Legislature(2019 - 2020)BELTZ 105 (TSBldg)
02/14/2020 09:00 AM Senate RAILBELT ELECTRIC SYSTEM
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| Audio | Topic |
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| 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
9:03:14 AM
CHAIR COGHILL announced the consideration of SENATE BILL NO.
123, "An Act relating to the regulation of electric utilities
and electric reliability organizations; and providing for an
effective date."
9:03:29 AM
CHAIR COGHILL removed his objection to the Committee Substitute
for SB 123 that was pending from the previous meeting. Finding
no further objection, Version K was adopted.
He asked Ms. Miller to discuss the additional language that had
been suggested.
9:04:46 AM
RENA MILLER, Staff, Senator Cathy Giessel Alaska State
Legislature, Juneau, Alaska, and on loan to the Senate Special
Committee on Railbelt Electric System, stated that Version K was
circulated among the stakeholders and they suggested some
changes. She and the chair also worked with the RCA to add
clarity to the definitions and process. Most of the proposed
changes will be offered through amendments or another CS
depending on the drafter's recommendation, she said.
MS. MILLER reviewed the following proposed changes to Version K:
• Add a provision that all load-serving entities in a system
that has an electric reliability organization (ERO),
including entities exempt from rate regulation, are subject
to the tariff the ERO has on file with the Regulatory
Commission of Alaska (RCA or commission).
CHAIR COGHILL provided some background. He explained that the
four parts of the bill: 1) require an ERO to be established; 2)
require integrated resource planning within the ERO; 3)
establish a process for preapproval of electric distribution
facilities; and 4) establish a timeline for implementation. He
said work has been ongoing with entities that are within the
Railbelt as well as those that are not included.
9:07:10 AM
MS. MILLER continued.
• The utilities suggested and the RCA agreed to the
modification of a provision that currently says that a
standard may not be designed for the purpose of requiring
enlargement of facilities. Instead, the provision should
say that a standard may result in enlargement but may not
be designed specifically to require enlargement.
• The utilities suggested and the RCA agreed to the
modification of a provision that says the RCA regulations
related to an ERO may provide for an open access
transmission tariff. Instead, the provision would say the
RCA regulations require that the ERO's tariff includes a
standard for nondiscriminatory open access transmission and
interconnection.
The amendment or CS will also require that an ERO's tariff
includes provisions for transmission system cost recovery.
• The utilities and the RCA both agreed that the CS, Version
K, went too far on the process the RCA will use to handle
the standards that the ERO files with the commission for
approval .
Fix the process for the RCA to handle standards filed. For
rejections, rely on existing statute in AS 42.05.391. Also
remove the inadvertent requirement for a hearing for
approving standards. Notice to stakeholders and the public
of the filing will still be required as well as the
timeframe for weighing in.
Clarify that each standard does not have to be filed
individually for approval. This will be dealt with in the
RCA regulations.
• The RCA suggested including a provision to accommodate a
given network that is not required to have an ERO because
they don't meet the definition of a bulk-power system that
wants to have an ERO. In this case they may ask the RCA to
be allowed to have an ERO and be certificated by the
commission.
• Refine an exemption for a group that is technically a
system but the entities are all municipally owned or
political subdivisions of the state. For example, there is
no intention to include the Southeast Alaska Power
Association.
Work is ongoing to provide an exemption from preapproval
related to the Sweetheart Lake hydroelectric project that
would potentially serve mines in the Juneau area. There is
no intention to include this project in the preapproval
requirement.
• In the definition section, specify that power distribution
to at least 10 customers is required to be considered a
load-serving entity.
• Redraft the definition of interconnected bulk-electric
system and an interconnected energy transmission network.
These work together in the bill and the RCA recommended
refinement to avoid potential ambiguity.
9:12:38 AM
SENATOR MICCICHE asked if the CS is trying to clarify that load-
serving entities in a network that aren't required to have an
ERO could form one.
MS. MILLER said she would review the language in more detail,
but the RCA recommended making it clear that the bill was not
being exclusive simply because it wasn't inclusive. A system
that is not required to have an ERO but wants one could talk to
the RCA to make that happen.
SENATOR MICCICHE said he didn't believe the bill disallowed that
but clarification is always good. He then asked if the
requirement that RCA regulations allow for an open access
transmission tariff was being changed to allow for regulations
that include provisions for cost recovery.
MS. MILLER directed attention to the language in subsection (q)
on page 5, line 29 through page 6, line 7. It says the
commission shall adopt regulations governing certain things and
those regulations must require that the tariff provide for
nondiscriminatory open access transmission and interconnection.
