Legislature(2011 - 2012)BARNES 124
02/24/2011 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
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| Start | |
| Overview: Regulatory Commission of Alaska (rca) | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE
February 24, 2011
8:05 a.m.
MEMBERS PRESENT
Representative Cathy Engstrom Munoz, Chair
Representative Neal Foster, Vice Chair
Representative Alan Austerman
Representative Alan Dick
Representative Dan Saddler
Representative Berta Gardner
MEMBERS ABSENT
Representative Sharon Cissna
COMMITTEE CALENDAR
OVERVIEW: REGULATORY COMMISSION OF ALASKA (RCA)
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
ROBERT PICKETT, Chairman/Commissioner
Regulatory Commission of Alaska (RCA)
Department of Commerce, Community & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: Provided an overview of the RCA.
ACTION NARRATIVE
8:05:13 AM
CHAIR CATHY ENGSTROM MUNOZ called the House Community and
Regional Affairs Standing Committee meeting to order at 8:05
a.m. Representatives Foster, Austerman, Dick, Saddler, Gardner,
and Munoz were present at the call to order.
^Overview: Regulatory Commission of Alaska (RCA)
Overview: Regulatory Commission of Alaska (RCA)
8:05:28 AM
CHAIR MUNOZ announced that the only order of business would be
an overview of the RCA.
8:05:44 AM
ROBERT PICKETT, Chairman/Commissioner, Regulatory Commission of
Alaska (RCA), Department of Commerce, Community & Economic
Development (DCCED), began by informing the committee that the
RCA is a five-member board with a staff of 50 professionals in
Anchorage. Each commissioner is appointed for a six-year term
by the governor and confirmed by the legislature. Mr. Pickett
opined that the RCA's work is not fully understood by the
public. In AS 42.05, the utility statute, and AS 42.06, the
pipeline act, the legislature has charged the commission with a
number of activities to strike the right balance between the
people who pay for a monopoly pipeline for utility services and
the actual provider of those services. He pointed out that the
most effective form of true regulation is competition. In a
competitive market place, there is no need for regulation, save
some very broad guidelines. Without that competition, there
needs to be some counter veiling force to achieve the
appropriate balance. Mr. Pickett opined that it's a
misconception to interpret the RCA's mission to push for the
absolute lowest rates in all circumstances. There are those in
the public who sometimes believe that the RCA is a rubberstamp
for those [utilities] that want to obtain more money by
increasing their rates. However, the truth is more complicated
and is somewhere in the middle. Frequently, the RCA finds
itself antagonizing both the public and the utilities, but it's
being done based on very formalized proceedings and the
development of sound records that can be defended in court.
Above all, it's a fair, open, transparent, and understandable
process, he said.
8:09:58 AM
MR. PICKETT, turning to his presentation, directed attention to
slide 2, which outlines where the RCA receives its statutory
authority. The RCA, created in 1999, is the successor agency to
the Alaska Public Utilities Commission (APUC). He then
highlighted the definition of a public utility, which is fairly
broad, as evidenced in AS 42.05.990(4) on slide 3. The
definition of a public utility describes the type of activities
public utilities perform and when they are covered by AS 42.05
as well as specifying the size. Mr. Pickett explained that the
RCA issues certificates of public convenience and necessity
(CPCN), of which there are about 600 in the state. The CPCN is
a license to do business for that type of activity and without
it an entity has no legal authority to collect anything in rates
from anyone.
8:11:03 AM
REPRESENTATIVE AUSTERMAN asked if some utilities are able to
exempt themselves from RCA's regulation.
MR. PICKETT replied yes, adding that later slides will describe
specifically what those exemptions are and when they are in
effect.
