Legislature(2009 - 2010)BARNES 124
04/01/2010 03:00 PM House ENERGY
| Audio | Topic |
|---|---|
| Start | |
| Overview(s): Railbelt Energy Study by Commonwealth North, "energy for a Sustainable Alaska" | |
| HB182 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | TELECONFERENCED | ||
| += | HB 182 | TELECONFERENCED | |
HB 182-RAILBELT ENERGY & TRANSMISSION CORP.
3:48:20 PM
CO-CHAIR MILLETT announced that the next order of business would
be HOUSE BILL NO. 182, "An Act establishing the Greater Railbelt
Energy and Transmission Corporation and relating to the
corporation; relating to transition, financial plan, and
reporting requirements regarding planning for the initial
business operations of the Greater Railbelt Energy and
Transmission Corporation; relating to a report on legislation
regarding the Regulatory Commission of Alaska and the Greater
Railbelt Energy and Transmission Corporation; authorizing the
Alaska Energy Authority to convey the Bradley Lake Hydroelectric
Project and the Alaska Intertie to the Greater Railbelt Energy
and Transmission Corporation; and providing for an effective
date." She identified the working document as Committee
Substitute (CS) for HB 182, version 26-GH1041\S,
Chenoweth/Bailey, dated 3/24/10.
3:49:54 PM
BRUCE TANGEMAN, Chief Financial Officer, Doyon Utilities (DU),
informed the committee his testimony intends to familiarize the
committee with his company, and to request "equal participation
in the GRETC process currently under consideration by this
legislature." Mr. Tangeman explained that DU is not included as
a member of the joint utility taskforce or the work group
because it is not a municipal or cooperative electric utility.
However, DU owns and operates three Railbelt electric utilities
located at Fort Wainwright in Fairbanks, Fort Greely in Delta,
and Fort Richardson in Anchorage. In 2007, DU was awarded three
50-year contracts with the Army to privatize twelve utility
systems on the Army posts including electric generation and
distribution, heat distribution, water distribution, and
wastewater collection, thus saving the Army an estimated $950
million. Doyon Utilities is responsible to maintain, repair,
replace, and construct new assets as needed to provide services
to approximately 45,000 soldiers, family members, and civilians.
Mr. Tangeman noted that investments in the utilities occur
through DU shareholders, which has totaled $135 million during
the past two years, and by the investment of federal funds
through the Army. He said DU is concerned about its lack of
participation in the GRETC process for two main reasons: (1)
withholding the wholesale rate from the Army may negatively
influence the Base Realignment and Closure (BRAC) process that
keeps the posts open; (2) the proposed legislation presumes that
funding for capital projects will come from the state, and from
a funding perspective, there should be more diversity in
investment. Mr. Tangeman advised that DU should have an equal
seat at the table and not as a non-voting member without a role
in management or investment. In fact, by precluding meaningful
involvement by DU and the Army in GRETC, the state would prevent
private or federal investment in capital projects, and the
efficiencies gained from a joint utility effort would be limited
by the exclusion of three electric utilities. He urged the
committee to consider whether the present structure of the
legislation serves the best interests of the Railbelt residents.
3:56:36 PM
REPRESENTATIVE TUCK asked about the three power utilities and
the source of their power generation.
3:56:59 PM
MR. TANGEMAN answered that DU owns and operates a coal-fired
power plant for Fort Wainwright, the Army purchases power from
Golden Valley Electric Association (GVEA) for Fort Wainwright
and Fort Greely, and it has a contract with Anchorage Municipal
Light & Power (ML&P) for Fort Richardson. Doyon Utilities owns
the infrastructure.
3:57:30 PM
CO-CHAIR MILLETT invited Mr. Tangeman to explain the changes
proposed by DU.
3:57:55 PM
MR. TANGEMAN suggested the most important change to the bill is
to strike "municipal" and "cooperatives," and replace this
language with "public utilities." Also, the CS authorizes his
company to invest, but not to address "where that funding is
going to go and how it is going to be used." In addition, the
Army should not be charged retail rates. His said another
concern is over the requirement of a two-thirds vote by the
GRETC board to allow participation in capital projects.
4:00:19 PM
CO-CHAIR EDGMON asked whether a profit-driven entity can "mix"
in a not-for-profit structure.
4:00:53 PM
MR. TANGEMAN clarified that 50 percent of DU is owned by
Fairbanks Sewer Water Inc. (FSW), and 50 percent is owned by
Doyon Properties, Inc.
