Legislature(2019 - 2020)BUTROVICH 205
02/24/2020 09:00 AM 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
9:01:59 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."
He noted that Version G was adopted during the previous hearing
and there was a proposed amendment, work order 32-LS0959\G.1,
relating to the Bradley Lake exemptions and electric reliability
organizations (ERO) in the Railbelt. He asked Ms. Miller to
review the proposed amendment.
9:04:09 AM
RENA MILLER, Staff, Senator Cathy Giessel, Alaska State
Legislature, Juneau, Alaska, stated that she was on loan to this
committee for the purposes of SB 123. She explained that the
bill drafter suggested that because the exemptions municipal
utilities and entities have under AS 42.05.711 are very broad,
SB 123 should be amended to clarify that utilities that are part
of a network served by an ERO, must comply with the ERO
statutes. She reviewed the following from amendment 31-
LS0959\G.1:
Page 4, line 3:
Delete "otherwise"
Following "from":
Insert "other"
Following "under":
Insert "AS 42.05.711 or another provision of"
Page 8, line 20, following "utility":
Insert ", including a public utility that is exempt
from other regulation under AS 42.05.711 or another
provision of this chapter,"
MS. MILLER advised that the [Southeast Alaska Power Agency
(SEAPA)] has requested an amendment to amendment G.1 to clarify
that the RCA shall not require an ERO for a network where all
the entities are exempt under AS 42.05.711. The following would
be inserted:
Page 4, line 2, following "network"
Insert "served by an electric reliability
organization,"
MS. MILLER explained that page 1 of the bill says that SEAPA
utilities would not be required to have an ERO and this
clarifies that the tariff applies to an ERO.
9:07:27 AM
CHAIR COGHILL restated the amended amendment Ms. Miller
described.
9:08:45 AM
SENATOR MICCICHE moved Amendment 1.
AMENDMENT 1
Page 4, line 2, following "network"
Insert "served by an electric reliability
organization,"
Page 4, line 3:
Delete "otherwise"
Following "from":
Insert "other"
Following "under":
Insert "AS 42.05.711 or another provision of"
Page 8, line 20, following "utility":
Insert ", including a public utility that is exempt
from other regulation under AS 42.05.711 or another
provision of this chapter,"
9:09:33 AM
CHAIR COGHILL found no discussion or questions and announced
that without objection, Amendment 1 passed.
He reminded the members that during the previous hearing they
talked about adding intent language to identify Bradley Lake as
unregulated but a participant on the Railbelt utility line. He
asked Ms. Miller to discuss the proposed intent language and
noted that it had been distributed to stakeholders and the
committee and reviewed by the drafter.
9:10:59 AM
MS. MILLER said she'd first step back to remind members that the
intent of SB 123 is to require interconnected networks to work
together on planning and reliability for an entire system to
benefit ratepayers. For this to occur, all entities feeding in
and moving power through that system need to be part of an
electric reliability organization (ERO) and the planning
process. She said this makes sense for the Railbelt that has
utilities over which the Regulatory Commission of Alaska (RCA)
has jurisdiction to ensure participation and compliance. But
that component does not quite fit the Bradley Lake project and
the associated transmission lines that are required services by
the sweet of contracts that are exempt from RCA oversight and
review. The question that's come up, she said, is how SB 123 and
these requirements work in an ERO interface with this entity
that is not subject to the same levels of regulation as the
other entities.
MS. MILLER advised that the intent statement is intended to be a
tool that reflects the committee's purpose and intent without
wading into ongoing litigation and dispute over some of the
Bradley issues. It expresses the intent of this legislature.
9:13:12 AM
MS. MILLER paraphrased the following Intent Statement for the CS
for Senate Bill 123(RBE), version G:
It is the intent of the Thirty-First Alaska State
Legislature that under SB 123, reliability standards,
electric reliability organization (ERO) tariff
standards, planning terms, and project pre-approval
requirements will ultimately apply across the entire
interconnected Railbelt electric energy network. Broad
application is necessary to achieve the desired
efficiencies and reliability for Alaskans within the
Railbelt.
