Legislature(2021 - 2022)BELTZ 105 (TSBldg)

02/15/2021 01:30 PM Senate LABOR & COMMERCE

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01:28:44 PM Start
01:29:27 PM SB69
02:08:15 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
-- Invited & Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
**Streamed live on AKL.tv**
         SB 69-EXEMPT RENEWABLE ENERGY ELECTRIC PLANTS                                                                      
1:29:27 PM                                                                                                                    
CHAIR  COSTELLO announced  the consideration  of SENATE  BILL NO.                                                               
69, "An  Act extending an  exemption from regulation as  a public                                                               
utility   for  plants   and  facilities   generating  electricity                                                               
entirely from  renewable energy resources;  and providing  for an                                                               
effective date."                                                                                                                
1:29:52 PM                                                                                                                    
SENATOR REVAK,  speaking as  sponsor of SB  69, stated  that this                                                               
legislation extends  a regulatory exemption for  renewable energy                                                               
produced by  independent power producers  (IPPs), which  has been                                                               
in statute  since 2010. This exemption  encourages private sector                                                               
investment in smaller than  65-megawatt renewable energy projects                                                               
across the state.                                                                                                               
He  explained that  for the  last  10 years  Alaska has  exempted                                                               
small  power producers  from  certain  regulations provided  they                                                               
sell  power on  a  wholesale basis  to  regulated utilities  that                                                               
distribute  power  to  local customers.  The  renewable  projects                                                               
affected by the  exemption cannot have received  any state grants                                                               
or tax  credits. This exemption  has been successful;  it reduces                                                               
cost of entry barriers, provides  jobs, and encourages investment                                                               
across  the  state.  SB  69 has  received  little  criticism  and                                                               
overwhelming support;  it simply  extends the  existing exemption                                                               
that is due to expire on July 1, 2021.                                                                                          
1:33:18 PM                                                                                                                    
SENATOR GRAY-JACKSON asked what the criticism has been.                                                                         
SENATOR REVAK replied there were  questions rather than criticism                                                               
about the  potential to  game the system  using state  grants and                                                               
tax credits. The  concern is baseless because state  law does not                                                               
allow  renewable projects  affected by  the exemption  to receive                                                               
either  state  grants or  tax  credits.  He reiterated  that  the                                                               
exemption has  been in  effect for  10 years  and no  issues have                                                               
been identified  that relate  to any of  the questions  that have                                                               
been asked.                                                                                                                     
SENATOR GRAY-JACKSON  asked if the  bill exempts  larger projects                                                               
than previously.                                                                                                                
SENATOR  REVAK answered  no; SB  69 simply  extends the  existing                                                               
exemption for ten years.                                                                                                        
1:35:41 PM                                                                                                                    
CHAIR COSTELLO asked what regulations  are exempted, who has used                                                               
this program, and the cost of energy being provided.                                                                            
SENATOR REVAK deferred to his staff, Dirk Craft.                                                                                
1:36:10 PM                                                                                                                    
DIRK CRAFT, Staff, Senator Josh  Revak, Alaska State Legislature,                                                               
Juneau,  Alaska, listed  the  following  renewable projects  that                                                               
have  benefitted  from  the AS  42.05.711(r)(2)  exemption:  Fire                                                               
Island Wind  Project at 17  megawatts is the largest,  the Willow                                                               
solar project,  and Juniper  Creek Hydro  at Sweetwater  Lake. He                                                               
deferred  to Commissioner  Bob Pickett  to  discuss the  specific                                                               
regulatory exemptions.                                                                                                          
CHAIR COSTELLO  asked for  a list of  everyone who  had benefited                                                               
from the  exemption and  reminded him that  she also  asked about                                                               
the cost of the energy the IPPs provide.                                                                                        
MR. CRAFT agreed to provide  the list and deferred the discussion                                                               
about cost to Commissioner Pickett.                                                                                             
1:37:48 PM                                                                                                                    
SENATOR STEVENS  asked how  many times  the exceptions  have been                                                               
MR. CRAFT offered to follow up with the information.                                                                            
1:38:18 PM                                                                                                                    
BOB  PICKETT,  Commissioner,   Regulatory  Commission  of  Alaska                                                               
(RCA),  Regulatory Commission  of Alaska  (RCA), Palmer,  Alaska,                                                               
confirmed that  Fire Island was  the largest exempted  project to                                                               
date.  He explained  that when  the commission  looks at  a power                                                               
purchase agreement, they evaluate it  essentially in terms of the                                                               
