Legislature(2019 - 2020)BUTROVICH 205
01/31/2020 03:30 PM Senate RAILBELT ELECTRIC SYSTEM
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| Audio | Topic |
|---|---|
| Start | |
| SB123 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 123 | TELECONFERENCED | |
SB 123-ELECTRIC RELIABILITY ORGANIZATIONS
3:33:04 PM
CHAIR COGHILL announced 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."
CHAIR COGHILL stated that this is the fourth hearing on SB 123,
including two joint hearings that were held with the House
Energy Committee. The intention today is for RCA Commissioner
Scott to review the process issues that were raised at previous
hearings; discuss the difference between the RCA and state
agencies adopting regulations; explain how SB 123 will intersect
with the existing RCA tariff process; discuss the provisions in
the bill that allow the RCA to modify standards and integrated
resource plans; and discuss the pre-approval provisions in SB
123 for renewal versus expanded capacity.
He advised that he intended to open public testimony after the
RCA PowerPoint presentation.
3:35:16 PM
ANTONY SCOTT, Commissioner, Regulatory Commission of Alaska
(RCA), Anchorage, Alaska, said he would respond to the concerns
raised in previous hearings and outline the commission's current
practice and requirements relating to those concerns. He will
also revisit some of the key bill principles that drive towards
palatable, cooperative solutions. He acknowledged that some
concern has been raised about modifying timelines in the bill,
which seems reasonable. The RCA's main focus is to ensure that
the bill passes so the process can move forward.
He referenced the point that Senator Micciche raised in an
earlier hearing regarding reliability standards and the RCA's
authorities under AS 42.05.291(c). He relayed that, to date, the
RCA has not promulgated Railbelt-wide reliability regulations.
However, RCA Chair Pickett has made it clear that if the bill
does not pass, the RCA will proceed to that process. He opined
that everyone would agree that that approach would not be
optimal. He characterized the RCA's regulatory process as
"sticky" and relatively slow to respond as compared to the
legislative process. He expressed hope that the bill moves
forward so that the process outlined in SB 123 can be relied on
and used.
3:37:43 PM
MR. SCOTT said he heard concern about the need to ensure that
the processes outlined in SB 123 would be timely executed by the
commission. In response, he pointed out that the bill makes it
clear that the reliability standard is a tariff and will be
filed as one. Therefore, the RCA has 45 days to accept, reject
according to form and filing, or open a docket of investigation.
If a docket is opened, the reliability standards would be
decided within 270 days as per the timeline in existing statute,
AS 42.05.175(b).
MR. SCOTT turned to Integrated Resource Plans (IRPs) and project
pre-approvals. He said the bill contains language related to the
RCA accepting, rejecting, or opening a docket of investigation
to consider an IRP. He offered his belief that it is reasonable
to specify an initial process or timeline and for the RCA to
accept something without opening a docket of investigation. The
existing statutory timelines are clear that once a docket is
opened, the RCA has six months to make a final determination, he
said.
3:40:07 PM
CHAIR COGHILL relayed a concern the Railbelt Reliability Council
(RCC) voiced that the RCA might modify a proposal that is
submitted before opening a docket. He asked for assurance that
the RCA would provide feedback before opening a docket.
MR. SCOTT responded that if the RCA modifies anything, the
commission is required to hold a hearing and that requires
opening a docket. If the RCA wanted to modify reliability
standards, it is very clear that the RCA must hold a hearing and
have a docket of investigation that includes testimony. That is
the RCA's standard approach to ensure that people are able to
make their concerns known. He continued to explain that IRPs
come to the commission as a petition for approval. He said it
would not be unreasonable to specify that the RCA must accept an
IRP, as filed, within a certain amount of time or open a docket
of investigation. He reiterated that under existing law, the RCA
must make a final determination within six months.
