Legislature(2009 - 2010)BARNES 124

04/01/2010 03:00 PM ENERGY


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Audio Topic
03:10:40 PM Start
03:10:53 PM Overview(s): Railbelt Energy Study by Commonwealth North, "energy for a Sustainable Alaska"
03:48:20 PM HB182
04:43:00 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Overview: Railbelt Energy Study, by TELECONFERENCED
Mary Ann Pease, Commonwealth North
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 182 RAILBELT ENERGY & TRANSMISSION CORP. TELECONFERENCED
Heard & Held
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE SPECIAL COMMITTEE ON ENERGY                                                                              
                         April 1, 2010                                                                                          
                           3:10 p.m.                                                                                            
                                                                                                                              
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Bryce Edgmon, Co-Chair                                                                                           
Representative Charisse Millett, Co-Chair                                                                                       
Representative Nancy Dahlstrom                                                                                                  
Representative Kyle Johansen                                                                                                    
Representative Jay Ramras                                                                                                       
Representative Pete Petersen                                                                                                    
Representative Chris Tuck                                                                                                       
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                              
Senator Linda Menard                                                                                                            
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
OVERVIEW(S):    RAILBELT  ENERGY  STUDY  BY  COMMONWEALTH  NORTH,                                                               
"ENERGY FOR A SUSTAINABLE ALASKA"                                                                                               
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
HOUSE BILL NO. 182                                                                                                              
"An   Act   establishing   the  Greater   Railbelt   Energy   and                                                               
Transmission  Corporation   and  relating  to   the  corporation;                                                               
relating   to   transition,   financial   plan,   and   reporting                                                               
requirements   regarding  planning   for  the   initial  business                                                               
operations  of  the  Greater  Railbelt  Energy  and  Transmission                                                               
Corporation; relating  to a report  on legislation  regarding the                                                               
Regulatory Commission  of Alaska and the  Greater Railbelt Energy                                                               
and  Transmission  Corporation;  authorizing  the  Alaska  Energy                                                               
Authority to  convey the Bradley  Lake Hydroelectric  Project and                                                               
the  Alaska   Intertie  to  the   Greater  Railbelt   Energy  and                                                               
Transmission Corporation; and providing for an effective date."                                                                 
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 182                                                                                                                  
SHORT TITLE: RAILBELT ENERGY & TRANSMISSION CORP.                                                                               
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
03/12/09       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/12/09       (H)       ENE, L&C, FIN                                                                                          
03/26/09       (H)       ENE AT 3:00 PM BARNES 124                                                                              
03/26/09       (H)       Heard & Held                                                                                           
03/26/09       (H)       MINUTE(ENE)                                                                                            
04/09/09       (H)       ENE AT 3:00 PM BARNES 124                                                                              
04/09/09       (H)       Heard & Held                                                                                           
04/09/09       (H)       MINUTE(ENE)                                                                                            
03/18/10       (H)       ENE AT 3:00 PM BARNES 124                                                                              
03/18/10       (H)       Heard & Held                                                                                           
03/18/10       (H)       MINUTE(ENE)                                                                                            
03/23/10       (H)       ENE AT 3:00 PM BARNES 124                                                                              
03/23/10       (H)       -- MEETING CANCELED --                                                                                 
03/25/10       (H)       ENE AT 3:00 PM BARNES 124                                                                              
03/25/10       (H)       Heard & Held                                                                                           
03/25/10       (H)       MINUTE(ENE)                                                                                            
03/30/10       (H)       ENE AT 3:00 PM BARNES 124                                                                              
03/30/10       (H)       Heard & Held                                                                                           
03/30/10       (H)       MINUTE(ENE)                                                                                            
03/31/10       (H)       ENE AT 5:00 PM BARNES 124                                                                              
03/31/10       (H)       -- Continued from 03/30/10 Meeting                                                                     
04/01/10       (H)       ENE AT 3:00 PM BARNES 124                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
MARY ANN PEASE, Consultant                                                                                                      
MAP Consulting; Co-Chair                                                                                                        
Commonwealth North Energy Study Group                                                                                           
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Gave a PowerPoint presentation by                                                                        
Commonwealth North titled "Energy for a Sustainable Alaska:  the                                                                
Railbelt Predicament."                                                                                                          
                                                                                                                                
BRUCE TANGEMAN, Chief Financial Officer                                                                                         
Doyon Utilities (DU)                                                                                                            
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified during the hearing on HB 182.                                                                  
                                                                                                                                