avoided fuel  costs to  the regulated  utility. He  recalled that                                                               
when the RCA approved CIRI's  Fire Island Wind Project, the costs                                                               
came  in relatively  close to  Chugach  Electric's other  avoided                                                               
costs at the time.                                                                                                              
MR. PICKETT  added that the  RCA economically regulates  about 32                                                               
of the 128  certificated electric utilities in the  state, so the                                                               
commission  has  to approve  the  power  purchase agreements  for                                                               
those 32 utilities. He said it  would be helpful to have a little                                                               
legislative clarity about  what the commission would  be asked to                                                               
do for  these other non-economically regulated  utilities subject                                                               
to AS 42.05.711(r)(2). He acknowledged  that the commission has a                                                               
bit of  insight into  those through  the Power  Cost Equalization                                                               
Program filings.                                                                                                                
CHAIR COSTELLO  asked if some  of the applicants  receive benefit                                                               
through the Power Cost Equalization Program.                                                                                    
MR.  PICKETT  replied  that  is  probably  an  overstatement.  He                                                               
explained  that when  the RCA  evaluates Power  Cost Equalization                                                               
filings, they look  at actual fuel costs and  non-fuel costs that                                                               
the  utility incurs.  The  RCA evaluates  the  non-fuel costs  in                                                               
terms  of   reasonableness  compared  to  a   regulated  electric                                                               
CHAIR COSTELLO  asked what specific  regulations are  exempted so                                                               
that these projects can be viable.                                                                                              
MR. PICKET requested clarification of the question.                                                                             
CHAIR COSTELLO said the sponsor  said regulations are essentially                                                               
being waived for these projects.                                                                                                
1:42:36 PM                                                                                                                    
MR. PICKETT  replied the  sponsor was  probably referring  to the                                                               
fact  that the  independent  power producers  would  not have  to                                                               
secure a certificate of public  convenience and necessity (CPCN),                                                               
which  takes time  and effort,  and they  would be  exempted from                                                               
other   filing  requirements   and   annual   reporting  to   the                                                               
CHAIR  COSTELLO   asked  for  a   list  of  the   other  exempted                                                               
regulations that apply to the IPPs.                                                                                             
MR. PICKETT agreed to provide the information.                                                                                  
1:43:23 PM                                                                                                                    
SENATOR  STEVENS asked  if  the  majority of  the  IPPs are  much                                                               
smaller than the 17 megawatt Fire Island projet.                                                                                
MR. PICKETT agreed  that most are quite small. Fire  Island is 17                                                               
megawatts  but originally  it had  the  ability to  expand to  55                                                               
megawatts, he said.                                                                                                             
SENATOR STEVENS restated his question.                                                                                          
MR. PICKETT said they largely seem  to be less than 10 megawatts,                                                               
although project sponsors would like something larger.                                                                          
1:44:49 PM                                                                                                                    
SENATOR GRAY-JACKSON asked if the  bottom line to qualify is less                                                               
than 65 megawatts.                                                                                                              
MR. PICKETT replied that is correct.                                                                                            
CHAIR COSTELLO asked  how anybody would know if  the IPP expanded                                                               
beyond 65 megawatts.                                                                                                            
1:45:25 PM                                                                                                                    
MR.  PICKETT  explained  that  the RCA  would  know  because  the                                                               
economically  regulated utility  would  have to  file an  amended                                                               
power purchase agreement with that information in the filing.                                                                   
SENATOR HOLLAND asked for the length of the exemption.                                                                          
SENATOR  REVAK  answered  that  this  is  about  the  regulations                                                               
related to start up such as the ones that Mr. Pickett mentioned.                                                                
1:46:41 PM                                                                                                                    
CHAIR  COSTELLO asked  for the  estimated cost  to apply  for the                                                               
certificate of  public convenience  and necessity (CPCN)  and the                                                               
other filings. She  said her impression was that it  was a costly                                                               
and time-consuming process  and she was trying  to understand the                                                               
benefit of exempting these small IPPs from these requirements.                                                                  
MR. PICKETT  responded that  the complexity of  a CPCN  filing is                                                               
tied directly to  the complexity of what the entity  is asking to                                                               
be allowed  to do. By statute,  the RCA must make  a finding that                                                               
the applicant is  fit willing and able to do  everything they say                                                               
they will  do in  the filing.  The evaluation  covers a  range of                                                               