3:42:26 PM
MR. SCOTT said he heard the concern about ensuring that the RCA
does not make a modification to a standard or contents of an IRP
that is not technically sound, which is totally reasonable. He
reviewed the RCA's normal practices for tariff filings. When the
RCA opens a docket of investigation, it has powers to set rates
and establish reliability standards. Once the docket is opened
and the RCA has made its ruling, the normal commission practice
is to issue an order that requires the party to modify the
tariff consistent with the commission's findings. The RCA also
specifies a deadline for return. He said this is considered a
compliance filing.
He said he appreciates that the language in SB 123 may raise
concerns that the RCA would not necessarily need to do that. He
explained that while the RCA does not need to send tariffs back
for revisions, it has almost always been the commission's
practice to do so. He said, if it's the legislature's desire, he
didn't see any problem clarifying that an ERO has the
opportunity to make revisions consistent with the commission's
findings. However, it is important for the RCA to have a
mechanism to ensure that the party will comply. He characterized
it as a backstop in terms of the RCA's broader authority.
3:45:45 PM
SENATOR MICCICHE said the committee can discuss how an ERO
filing fits into the tariff structure, but a new ERO with a
traditionally strained relationship is different. He said he's
concerned about the language 123 because this new effort is very
important to all parties. He said he can imagine that the first
rendition of a filing might be something the RCA wants to send
back for amendments. However, the current law that allows the
RCA to modify the filing without an appeal is a big problem. He
described a hypothetical scenario in which the ERO presents a
plan, the RCA amends it so significantly that the deal falls
apart, and the ERO asks the legislature for a remedy.
He advocated for language that will provide an adequate process
for an ERO and the RCA to "bounce something back and forth"
without getting into the commission's formal process. That is
imperative for this to be successful, said.
CHAIR COGHILL agreed with Senator Micciche.
3:47:37 PM
Representative Hopkins joined the committee.
3:47:49 PM
MR. SCOTT replied it's a valid concern but the question is how
to design statutory mechanisms that ensure an outcome and
clarify who has the final say. In terms of "back and forth
dialogue," he recalled one provision of SB 123 would establish
that the RCA had an ex officio seat on whatever governance
structure an ERO established. The intent is to allow open and
regular dialog in the ERO process to address any of the
commission's potential concerns, he said. As he reads it, the
bill provides a mechanism to ensure those conversations happen,
while still providing certainty that decisions can be made and
clarity as to who makes them.
SENATOR MICCICHE said he sees two approaches to solve the issue,
which is to either provide a mechanism that allows "back and
forth" discussions between the ERO and the RCA or remove the
"must have by" date. He emphasized that six utilities are on the
verge of something really successful, so the legislature must
develop statutes that work regardless of the specific
commissioners who serve on the RCA.
CHAIR COGHILL related his understanding that Mr. Scott has
agreed that this is necessary. He expressed interest in ensuring
that the language in the bill will allow discussions between the
ERO and the RCA to address issues and concerns. However, at the
end of the day, the RCA has to [have authority]. He said he was
committed to finding statutory language to accomplish this.
3:51:29 PM
MR. SCOTT recalled earlier concern about ensuring that the RCA
not arbitrarily dismiss an IRP developed by the ERO. He
responded to the concern by saying that the RCA would give "due
weight" to the process that led to the IRP and the weighting of
various minority proposals when the RCA decides whether to
investigate or approve an IRP. That is what the RCA already
does, so it merely reflects the current process. It's entirely
possible new things could arise that had not been considered or
contemplated, he said. However, it's reasonable that the RCA not
change things willy-nilly, he said.
3:53:01 PM
MR. SCOTT recalled earlier comments that the ERO should be able
to ensure needed projects can be built by non-incumbents. For
example, if Chugach Electric Association, Inc. is not able to
build a facility within its service territory, but an IRP
identifies it as being necessary, a vehicle should exist to
ensure that the project gets built.
He said he was not clear that is needed because the RCA already
has the authority, after a hearing, to order construction of
projects needed by the system. Nothing in statute prevents
infrastructure from being owned and operated by a new utility.
The RCA does not have a statute that says, "Within the Chugach
Service Territory there is no other electric utility that can
operate." However, the current statutes state that the
commission should try to ensure that there aren't duplicative
facilities. He said this is precisely not a duplicative facility
so he was unsure of the necessity to create express authority.