8:11:32 AM
MR. PICKETT pointed out that one of the triggers is on slide 6,
which continues the definition a public utility. He highlighted
the following language: "electrical service for use within an
area that is certificated ... sales of electricity exceeds
$50,000". The definition continues on slide 7. Slide 8
discusses the CPCN for both AS 42.05, public utilities, and AS
42.06, pipeline act. The key for a CPCN is that the RCA has to
find that the applicant is fit, willing, and able. The
aforementioned applies to all applicants, whether it's an
economically regulated entity or otherwise. Slide 9 relates
some statutory exemptions that address electric utilities. For
those electric utilities that make less than $50,000, statute
makes a provision for a joint action agency (JAA). Furthermore,
the Federal Energy Regulatory Commission (FERC) has a qualifying
facility designation that exempts [JAAs] from the state's
jurisdiction. Slide 10 relates the statutory exemptions for
electric [utilities] from economic regulation. The exemptions
are as follows: a utility owned by a political subdivision,
except a utility competing with a regulated utility; utilities
making between $50,000 and $500,000 that have a deregulation
election; cooperatives that have a deregulation election; and
utilities that receive a qualifying facility designation from
FERC.
8:13:37 AM
REPRESENTATIVE SADDLER inquired as to whether many utilities
avail themselves of the aforementioned exemptions.
MR. PICKETT replied yes. For example, there are about 150
communities served by 127 electric utilities in the state. The
RCA economically regulates about 37 of those. The electric
utilities that the RCA regulates tend to be the larger entities.
He noted that the RCA doesn't regulate most municipally owned
utilities, although they still have a CPCN. The RCA becomes
involved if there is a service problem, dispute, or the utility
collapses. Once the RCA is involved there is a show of cause
hearing regarding whether the certificate should be revoked.
REPRESENTATIVE AUSTERMAN related his understanding that Kodiak
is a cooperative and elected to deregulate itself, and therefore
isn't regulated by the RCA.
MR. PICKETT remarked that it's a fairly low threshold for a
cooperative. He further remarked that there are reasons why an
entity would choose not to be deregulated. Mr. Pickett opined
that it's fair to say that the RCA strikes a balance. The RCA
is entering into difficult times as the pressure on ratepayers
is intense, while simultaneously utilities and pipeline
companies face aging infrastructure and huge needs for massive
capital investments. Ultimately, the ratepayers are asked to be
responsible for the repayment of debt, building of capital,
increased operating expenses, etcetera. As mentioned earlier,
the role of the RCA is to strike the appropriate balance.
8:16:16 AM
MR. PICKETT moved on to slide 11, which provides a general
overview of general issues that are of great concern. The top
concern is the Cook Inlet natural gas supplies. Although it's a
regional issue, it impacts a large part of the state. This has
been developing over a 10-year period, and therefore it
shouldn't be a surprise. Recently, there was an announcement
that the ConocoPhillips and Marathon liquefied natural gas (LNG)
export facility would be closing. Some view [the
aforementioned] as a benefit to the gas situation in South
Central Alaska. However, he opined that such a view isn't
taking into consideration the entire system as it's a very small
market. The incentives are fairly tenuous. He highlighted that
one still needs a place to sell the gas and the utility market
is limited in size. The RCA, he pointed out, doesn't have
anything to do with LNG. The RCA is involved with the gas
supply agreements with utilities. However, the RCA impacts the
market place because one must have all the pieces working well
together. Therefore, there may be a point at which utilities
come forward with proposals to import LNG for the short-term.
The responsibility of the RCA is to ensure that the utilities
can continue to provide the service they are certificated to do.
Therefore, he predicted some very challenging times.
8:18:43 AM
REPRESENTATIVE AUSTERMAN asked if the RCA regulates what
consumers in Anchorage pay for natural gas.
MR. PICKETT clarified that the RCA doesn't regulate the
producers, but it does approve gas supply agreements that the
utilities negotiate with the producers. He informed the
committee that House Bill 280 included a provision that as the
RCA evaluates gas supply agreements, it must consider the
alternatives if it rejects those agreements the utility
negotiated with the gas supplier. There are only a handful of
players in the Cook Inlet gas market, at this point.
REPRESENTATIVE AUSTERMAN asked if a natural gas supplier that
wants to increase its rates would approach the RCA.
MR. PICKETT replied yes, adding that there are different factors
that propel rate increases. In the case of natural gas and a
local gas distributor, such as Enstar, about 80 percent of the
customer's bill is the actual cost of the gas and the 20 percent
remaining is the company's overhead and investment in the
system. With flow through, rural utilities, and PCE and fuel
charges for which the fuel charge can be documented, the RCA has
provisions that allow it to flow through with the tariff filing.
