; however, she explained
that this question deals more with the radial transmission line
serving a specific utility - or a portion of their service
territory. She clarified that this is not part of the backbone
transmission addressed by SB 257. She emphasized the importance
of distinguishing between the "highway" and what constitutes a
"side road" - even if it is at the same transmission size.
2:37:06 PM
CHAIR BJORKMAN commented that in Alaska, one "road" from Homer
to Healy would be the goal - and there is not a big grid there,
just one wire. He asked if this interpretation is correct.
2:37:28 PM
MS. HOLDMANN replied yes and clarified that it may be one or two
transmission lines.
2:37:34 PM
MS. HOLDMANN advanced to slide 10:
[Original punctuation provided.]
Goal 3: Design a planning process that uses a whole-
system approach
Integrated Grid Planning (IGP) is a successor concept
to Integrated Resource Planning. IGP emphasizes whole
system planning across generation, transmission, and
distribution resources.
Hawaii was an early adopter of IGP and may have coined
the term. According to the Hawaii Public Utilities
Commission, in 2018, the Hawaii Public Utilities
Commission opened the Integrated Grid Planning (IGP)
Docket (2018-0165) to replace earlier grid planning
efforts, namely Hawaiian Electric's Integrated
Resource Planning (19902014) and Power Supply
Improvement Planning (20142017)
• Hawaii differs from Alaska in that power is not
transmitted over long distances, and it is
primarily served by a single investor-owned
utility, HECO, which also owns the transmission
assets (with the exception of Kauai).
2:38:38 PM
MS. HOLDMANN advanced to slide 11:
[Original punctuation provided.]
Three Goals: SB 257
• Eliminate pancaking wheeling rates and establish
a framework for how transmission costs will be
recovered and allocated
• Create an organization that can oversee, manage
and develop backbone transmission assets and that
is subject to appropriate regulation
• Re-imagining a planning process that uses a
whole-system approach (transmission, generation,
and distribution)
2:40:11 PM
TONY IZZO, CEO, Matanuska Electric Association, Palmer, Alaska,
testified by invitation on SB 257. He said that he also speaks
as a co-chair of the Governor's Energy Security Taskforce, co-
chair of the railbelt subcommittee. He said he has been in the
utility business for 43 years. He stated that there are
immediate and secondary energy issues that need to be addressed.
He opined that the immediate issues are being addressed,
including the diversification of the fuel supply, renewable
energy, clean energy, etc.
2:43:32 PM
MR. IZZO said that SB 257 addresses a critical, parallel
process. He shared his belief that while triage is being done on
the immediate situation, work needs to be done to shift the
paradigm in order to avoid returning to the same problematic
cycle in ten years. He said that he has seen these cycles play
out numerous times over the years. He stated that the energy
taskforce looked at its work - based on the Governor's
instructions - to seek out a rate of 10 cents per kilowatt-hour.
He added that his utility is roughly 20 cents per kilowatt-hour.
He explained that the largest component of power is the fuel
cost - and the taskforce determined that 10 cents per kilowatt-
hour is not feasible at this time. Therefore, the taskforce
shifted its focus to determining ways to get to a future in
which it is possible.
MR. IZZO explained the three taskforce goals, which included
unifying and upgrading transmission assets; diversifying
generation; and increasing demand. He shared how visiting
Iceland allowed the taskforce to see how these goals could
successfully play out 30 years down the road. He stated that the
taskforce's intent for the transmission goal was to provide a
strong transmission system which would enable new generation
projects to integrate into the grid. He said that investing in
transmission and infrastructure - and unifying assets - would
enable the long-term goal of diversifying railbelt generation.
2:47:17 PM
MR. IZZO briefly discussed the differences between investor-
owned utilities and cooperatives and the system that resulted
from this structure. He explained how the GRIP funding would
solve some of the problems by creating an electron highway.
2:49:41 PM
CHAIR BJORKMAN asked what type of savings utilities like
Matanuska Electric Association would experience by eliminating
part of the spending reserve.
2:50:00 PM
MR. IZZO answered that he does not have a calculation. He said
this would be a low-cost operation, managed by the utilities.
