Legislature(2019 - 2020)SENATE FINANCE 532
01/29/2020 03:30 PM House ENERGY
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| Audio | Topic |
|---|---|
| Start | |
| SB123|| HB151 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 151 | TELECONFERENCED | |
SB 123-ELECTRIC RELIABILITY ORGANIZATIONS
HB 151-ELECTRIC RELIABILITY ORGANIZATIONS
3:35:25 PM
CHAIR COGHILL announced the consideration of SENATE BILL NO.
123, "An Act relating to the regulation of electric utilities
and electric reliability organizations; and providing for an
effective date." and
HOUSE BILL NO. 151, "An Act relating to the regulation of
electric utilities and electric reliability organizations; and
providing for an effective date."
3:37:59 PM
CHAIR COGHILL asked Mr. Rose with REAP to present his
PowerPoint.
CHRIS ROSE, Executive Director, Renewable Energy Alaska Project
(REAP) thanked the committees for hearing the legislation and
the Regulatory Commission of Alaska (RCA), the utilities, and
all other stakeholders for their work on this effort. He stated
support for both SB 123 and HB 151.
He reported that REAP, a nonprofit founded in 2004, has over 75
dues-paying members. Each year 21 members are elected to the
board representing businesses, utilities, NGOs, educational
institutions, and at-large members. He said REAP's mission is to
increase renewable energy development and promote energy
efficiency in Alaska.
MR. ROSE described REAP's focus on education and programs. Each
year STEM educators reach 700 classrooms promoting AK
EnergySmart and Wind for Schools. They work throughout the state
giving presentations, workshops, and conferences. Their focused
effort is to increase energy literacy in all areas of the state.
3:39:09 PM
MR. ROSE displayed a timeline showing 30 years of Railbelt
energy reform efforts from 1986 when the Railbelt Energy Fund
was established through 2014 when the legislature appropriated
money for the RCA to study the Railbelt system. During that time
there were many efforts to reorganize the Railbelt grid. He said
the Railbelt utilities have done a terrific job over the last 70
years but things changed over time and there are issues now
about how to operate as a whole.
3:39:52 PM
REPRESENTATIVE SPOHNHOLZ joined the meeting.
MR. ROSE displayed a timeline showing REAP's involvement since
2011 when it became a member of the Railbelt Integrated Resource
Plan (RIRP) Citizen Advisory Committee. Once the legislature
appropriated money for a study and the RCA opened docket I-15-
001, REAP became more heavily involved. In 2015 REAP urged the
legislature to introduce House Bill 187 to create an independent
system operator (ISO). This effort was repeated in 2018 with
House Bill 382. Both bills looked at an independent board of
directors with three or four representatives from the utilities.
Over the last year and a half REAP has been helping the
utilities develop a memorandum of understanding (MOU) that they
have now all signed. A primary driver has been to make many of
the functions mandatory.
He stated that REAP supports the legislation as proposed as well
as the following four pillars:
1. To allow the RCA to oversee the new RRC if it is
successfully established voluntarily.
2. To allow the RCA to establish something like the RRC on its
own, if current voluntary efforts to do so fail.
3. To call on the RRC to execute regional integrated resource
planning that would allow a broad public process to decide
the future generation and transmission needs for the
Railbelt.
4. To give the RCA the authority to preapprove all large new
generation and transmission projects to protect Railbelt
consumers.
3:41:47 PM
MR. ROSE listed the following problems:
• There is no regional economic dispatch. The RCA pointed
this out in their 2015 and 2020 letters. Each of the six
utilities is balancing supply and demand within their own
suboptimal balancing area. This is problematic for
renewable energy because it limits the space the variable
electrons from wind and solar can go.
• There is no regional planning, which the bill does address.
• The RCA does not have pre-approval authority, which the
bill does address.
• There are no regional reliability standards, which the bill
does address.
• There are no regional nondiscriminatory interconnection
standards, which the bill does address.
• There is no regional transmission tariff, which can make
the cost of moving power uneconomic. The open access
transmission tariff in the bill will hopefully address the
regional transmission tariff.
3:42:54 PM
MR. ROSE stated that REAP sees electric grid reform as risk
management. Establishing an ERO will help the Railbelt with the
existing challenges associated with fuel price volatility,
climate risk, technology innovation, changing customer needs and
desires, and grid resiliency and security.
He related that in Cook Inlet, one producer controls about 85
percent of the production. Natural gas is virtually monopoly
controlled in Cook Inlet. There is flat demand and a small
market for that gas in the Railbelt. The infrastructure is aging
and the production costs for the gas are high. A lot of state
subsidies have been supporting the production of that gas, which
is a risk for the region.
MR. ROSE displayed an excerpt from a 2015 letter from five large
oil companies to the United Nations to illustrate the climate
risk.