He opined that it doesn't make sense to have expensive
litigation in rate cases for things that can merely be reviewed
to ensure they're supported and the utility used diligence.
8:21:18 AM
CHAIR MUNOZ asked if the RCA has the ability to review a
specific rate of return on a capital investment when reviewing
rate increases.
MR. PICKETT replied yes. In further response to Chair Munoz,
Mr. Pickett hesitated to specify a standard rate of return for a
for-profit utility on a large capital investment as it's
dependent upon many factors. He pointed out that the RCA
reviews the return on equity, overall capital, debt structure,
and the overall return for the utility as a whole.
8:22:15 AM
MR. PICKETT, continuing his presentation, emphasized that the
dollar figures for the large infrastructure needs of electric
utilities are staggering. He recalled that the RCA did an
approval for the recovery of costs for a gas plant in Anchorage
with Chugach Electric last summer. Between Chugach Electric's
share, about $200 million, and Municipal Light & Power it
amounts to about a $300 million project. The various energy
studies relate staggering amounts of money. For example, the
entire depreciated rate base of the electric utilities in the
Railbelt is about $1.6 billion. There are proposals that could
double the aforementioned. The ratepayers will likely be a
large part of paying for it or folks will seek assistance from
the legislature. He then turned to the PCE program, which the
RCA administers cooperatively with the Alaska Energy Authority
(AEA). For the PCE program, the RCA is charged with calculating
the rates, even for the noneconomically regulated utilities.
The PCE subsidy is calculated by the RCA reviewing a cost
structure for PCE as if it were a regulated entity in order to
determine the cost per kilowatt hour (kWh) with a baseline of
Anchorage, Fairbanks, and Juneau. The PCE program is very
important to rural Alaska and was significantly expanded in 2008
when energy prices skyrocketed and communities were struggling.
MR. PICKETT mentioned that he will be meeting with Senator
Hoffman's staff on the following matters. The renewable energy
grants have created a high level of expectations regarding who
will actually benefit, and thus he anticipated collision of
expectations as the projects come on line. He highlighted that
renewable projects that offset high priced diesel will lessen
the impact to the PCE program, which is good. However, he
reminded the committee that the PCE program only covers the
first 500 kWh and doesn't help businesses. When state funded
renewable energy projects are put in place and a customer can't
trace through to a positive impact on his/her bill, it will
likely elicit questions about the program.
8:25:51 AM
REPRESENTATIVE SADDLER inquired as to the regional factors
utilized in PCE.
MR. PICKETT, noting that these aren't total swag numbers, stated
that it's not uncommon to perform the PCE calculations as if it
was an economically regulated utility and the cost of producing
the power is 54 cents per kWh. The RCA then reviews the annual
cost [of that energy] in Anchorage, Fairbanks, and Juneau, which
will likely be close to 12.5 cents per kWh. The PCE subsidy is
based on the difference for the first 500 kWh. Some communities
charge much more than the actual cost, which causes
consternation, he noted. Those communities aren't economically
regulated by the RCA and it doesn't have the statutory authority
to address that. However, the community is accountable to its
residents, he pointed out.
8:27:21 AM
REPRESENTATIVE AUSTERMAN noted that his district contains about
14 communities that are considered rural. One of the complaints
he hears most often is that one community will be diligent in
maintaining its equipment and keeping its cost down, while
another community doesn't and the energy cost is higher. The
more efficient community loses PCE funds, whereas the more
irresponsible community is given more PCE funds.
MR. PICKETT explained that the RCA engineering staff utilize
various calculations, such as line loss calculations, to
encourage efficiency. He acknowledged that Representative
Austerman had hit on a very good point. However, he pointed out
that the responsible community is benefiting the community as a
whole because there are many businesses and individuals who
utilize more than 500 kWh. He explained that the PCE filings
are paper filings and the annual in-depth reports provide a more
thorough analysis that reaches the non fuel costs. Still, the
RCA doesn't perform any field audits. Although AEA does have
circuit riders to ensure the systems are working, AEA doesn't
have much staff to do so. Within DCCED there is a rural utility
business assistance program, which is an important program. Mr.