things  and  the  package must  be  well  supported  technically,                                                               
legally, and  for engineering; there  is time and  money invested                                                               
in putting these packages together.                                                                                             
1:48:25 PM                                                                                                                    
CHAIR COSTELLO asked if it  would better serve the public purpose                                                               
to require every project to be deemed fit willing and able.                                                                     
MR. PICKETT  explained that  when a  regulated utility  submits a                                                               
power purchase agreement to the  commission, their certificate is                                                               
on the  line. They  have the  ultimate responsibility  to perform                                                               
adequately,   safely,  and   responsibly   to   not  affect   the                                                               
reliability of their system.                                                                                                    
SENATOR STEVENS asked if a  regulated utility could get a portion                                                               
of their power from an unregulated utility.                                                                                     
MR. PICKETT answered yes. For  example, Chugach Electric has been                                                               
receiving power from the Fire  Island Wind Project for 8-9 years.                                                               
It is  Chugach's responsibility  to blend  that power  into their                                                               
system and  ensure there  are no  reliability or  adequacy issues                                                               
associated with doing that.                                                                                                     
SENATOR REVAK explained  that when this exemption  became law ten                                                               
years  ago,  Alaska   was  the  only  state   that  extended  the                                                               
regulatory authority  of the RCA  to independent  power producers                                                               
(IPPs). In other states, it  is the utilities that purchase power                                                               
from  IPPs   that  are  subject  to   the  regulatory  commission                                                               
1:51:57 PM                                                                                                                    
CHAIR COSTELLO opened public testimony on SB 69.                                                                                
1:52:19 PM                                                                                                                    
BERNIE  KARL, representing  self, Fairbanks,  Alaska, said  he is                                                               
with Chena  Power and  while they  do not  use the  exemption, he                                                               
sees the  benefit. He  opined that  extending the  exemption will                                                               
enhance investment in Alaska for renewable energy.                                                                              
1:53:06 PM                                                                                                                    
DUFF  MITCHELL,  Executive  Director,  Alaska  Independent  Power                                                               
Producers Association  (AIPPA), Juneau,  Alaska, said AIPPA  is a                                                               
diverse group  of many IPPs.  He pointed out that  IPPs represent                                                               
about 39 percent  of the electrical generation in the  US, but it                                                               
is less than  10 percent in Alaska. Alaska  ranks last nationally                                                               
in  IPP power  supply  and  it has  the  second  highest cost  of                                                               
electricity.  He said  IPPs are  not successful  unless they  can                                                               
meet or  beat the cost  of an incumbent utility.  As commissioner                                                               
Pickett  mentioned,   the  RCA  must  approve   all  power  sales                                                               
agreements,  which  means  that  they  review  the  IPP  contract                                                               
through the incumbent utility.                                                                                                  
MR. MITCHELL  pointed to the  research from  Legislative Research                                                               
Services that queried  other states and found that  Alaska is the                                                               
only  state  that  extends  regulatory  oversight  to  IPPs.  The                                                               
federal government exempts  IPPs up to 65  megawatts from Federal                                                               
Energy Regulatory Commission (FERC) regulations.                                                                                
MR.  MITCHELL highlighted  that  the  U.S. Energy  Administration                                                               
projects that  the renewable energy  mix in the U.S.  will double                                                               
by  2050. He  emphasized that  Alaska has  more renewable  energy                                                               
resources than any state in the nation  and it needs to be on the                                                               
right glide  path to be  part of that  projection. He said  SB 69                                                               
sends  a  strong signal  to  the  energy investment  market  that                                                               
Alaska  supports private  capital  investment  in developing  its                                                               
renewable  energy resources  with the  regulatory consistency  of                                                               
other states.                                                                                                                   
He restated  the expense of arguably  duplicative regulation that                                                               
could be  onerous to small  companies, and reminded  members that                                                               
AS 42.05.711(r)(2)  does not preclude  future IPP  regulation. He                                                               
urged the committee to pass SB 69.                                                                                              
1:58:38 PM                                                                                                                    
SUZANNE SETTLE, Vice President,  Energy, Land and Resources, Cook                                                               
Inlet Region,  Inc. (CIRI),  Anchorage, Alaska,  informed members                                                               
that CIRI worked  with former Senator Lesil McGuire  to enact the                                                               
initial  exemption and  they successfully  completed construction                                                               
of  the  Fire   Island  Wind  Project  in   2012.  The  exemption                                                               
eliminated significant  operating and  cost uncertainty  and made                                                               