Pricing carbon obviously adds a cost to our production
and our products - but carbon pricing policy
frameworks will contribute to provide our businesses
and their many stakeholders with a clear roadmap for
future investment, a level playing field for all
energy sources across geographies and a clear role in
securing a more sustainable future.
He emphasized that a federal carbon price is inevitable.
3:44:09 PM
MR. ROSE turned to the slide that lists technology innovations
and other disruptors. He highlighted that wind and solar prices
are falling dramatically. They are market disruptors in other
places because they often cost less than generation by coal and
natural gas. Electric transportation is another disruptor that
is gaining traction. Electricity is being used for heating and
batteries and other energy storage devices are dropping in
price. He said it's important to have a regional forum to
address these changes.
He displayed a slide depicting a wind and solar farm and
highlighted that according to a December 2019 analysis by
Lazard, wind energy prices have fallen 70 percent and solar
photovoltaics have fallen 89 percent, on average, over the last
decade. Those prices are predicted to continue to decrease going
forward. He displayed a recent slide from the U.S. Energy
Information Administration that states:
According to the U.S. Energy Information
Administration's (EIA) latest inventory of electric
generators, EIA expects 42 gigawatts (GW) of new
capacity additions to start commercial operation in
2020. Solar and wind represent almost 32 GW, or 76%,
of these additions. Wind accounts for the largest
share of these additions at 44%, followed by solar and
natural gas at 32% and 22%, respectively. The
remaining 2% comes from hydroelectric generators and
battery storage.
3:45:43 PM
MR. ROSE displayed Lazard's most recent estimates of Levelized
Cost of Energy Comparison of renewable and conventional energy.
It is an unsubsidized analysis, so it is comparing "apples to
apples" and shows a cost range for each renewable and
conventional resource. He noted the range for solar is 3.2 cents
to 4.2 cents per kilowatt hour. The range for wind is 2.8 cents
to 5.4 cents per kilowatt hour. He said these are the cheapest
resources available right now.
MR. ROSE directed attention to the graph showing the trajectory
of solar photovoltaic deployment and cost since 2009. The
superimposed red line shows that as the cost goes down,
generation increases considerably. He noted that more than 60
gigawatts of solar was installed in 2018.
The next graph shows a similar graph for U.S. Onshore Wind
deployment & Cost. He highlighted that the price of wind is
dropping so dramatically, an additional 90 gigawatts of wind
generation is anticipated this year. The next graphic of the
Lower 48 shows that the states colored dark blue have passed 100
percent clean energy policies and those colored light blue have
renewable energy targets. He pointed out that Alaska is not
colored because it does not have a codified goal for renewable
energy.
3:47:19 PM
MR. ROSE emphasized that customer needs and desires are changing
quickly. People are installing solar on their roofs but, more
importantly, 63 percent of the Fortune 500 companies have set
one or more climate change or clean energy targets. This means
they will not move into communities that do not have renewable
energy for their customers. He highlighted that this is
important to Alaska as it tries to encourage companies to invest
in the state.
He reported that Apple's next U.S. data center will be built
near Des Moines, Iowa, his hometown. [Apple's investment of $1.3
billion is projected to create 550 constructions jobs in the
area, and the company is contributing up to $100 million to a
newly created Public Improvement Fund.] He said the tremendous
economic investment in this area can be attributed to the fact
that 100 percent of the power that Apple purchases will come
from wind generation. Statewide, 40 percent of the power
generated in Iowa is from wind.
3:48:16 PM
CHAIR HOPKINS asked if the wind farms are located in Iowa or in
another state and available through the interconnection in the
Lower 48.
MR. ROSE responded that he assumes that the power comes from
Iowa. On a per capita basis, Iowa produces more electricity from
wind than any other state. It's more than Iowans use and the
excess is delivered to places like Kansas City and Chicago.
CHAIR HOPKINS commented that the electricity is delivered
through the interconnection among utilities and the transmission
system in the Lower 48.
MR. ROSE agreed. He added that the transmission system acts like
a storage system for this large grid so there is always
someplace for the electrons to go. It's different than in the
Railbelt where there isn't a regional grid to deliver electrons
regardless of where they're produced. He continued to say that
grid resiliency and security is a large issue for the RCA.
3:49:48 PM
REPRESENTATIVE SPOHNHOLZ questioned his statement that Alaska
doesn't have a policy regarding renewable energy because the
governor mentioned on Monday that the legislature passed a
policy in 2010 that required 50 percent of energy in Alaska come
from renewables. She asked for an explanation of the discrepancy
between statements.
MR. ROSE explained that the governor was referring to House Bill
306 that passed in 2010. It had the 50 percent by 2025 goal, but
it was not codified. Therefore, it is neither a mandate nor a
goal. He noted that he mentioned this to the governor yesterday.
REPRESENTATIVE SPOHNHOLZ described the legislation as
aspirational.
MR. ROSE agreed it was an aspirational goal. He then pointed out
that other states have codified their goals.