Pickett expressed concern with regard to the state of many rural
utilities. Between the state and the federal government,
there's likely been in excess of $3 billion invested in various
types of infrastructure over the last couple of years. The
infrastructure depends upon a well functioning, reasonably
affordable electric utility.
8:30:18 AM
REPRESENTATIVE AUSTERMAN surmised that the issue isn't being
addressed within the rate structure of PCE.
MR. PICKETT said, "Not as well as it should be." One of the
main problems is that 15-20 communities have difficulty filling
out a two-page form to be eligible for PCE. Personally, Mr.
Pickett remarked that a community's inability to fill out a two-
page form calls into question how well a community is
maintaining the generation and transmission systems.
Unfortunately, the RCA doesn't know until there is a problem at
a certain level, which is a poor manner in which to create
public policy.
8:32:19 AM
REPRESENTATIVE DICK pointed out that along the Kuskokwim River
villages are sold electricity from utilities and there is also
delivery of fuel via the river. He asked if what's being
discussed applies to the delivery of fuel as well.
MR. PICKETT answered that it could conceivably. He told the
committee that a couple of years ago in Adak, the city owned the
electric utility. After the city manager advised the residents
to leave the island because the utility wasn't going to function
that winter, the RCA held a show cause hearing regarding
possible revocation of the certificate. Although it wasn't an
entirely clear cut desirable response, there is an argument that
delivery of fuel could be covered. However, to date the RCA
hasn't entered into such.
REPRESENTATIVE DICK clarified that he's referring to the
delivery of petroleum products on the Kuskokwim River and asked
if that's what Mr. Pickett is speaking about. He expressed his
desire for those utilities receiving the petroleum products to
have input regarding the delivery of petroleum products.
MR. PICKETT informed the committee that similar arguments have
been made with petroleum distributors on the road system,
although these are isolated communities. He offered to provide
the committee information from the Adak proceeding, which may
provide insight into the matter.
8:36:10 AM
REPRESENTATIVE GARDNER asked if it would be appropriate to refer
or require someone from the Department of Environmental
Conservation (DEC) or the Rural Alaska Fuel Services (RAFS) to
review the local system, when the RCA receives a poorly
completed report or application or other sign that the local
community isn't maintaining its energy systems.
MR. PICKETT related that the RCA works closely with the circuit
riders of AEA, which does what it can with its staff as is also
the case with the Rural Utility Business Analyst (RUBA). He
opined that it's a matter of people, just as it is with the RCA,
which has faced tremendous staffing challenges. In fact, about
four years ago there was a joint legislative and executive
branch task force regarding the RCA's [staff level], but nothing
came of it. Therefore, the RCA is confronted with fairly
significant staff turnover in certain areas and "pancaking [the
Trans-Alaska Pipeline System] TAPS rate cases and strategic
reconfiguration." Simply put, Mr. Picket said he has to make
decisions regarding where the staff resources are allocated. At
this point, TAPS is quite important.
REPRESENTATIVE GARDNER surmised then that mechanisms such as
what she described are in place, but staffing is a problem.
Therefore, there is a lack of efficiency and thoroughness and
money could be saved and the PCE program could have a greater
impact if these communities knew how to maintain their equipment
and follow through.
MR. PICKETT opined that AEA does a good job, but it doesn't have
unlimited staff and resources. At some point, he opined that it
would behoove the legislature to take a broader look as there
are many interrelated issues. When the RCA regulates a utility,
it reviews the entire picture. The RCA has various regulatory
structures, such as depreciation expense, in order to ensure the
utility is operating on a sustainable basis per the law and that
it plans and performs maintenance and plans future replacements.
Mr. Pickett emphasized that although there has been a
significant amount of investment [in utility infrastructure] and
it's still fairly new and better engineered than in the past,
there still will be a day when the aforementioned rural utility
issues will come to the forefront.
8:39:35 AM
REPRESENTATIVE GARDNER recalled mention of the potential debt
level and increased costs for Enstar and Chugach Electric and
that their consumers might face very high rate increases. She
further recalled mention of the possibility that the
aforementioned might result in a request for state assistance.
If PCE is calculated as a ratio of the urban areas, then a
dramatic increase in rates in the urban areas would cause PCE
values to drop, she surmised.