SB 123 does not in any way affect or change the
existing relationship between the RCA and the Bradley
Lake project agreements, contracts, and amendments
exempt under AS 42.05.431(c). It is, however, the
intent of the Alaska State Legislature that after the
Bradley Lake project debt is satisfied and the AS
42.05.431(c) exemption expires, those agreements,
contracts, and amendments shall be subject to SB 123.
Should Bradley Lake project agreements, contracts, and
amendments receive a future extension of the AS
42.05.431(c) exemptions, the Thirty-First Alaska State
Legislature urges consideration of the relationship
between Bradley Lake and associated infrastructure and
projects, the Railbelt network, and the electric
reliability organization, and emphasizes the intent to
subject all interconnected network users, owners, or
operators to the reliability standards, an electric
reliability organization tariff, planning, and project
pre-approval requirements.
9:14:39 AM
CHAIR COGHILL said the idea was to put the planning and the
reliability organization together to recognize the extraordinary
circumstance where one entity is not subject to regulation but
is a participant in the Railbelt energy grid.
CHAIR COGHILL found no committee comment and said he'd like to
hear public testimony before adopting the letter of intent. He
listed those who were available to answer question and those who
wanted to testify.
9:17:36 AM
CHARLES R. BALDWIN, General Counsel, Homer Electric Association
(HEA), Homer, Alaska, stated that he has been general counsel to
the utility for 38 years, representing it before the RCA in
multiple regulatory matters as well as the transaction related
to the construction of the Bradley Lake Hydroelectric Project.
MR. BALDWIN reminded the committee that in an effort to fast-
track the construction of the Bradley Lake Hydroelectric
Project, the legislature in 1988 amended the Alaska Public
Utilities Act by exempting from RCA jurisdiction, the Bradley
Lake Power Sales Agreement between the Railbelt utilities and
the owner of the Bradley Lake project, the Alaska Energy
Authority. This was done to sell very favorable bonds within a
window of opportunity. Under AS 42.05.431(c), the legislature
also exempted the agreements among the Railbelt utilities that
provided for the transmission of Bradley Lake power. That power
now accounts for about half of all wholesale power transmitted
within the Railbelt.
MR. BALDWIN highlighted that the legislature understood that the
Bradley Lake agreements and statutory exemption were to address
a unique circumstance and that uniqueness was provided for by
sunsetting the Bradley exemption when the bonds were paid.
MR. BALDWIN said he would respond to the two questions that
arose during the last hearing on the bill, the first of which
asked when the exemption expires. He directed attention to the
statutory language that says the exemption of the Bradley
agreements remains in effect, "until all long-term debt incurred
for the project is retired." He noted that the last bond of the
debt originally issued to pay for that project is scheduled to
be retired on July 1, 2021. If all the Railbelt utilities accept
that expiration, any conflict between SB 123 and the Bradley
exemption statute would be of minimal concern. However, HEA
understands that certain Railbelt utilities are prepared to
argue that the exemption will not expire until 2041, which is
when the new bonds for the Battle Lake expansion of the Bradley
project are paid.
MR. BALDWIN described this as a significant issue because there
can be no unified open access Railbelt transmission system as
long as the RCA is precluded from approving electric
transmission rates and standards for the Bradley Lake power. He
said the Supreme Court agreed when it held that the RCA is
without jurisdiction to approve transmission tariffs for Bradley
Lake power.
MR. BALDWIN said that leads to the second question, which is the
extent to which SB 123 might be impacted by the RCA's future
inability to review and approve the terms of the Bradley
contracts. For context, he said it is important to understand
the relationship between public utilities and the public as
represented by the RCA. He explained that under what is known as
the regulatory compact, the state (as the regulator) gives a
utility company a monopoly to serve a specific area. In return,
the regulator is vested with the power to regulate that utility
as to rates and conditions of service, including the right to
review, to approve, and to modify contracts affecting the public
interest.
MR. BALDWIN said one of the goals of SB 123 appears to be to
foster conditions conducive to common rules and rates for
transmitting wholesale power within the Railbelt. In the
industry, these rules are known as an open access transmission
tariff (OATT). He directed attention to Sec. 42.05.77 on pages 5
and 6 of version G that allows the RCA to implement regulations
requiring the ERO to lay the groundwork for the eventual unified
Railbelt transmission rates and services, but not to adopt rules
outright to establish an OATT.