3:51:13 PM
MR. ROSE turned to the slide that states that western grid
integration could be a boon for wind. He read the following
quote from Stephen Beuning, Director of Market Operations, Xcel
Energy:
When utilities pool their generation assets and
dispatch [them] together, you get greater efficiency
and flexibility. Those two things combine to help
renewable integration.
He highlighted that XL Energy, the largest utility in the
country, has come full circle. It initially fought Colorado's
Renewable Portfolio Standard and now says it will go 100 percent
renewable electricity.
MR. ROSE stated that REAP has a few concerns about the
governance structure of the proposed RRC. First, the governing
board outlined in the RRC memorandum of understanding (MOU) that
the utilities negotiated is not independent. REAP and other non-
utility stakeholders worked with the utilities to tighten the
language but didn't have any leverage to encourage the utilities
to change the governance structure in the MOU. He pointed out
that if AEA (Alaska Energy Authority) weren't a state entity, it
would be classified as a utility because it owns generation and
transmission. From that standpoint, the board has seven
utilities and five non-utilities. He said REAP would like to see
a requirement that minority positions of the RRC in the
Integrated Resource Planning process are reported to the RCA.
Then the RCA could consider that when it decides whether or not
to modify or approve an IRP. He said REAP would also like a
commitment from the utilities that the governance board will
evolve over the next 5-10 years to become truly independent.
3:54:08 PM
MR. ROSE reviewed five points that REAP believes are important
going forward. First is the hope that the local planning and
reliability criteria in existing statute do not create loopholes
that would defeat the purpose of the Integrated Resource
Planning (IRP) process or the ability of the RCA to pre-approve
projects. Second is to ensure that the legislation makes it
possible to move toward a universal transmission tariff in the
Railbelt so there are no pancaking transmission tariffs. The
third point is that REAP would like a commitment to transition
to merit-order economic dispatch at a future time certain. He
noted that the MOU simply says that when established the RRC
will study merit-order economic dispatch.
3:54:59 PM
CHAIR COGHILL pointed out that the MOU is very different than
the statutory rule and it's important that they aren't crossed.
MR. ROSE replied he wanted the committee to understand some of
the issues involved with the MOU process.
He continued to say that REAP wants to make certain that the RRC
develops protocols to allow for non-discriminatory open access
to both individual utility networks and the wider transmission
system. He said the last point is that the legislation should
reflect the needs of Alaskans, not necessarily the needs of the
utilities' MOU to form the RRC. He noted the testimony from the
utilities on Monday was that they would like the legislation to
comport to the MOU whereas REAP believes the legislation should
protect Alaskans first.
3:56:19 PM
MR. ROSE said the following points summarize what REAP believes
Railbelt reform would do for Alaska:
• Create a more level playing field for renewable
energy producers
• Stabilize energy prices, including rural
electricity, and diversify the fuel mix
• Decrease greenhouse gas emissions
• Attract investment
• Diversify the economy and create jobs
• Prepare Alaska for a better future that will
likely include both electric transportation and
heating
MR. ROSE said the meetings over the last year and a half have
been very productive, but the recent effort to completely
rewrite SB 123 was not a good process. He expressed hope that
the processes will be less rapid when the Implementation
Committee and the Railbelt Reliability Council are formed.
3:57:26 PM
CHAIR COGHILL asked if he would agree that integrated resource
planning with a number of utilities that have different
geographic economies is very different than a single utility
because they bring very disparate points of view.
MR. ROSE said yes; it makes sense that the utilities want to be
on the implementation committee and the RRC. He added that the
resources and needs vary in different parts of the Railbelt, but
they aren't that different and the non-utility stakeholders may
bring up issues that the utilities may not consider if they're
alone in the room.
CHAIR COGHILL referenced the statement that utilities are
interested in utility business whereas REAP is interested in the
public good. He pointed out that utilities are required to have
a certificate of public convenience and the RCA requires that
they operate in the public interest. Their mandate is to deliver
reliable power at the lowest cost service.
MR. ROSE said he agrees and believes the utilities do a great
job of meeting that mandate. However, when the ERO is
certificated, REAP wants broad assurance that there is broad
consensus and the ERO is working for the public interest.
4:00:40 PM
CHAIR COGHILL thanked Mr. Rose and invited Mr. Thayer to provide
his testimony.
4:00:54 PM
CURTIS THAYER, Executive Director, Alaska Energy Authority
(AEA), Department of Commerce, Community and Economic
Development (DCCED), Anchorage, Alaska, stated that AEA's goal
is to lower the cost of energy in Alaska. The authority
accomplishes this through its assets, primarily Bradley Lake
Hydroelectric Project and the Alaska Intertie transmission line,
but also the Battle Creek Diversion Project.