MR. PICKETT cautioned the committee because it could potentially
set in stone inefficiencies with no mechanisms to encourage
efficiency. The aforementioned is the problem with subsidies.
8:41:02 AM
REPRESENTATIVE SADDLER asked if there's a requirement for a
regulated entity to have a proactive set aside for future
capital needs.
MR. PICKETT clarified that he wouldn't characterize it as a set
aside. He explained that when there is a rate case, the
[utility] has to prove up a revenue requirement. A component of
the revenue requirement is a determination of the rate base for
the utility. The rate base calculations consider the physical
assets the utility has and there is also a depreciation study,
in terms of how the assets are declining. Mr. Pickett said that
the RCA reacts to the filings and doesn't demand utilities do
specific things. However, if there are patterns/concerns, the
RCA has the ability to investigate on its own motion. In
further response to Representative Saddler, Mr. Pickett
confirmed that a set aside for future capital needs is a factor
not a mandate. He added that well-managed utilities do so as
it's part of how business is done.
8:42:44 AM
REPRESENTATIVE FOSTER asked if the earlier testimony regarding
the renewable energy fund was meant to relate that as grants are
made, the benefits aren't always passed on to the consumer.
MR. PICKETT said that there are a few different scenarios and
it's dependent upon the recipient of the funds. The independent
power producers are one of the allowable recipients for the
funds. He explained that the independent power producers have
to enter a power sale agreement with a utility. When the RCA
calculates the PCE for a particular community, the [independent
power producer] is treated as any other factor. If the result
of the power sale agreement is to decrease the cost of a certain
block of kW, it will cause the PCE subsidy to that community to
decrease. There will be a benefit to the non PCE [entities],
the entities using over 500 kWh and businesses. Mr. Pickett
opined that this information hasn't been clearly presented to
communities.
8:44:20 AM
MR. PICKETT, continuing his presentation, reviewed slide 12
entitled "RCA Role in Cook Inlet Gas." He highlighted that
although the RCA doesn't regulate the producers of natural gas
in the Cook Inlet, it does evaluate the Gas Sale Agreements
(GSA) between the utilities and the producers. Mr. Pickett
clarified that the RCA reviews whether utilities behaved
prudently. However, he clarified that the RCA isn't trying to
set a price per unit of gas. House Bill 280 provided direction
for the RCA, he noted. Moving on to slide 13, which relates the
electric utilities infrastructure needs, he highlighted that the
Alaska Railbelt Electrical Grid Authority (REGA) Study of 2008
estimates [cumulative capital] investment requirements ranging
from $2.5 to $8.1 billion over the next 30 years. Much of that
investment is frontloaded over the next 10-15 years. Slide 14
relates the assumptions of the Railbelt Integrated Resource
Plan. The pie chart on slide 15 illustrates the existing
installed Railbelt generation, which is mainly natural gas. The
chart on slide 16 relates the existing generation versus
proposed generation in the Railbelt. He noted that some of the
natural gas generation at the Beluga Field will be retired in
2014.
MR. PICKETT remarked that the state has set an aggressive goal
for renewable energy. However, the aforementioned causes some
issues from a regulatory perspective in terms of firm versus
non-firm power supplies, the definition of which is related on
slide 17. Firm power, base load power, is power that a utility
can dispatch 24/7 365 days a year and it has a particular value.
Non-firm power is unpredictable and has a different value
because the capital investment for base load power can't be
displaced with non-firm power; the [base load power] generation
has to remain in place. With adequate storage, hydro can be
included in the firm power portfolio because the reservoir would
be considered the battery. Therefore, hydro has a higher value
than a series of windmills that provide power only 30 percent of
the time. In certain locations, the two can be complimentary.
Mr. Pickett moved on to slide 18 entitled "Greater Railbelt
Energy & Transmission Company (GRETC)" and informed the
committee that although the legislature declined to do anything
with GRETC last year, the factors motivating and propelling it
remain. In fact, five of the utilities in the Railbelt formed a
generation and transmission cooperative that is authorized under
current statute. The RCA will review various projects in the
future. He opined that [GRETC] can limit redundancies, achieve
economies of scale, and be a useful long-term planning and
execution vehicle. Slide 20 reiterates continuing Railbelt
energy issues. Slides 21-22 provide a brief overview of the PCE
program, which the committee has already discussed.
