Legislature(2023 - 2024)BARNES 124
02/02/2023 10:15 AM House ENERGY
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| Audio | Topic |
|---|---|
| Start | |
| Presentation(s): Utility Company Update | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ENERGY
February 2, 2023
10:15 a.m.
DRAFT
MEMBERS PRESENT
Representative George Rauscher, Chair
Representative Tom McKay
Representative Stanley Wright
Representative Calvin Schrage
MEMBERS ABSENT
Representative Josiah Patkotak
COMMITTEE CALENDAR
PRESENTATION(S): UTILITY COMPANY UPDATE
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
TONY IZZO, CEO
Matanuska Electric Association
Palmer, Alaska
POSITION STATEMENT: Co-presented a PowerPoint presentation on
the Railbelt Electric Energy System.
BRAD JANORSCHKE, General Manager
Homer Electric Association
Homer, Alaska
POSITION STATEMENT: Co-presented a PowerPoint presentation on
the Railbelt Electric Energy System.
ARTHUR MILLER, CEO
Chugach Electric Association
Anchorage, Alaska
POSITION STATEMENT: Co-presented a PowerPoint presentation on
the Railbelt Electric Energy System.
JOHN BURNS, CEO
Golden Valley Electric Association
Fairbanks, Alaska
POSITION STATEMENT: Co-presented a PowerPoint presentation on
the Railbelt Electric Energy System.
ACTION NARRATIVE
10:15:48 AM
CHAIR GEORGE RAUSCHER called the House Special Committee on
Energy meeting to order at 10:15 a.m. Representatives Wright,
McKay, Schrage, and Rauscher were present at the call to order.
^PRESENTATION(S): UTILITY COMPANY UPDATE
PRESENTATION(S): UTILITY COMPANY UPDATE
10:17:41 AM
CHAIR RAUSHCER announced that the only order of business would
be a presentation, titled "Utility Company Update."
10:18:38 AM
TONY IZZO, CEO, Matanuska Electric Association, introduced the
presenters and their companies.
10:19:15 AM
BRAD JANORSCHKE, General Manager, Homer Electric Association,
began with slide 2 and stated that the Railbelt serves 75
percent of Alaska's population. He added that electricity for
the Railbelt is cheap compared to Alaska's rural communities and
expensive compared to Southeast Alaska, due to Southeast Alaska
having hydroelectric opportunities that are unavailable to the
Railbelt communities. He returned to slide 2 and said that the
Railbelt utility companies use 41 percent of the natural gas
produced from the Cook Inlet, and that 85 percent of the
electricity produced by the utilities comes from natural gas.
10:22:07 AM
MR. JANORSCHKE continued to slide 3 and stated that a single
transmission line is what connects the four different companies
and their respective areas of coverage. He added that the
companies are putting forth $166 million to upgrade the
transmission line.
10:24:05 AM
ARTHUR MILLER, CEO, Chugach Electric Association, continued to
slide 4 and stated that an upcoming challenge in keeping
electricity rates competitive in the Railbelt is declining
natural gas production in Cook Inlet. He continued to slide 5
and stated that in the past, the supply of natural gas was
greater than the demand, but the forecasted production shows
that there is a likelihood of the supply falling below the
demand.
10:27:41 AM
MR. MILLER added that the main goal of the utilities is to keep
rates as low as possible while meeting reliability standards.
He continued to slides 6 and 7 and stated that there will be a
gap in energy production starting in the year 2027. He said
that the options for filling the gap include: using clean energy
when economically possible, pursuing natural gas options on the
North Slope, and importing LNG (liquefied natural gas). He
continued that the transition would require energy storage and
upgrades to transmission infrastructure. He said that the
batteries being purchased by the utilities allow the companies
to better regulate the system, thus reducing cost and increasing
reliability. He said that the batteries will make the usage of
renewable energy more economical.
10:34:59 AM
MR. IZZO continued with slide 7 and stated that the availability
of natural gas is critical for the foreseeable future, and that
the future would also require a diversification of resources.
He added that it was the third time he had witnessed a similar
situation and that each of them had been solved in the past.
MR. IZZO continued to slide 8 and stated that energy security is
a major goal of the utilities and defined it as the ability to
keep the power running. He said that the utility companies are
continuing to set new goals for renewable energy in order to
reduce reliance on natural gas while maintaining the same rates.
10:38:56 AM
MR. IZZO continued to slide 9 and displayed a graph showing the
historical and current prices of different forms of energy
generation in Alaska, along with the prices during the same
period for different forms of energy generation in other parts
of the United States. He stated that the average price of a
megawatt on the Railbelt is still cheaper than many of the other
regions. He added that the price of a kilowatt on the Railbelt
is 20 cents while the U.S. average is 16 cents.
10:42:59 AM
JOHN BURNS, CEO, Golden Valley Electric Association, continued
to slide 10 and stated that the goal of the utilities was to
reduce the price as much as possible along the Railbelt. He
advised that achieving this goal would require a "reliable,
redundant, and resilient" transmission system. He stated that
accomplishing the vision of the utilities would require
upgrading the current transmission lines, adding additional
lines, and increasing the ability to store energy.