He advised that AEA also operates rural programs in 195
communities in terms of Power Cost Equalization and is primarily
responsible for the powerhouses, bulk fuel, and upgrades.
Further, AEA supports rural communities by administering grants,
including the Renewable Energy Fund (REF) and Power Project Fund
(PPF).
MR. THAYER said his focus today is to discuss AEA's perspective
of SB 123 as an asset owner of Bradley Lake and the Alaska
Intertie. He related that Bradley Lake is currently managed by
the Railbelt utilities and AEA participates in the Battle Creek
Management Committee. The committee makes operational
maintenance decisions and AEA receives feedback from outside
agencies. The budget for required improvements is not affected
by SB 123. The state does not give away any of its fiduciary
rights or responsibilities, but still has clear rights on
budgeting matters on AEA assets. The Alaska Intertie still has
the maximum intertie transfer capacity rights. It is managed by
the utilities through an Intertie Management Committee, similar
to the Bradley Project Management Committee, for operational
maintenance decisions.
4:03:18 PM
MR. THAYER, in response to Chair Hopkins, advised that the
acronym BPMC stands for the Bradley Project Management Committee
which is composed of participants from all six of the utilities
and AEA.
He opined that the less prescriptive and more intentional
approach in SB 123 for energy policy is preferable, particularly
when looking back at legislative intent. It ensures that the
Regulatory Commission of Alaska (RCA) will play a proper
regulatory role and allows maximum flexibility for the electric
reliability organization to create rules of the road and meet
Alaska's specific situations.
MR. THAYER suggested that planning functions should be closely
aligned with a statewide effort and flexibility, and bifurcation
should be maintained. He said a combination of new technologies
and synergy among the utilities currently exist, so SB 123 is
the right vehicle at the right time. The AEA has worked very
closely in the past year with utilities in addressing the issues
related to the Swan Lake fire and the SQ line [Soldotna
Substation to Quartz Creek Substation].
He reported that the Swan Lake fire cost utilities and the
ratepayers north of Homer approximately $12 million during the
four-month period when the line was down. Collectively, the AEA
and the utilities learned a lot during that process, not only on
that section of line, but also regarding the need to improve
transmission lines throughout the state. SB [123] will provide a
very deliberate consideration of the right mix of technical
expertise and regulatory oversight. If successful, it will
benefit ratepayers and lower energy costs.
CHAIR COGHILL asked him to submit his comments in writing.
MR. THAYER agreed to provide them.
4:06:03 PM
SENATOR GIESSEL requested an explanation of why the RCA does not
regulate Bradley Lake.
MR. THAYER replied it was an agreement related to project
bonding that was reached during construction. He said the bonds
will be paid off next year so there will likely be a
conversation about regulation at that time. He related that the
AEA and utilities are currently improving Bradley Lake with the
$47 million Battle Creek Diversion Project, which will increase
Bradley Lake hydroelectric production by about ten percent. He
pointed out that while Bradley Lake bonds will be paid off next
year, the Battle Creek bonds will continue. The AEA is in the
very beginning stages of repaying those bonds, he said.
4:07:07 PM
SENATOR MICCICHE said the committee needs to understand that HEA
(Homer Electric Association, Inc.) did not benefit from the Swan
Lake fire. HEA was forced to use generation capacity that it
planned to use this spring, so it will need to supplement fuel
gas in the system. No one benefitted; it was an unfortunate
situation that affected everyone negatively, he said.
CHAIR COGHILL commented that the ratepayers on the northern end
of the Alaska Intertie are very well aware of that.
MR. THAYER said it was not his intention to suggest HEA
benefitted when he highlighted the figures for the five
utilities on the north end that were cut off from power. Homer
was affected by a completely different set of circumstances. He
said the issue at hand was that the line was down and
hydroelectric was not available to the utilities north of Homer.
He noted that hydroelectric costs approximately $.04 per
kilowatt compared to gas at $.08 per kilowatt. He reiterated
that it was not his intention to slight Homer in any way.
SENATOR MICCICHE said he understood.
4:08:28 PM
CHAIR COGHILL asked about the tension created by AEA being part
of a reliability group when it works as both a utility and in
energy management.
MR. THAYER answered that AEA's role is as a state entity viewing
the process holistically. The state owns Bradley Lake and the
Alaska Intertie, so the AEA must keep its distance, he said. The
AEA is part of the process and has worked with the utilities but
chose not to be a party to the Memorandum of Understanding. Nor
did the utilities ask the AEA to be a party to the MOU, he said.
CHAIR COGHILL said he thinks that all those things are
considered as an ERO is formed.
4:09:57 PM
CHAIR HOPKINS recognized that Representative Pruitt had joined
the committee.
He asked if the AEA, as owner and operator of the Alaska
Intertie from Anchorage to Fairbanks, sees a need for any
upgrades to the system to allow for better reliability,
especially as the Golden Valley Electric Association (GVEA)
mentioned earlier that the power line went down in the dead of
winter.