4:01:26 PM
CO-CHAIR EDGMON re-stated his question.
4:01:32 PM
MR. TANGEMAN observed that DU is an economically regulated
utility as is ML&P, Alaska Electric Light and Power Company
(AEL&P), and GVEA. In addition, like other utilities, DU
operates under a certificate of public convenience and necessity
(CPCN), has customers, and is supervised by Regulatory
Commission of Alaska (RCA), Department of Commerce, Community, &
Economic Development, oversight.
4:02:51 PM
CO-CHAIR EDGMON gave the example of DU benefitting from public
funds as a participant in GRETC. He also asked whether DU has
an opinion on RCA oversight of GRETC.
4:03:06 PM
MR. TANGEMAN, referring to the RCA oversight of GRETC, explained
that DU won its contract as one of the largest utility
privatizations with the federal government because of the
"bundling aspect" of the 12 utilities, and also because DU
proposed a regulated model. Doyon Utilities' business model is
transparent, and allows the Army access to its business records.
He opined the Army "love[s] the regulatory aspect," and would be
a strong supporter of GRETC regulation. In response to Co-Chair
Edgmon's first question, Mr. Tangeman said DU is asking to be on
the same footing with the other utilities participating in
GRETC, and to receive the same benefits.
4:05:08 PM
REPRESENTATIVE PETERSEN asked whether DU anticipates regulatory
complications because its contracts are with the military.
4:05:38 PM
MR. TANGEMAN assured the committee DU will research this
question.
4:06:07 PM
REPRESENTATIVE TUCK questioned whether state regulation can have
jurisdiction over military properties.
4:06:41 PM
MR. TANGEMAN explained that in the contract the Army agreed that
the RCA would be the independent third party overseeing the
contract.
4:07:25 PM
REPRESENTATIVE TUCK further asked whether the RCA agreed.
4:07:42 PM
MR. TANGEMAN indicated yes. In further response to
Representative Tuck, he said a CPCN is the regulated document
issued by the RCA that allows DU to operate as a utility.
4:08:15 PM
REPRESENTATIVE TUCK asked whether DU obtained its CPCN as part
of its contract with the Army.
4:08:30 PM
MR. TANGEMAN responded that regulation by the RCA was part of
the proposal to the Army by DU.
4:09:09 PM
MIKE O'MEARA, Homer Spokesman, HEA Member's Forum, informed the
committee he represents "just some of the people who are
involved in paying the bills for all of this stuff." Mr.
O'Meara said HEA Member's Forum has been in favor of a GRETC-
type organization in order to increase Railbelt operational
efficiencies through greater collaboration among the utilities.
However, his group is concerned that there has not been an
opportunity for ratepayers to be involved in drafting the
legislation. HEA Member's Forum's recommendations are:
regulation by the RCA should be over time and not short-term
because the RCA supports ratepayers' interests; better
participation by ratepayers in governance of the system; savings
in costs by greater efficiency and energy conservation; support
for achieving the ultimate goal of renewable energy; state
funding should be adequate for the function of GRETC without
placing an undue burden on the participating utilities.
4:14:33 PM
CHRISTINE VECCHIO, Board Member, MEA Ratepayers Alliance, said
she represents a grassroots organization formed to provide more
information to the ratepayers in the Matanuska Electric
Association (MEA) district on energy issues. Her organization
participated in the Alaska Railbelt Electrical Grid Authority
(REGA) study in 2007 and the Railbelt Integrated Resource Plan
(RIRP), and she offered its perspective on public participation
and governance in the proposed legislation. The Alaska Energy
Authority (AEA) and its consultants worked diligently to include
stakeholders in the aforementioned studies, and she urged the
incorporation of public participation in the language of GRETC
as well. Furthermore, her organization feels there is a need
for an utility advisory group along with the board of directors
at the governance level for GRETC. This is important because
any organization needs public and diverse involvement to bring
"other realities" to those at the governance level. She
suggested an IRP review should be done every three years, as is
done in Hawaii. Ms. Vecchio expressed her appreciation of the
testimony from previous witnesses in support of regulation and
public involvement.
4:21:19 PM
CO-CHAIR EDGMON referred to the audits, reports, and regulatory
oversight that are already required in the bill, and asked
whether the stakeholder group would be an addition.