She said this was a recommendation from the utilities and the
RCA was supportive.
SENATOR MICCICHE responded that provisions for cost recovery and
issuance of an open access tariff would change "mays" to
"musts."
9:16:12 AM
MS. MILLER replied it's a must but it's not specifically an open
access transmission tariff. It is standards that would require
nondiscriminatory open access and interconnections. She said
that's a subtlety as to whether it's actually a tariff. The
utilities and the RCA would work out what those standards would
look like to accomplish the goal. She noted that the language
about cost recovery would be added to subsection (q)(1) that
talks about issuance of an open access transmission tariff to an
ERO.
SENATOR MICCICHE commented that that section subtly crosses into
"how to do."
9:17:53 AM
CHAIR COGHILL said the point is well taken.
9:18:20 AM
At ease
9:18:48 AM
CHAIR COGHILL reconvened the meeting and asked Mr. Hickey to
provide his testimony.
9:19:19 AM
BRIAN HICKEY, Chief Operating Officer (COO), Chugach Electric
Association, Anchorage, Alaska, said he was speaking on behalf
of the organizational development team (ODT) that represents the
six Railbelt utilities. He extended thanks for the work that has
gone into SB 123 and appreciation for the effort to address the
team's concerns. He said he would speak to one concern today
that was not addressed in the proposed amendments.
He explained that the utilities proposed that the RCA be
directed to develop a standard in regulation to give due
consideration to the conclusion of an integrated resource plan
(IRP) when the process the ERO undertook to develop that plan
was open, transparent, and inclusive of all stakeholders and the
general public. The commission would give additional weight and
consideration when it determines whether or not to suspend a
petition for approval into an investigative hearing.
MR. HICKEY said the organizational team's vision of the ERO is
modeled on reliability organizations in the Lower 48 such as the
Electric Reliability Council of Texas (ERCOT). The IRP
development process for the ERO would be open, transparent, and
inclusive and would take into account the views of all
stakeholders and the general public. Such a process would
involve public meetings, data, and input gathering throughout
the region, all of which would be lengthy and costly. He opined
that the result of such a process should be presumed to be in
the public interest and should not be subject to an
investigative hearing, subsequent intervention by stakeholders,
and an adjudicatory hearing unless it is evident to the
commission that the conclusions of the document are not just,
reasonable, or in the public interest.
He said giving additional deference to the technical decisions
of the stakeholders' governing entity is a concept that is found
among commissions governing similar organizations in the Lower
48. He cited an example where the Texas Public Utility
Commission gave deference to conclusions justifying transmission
line construction performed by ERCOT. He said there are other
examples.
MR. HICKEY said the organizational development team proposes
amending subsection (d) on page 7 of Version K to instruct the
RCA to develop regulations that recognize the process taken by
the ERO to develop the IRP, and that its conclusions be given
due consideration given the degree to which the IRP process was
open, transparent, and inclusive of stakeholders and the general
public.
CHAIR COGHILL advised that Ms. Miller would discuss the proposed
solution after Mr. Jorgensen testified.
9:23:43 AM
LARRY JORGENSEN, Director of Power, Fuels and Dispatch, Homer
Electric Association (HEA), Kenai, Alaska, thanked the committee
and staff for listening to the Railbelt's concerns about SB 123.
He related that as a member of the organizational development
team (ODT), he called today to comment on project preapproval
described in Version K on page 8, line 5, subsection (d)(4).
He said the ODT's concern is that utilities that have capital
projects in process are left with the uncertainty that a
preapproval process could be applied midstream. He cited two
examples: 1) After ten years, HEA was granted a FERC license for
the Grant Lake Hydro Project. A specific timeframe is attached
to the license for activities such as mitigation plans, final
engineering, and construction. Anything that disrupts the
ability to meet the FERC license schedule will put the license
at risk; 2) HEA's board approved the battery energy storage
system (BESS) project in 2019 after spending significant time
and resources.
MR. JORGENSEN said HEA and the Railbelt utilities are seeking
language that allows for projects that are in process to be
completed without increased risk of delays or additional cost.
He emphasized that there is no intention to subvert the
preapproval process.
9:25:43 AM
CHAIR COGHILL asked Ms. Miller to discuss the language to
address Mr. Hickey's concern.