MR. THAYER clarified that AEA has the portion of the Alaska
Intertie from Willow to Healy. Golden Valley Electric
Association has the portion from Healy to Fairbanks. He referred
to a 10-year old study that considered the Railbelt needs as a
whole. It identified close to $1 billion in overall projects
needed for upgrades or improvements. He said AEA would like to
reevaluate that study since technology and utility ownership
has changed since then. He suggested that AEA needs to look from
Homer to Fairbanks because Bradley Lake hydroelectric provides
power to Fairbanks. That is a key component but there is
potential line loss up to 40 percent, depending on the time of
year and the constraints on the transmission line. He opined
that the AEA needs to find ways to un-constrain the power from
Bradley Lake. It is the largest hydroelectric project in the
state and it provides the cheapest source of power.
CHAIR COGHILL asked if that wouldn't be part of the resource
planning as contemplated in SB 123.
MR. THAYER answered yes.
4:12:03 PM
CHAIR COGHILL thanked Mr. Thayer and invited Mr. Mitchell to
deliver his PowerPoint.
4:12:40 PM
DUFF MITCHELL, Executive Director, Alaska Independent Power
Producers Association (AIPPA), Juneau, Alaska, began the
PowerPoint by displaying the logos of AIPPA's nine members from
across the state. He explained that AIPPA is a support group
that shares lessons learned regarding how individual IPPs have
dealt with integrating with individual utilities and working
with the RCA. He said this very useful group has been
instrumental in moving the needle toward more competitive power
in the state. To provide context, he said 42 percent of the
nation's power comes from independent power producers whereas
it's 4 percent in Alaska, as noted on slide 3.
He relayed that the model for the ERO and the Railbelt
organizations comes from the Electric Reliability Council of
Texas (ERCOT) where 78 percent of the state's power comes from
IPPs. He opined that IPPs in Alaska will continue to grow and
play a larger role going forward.
4:15:01 PM
MR. MITCHELL said he mentioned this because one of the key
recommendations in 2016 when the U.S. Department of Energy
analyzed Alaska's energy situation was to increase the role of
independent power producers and other third-party service
providers in Alaska. He said the IPPs have proven they can do
this in Alaska. They are nimble and use private investment to
accelerate the option of innovative technologies. He described
Alaska as the breadbasket of energy nationwide. It has about 45
percent of the nation's untapped hydropower, two-thirds of the
coastline for offshore wind, rivers available for hydrokinetic,
renewable energy resources, and nonrenewable energy resources.
4:16:06 PM
MR. MITCHELL said he worked on Alaska's Energy Policy in 2010
and it is aspirational rather than directional. When he
testified before the Regulatory Commission of Alaska, he learned
that the RCA does not believe it pertains to the agency because
the policy is not codified.
He stated support for SB 123 and HB 151 on behalf of AIPPA. The
bills are not perfect, but his belief is that they will evolve
and improve.
4:18:46 PM
MR. MITCHELL outlined three points on slide 8 to highlight
AIPPA's consistent position. First, Alaska should adopt an open
access transmission tariff (OATT) so those connecting to the
system would pay the same tariff as the owners. He said
transmission is the highway to the market, but it can also be a
barrier. For example, when a solar or wind project cannot get on
the transmission line to market its power. The organizational
development team (ODT) has recognized this dilemma in its
memorandum of understanding (MOU). It is also mentioned in the
bills and shown in the language on slide 9. He expressed a
preference for changing the word "may" to "shall" because "may"
is aspirational.
MR. MITCHELL said AIPPA also supports an independent board of
directors. He paraphrased the language on slide 10, "Every
Transmission Organization in the US has strong regulation and
code of ethics requiring an Independent Board of Directors." He
said AIPPA recognizes that Alaska's population is smaller, so it
will be difficult to find people with the expertise to serve on
the board and be completely independent from their organization.
He emphasized the need for independence for both utilities and
non-utilities. Board members should also have a fiduciary
responsibility to the transmission organization rather than
their specific interests, he said. Without strong independent
organizations, Alaska will risk unintended consequences such as
the creation of oligopolies or cartels, he said.
4:20:20 PM
MR. MITCHELL said AIPPA appreciates the commitments made by the
ODT and utilities to date as shown in the language on slide 12:
Regulatory compact (contractual commitment) with the
State of Alaska.
Commitment that the utilities will be bound by the
decisions of the RRC.
Commitment of the utilities to support statutory
language to provide the RCA authority to regulate the
RRC as described in the MOU.
Commitment of the utilities to be inclusive of a
variety of perspectives in decisions relating to the
Railbelt bulk electric system.
Commitment of the utilities to participate with one
another and non-utility stakeholders to achieve
benefits for ratepayers across the Railbelt region.