MR. SCOTT said he was surprised to see language that's been
circulated that would give an ERO the authority to require new
facilities. If he were an incumbent utility, he would want to
preserve the ability to appeal to the commission rather than
rely on an ERO to determine what the utility must construct. In
fact, there may be some due process concerns with a non-profit
organization with police power to mandate what must be
constructed, although he did not think that was the intent.
3:55:41 PM
CHAIR COGHILL said that issue has not surfaced as a concern. He
guessed that would be part of an ERO's discussion and planning
process and is something the RCA would consider. He did not
think language to address that concern needed to be added to
this bill.
3:56:22 PM
MR. SCOTT said he heard concern that interested parties,
including the utilities, would not have a clear voice in any
regulatory process the commission initiates. He assured the
committee that the existing regulation practice provides for
this. The RCA is different from most agencies in that the five
commissioners consider all regulations in a public process and
any private or informal discussions on proposed regulations are
prohibited. When the RCA opens a regulation docket, the issues
are considered, draft regulations are noticed, and the
commission must respond to all substantive comments in public.
Any subsequent changes require more public comment. The RCA's
process provides ample opportunity for all parties to be heard,
and each regulation requires three votes to pass. Further, it is
not uncommon for the commission to receive proposed draft
regulations to adopt and he anticipates the RCC will do that.
3:58:49 PM
SENATOR MICCICHE asked how often regulations are adopted with a
simple majority and whether it was rare for the commission to
have a split decision.
MR. SCOTT responded that he is aware of some regulation projects
that had split decisions but it happens both ways.
3:59:56 PM
MR. SCOTT discussed the governance structure. He said the RCA
recommends maintaining flexibility for the commission to approve
EROs with different governance structures. This is needed for
the backstop to be effective and it recognizes that the Railbelt
may continue to change.
4:01:25 PM
MR. SCOTT turned to project pre-approval. He explained that
project pre-approval is a determination of need for and
suitability of a given project. It is not a determination that
the cost of that project, whatever it turns out to be, is
prudent and collectable in rates. The standards that the
commission would use to determine the need for a given project
include whether it is safe and if it is needed to provide safe,
reliable, and adequate service. These are existing standards
under AS 42.04.291. An IRP would help the commission make that
decision, he said. The bill provides that project pre-approval
can be requested outside of an IRP process, which is an
important backstop because IRPs go stale, new events may occur,
and it might be necessary to act in a hurry. However, there is
no obligation to build anything that comes from an IRP.
4:03:02 PM
MR. SCOTT said a recent superior court ruling by Judge Lamoureux
creates a need for this process. He said he would skip over this
due to time constraints today, but he would provide a copy of
the ruling to the committee. He said the IRP planning process
and the large project pre-approval process will ensure that
utilities get cost recovery. It will also provide safe harbor
against unfortunate court decisions.
4:03:41 PM
MR. SCOTT said project pre-approval can happen outside an IRP,
but since an IRP considers alternatives, it will basically
"grease the skids." He said the strong language in the bill
provides deference to any project that is consistent with an
IRP. He noted that some suggestions have been made to modify the
scope of projects requiring pre-approval, clarifying that the
commission would not be involved in routing or specific project
siting.
He pointed out that although other states may identify the
location of a transmission line, the RCA is not interested or
involved in that process in Alaska. He noted that some interest
has been expressed in clarifying the scope of what counts as a
large project includes battery storage or reactive power
devices. He said that is reasonable, as is the adjustment of
appropriate transmission length from five miles to ten.
4:05:20 PM
CHAIR COGHILL said some concern about reliability and managing
power fluctuations or interruptions arises at both ends of the
Railbelt. There was also concern about investing in something
that the bill would bar. He said he's looked for ways to provide
some comfort that the utilities can take care of their
constituencies while working in the ERO. He asked if one avenue
would be to raise the issue with the ERO and put it in the
planning process. Additionally, the RCA could open a docket to
address the issue, based on recommendations from the ERO.