8:50:04 AM
MR. PICKETT, referring to slide 23, informed the committee that
the RCA has a number of federal mandates, such as the Energy
Policy Act of 2005. The aforementioned act required state
regulatory authorities to consider adoption of five new
standards. The basic motivation of the aforementioned act was
to encourage the development of small and alternative energy
sources. The standards the RCA addressed are listed on slide 24
and include net metering, fuel sources, fossil fuel generation
efficiency, demand response and time-based metering, and
interconnection standards. After the RCA opened a rule-making
docket on the aforementioned, the RCA declined to adopt any of
the federal standards as they stood because they didn't fit
Alaska well.
8:51:04 AM
REPRESENTATIVE GARDNER requested an explanation of demand
response and time-based metering.
MR. PICKETT mentioned the smart grid and smart meter and related
that the idea is to get technology and the system to a point at
which it's more feasible to have more dynamic pricing.
Therefore, it may be based on the time of day when the
generation resources are available but underutilized, such as in
the middle of the night, and a price signal is provided to
consumers to make decisions. In response to Representative
Austerman, Mr. Pickett pointed out that forthcoming slides will
discuss net metering in Alaska.
8:52:40 AM
MR. PICKETT reiterated that the RCA declined to adopt any of the
federal standards. However, based on the proceedings over a
two-year period it was obvious that there was a high level of
interest in net metering and interconnection standards.
Therefore, the RCA opened rule-making dockets for those two
standards. In response to Representative Foster, Mr. Pickett
stated that in the 2005 federal act there are no ramifications
for the RCA not adopting the standards.
8:53:40 AM
MR. PICKETT, continuing his presentation, directed attention to
slide 26, which references the two dockets the RCA opened to
consider net metering and interconnection standards. With
docket R-09-1, net metering, the RCA tried to create an Alaska
rule that would encourage [the development of distributed small-
scale renewable generation, while maintaining system integrity
and fairly apportioning costs among consumers and
consumer/producers]. He opined that although the RCA's goals in
these dockets are essentially the same as those of the federal
standards, the federal standards are too restrictive for the
conditions in Alaska. The RCA approved the net metering
regulations and the effective date on those regulations was June
16, 2010. The regulations apply to economically regulated
utilities with total retail sales of 5 million kWh or more and
the affected utilities are required to interconnect with
eligible customer generation systems. The aforementioned
regulations applied to about eight or so utilities throughout
the state.
8:54:32 AM
CHAIR MUNOZ asked if the aforementioned regulations mean that
Representative Olson's legislation is unnecessary.
MR. PICKETT related his understanding that Representative
Olson's legislation is similar to the RCA's regulations, but he
wasn't sure of the sponsor's intent. Because the regulations
have been in effect less than nine months and the utilities are
still filing their tariffs, it might be appropriate to let the
regulations go forward, especially since regulations are easier
to change than statute. In further response to Chair Munoz, Mr.
Pickett reminded the committee that the regulations have a size
limitation. Referring to slide 28, Mr. Pickett opined that this
net metering regulation is tightly contained. The problem is
that if there's a small utility and a sufficient surge of energy
at a point in the system, it could cause stability issues with
the system. Rather than try to foresee all the possible
problems, it's better for a utility to determine the problems
and review the work the RCA performed and adopt parts of it.
The larger utilities are better positioned to make [net
metering] work. He noted that with the net metering docket
there was vigorous participation from an array of entities for
about a year.
8:57:04 AM
CHAIR MUNOZ surmised then that the regulations are in place for
the larger utilities and individual consumers can participate.
MR. PICKETT confirmed that to be the case, and added that many
of the larger utilities have already filed their tariff
provisions to implement these [regulations] with the RCA.
8:57:24 AM
MR. PICKETT, in response to Representative Dick, explained net
metering as follows. Many renewable energy producers produce an
amount of energy in excess of their needs, and therefore they
wanted the ability to sell that excess power back to the utility
and would either receive a credit on their bill or a check.
[The RCA] created a form of credit on the bills.