4:20:54 PM
MR. MITCHELL reviewed slide 13, highlighting the importance of
cybersecurity, integrated resource planning (IRP), and project
pre-approval. Because of the military bases in Alaska, he said
he was pleased to see the legislation address cybersecurity. He
noted that some schools and cities in Alaska have already been
affected.
MR. MITCHELL said SB 123 also provides the necessary tools for
integrated resource planning (IRP) and project pre-approval. He
said integrated resource planning doesn't need to be expensive,
but it does need public participation. IRPs are commonly used in
the Lower 48, which results in better decisions.
He said most states have project pre-approval in code. The RCA
does not have this authority, but it is important in not just
the Railbelt but statewide. He also suggested that some
reference to the state energy policy could be mentioned in the
bill.
4:22:57 PM
MR. MITCHELL summarized the six points on slide 14. First,
Alaska has abundant resources. Second, Alaskans deserve lower
cost power. Third, Alaskans deserve diversity of sources of
electrical generation for energy security. Fourth, Alaskans
deserve open access transportation tariffs (OATT) to create a
level playing field. Fifth, Alaskans need the RCA to have the
statutory tools including integrated resource planning, project
pre-approval, and cybersecurity. Finally, the AIPPA views SB
123/HB 151 and the establishment of the ERO as a foundational
road map to achieve lower electrical costs. While significant
work still needs to be done, he suggested that the state is
moving beyond gridlock.
MR. MITCHELL concluded that collaboration and cooperation
represent the new approach and he hopes it will continue.
4:24:13 PM
CHAIR COGHILL questioned whether the open tariff would come out
of the ERO through integrated planning or if it would need to be
a statutory requirement.
MR. MITCHELL responded that the bill says "may" and IPPA prefers
stronger language to ensure open access to eliminate any
barriers. Most utilities agree, he said.
CHAIR COGHILL asked if he sees that the ERO will structure
itself to have input from IPPs.
MR. MITCHELL answered yes. He said he sees the current
commitment, but if that commitment wanes in three years, the
current language will not provide the same statutory strength.
He said there were problems in the past and he wants to move
beyond fractiousness.
CHAIR COGHILL suggested that the bill reduces the number of
"doors" from six or eight plus the RCA to just one to knock on
for approval.
MR. MITCHELL replied he agrees, so long as the open access
covers the entire grid and isn't a two-step process.
CHAIR COGHILL said he favors that approach. He added that he
would like the listening public to understand that the committee
wants to take all the input, yet still come up with a simple and
discrete way to accomplish it.
4:26:53 PM
CHAIR COGHILL thanked Mr. Mitchell and invited Ms. di Suvero to
testify.
4:27:19 PM
VERI DI SUVERO, Executive Director, Alaska Public Interest
Research Group (AKPIRG), paraphrased the following prepared
testimony: [Original punctuation provided.]
Introduction
To the chair and the committee, hello and thank you
for inviting me to speak. My name is Veri di Suvero
and I am the Executive Director of the Alaska Public
Interest Research Group (AKPIRG).
We were founded in 1974 and are the State's only non-
partisan non-profit organization advocating
specifically in the interest of the public and
consumers. We are a 501(c)3, state-wide organization.
As part of our work, we advocate on behalf of
ratepayers. I recently found a filing from AKPIRG
petitioning to intervene in a rate case to the RCA
from 1976. In 1986, we were canvassing about least-
cost energy planning with utilities.
I started as Director a little over a year ago, and
have had a bunch of very patient teachers, from a
range of stakeholders on this issue. I want to start
by expressing my gratitude to themfrom utility
representatives in each service area, to the
Regulatory Commission, to non-utility stakeholders,
and once again to this body for helping Alaskan
ratepayers.
I am not here as a technical expert. I am here as a
consumer representative, and it is AKPIRG's belief
that I do not need to know everything that goes on
behind my light switch to know that my utility bill is
one of the highest in the nation.
In addition to advocating for cost-effective and
reliable service, AKPIRG advocates in the public's
interest. That entails a few things, including
transparency and accessible information to consumers.
As a research group, accessible information means both
transmitting information already presented, and also
compiling some of our ownfrom going to the RCA to
look at tariffs for residential consumer rates, to
explaining various acquisition or other electric
utility proceedings to stakeholders. It's critical to
start with the basic numbers, with actual consumers
and the direct impacts of rate changes.
As Commissioner Scott testified last Friday, consumers
could save $17 million in a yearly aggregate, with
just an efficiency increase of 2%.
SB 123 and HB 151 could not be coming at a better
time. This is a critical first step, and to me it
underscores the timeliness of ensuring these
efficiency increases are possible.
Integrated Resource Planning
Along with transparency and accessible information, it
is necessary to ensure a planning process that
benefits not just one utility's membership, but all
consumers. Plans are important for their cost-savings
purposes, and also for the important sake of having a
plan, ensuring a more certain and predictable path
forward.