MS. MILLER summarized that the utilities' concern was to add
specific language requiring the RCA to give due weight to the
process that the IRP was undertaking and developing. This is not
a new concern. She said the discussions were that it's difficult
to require a behavior - the spirit in which something is
undertaken. The utilities' organizational development team have
an MOU in place on how they're going to prepare an entity to be
the applicant to be an ERO. They want to have a very open and
transparent process that involves a lot of stakeholders in the
IRP.
When the bill talks about what a prospective ERO has to
demonstrate to the RCA to be certified, it says the commission
will need to see that the ERO applicant has rules that will
provide opportunities for public comment, due process, openness,
and balance of interests in exercising its duties. She said the
RCA understands the concern to provide due weight but the
process used may not be a due weight consideration in light of
other issues that arise within the IRP and its approval.
MS. MILLER directed attention to the language that was added in
Version K on page 6, line 26. It says the RCA must review the
process used to develop the IRP when it considers whether to
approve the plan or require modifications. She said she believes
the Chair felt that was sufficient to require the RCA to
actually look at the process that was used.
CHAIR COGHILL added that the idea was to find a balance between
giving as much authority as possible to the ERO to develop its
plan but the decision as to whether it is in the public interest
rests with the RCA. He noted that both page 5 and 6 talk about
the organization and its plan.
He noted that an RCA commissioner was available online to answer
questions.
9:30:01 AM
MS. MILLER advised that the committee has also heard from
stakeholders on the second concern about not requiring
preapproval for projects that have board approval. She related
that the utilities and others said that that would "create a
hole big enough to drive a Mac truck through." Therefore,
language was added to Version K on page 8, lines 5-6 that say
the regulations for project preapproval that the RCA writes need
to address projects undertaken before an IRP approval for an
interconnected bulk electric system. She explained that there
are different potential stages of undertaken and the Chair felt
it was best to leave it to the RCA and the utilities working
together to define that in regulation rather than trying to make
it explicit in statute.
CHAIR COGHILL said his preference is to leave it to the RCA to
bring everyone to the table to have the discussion based on
economics and anticipated planning.
9:31:55 AM
SENATOR MICCICHE said he believes he understands Mr. Hickey's
concern but he hasn't had the opportunity to review the ERCOT
model.
CHAIR COGHILL suggested that the RCA could provide information
on the ERCOT model.
SENATOR MICCICHE referenced the second concern and suggested
considering a blend because he believes that other Railbelt
utilities, moving toward an ERO, may be interested in sharing
the costs and benefits of projects like the ones cited. He
acknowledged that it wouldn't be simple and the current process
shouldn't be interrupted.
CHAIR COGHILL responded that the process for an ERO will be put
in place and there will be a process for the RCA to look at
things that were started before the ERO was formed. He opined
that that is well described in the bill.
93359
CHRIS ROSE, Executive Director, Renewable Energy Alaska Project
(REAP), Anchorage, Alaska, stated support SB 123, Version K and
the proposed amendments Ms. Miller outlined.
He stated that REAP does not support the amendment Mr. Hickey
proposed. He pointed out that the ERCOT Board is different than
what the Railbelt utilities are proposing in their MOU. He noted
his previous testimony that the governing structure outlined in
the MOU is getting close but still isn't exactly what REAP would
have suggested if it had more leverage to increase public
participation on the board. Different than the ERCOT Board,
there will be market participants on this board that all have
their own interests. REAP does not believe that the RCA's
authority to modify an IRP should be subverted in any way. The
commission should be the final backstop that supports the public
interest. The existing language on page 6, lines 24-29 allows
for a back-and-forth process between the RCA and the ERO. This
ERO will be a brand new entity and should not have the deference
it may have in other jurisdictions. He pointed out that ERCOT
has been around for quite a while, it has evolved over time, and
it has earned the trust of the Texas regulatory commission. That
is very different than the ERO that is proposed in the Railbelt.
MR. ROSE said REAP does not support Mr. Jorgensen's proposed
amendment because the language on page 8, lines 5-6 of Version K
addresses the concern. He agreed with Ms. Miller that there are
many nuances and a wide range of what a "project in process"
might mean. That definition is best left to the rulemaking
process that is inclusive of all parties. He opined that
projects like Grant Lake that have a longer history would be
treated differently in the rulemaking process than an idea that
just came up at a recent board meeting. That range can be
addressed by the language in Version K, he said.
SENATOR MICCICHE advised that the Chair had to step out. He
asked Mr. Craft to give his testimony.