8:58:45 AM
REPRESENTATIVE AUSTERMAN returned to the portion of the
regulations that apply to economically regulated utilities with
total retail sales of 5 million kWh or more and inquired as to
Kodiak's position.
MR. PICKETT answered that since Kodiak isn't economically
regulated, it's not mandated to participate [in net metering].
8:59:21 AM
REPRESENTATIVE FOSTER recalled Mr. Pickett's comments regarding
Representative Olson's net metering legislation and asked if
Representative Olson's office has worked with the RCA.
MR. PICKETT replied yes.
9:00:02 AM
REPRESENTATIVE AUSTERMAN surmised then that since Kodiak is a
non regulated community, it would be up to the members of the
cooperative to decide.
MR. PICKETT agreed with Representative Austerman's
understanding, but added that the cooperative could review the
RCA's regulations and use them as a model.
9:00:36 AM
REPRESENTATIVE DICK opined that in his small village feeding
energy back into the power system wouldn't provide a savings to
anyone. He posed an example of a 25 kWh generator that burns 10
gallons at full load, whereas at a half load it burns 9.5
gallons. Therefore, pumping energy back into the system doesn't
help because the pistons still have to turn and everyone's
electric bill would increase. Therefore, the benefit of feeding
energy back into the system would depend upon whether the large
utility has the ability to save fuel as a [consumer] returns
energy to the system. If there's no fuel savings, it seems to
just be an illusion of savings, he remarked.
MR. PICKETT acknowledged that there are elements of truth in
Representative Dick's comments. Directing attention to slide
28, he pointed out that the net metering cap is very restrictive
cap as it's capped at 1.5 percent of the average retail demand
for the entire system of that utility. Furthermore, 25 kW was
the maximum size for any generation unit. Mr. Pickett opined
that [net metering] isn't going to have a significant impact on
the operations of the six to seven largest utilities in the
state.
REPRESENTATIVE DICK surmised that whether there is actual
savings or the illusion of savings is dependent upon the
generating system of the main utility. The savings is dependent
upon whether that energy returned to the system causes the fuel
the utility uses to provide energy decreases.
MR. PICKETT agreed that there is truth in that, and added that
savings would be related to the efficiency of the utility. The
University of Alaska's Center for the Study of Power has
received U.S. Department of Agriculture (USDA) funds to study
wind-diesel hybrid systems in the Bush. The aforementioned is
appropriate because thus far mainly anecdotal information is
available. If the state is going to continue to give renewable
energy funds, the aforementioned is the type of baseline
information that's necessary.
9:03:50 AM
MR. PICKETT, returning to his presentation, directed the
committee's attention to slide 29 entitled "R-09-2
Interconnection Standards". With these new distributed
renewable sources, interconnection is critical and greatly
concerns the utilities, he opined. Referring to slide 30, Mr.
Pickett informed the committee that the RCA will soon consider
draft interconnection regulations. He then turned attention to
slides 31-33 regarding the Energy Independence and Security Act
of 2007 (EISA). The new Public Utility Regulatory Policies Act
of 1978 (PURPA) standards in EISA include integrated resource
planning, rate design modification to promote energy efficiency
investments, consideration of smart grid investment, and smart
grid information. The RCA opened a docket on the aforementioned
and took comments through December and the docket will be taken
up at a public meeting in the near future. Referring to slide
34 entitled "Challenges Ahead for the RCA", Mr. Pickett pointed
out the challenge of telecommunications. The RCA is involved
with the incumbent local carriers that are economically
regulated as well as the Federal Universal Service Fund (USF)
and provide certifications to the Federal Communications
Commission (FCC) annually. Most people don't realize the
significance of USF to the State of Alaska. However, he
highlighted that it's a subsidy approaching $200 million per
year to support the state's telecommunications system. He noted
that the national broadband plan may have a significant impact
on the telecommunications income stream if there is no
recognition as to Alaska's unique nature. He also mentioned the
challenge of major capital investments by utilities and the
struggling rural utilities. He related his concern for the
struggling rural utilities, which he opined needs to be
addressed rather than waiting to address broken [utility
equipment and systems].