As a consumer interest organization, it would be
inappropriate to speak for all consumers and their
needs. But helping develop a plan and thereby ensuring
predictability, as well as substantial opportunities
to participate in that planning process, is AKPIRG's
role in this space.
Right now, that predictability is a big question. As
the price of fuel is fluctuating, a consumer does not
have an easy time of budgeting. And with emerging
technologies like new battery storage, there are many
exciting paths forward.
As it stands now, without a planning body to create
longer-term integrated resource planning, consumers
are footing the bill of that uncertainty. Building out
long-term economic models is crucial, so that
individual consumers as well as larger consumers can
budget correctly for their future.
4:31:28 PM
AKPIRG is not here to speak negatively about how
electrical utilities have taken care of their
ratepayers--we are very lucky in the railbelt region
to have cooperatives that are so responsive and
dedicated to their members. And although the grid
could now be most efficiently served, if built from
scratch today, by just one utility, the history and
formation of these utilities is reflective of their
dedication to their consumers.
In fact, ensuring their members are best served has
been a big reason why, as a statewide organization,
AKPIRG is excited for an additional, regional approach
to planning. This is because regional planning has not
been consistently done together. As an example,
through the past decade there have been four new
generation plants built on the railbelt, costing
ratepayers an estimated $1.49 billion. And this is for
a population size, as Commissioner Scott said, that
could be served by one utility--and by the equivalent
of a half of one power plant in the lower 48.
This increased spending creates costly inefficiencies,
higher rates, and a higher barrier to enter an energy
market that doesn't need more energy producers. To our
estimation, none of these things serves the consumers'
interests. The costs of this infrastructure have been
pushed to the end-user, or the consumer. And by
building non-renewable sources in a small balancing
area, renewables are prevented from attaching from the
grid--preventing a diversity of energy sources which
would stabilize costs in the region. As it stands, 85%
of our energy portfolio is made up of non-renewable
sources.
These inefficiencies are part of what pushed the RCA
and legislature to investigate what a regional
planning body--and specifically an Independent System
Operator--would look like. And the RCA's work, as well
as the legislature's, to ensure greater cooperation
between utilities, as well as cost-savings through
greater efficiency and integrated resource planning,
is impressive and necessary.
That's partly why SB 123/HB 151 and the RRC, while not
solving everything, will introduce a regional planning
approach (or Integrated Resource Planning) and we're
incredibly excited to see this necessary step happen.
I want to thank and give my appreciation to everyone
who has spent decades on seeing this important process
to an almost-reality.
AKPIRG's involvement
AKPIRG does a lot of public outreach on electric
utility issues, and I go through this railbelt history
and this need for energy efficiency in AKPIRG's
consumer forums. I also talk about how we have a
pretty incredible model in Alaska, with utilities that
are really in it for their members. Part of the work
AKPIRG does is to talk with and educate members about
what it means to participate in their utilitymuch
like the public arena, participation may seem
daunting, but is critical to ensuring that
representative bodies can hear from their
constituents.
As a little more background about our involvement with
electric utilities: we endorse candidates regionally,
we have staff in Fairbanks working on energy issues as
well as volunteers on the Kenai, and AKPIRG has a seat
on the Chugach Reliability Group--a group of
ratepayers advocating for safe work practices,
reliability, and increased renewables at Chugach.
Through member education events as well as these
elections, we are able to help translate some of the
wonkier happenings across the railbelt. This includes
participating at the RCA and with the utilities on the
MOU as requested.
Through our regional work, we consider the needs of
all the consumers on the railbelt, not just members
(not everyone who has to budget for utility bills is a
registered member) and we don't just consider the
needs of each local cooperative. We recognize there is
an important balance to strike to ensure that
cooperatives maintain local control and responsiveness
to their members, but without a body to also consider
the needs of the entire region, members and ratepayers
can lose out on cost-effective and energy efficient
decisions, especially in the longer term.
AKPIRG Pillars
The good news is that we have incredible need for
changes to be made, and in response we have seen
historic movement on this front. We don't always
expect the kind of current cooperation between
utilities, but I am grateful and more hopeful because
of it.
Given this, AKPIRG has identified the following top-
level needs: the creation of an Electric Reliability
Organization, successful cooperation between
utilities, input from other stakeholders (and
especially the public), and accountability within this
process in the public's interest.
To that end, AKPIRG's comments on SB 123 are as
follows:
- The RRC should not be drafting regulations. It is
critical that the RCA maintain control over the RRC
decision-making process. As Commissioner Scott
testified, the RRC will have available to it many
experts on technical and process matters. That said,
the RRC has been established, as provided in the MOU,
to "ensure reliability benefits to electric consumers
in the Railbelt." Reliability benefits do not
encompass a public interest determination--that is the
purview of the RCA. At the RCA, anyone can be involved
in a rulemaking process. Right now, the formation and
structure of the RRC is uncertain, and sowith that
question of stability in mindit is in the public's
interest to have regulations made where they can have
the most direct input: at the RCA.