9:40:23 AM
MIKE CRAFT, representing self, Fairbanks, Alaska, said he echoes
Mr. Rose's comments and agrees with the utilities' and RCA's
suggestion to change "may" to "must" on page 6, line 1 relating
to regulations that have nondiscriminatory open access
transmission and interconnection requirements.
SENATOR COGHILL asked Mr. Izzo to give his testimony.
9:42:31 AM
TONY IZZO, Chief Executive Officer (CEO) Matanuska Electric
Association (MEA), Anchorage, Alaska, thanked the committee and
staff for their work on SB 123 and effort to balance the needs
of multiple parties. He characterized it as an overdue but
historic change for the better for the energy industry in the
Railbelt. He expressed satisfaction and support for Version K
and the amendments that [Ms. Miller] presented.
9:43:16 AM
TREY ACTESON, Chief Executive Officer (CEO), Southeast Alaska
Power Agency (SEAPA), Ketchikan, Alaska, stated that SEAPA is a
joint action agency that was created pursuant to Alaska statutes
providing wholesale power to the municipal utilities in
Ketchikan, Wrangell, and Petersburg. He stated that SEAPA urges
the committee to amend SB 123 to include language that clarifies
the bill's applicability to municipalities and political
subdivisions of the state. He opined that minor changes to the
language will simplify interpretation and avoid unintended
consequences of potential inclusion of utilities that are not
economically regulated by the RCA or connected to the Railbelt
in any way. He expressed appreciation to the committee for
considering the bill and to Chair Coghill and Senate President
Giessel for their efforts to craft an appropriate solution.
Version K moves in that direction, he said.
CHAIR COGHILL said he'd continue work to ensure that the
relevant language is refined.
9:44:51 AM
DUFF MITCHELL, Executive Director, Alaska Independent Power
Producers Association (AIPPA), Juneau, Alaska, expressed
appreciation for the efforts to accommodate the various
interests and craft a measure that benefits the state. He
advised that he was testifying on behalf of AIPPA but he is also
the managing director of Juneau Hydropower. He said AIPPA
continues to support SB 123 and looks forward to a positive
resolution of the issues that have been presented.
CHAIR COGHILL described SB 123 as an Alaska works bill.
9:46:56 AM
LOU FLORENCE, President/CEO, Doyon Utilities LLC, Fairbanks,
Alaska, stated that Doyon Utilities operates the utility systems
for the Army's installation infrastructure in Alaska. There are
12 separate utility systems across three installations,
including electrical distribution systems at Fort Wainwright,
Fort Greeley, and the Fort Richardson portion of Joint Base
Elmendorf/Richardson. Doyon Utilities operates a cogeneration
plant at Fort Wainwright that has 18 megawatts of capacity and a
landfill gas plant at Joint Base Elmendorf/Richardson that has
7.5 megawatts capacity. They are directly connected in several
spots to the bulk electrical system. He reported that Doyon
Utilities serves more than 36,000 military members, their
families, and Department of Defense (DoD) civilians. It is
Alaska's fourth largest utility when measured in total plant and
service. Doyon Utilities owns and operates utilities that are
regulated by the RCA, but is unique in that it is paid by a
single ratepayer, the Department of Defense.
MR. FLORENCE said Doyon Utilities applauds the committee's
efforts to establish and enforce reliability standards across
the state. This is particularly important for cybersecurity
protection of the electric grid. He reported that protecting the
military infrastructure has been a significant portion of their
mandate in recent years as adversaries have specifically
targeted utility information technology and operations
technology networks worldwide.
MR. FLORENCE said SB 123 appears to require Doyon Utilities'
participation and therefore the military they serve. He
described the following two concerns with the legislation:
First, under our contract with the military we're
required to meet reliability and security standards
directed by the Department of Defense. If the electric
reliability organization requires stricter standards
or standards that are more lenient, we don't have a
problem with that. We would generally adopt the
stricter standards. However, were the electric
reliability organization [to] adopt standards that
conflict with DoD requirements, we would have a
dilemma. We might request a waiver from the RCA but
the commission would naturally be reluctant to grant a
waiver to something required by statute. For that
reason, where the statute requires mandatory
participation or compliance, we believe a good cause
exemption provision should be included in the
legislation.
Second, it appears to us that the recently established
Railbelt Reliability Council could potentially be
adopted as the electric reliability organization
required under this legislation. The memorandum of
understanding developed by the six Railbelt utilities
contains provisions that meets most if not all the
requirements established by this legislation. We have
participated with the Railbelt utilities recently in
identifying and establishing standards for
cybersecurity and they are doing very good work.