CIRI's investment  in the project  feasible. It produces  about 4                                                               
percent of the  energy requirement for Chugach  Electric prior to                                                               
the acquisition of (ML&P) [Municipal Light & Power].                                                                            
She stated  support for SB  69 to extend  the term of  the tested                                                               
and successful  exemption. She confirmed previous  testimony that                                                               
no  other state  regulates IPPs  that sell  power to  a regulated                                                               
utility. She reminded members that  IPP projects are dependent on                                                               
successfully  negotiating  a  power  purchase  agreement  with  a                                                               
regulated utility and RCA approval of that contract.                                                                            
2:01:22 PM                                                                                                                    
SENATOR STEVENS asked  what time, money, and labor  CIRI saved by                                                               
not having to go through the regulatory process.                                                                                
MS. SETTLE  replied it  would have been  expensive to  create the                                                               
application  for a  CPCN and  the cost  of the  recurring filings                                                               
would have been uncertain and  potentially burdensome. "It adds a                                                               
huge question mark and I can't put  a number on it because I just                                                               
don't know," she said.                                                                                                          
2:02:53 PM                                                                                                                    
JENN MILLER,  CEO, Renewable IPP, Anchorage,  Alaska, stated that                                                               
this  Alaska-grown small  business  develops utility-scale  solar                                                               
farms. She provided  information about the Willow  solar farm and                                                               
the  upcoming Houston  solar farm  to illustrate  the benefit  of                                                               
extending the exemption.                                                                                                        
She  explained that  the 1.2-megawatt  Willow  solar project  was                                                               
constructed  in 2019  at a  cost of  $1.5 million.  Renewable IPP                                                               
worked  with Matanuska  Electric  Association  (MEA) to  complete                                                               
detailed grid studies, an interconnection  agreement, and a power                                                               
purchase  agreement.  The RCA  reviewed  and  approved the  power                                                               
purchase  agreement, which  sells  power at  MEA's avoided  cost.                                                               
This  regulatory oversight  ensured fair  pricing for  consumers.                                                               
She  said  this is  a  simple  and  efficient operation  and  the                                                               
existing regulatory environment made the investment attractive.                                                                 
MS. MILLER  reported that Renewable  IPP is now embarking  on the                                                               
Houston solar farm,  which is roughly 7 times the  size of Willow                                                               
and  will nearly  double the  solar capacity  in the  state. They                                                               
completed similar  steps for  this $8-10  million project  as the                                                               
Willow project  with the substantial exception  that this project                                                               
will come online after the  current regulatory exemption expires.                                                               
She said they petitioned the RCA  to request the exemption and an                                                               
expedited decision  to facilitate  construction in 2021.  The RCA                                                               
granted the exemption within 90 days.  She said she could not ask                                                               
for  a better  outcome,  but the  unknown regulatory  environment                                                               
introduced significant uncertainty to  the project. The potential                                                               
investors in this  project are comparing it to  projects in other                                                               
states,  none of  which require  regulation of  IPPs. This  makes                                                               
projects in Alaska less attractive.                                                                                             
MS. MILLER stated  that if the RCA had not  granted the exemption                                                               
for the Houston  project, Renewable IPP would be  required to pay                                                               
a  regulation fee  on the  energy it  sells. They  would also  be                                                               
required to  do quarterly filing, which  would require additional                                                               
legal and  support staff. From  the investor's  perspective, this                                                               
makes  Alaska projects  more complex,  expensive, less  economic,                                                               
and less attractive overall, she  said. She pointed out that wind                                                               
and solar  are the cheapest  forms of  new energy and  that there                                                               
will  be  significant private  and  federal  investment in  these                                                               
projects in  the next decade.  She emphasized that  extending the                                                               
existing regulatory  environment will  keep Alaska projects  on a                                                               
level playing field for investments  and is critical to diversify                                                               
the economy,  reduce the carbon  footprint, and provide  jobs for                                                               
2:07:14 PM                                                                                                                    
CHAIR  COSTELLO closed  public testimony  on SB  69 and  held the                                                               
bill in committee.                                                                                                              

Document Name Date/Time Subjects
SB 69 v. A.PDF SL&C 2/15/2021 1:30:00 PM
SB 69
SB 69 v. A Sponsor Statement.pdf SL&C 2/15/2021 1:30:00 PM
SB 69
SB 69 v. A Legislative Research IPP's 2.4.2021.pdf HL&C 4/26/2021 3:15:00 PM
SL&C 2/15/2021 1:30:00 PM
SB 69
SB69 v. A Fiscal Note DCCED.pdf SL&C 2/15/2021 1:30:00 PM
SB 69
SB 69 Letter of Support CIRI.pdf SL&C 2/15/2021 1:30:00 PM
SB 69
SB 69 Letter of Support Renewable IPP.pdf SL&C 2/15/2021 1:30:00 PM
SB 69
SB 69 Letter of Support Fishhook Renewable Energy.pdf SL&C 2/15/2021 1:30:00 PM
SB 69