Legislature(2009 - 2010)BARNES 124

04/01/2010 03:00 PM ENERGY


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03:10:40 PM Start
03:10:53 PM Overview(s): Railbelt Energy Study by Commonwealth North, "energy for a Sustainable Alaska"
03:48:20 PM HB182
04:43:00 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Overview: Railbelt Energy Study, by TELECONFERENCED
Mary Ann Pease, Commonwealth North
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 182 RAILBELT ENERGY & TRANSMISSION CORP. TELECONFERENCED
Heard & Held
          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