However, the Railbelt Reliability Council composition
as outlined in the memorandum of understanding would
exclude Doyon Utilities as well as other major
electricity producers in the Interior, such as the
University of Alaska Fairbanks and Eielson Air Force
Base from having a defined seat on the council.
MR. FLORENCE maintained that since Doyon Utilities is subject to
the requirements of SB 123 and the ERO, it is appropriate that
it has an equal voice and vote along with the other regulated
utilities. He suggested that the bill should clarify that
mandated participation by electric utilities should be equal
participation. He concluded that Doyon Utilities looks forward
to assisting in the effort to protect and improve electric
reliability in Alaska.
9:51:43 AM
CHAIR COGHILL asked him to forward any suggested language to his
office.
MR. FLORENCE agreed to do so.
9:52:13 AM
VERI DI SUVERO, Executive Director, Alaska Public Interest
Research Group (AkPIRG), Anchorage, Alaska, stated that AkPIRG
was established in 1974 as a consumer and public interest
advocate. She voiced support for the recent changes to SB 123
and for having everyone at the table. She described the
Regulatory Commission of Alaska as the natural partner and
backstop for all decisions put forth by the ERO. She also urged
the committee to avoid including "due weight" language in the
bill because the assumption should be that if an ERO is stood
up, weight will be given to all the plans. The RCA shouldn't
have its hands tied. She mentioned the concern that Mr.
Jorgensen brought up and pointed out that it is already covered
on page 8, lines 5-6. The RCA would be able to address that
issue through the regulatory process. Finally, she stated
support for the amendments Ms. Miller described earlier in the
hearing.
9:55:56 AM
CHAIR COGHILL asked Mr. Scott if he had anything to add.
9:56:27 AM
ANTONY SCOTT, Commissioner, Regulatory Commission of Alaska,
Anchorage, Alaska, said SB 123 continues to improve and he would
echo Mr. Izzo's comment that the bill is overdue and historic.
He relayed that the RCA held a public meeting two days ago and
unanimously endorsed Version K. The commission also supports the
technical changes that Ms. Miller described.
Responding to Senator Micciche's question about whether it was
necessary to expressly include a provision to allow an otherwise
exempt network to form an ERO, he said the commission believes
that statutory clarity would be helpful. While SB 123 spells out
the circumstances under which the RCA can and shall certificate
an ERO, it does not specifically address the circumstance where
an ERO is not required but could be certificated and thus
subject to RCA jurisdiction.
MR. SCOTT voiced support for the amendment Mr. Hickey proposed
on page 6, lines 1 and 2 to change "may" to "must." He said his
understanding is that the amendment intends to clarify that an
ERO would promulgate tariff provisions for open access
transmission and interconnection, but the actual operation of
the transmission would not fall under the ERO's ambit. The RCA
agrees with the people who have said that it is an inappropriate
conflict for an entity that is responsible for enforcement to
enforce its own operations. He said how an ERO recovers its
costs needs to be articulated and he was pleased that there is
utility consensus around creating a clear public forum for
addressing how that shall be done
MR. SCOTT reminded the committee that his 1/24/20 testimony was
that SB 123 addresses the business model problem that the RCA
recognized in 2015. He said it will go a long way towards
ensuring a new business model by which transmission
infrastructure that is needed by the system can be built.
10:02:34 AM
SENATOR MICCICHE asked him to articulate his interpretation of
the language in paragraph (4) on page 8, lines 5-6 that
addresses projects undertaken before IRP approval [for an
interconnected bulk-electric system]. He said he wasn't sure he
was comfortable with that language because it seems that
preapproval could interrupt the flow of a project in the
advanced planning stage and after significant funds had been
spent. He offered his perspective that the provision lacked
clarity and definition.
MR. SCOTT replied he was comfortable with the language because
he trusts the RCA's processes and that the commission won't do
anything unreasonable. The commission will need to promulgate
regulations to address these circumstances and that process
includes public comment. "We will absolutely be listening to and
responding to parties' valid needs and concerns about ensuring
something that really needs to go forward and represents large,
irrevocable commitments and are well on the way can indeed do
so."
SENATOR MICCICHE clarified that he never considered that the
commission might do something unreasonable. He expressed
appreciation that Mr. Scott made it clear that the RCA would
likely not intervene in something started well in advance of
this effort.
CHAIR COGHILL added that the regulatory process calls for
stakeholders to give public comment and make their case.
10:06:16 AM
CHAIR COGHILL held SB 123 in committee with public testimony
open.
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