-Increased opportunities for public participation.
AKPIRG suggestsand did so to the utilities last week,
without oppositionto add 'public participation and
comment' wherever 'public comment' occurs, in order to
allow for as open, engaged, and transparent a process
as possible.
4:37:49 PM
MS.DI SUVERO referenced Senator Coghill's earlier question and
said she agrees that the utilities represent some of the
stakeholder needs but thus far the process at the RRC level has
been utility-driven. She opined that that is the distinction
between the process so far in terms of involving stakeholders on
the same plane, and what it could be going forward.
CHAIR COGHILL asked if she sees a healthy tension in that the
ERO has to answer to the RCA for its organizational structure
and integrated resource planning.
MS.DI SUVERO answered absolutely and she is pleased that the RRC
is not mixed in SB 123. She noted that the RRC has two ex
officio members, one from the Regulatory Commission of Alaska
(RCA) and the other from the Regulatory Affairs & Public
Advocacy (RAPA).
4:40:15 PM
CHAIR COGHILL pointed out that the RRC may or may not ultimately
be certified as the ERO. He suggested that her testimony could
be misinterpreted that the decision had been made, but it has
not.
MS.DI SUVERO said she didn't intend to make that assumption.
4:41:04 PM
CHAIR HOPKINS asked how she sees it working in practice if the
language "public participation and comment" were to replace the
term "public comment" whenever it occurs.
MS. DI SUVERO said she didn't want to influence how that
language could be seen in the future but in other models it
includes robust public participation at meetings and during the
formation of policy and planning. She said the idea of hosting
consumer forums and having other types of input in the process
is critical, even with the RCA as the backstop for whatever ERO
is formed. She shared that AKPIRG is applying to the consumer
seat if the Railbelt Reliability Council is approved.
CHAIR COGHILL emphasized that the reliability organization is
structured to have various different voices and that includes
healthy public input. He added that whenever the RCA is
involved, public input is required.
4:44:09 PM
MS. DI SUVERO returned to her prepared comments on SB 123:
-Pass SB 123. Most importantly, AKPIRG feels it is
necessary to pass this bill. Without the ability to
move forward with the RRC under the RCA's
jurisdiction, this will cost consumers millions. This
past summer, the transmission line Bradley Lake was
out of commission from August until recently, in
December. That left all utilities except Homer without
the cheapest source of power on the grid: Hydro. It
cost Southcentral and Interior ratepayers roughly
$11.8 million, according to reporting by Elwood
Brehmer. This legislation will help create a more
resilient and redundant system as our region faces
increasing wildfires and other severe weather events.
Pass the bill as is. We feel that too many substantive
changes will slow down this process and undermine the
years-long efforts thus far of the six electric
utilities, other stakeholders (including AKPIRG), the
Regulatory Commission, and this body. This bill is an
outgrowth of what the RCA has learned and reflects
their recommendations based on 2015 substantive
recommendations for reform. There are clear topical
changes needed, like dates, but our worst-case
scenario is for this body to spend so long
incorporating and deliberating over the changes that
the utilities are proposing that the bill does not
pass. To our estimation, as it is written, SB 123 and
HB 151 substantially serves consumers and the public's
interest, and is a necessary and critical step
forward.
I am remarkably grateful to be invited to testify and
want to express my appreciation for your undertaking
this important step forward in a way that will provide
major benefits to consumers, and the public.
4:46:18 PM
CHAIR COGHILL thanked Ms. di Suvero for her testimony and
consistent policy push for the consumer. He asked her to briefly
describe AKPIRG's membership.
MS. DI SUVERO reported that AKPIRG has four paid employees in
addition to herself, one of which is in Fairbanks. Their
membership base in the Railbelt region is about 50, they work in
partnership with about 20 affiliated organizations, and they
reach about 10,000 people statewide.
4:48:10 PM
CHAIR COGHILL asked Mr. Rose to describe REAP's membership.
4:48:37 PM
MR. ROSE stated that REAP has about 77 paid member organizations
that fall into one or more categories as businesses or electric
utilities. They have electric utilities in both the Railbelt and
rural Alaska. Homer Electric, Chugach Electric, and Matanuska
Electric serve on the REAP Board of Directors. Non-governmental
organizations, educational institutions, Native corporations,
and developers are also represented in their membership.
Additionally, there are hundreds of people who support REAP
through donations. REAP's mailing list reaches about 3,500
people. It is a broad, statewide group that's been around for 16
years.
CHAIR COGHILL highlighted that both REAP and AKPIRG speak from
broad perspectives.
[SB 123 was held in committee.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| 2020-01-29 - AKPIRG - HB 151 testimony.pdf |
HENE 1/29/2020 3:30:00 PM |
HB 151 |