9:27:03 AM
MR. BALDWIN said it is pointless to adopt standards for an OATT
if the commission has no jurisdiction to approve an OATT, unless
that inability is short-lived. Further, if the RCA is ever able
to approve a nondiscriminatory open access Railbelt transmission
tariff, it must first be able to approve tariff provisions that
overrule the contrary language in the Bradley Lake transmission
agreements, because those agreements are both discriminatory and
anticompetitive. They are discriminatory in that they give the
Bradley Lake Hydroelectric Project transmission priority over
every other resource. They are anticompetitive in that they
limit the right to transport power to a select group of
utilities and they provide that disputes are to be decided by a
majority vote of the interested parties, not the RCA that looks
out for the public interest. He reiterated that it is impossible
to establish an OATT if the RCA does not have authority to
oversee these contracts of the monopolies they regulate.
MR. BALDWIN pointed out that while HEA is the only power
generator currently constrained by the Bradley transmission
agreements, the same constraints will exist for any other entity
wishing to make firm power sales off the Kenai Peninsula. Any
future peninsula-based wind, solar, or tidal projects would be
precluded from access to the Railbelt market. He said HEA urges
the committee to adopt the language that clarifies the
legislature's understanding that the exemption expires when the
original revenue bonds have been paid; that there will be no
extension; and the original purpose for which the exemption was
granted is satisfied.
MR. BALDWIN concluded his comments saying that only time will
tell whether the RCA's jurisdiction to regulate Bradley Lake
matters will be challenged after the 2021 sunset date, but a
clear statement of legislative intent would make such challenges
less likely. That would remove a major impediment to a unified
transmission system for the Railbelt.
9:31:24 AM
CHAIR COGHILL thanked him for the testimony.
9:31:58 AM
At ease
9:33:00 AM
CHAIR COGHILL reconvened the meeting and asked Mr. Warner to
provide his testimony.
9:33:25 AM
JEFF WARNER, Municipal Light and Power, Anchorage, Alaska,
stated that the intent statement for SB 123 satisfies ML&P's
original concern and they appreciate the committee's
consideration of the statement.
CHAIR COGHILL asked Mr. Izzo to provide his testimony.
9:34:34 AM
TONY IZZO, CEO, Matanuska Electric Association, Anchorage,
Alaska, stated that the intent statement for SB 123 satisfies
the concerns that were raised and MEA supports it completely. It
strikes a balance between moving the Railbelt forward and the
existing contractual agreements that are in statute and in
dispute. He thanked the committee for finding an artful solution
to bifurcate those two things and satisfy the concerns. He
repeated his earlier testimony that SB 123 is overdue and
historic and warned against letting the perfect get in the way
of the extremely good.
9:35:57 AM
CHAIR COGHILL summarized that the intent statement clarifies
that SB 123 is trying to stay out of the litigation but when all
the issues are satisfied, the power from the Bradley Lake
Hydroelectric Project will be part of the planning and ERO
process.
9:37:41 AM
At ease
9:41:18 AM
CHAIR COGHILL reconvened the meeting.
9:41:34 AM
SENATOR MICCICHE moved the letter of intent.
9:41:43 AM
CHAIR COGHILL found no objection and the [Intent Statement for
CSSB 123(RBE), version G,] was adopted. He solicited a motion.
9:42:08 AM
SENATOR MICCICHE moved to report the CS for SB 123, work order
31-LS0959\G as amended, from committee with individual
recommendations and attached fiscal note(s).
CHAIR COGHILL found no objection and CSSB 123(RBE) with intent
statement was reported from the Senate Special Committee on
Railbelt Electric System.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB123 - Intent Statement 2.24.2020 Revised.pdf |
SRBE 2/24/2020 9:00:00 AM |
SB 123 |
| SB123 - Background-AS 42-05-711-exemptions 2.24.2020.pdf |
SRBE 2/24/2020 9:00:00 AM |
SB 123 |
| SB123 - Background-AS 42-05-431 Bradley exemption 2.24.2020.pdf |
SRBE 2/24/2020 9:00:00 AM |
SB 123 |
| SB 123 - Amendment G.1 Feb 22 2020.pdf |
SRBE 2/24/2020 9:00:00 AM |
SB 123 |