MR. SCOTT answered that the bill absolutely provides the avenue
for any utility to come before the commission and say, "We need
to do this." This can be done outside an IRP process. For
example, a utility may have a project it thinks is necessary,
even if the IRP does not think it is needed. He reiterated that
the commission exists to provide an avenue for approval of such
a project.
CHAIR COGHILL responded that when the utilities put themselves
together in a reliability organization, they will have a
reliability council that is bound by certain contractual
agreements. It is up to them to seek flexibility, he said. He
added that he'd try to find ways to address this in statute but
if a reliability organization is approved under this statute and
it becomes an RRC, the reliability council must specifically
state their needs. He said he wants to send a signal that this
should not be the only place it is taken up. He asked the record
to reflect that it is the committee's intention to find suitable
language.
4:08:38 PM
MR. SCOTT addressed concerns about scope of projects requiring
project pre-approval, especially if the project is refurbishing
something that already exists. He said that seems reasonable,
but you don't want a refurbishment clause to swallow the
process. He cited the example of resource performance reviews of
the Clean Air Act. He suggested that fine distinctions would be
better addressed in regulation. Although the commission does not
currently have a definition of what constitutes refurbishment,
the RCA could be directed to establish one. It would allow the
commission to collect information to help it determine where it
is reasonable to draw those lines and craft language that is
consistent.
CHAIR COGHILL said he's tried to protect the authority of the
ERO but he also wants the public to understand the interaction
between the ERO and the RCA as the regulator. Many approaches
can be taken, but his goal is to provide clarity as to the
respective roles.
4:11:18 PM
MR. SCOTT advised that the last slide in the presentation
reiterates his previous testimony about the incentives for
collaborative efforts in SB 123. He related that as currently
drafted, the RCA would not delegate its authority for
reliability and planning to the ERO. However, the commission
would assign most of the work to the ERO and create incentives
for the reliability organization to replicate public interest
weighing and assessments the RCA would engage in so the
commission could easily adopt them.
CHAIR COGHILL said this tells the utilities to collaborate,
develop a workable plan, and the RCA will work with it. He said
this is a new authority because the legal structure calls for
collaboration under the ERO, but the RCA will still be part of
the process.
4:12:35 PM
SENATOR MICCICHE opined that public pressure provides adequate
motivation for these organizations to succeed in this effort. He
said he was pleased to hear that the commission would not create
redundant work when talent exists in the organizations, because
the utilities had that fear. He commented that a new technical
branch of the RCA is needed.
CHAIR COGHILL said he was pleased with the confidence in this
structure.
He again highlighted that the Southeast Alaska Power Agency
(SEAPA) has its own structural grid but has still voiced concern
that it could be affected by the bill even though Legislative
Legal Services has said the bill clearly does not apply to
SEAPA. He asked Mr. Scott to give his perspective.
MR. SCOTT said to form an ERO requires the interconnection of at
least two utilities, one or which is subject to the RCA
statutes. None of the SEAPA utilities are subject to AS
04.240.291, which is the RCA statute governing quality of
service. He said he cannot see any possible way that there would
be nexus with SEAPA. He added that the bill is clear that for an
electric system that requires an ERO, there must be
interconnected entities. They are not necessarily public
utilities, but must comply with the reliability requirements
under this statute. That's very important, he said, because an
entity that is exempt from the statute can't be part of an
interconnected system. For example, Cook Inlet Region, Inc.
(CIRI) is exempt, but because it interconnects with the system,
it would be subject to the reliability requirements of the
system as a whole.
CHAIR COGHILL stated, "At this point, SEAPA is not rate
regulated."
MR. SCOTT confirmed that SEAPA is not subject to the provisions
that would require an ERO. However, if SEAPA wanted to form an
ERO, it could apply and the RCA would consider it.
4:17:10 PM
SENATOR MICCICHE asked if this would prevent a utility from
deciding to go out to its membership to no longer be regulated
by the RCA.
MR. SCOTT answered no.