9:06:17 AM
REPRESENTATIVE SADDLER recalled Mr. Pickett's testimony
regarding the major capital investments by utilities in the
amount of $8.5 billion over the next 15 years or so. He asked
if there is anticipation of other large investments in
infrastructure for energy generation. He also asked whether
it's necessary to choose a direction in terms of the type of new
capacity generation there will be and whether that will drive
the major capital investments by utilities or are they fungible
whatever the source.
MR. PICKETT pointed out that the capital investment amount to
which Representative Saddler referred was from the AEA study.
Mr. Pickett then highlighted that utilities have to make
decisions in real-time because there are real needs now. To
date, the state's energy plan or goals are more aspirational in
nature rather than a plan of executable specific action steps
with timelines and dollar figures attached. If the state does
become involved in a major energy project and invests its own
resources in it, the more timely such a decision is made the
better in order to avoid potential utilities making investments
in the next few years that would've potentially made different
decisions had other tracts been moving faster.
REPRESENTATIVE SADDLER surmised then that the sooner the
decisions are made, the better. However, the RCA has to make
decisions based on the current situation or the reasonably
foreseeable future.
9:08:10 AM
MR. PICKETT, returning to his presentation, characterized the
state's renewable energy goal as very aggressive and
aspirational. The state's goal of producing 50 percent of the
state's energy from renewable sources by 2025 could only be
achieved with a significant commitment to large scale hydro, he
said. The Cook Inlet gas situation will remain a challenge.
With regard to the TAPS cases he mentioned earlier, the RCA has
joint hearings with the FERC in October to address
reconfiguration issues on TAPS and setting the tariff. Another
challenge is the continuing RCA staffing issues.
9:09:07 AM
REPRESENTATIVE AUSTERMAN, referring to the pie chart on slide
15, directed attention to the Bradley Lake Hydro project and the
percentage of energy it supplies to the Railbelt. He then
suggested that the members consider the Susitna Hydro project
and the potential energy it would've supplied versus the Bradley
Lake Hydro project. Representative Austerman related that [the
pie chart] illustrates why one must think 20-30 years in the
future. Still, he noted his appreciation for the Bradley Lake
Hydro project as it forced the Four Dam Pool hydro projects.
MR. PICKETT related that the Bradley Lake Hydro project is the
cheapest power in the portfolio of the utilities that invested
in it.
9:10:51 AM
REPRESENTATIVE SADDLER inquired as to the questions members
should ask the FERC commissioners regarding the TAPS strategic
reconfiguration.
MR. PICKETT clarified that the FERC structure is very different
than that of the RCA as the FERC delegates a lot of authority to
the administrative law judges. At this point in the
proceedings, the FERC likely won't have a whole lot of specific
information and have restrictions regarding what they can
discuss in terms of an open docket.
9:11:58 AM
CHAIR MUNOZ thanked Mr. Pickett for his help with a couple of
issues in Juneau. She then sought comment from Mr. Pickett
regarding the upcoming Alaska Electric Light & Power (AEL&P)
rate increase proposal.
MR. PICKETT clarified that he can't speak to any particular
facts or merits of the case. However, he related that the RCA
decided to have the hearing in Juneau [the week of May 9th] and
is currently trying to find a suitable venue. Once the details
are available, those in Juneau will be informed.
9:13:07 AM
CHAIR MUNOZ mentioned the need for pay phones at some points of
entry, such as ferry terminals and airports. She related her
understanding that the RCA has opened a docket on that issue.
MR. PICKETT said that the RCA opened a docket about a year ago
when the Alaska Communication Services (ACS) began removing pay
phones. A similar situation is occurring in Anchorage with the
removal of private pay phones that are owned by the telecom
company. After thorough research, it has been determined that
the RCA's authority is very limited by the FCC regarding what it
can do. The RCA will address this matter next week and make a
determination going forward. He explained that public pay
phones are subsidized pay phones that are funded through some
public funding mechanism. As Chair Munoz mentioned, there may
be good reason to consider whether there should be a certain
number of public subsidized pay phones in certain locations.
Although the docket hasn't yet been opened, it will be
considered next week.
9:15:03 AM
ADJOURNMENT
There being no further business before the committee, the House
Community and Regional Affairs Standing Committee meeting was
adjourned at 9:15 a.m.
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