4:22:01 PM
MS. VECCHIO was unsure of the form of the stakeholder group;
however, at the governance level there is only one member of the
public appointed by the governor. She opined one appointment is
insufficient. In further response to Co-Chair Edgmon, she
confirmed that the stakeholder group would be additional to the
regulation and public participation already included in the
bill.
4:23:28 PM
REPRESENTATIVE JOHANSEN referred to previous testimony by MEA's
general manager, and asked whether the ratepayers' option of
petitioning federal entities for relief would suffice.
MS. VECCHIO said a petition is a reactive approach to a problem;
however, she is interested in a proactive approach to the policy
and direction of the corporation in order to avoid distrust. In
further response to Representative Johansen, she said her
preference would be to appeal to a state agency, rather than a
federal agency.
4:25:51 PM
REPRESENTATIVE PETERSEN asked whether her concern about public
participation would be satisfied if the governor's appointee was
a member of a consumer group.
4:26:24 PM
MS. VECCHIO observed the appointee would still only be one
person.
4:27:24 PM
JIM SYKES, Consumer Representative, AEA Stakeholder Advisory
Group; Representative, Alaska Public Interest Research Group;
Mat-Su Energy Issues Coordinator, Alaska Center for the
Environment, expressed appreciation to the committee, the
utilities, and stakeholders for their attention to this critical
issue. He informed the committee that three years ago, the REGA
study showed the benefits of a unified Railbelt energy system
even though the stakeholders and the utility working group did
not meet together at the beginning of the process, and still are
not. However, present testimony supports adding to the proposed
legislation the essential ingredients of transparency and public
accountability such as financial oversight, publicly involved
governance structure, meaningful regulation, public
participation, and clear mechanisms for issuing equity or
creating subsidiary corporations. He opined financial oversight
over investments should be provided by the AEA, rather than just
an audit. Regarding regulation, he said the process should be
simplified with one set of regulations for the operation of the
G&T that is accountable and transparent. Mr. Sykes pointed out
that there were 15 members of the RIRP advisory group, and urged
the same diversity for the GRETC board of directors; in fact,
the current structure calls for a "committee of managers," and
invites conflicts of interest. Furthermore, in addition to more
consumer representation, representation for renewable energy,
the elderly, and other interests is needed. Mr. Sykes
acknowledged the need for urgency, but he said public
accountability issues should not be left behind. He clarified
that he still supports the GRETC concept.
4:33:40 PM
CO-CHAIR EDGMON has heard from a variety of groups that there
needs to be an additional stakeholder group at the governance
level. He asked for information on how utility board members
are elected.
4:34:45 PM
MR. SYKES explained that in the Railbelt the election of board
members is by about 10-15 percent of the shareholders. The
elections have become a hybrid between public and corporate
elections, because few people vote; in fact, public utility
cooperatives have lost their connection to people, resulting in
a low response and low accountability. Although he does not
envision a separate stakeholder group, he suggested stakeholders
should operate on the same governing board.
[CO-CHAIR MILLETT passed the gavel to Co-Chair Edgmon.]
4:37:26 PM
MARY KVALHEIM informed the committee she is a Mat-Su electric
ratepayer and she thanked the committee, the utilities, and
stakeholders for their work. She agreed with the concept of
Railbelt-wide utilities, but stated that her public service
experience leads her to value public participation in public
issues. She requested that additional public representation
should be included in the structure of the organization. Ms.
Kvalheim strongly urged the committee to add language that will
bring regulation, and the knowledge and active participation
from the general public, to the GRETC concept.
[CO-CHAIR EDGMON returned the gavel to Co-Chair Millett.]
4:39:43 PM
CO-CHAIR MILLETT advised that there is no reason to rush the
bill through the committee process. The utilities have worked
on the legislation for nine months, and she said the committee
will pass a bill out of committee "that this committee ... is
behind ... [and] we are confident that is good public policy....
Consumer protection is in my mind, and I think all of my
colleagues that sit on this committee [agree], first and
foremost in forming a new utility."
4:41:33 PM
CO-CHAIR MILLETT announced that HB 182 was held with public
testimony open.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Commonwealth North Railbelt Energy 04012010.pdf |
HENE 4/1/2010 3:00:00 PM |
|
| HB182CS(ENE) Fiscal Note CED-AEA-3-24-10.pdf |
HENE 4/1/2010 3:00:00 PM |
HB 182 |