SENATOR MICCICHE related his understanding that the utility
would still need to meet the reliability standards because the
utility is interconnected to the transmission network, but every
other process will no longer be under the RCA's jurisdiction.
MR. SCOTT answered that none of the ratepaying processes would
be subject to the RCA. For example, if a co-operative chose to
no longer be regulated, it would still have a certificate and
some of the RCA statutes would apply. However, the co-operative
would be exempt from the rules requiring tariff filings and
approval for tariff changes.
4:18:08 PM
CHAIR COGHILL asked the record to reflect that SEAPA is not
regulated and not part of the requirements in SB 123.
MR. SCOTT agreed that is correct.
4:18:50 PM
CHAIR COGHILL opened public testimony on SB 123.
4:19:47 PM
MIKE CRAFT, Owner/Operator, Delta Wind Farm, Fairbanks, Alaska,
stated that since the wind farm went online 13 years ago as the
first grid-scale wind project on the Railbelt grid, it has been
limited to two megawatts, in part due to integration of the
power. He said SB 123 is important because it will open the grid
to renewable energy projects on the Railbelt grid. He added that
he does have concern with the lack of efficiencies in the
current power distribution system due to pancake transmission
fees and up to 40 percent in line loss.
He said SB 123 will diversify fuel sources, which will improve
reliability and improve energy security related to service
interruption due to snow slides and earthquakes. He pointed out
that the bill does not address the state's aspirational energy
policy, and acknowledged that it might not be the right
mechanism to do so. He offered his belief that public benefit
cannot be measured by cost alone since the benefits must also
consider security and environmental attributes. He said
Fairbanks and North Pole suffer from air pollution as a result
of thermal inversion, so bringing renewable energy online could
help alleviate this problem. He said independent power producers
have been waiting to move renewable energy projects forward for
ten years. During this time, Fairbanks has developed technology
and the workforce to do the work, so the community currently has
shovel-ready projects. In closing he said that SB 123 might be
the way for these projects to happen.
4:24:17 PM
JOEL GROVES, Member, Fishhook Renewable Energy (FRE), Anchorage,
Alaska, stated that FRE is an independent power producer (IPP)
that has worked on new hydropower in Southcentral Alaska since
2006. He said he believes that the six utilities should be
commended for their efforts to address the Railbelt energy
issues. The [proposed] RRC represents a real milestone since six
utilities have come together to reach agreement, but it also
highlights the RRC structural deficiencies that still need to be
addressed.
MR. GROVES said SB 123 is vital to move some reforms forward.
From the IPP perspective, market conditions remain decades
behind the Lower 48; IPPs lack open access transmission tariffs,
non-discriminatory access, and independent governance of an
integrated regional grid. He characterized the state's
aspirational energy policy as "toothless." From a public
interest perspective, the Railbelt grid has excess generation
capacity, deficient transmission capacity, and inefficient
operation of its existing assets. This results in higher rates
in the Railbelt and statewide since the Power Cost Equalization
Program subsidies are based on Railbelt and Juneau rates for
electricity. He pointed out that when the Railbelt suffers,
everyone in the Bush also suffers. SB 123 will benefit everyone,
he said. In closing, he endorsed Mr. Craft's comments.
4:27:42 PM
BERNIE SMITH, representing self, Anchorage, Alaska, spoke in
support of SB 123. He agreed with Commissioner Scott that the
bill needs to move forward. He said he has been involved in the
Railbelt issues since the late 1990s, serving as a commissioner
on the RCA, as staff to the Energy Policy Task Force in 2003,
and holding other positions in the energy field. He said the
bill and the RCA letter dated January 15, 2020 work hand-in-hand
to allow the six Railbelt utilities to unite to create an
efficient electric reliability group. All six utilities have
signed a Memorandum of Understanding (MOU) to form the RRC with
12 shareholders. SB 123 will add an initiative for the utilities
and stakeholders to continue to work together, he said. It will
give the RCA power to oversee and ensure that the Railbelt
electric customers have a reliable system. He agreed with an
earlier testifier that in the past five years, the Railbelt
utilities have seen great improvement in their working
relationships. He commended the committee for helping to make
this happen.