10:47:45 AM
MR. BURNS added that decisions made in the past to build new
projects have made a significant impact on the future and
referenced the Bradley Lake hydroelectric plant. He stated that
the Railbelt Vision would be a 1012 year commitment and cost
approximately $250 million, and that the utilities had already
invested $166 million.
10:51:06 AM
MR. BURNS continued to slide 11 and stated that completing the
vision would result in increased energy generation, including:
renewable energy; increased ability to transport energy; an
increase in the scale at which energy can be generated;
increased ability to support military facilities in Alaska;
increased economic development; and increased rate stability.
He added that the utilities would need help from the legislature
to avoid putting the burden on the rate payers.
10:55:48 AM
MR. BURNS continued to slide 12 and stated that there are four
priorities that the utilities hope the legislature will
accomplish. He stated that those priorities are: working with
the utilities to find a long-term and in-state supply of natural
gas, transmission and energy storage infrastructure, leveraging
state and federal funding, and an economic path to energy
sources that will reduce carbon emissions.
10:59:03 AM
CHAIR RAUSCHER asked why coal was not a part of the cost
comparison on slide 9.
MR. BURNS answered that 33 percent of Golden Valley Electric's
energy generation comes from coal, and while they have one plant
that works very well, their second plant, Healy Two, has
frequent issues.
CHAIR RAUSCHER asked what the energy production loss from
shutting down Healy Two would be.
MR. BURNS answered that the energy Golden Valley Electric can
buy from Southcentral Alaska is cheaper than producing energy at
Healy Two due to its frequent issues.
CHAIR RAUSCHER asked if Golden Valley Electric would be able to
recoup that loss.
MR. BURNS answered that the situation underscores the current
need for natural gas availability and the utilities working
together.
11:03:45 AM
CHAIR RAUSCHER asked about the decline of natural gas production
in Cook Inlet as shown on slide 5.
MR. IZZO answered that gas prices increased dramatically in the
early 2000s after the natural gas found in the 1950s and 60s had
been used. He added that the prices at the time were quite high
as an incentive for companies to fund new explorations of
natural gas reserves. He stated that in 2006, the prices had
another dramatic increase due to companies such as Chevron and
Marathon leaving the state due to Alaska's lack of connection to
the Henry Hub system. He said that in 2014, tax credits brought
new companies and investments to Alaska. He stated that there
was to be a 10 year agreement with another undisclosed utility
that would have greatly reduced rates, but the deal fell through
when the new tax credits were vetoed.
11:08:52 AM
MR. IZZO stated that this started a period of time in which the
only contracts the utilities were able to agree to with natural
gas producers were short-term 1- or 2-year contracts. He said
that Hilcorp stepped in and "picked up the pieces" by offering
5-year contracts to supply natural gas. He stated that this
experience is what has led the different utilities to create
plans to diversify the sources that they receive energy from.
He reiterated previous statements that building up the
transmission system is important; doing so allows for greater
diversification because different power sources that are used in
different parts of the state can be transferred.
11:14:21 AM
REPRESENTATIVE MCKAY stated that he had had a previous career as
a petroleum engineer. He warned that because of the number of
years that natural gas has been produced from Cook Inlet, the
possibility of running out is serious. He stated that something
needs to be done immediately because 5 years is a short amount
of time in the oil and gas industry.
11:18:02 AM
REPRESENTATIVE MCKAY stated that he believes the Cook Inlet
natural gas situation may be the most important issue the
legislature faces, and that it is possible that Alaska will need
to rely more on coal. He stated his belief that the U.S.
Department of Defense should be more involved in discussions
about power and the Port of Anchorage because of the strategic
importance of Alaska. He asked if it was true that most of the
reserve natural gas stored in Anchorage had been used last
winter.
MR. MILLER responded that that is correct. He added that the
storage facility in Anchorage is not big enough to properly
serve Southcentral Alaska.
11:21:57 AM
REPRESENTATIVE MCKAY asked how many billion cubic feet (BCF) of
natural gas is needed to meet demand per year.
MR. MILLER answered that the total number is 70 BCF. In
response to a follow-up question, he said the storage facility
is currently full.
11:23:19 AM
REPRESENTATIVE SCHRAGE stated that renewable energy sources are
becoming less expensive while the price of natural gas
increases, and he asked what the utilities are doing to increase
their percentage of generation coming from renewable sources.
He said that with the issue of people leaving the state, he is
not sure about the importance of building the suggested amount
of transmission line, and he asked what areas the utilities
believe are the most important in which to build the
transmission lines.
11:25:31 AM
CHAIR RAUSCHER stated that due to time constraints, those
questions would have to be answered at a later time.
11:26:04 AM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Energy meeting was adjourned at [11:26]
a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Energy Committee Schedule 30 Jan-3 Feb 2023.pdf |
HENE 2/2/2023 10:15:00 AM |
Committee Schedule Jan 30-Feb 3 |
| Railbelt Legislative Presentation.FINAL v2.pdf |
HENE 2/2/2023 10:15:00 AM |
Railbelt Legislative Presentation |