Each utility brings its labor in kind. He expressed concern
about the ERO projected costs. He said that SB 257 needs to
separate the transmission in a utility from the backbone - e.g.
what is the transmission for MEA, with over 4800 miles of line -
104 miles is transmission serving the purpose of moving power
north and south. He said that if these assets were combined with
the state - and combined with large scale renewable energy
sources - the material benefit would come from lower-cost power
in the future.
2:51:58 PM
CHAIR BJORKMAN asked if there is broad agreement on the 104 mile
number.
2:52:07 PM
MR. IZZO replied that this is the number for Matanuska Electric
and he does not know what the other utilities' components will
be. He asserted that no utilities should be financially harmed
in this process and emphasized that the taskforce was very
specific that it was not taking from utilities, that no debt
covenants would be violated, and that revenue requirements must
be met. However, utilities would need to split out their
"backbone" from the rest of transmission. He shared his belief
that a third-party engineering firm would be best suited to
define what this is. He added that MEA would recover its revenue
requirement on the 104 miles through the backbone and the rest
would be made up through membership.
2:53:19 PM
JOHN BURNS, President and CEO, Golden Valley Electric
Association, Fairbanks, Alaska, testified by invitation on SB
257. He said that he is in support of this legislation and that
its comprehensive nature aligns with the recommendations of the
Alaska Energy Security Taskforce. Specifically, it relates to
priority A of the Railbelt Transmission, Generation, and Storage
subcommittee. He shared some of the benefits noted by the
subcommittee, including reducing transmission constraints on the
railbelt grid while allowing for faster integration of clean
energy generation; system redundancy resilience; benefitting
utilities and ratepayers by sharing power throughout the region;
and reducing cost and promoting job creation, among other
benefits. He said that the goal of SB 257 is to ensure that the
lowest cost electron - from whatever source - can be transmitted
across the railbelt to wherever it is needed, unconstrained, and
at a single flat rate. He asserted that this is the only way to
lower costs across the railbelt. He noted that this legislation
is modeled after Iceland and pointed out that Iceland went from
economically challenged and importing much of its power to a
thriving country where younger generations choose to stay. He
summed up by saying that SB 257 provides not only the structure,
but also the funding and planning mechanisms - along with the
powers and duties - of the railbelt organization.
2:57:06 PM
CURTIS THAYER, Executive Director, Alaska Energy Authority
(AEA), Anchorage, Alaska, testified by invitation on SB 257. He
said that many of the transmission lines were constructed 40-60
years ago. Since their construction, the demands on the power
grid have increased significantly - and total energy sales for
the railbelt have nearly tripled over the past 20 years. He also
pointed to concerns about the availability of Cook Inlet natural
gas. He surmised that growth in total energy sales will continue
- and renewable energy sources will be needed. He stated that a
robust, resilient, and reliable electrical transmission grid is
essential for the future of Alaska. He added that a well-
functioning transmission system depends on several basic
characteristics: reliability and resilience (to reduce and avoid
outages); ability to meet growing energy demands; flexibility to
adapt to changing loads; and cost-effectiveness.
2:58:35 PM
CHAIR BJORKMAN said that it is imperative that customers get the
lowest cost power possible, in order to move the economy
forward. He added that it is also imperative that all of the
utilities work together to make the utility system better. This
would also empower the gains made from a GRIP match into a
system like the one in SB 257. He surmised that if the utilities
are asking Alaskans to allocate $100s of millions over the next
ten years for a project that creates redundancy and security
from Homer to Healy, it is fair for the Alaskan people to ask
for accountability, modernization, and for all the utilities to
work together. He expressed his understanding that natural gas
is preferred by many; however, he expressed doubt about this
possibility, particularly in the short or medium-term. He stated
that something needs to be done and he would like to see all
utilities working together on this project and added that if no
action is taken, homes will be cold and have no lights because
there is not enough fuel. He stated that the current system is
not capable of moving the energy that is needed. He opined that
the time to act is now and emphasized that doing nothing is not
an option. He noted that there are principles in place that must
be kept in mind and costs should be fairly distributed. He said
that open access means open access for cheap generation and
these benefits should be available to everyone. He asserted that
these conversations need to happen and encouraged everyone to
participate. He stressed the need for accountability during this
process.
3:02:32 PM
[CHAIR BJORKMAN held SB 257 in committee.]