4:30:53 PM
BRIAN MURKOWSKI, Consultant, Ocean Renewable Power Corporation
Anchorage, Alaska, stated that he has 25 years of local energy
and finance experience and he encourages the committee to pass
SB 123 in its original form. He expressed concern that the
committee could get bogged down with amendments and the bill
could lose momentum. SB 123 will provide needed stability in
pricing, reliability, and security, he said. He echoed previous
testimony from Mr. Craft and Mr. Smith. This bill will allow new
entrants to contribute to the available power grid and reduce
the cost of power to consumers. The governance structure may not
be ideal, but those details hopefully could be negotiated by
stakeholders outside the legislature. He said Alaska has the
highest cost of energy in North America and this bill could help
reduce those costs. He offered his belief that inexpensive power
will positively benefit consumers and the economy and should be
encouraged.
4:33:24 PM
TONY SLAPONBARKER, Vice President, Energy & Sustainability,
Coffman Engineers, Anchorage, Alaska said he has been a member
of the Rural Energy for America Program (REAP) for 10 years and
participated in the policy committee. He is speaking as a
lifelong Alaskan who wants the state to be successful. SB 123 is
an excellent start to modernize the Alaska grid, since it will
provide diversification of Alaska energy production, improve
security and geographical distribution, while also providing for
multiple fuel sources. Further, it will allow the most efficient
power generation to be used at any one time. This should help
save money, provide better access to the grid for IPPs, and
reduce pollution. It could help assist with backup power and
allow utilities to share resources across the grid. He related
several examples, including wind power on Fire Island, to
illustrate his point.
4:36:43 PM
SHAINA KILCOYNE, Energy and Sustainability Manager, Municipality
of Anchorage, Anchorage, Alaska, stated that the Municipality of
Anchorage assembly passed the Anchorage Climate Action Plan,
which is a road map for reducing greenhouse gas emissions and
preparing for the impacts of climate change. This effort
includes work to reduce energy use, improve public health,
promote energy independence, strengthen the economy, and build
more livable and resilient communities. The MOA recognizes it is
limited in its efforts to meet emission goals so it readily
works with utilities as well as state and regional partners. In
its climate action plan, MOA seeks to support a system operator
to provide regional planning, improve system efficiency, and
increase opportunities for independent power producers. While an
ERO is different than a system operator, SB 123, as written,
will get MOA closer to its energy goals by requiring regional
planning, improving system efficiency, and increasing
opportunities for independent power producers. It is an
important step forward in bringing more stable-priced non-fuel
dependent renewable energy to Alaskans. Southcentral Alaska is
very fortunate to have moderately-priced natural gas, with three
new natural gas plants generating over 80 percent of Anchorage's
electricity. Even though the energy efficiency of these new
plants reduces fuel usage, it is critical to have collaboration
and regional planning with the utilities to bring on more
renewable energy, which is something the Railbelt utilities
recently have been working towards. SB 123 will help achieve
this more quickly and this will benefit Anchorage ratepayers.
4:39:20 PM
PATRICE LEE, Citizens for Free Air, Fairbanks, Alaska, stated
that the Interior needs affordable, reliable, and renewable
energy because of challenges associated with poor air quality
that leads to health issues. Her organization is counting on SB
123 to bring a more reliable energy system to the state and
reduce energy costs to Interior residents. She expressed concern
that a five member team might not be large enough to accomplish
the work necessary to be successful.
CHAIR COGHILL agreed that SB 123 is designed to obtain as much
collaboration as possible.
[SB 123 was held in committee with public testimony open.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 123-Version M.PDF |
SRBE 1/31/2020 3:30:00 PM |
SB 123 |
| SB 123 - CIRI Letter of Support SB 123 1.31.20.pdf |
SRBE 1/31/2020 3:30:00 PM |
SB 123 |
| SB 123 - Support for SB 123 Jessica Austin 01-28-2020.pdf |
SRBE 1/31/2020 3:30:00 PM |
SB 123 |