MIKE O'MEARA, Homer Spokesman                                                                                                   
HEA Member's Forum                                                                                                              
Homer, Alaska                                                                                                                   
POSITION STATEMENT:  Testified during the hearing on HB 182.                                                                  
                                                                                                                                
CHRISTINE VECCHIO, Board Member                                                                                                 
MEA Ratepayers Alliance                                                                                                         
Palmer, Alaska                                                                                                                  
POSITION STATEMENT:  Testified during the hearing on HB 182.                                                                  
                                                                                                                                
JIM SYKES, Consumer Representative                                                                                              
AEA Stakeholder Advisory Group; Representative                                                                                  
Alaska  Public  Interest  Research Group;  Mat-Su  Energy  Issues                                                               
Coordinator                                                                                                                     
Alaska Center for the Environment                                                                                               
Palmer, Alaska                                                                                                                  
POSITION STATEMENT:  Testified during the hearing on HB 182.                                                                  
                                                                                                                                
MARY KVALHEIM                                                                                                                   
Wasilla, Alaska                                                                                                                 
POSITION STATEMENT:  Testified during the hearing on HB 182.                                                                  
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:10:40 PM                                                                                                                    
                                                                                                                                
CO-CHAIR CHARISSE  MILLETT called the House  Special Committee on                                                             
Energy meeting  to order  at 3:10  p.m.  Present  at the  call to                                                               
order   were   Representatives  Millett,   Dahlstrom,   Johansen,                                                               
Petersen,  Tuck, and  Edgmon.   Representative Ramras  arrived as                                                               
the meeting was in progress.                                                                                                    
                                                                                                                                
^Overview(s):    Railbelt  Energy Study  by  Commonwealth  North,                                                               
"Energy for a Sustainable Alaska"                                                                                               
OVERVIEW(S):                                                                                                                  
                                                                                                                              
   Railbelt Energy Study by Commonwealth North, "Energy for a                                                               
                      Sustainable Alaska"                                                                                   
                                                                                                                              
3:10:53 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  MILLETT  announced that  the  first  order of  business                                                               
would  be   an  overview   on  the   Railbelt  Energy   Study  by                                                               
Commonwealth North titled, "Energy  for a Sustainable Alaska: The                                                               
Railbelt Predicament."                                                                                                          
                                                                                                                                
3:12:45 PM                                                                                                                    
                                                                                                                                
MARY   ANN   PEASE,   Consultant,   MAP   Consulting;   Co-Chair,                                                               
Commonwealth  North Energy  Study Group,  informed the  committee                                                               
that Commonwealth  North's report on  energy is a  culmination of                                                               
over  one  year's  work  by  a  diverse  study  group,  including                                                               
contributions on energy policy from  legislators.  She noted that                                                               
the  study group  heard comprehensive  presentations representing                                                               
every aspect of  energy, while focusing on  Southcentral and also                                                               
looking  at renewables  in the  Interior and  beyond.   Ms. Pease                                                               
announced  that volume  2 of  the report  will be  available next                                                               
year.  Slide 1 was a  chart of the historic and projected natural                                                               
gas  production  in  the  Cook   Inlet  showing  the  decline  in                                                               
production beginning in 2006 and  continuing through 2030.  Slide                                                               
2  was   a  chart   that  showed  the   Cook  Inlet   demand  and                                                               
deliverability forecast,  and she  pointed out  that in  order to                                                               
sustain the projected  demand of 90 billion cubic  feet (Bcf) per                                                               
year beginning in  2011, about 185 new wells need  to be drilled.                                                               
The cost of  drilling these new wells to meet  the utility demand                                                               
is estimated  to be  between $1.9 billion  and $2.8  billion, and                                                               
does  not  include increased  demand  due  to industrial  growth.                                                               
Slide  3 indicated  that there  are  about 863  Bcf of  remaining                                                               
reserves,  and additional  probable  reserves of  279  Bcf.   Ms.                                                               
Pease  related that  most  of  the reserves  are  located in  the                                                               
Beluga  River, North  Cook Inlet,  Ninilchik, and  McArthur River                                                               
gas fields.   She said, "2013 is the problem  ... you've heard it                                                               
from other entities  that 2013 is kind of that  point where we're                                                               
really  going  be  in  a   problem."    Although  there  were  no                                                               
deliverability  shortages last  winter,  she warned  that in  the                                                               
case of a  compressor failure during a cold snap,  there is cause                                                               
for concern.   Ms. Pease  then displayed  Slide 4, and  noted the                                                               
deliverability  situation in  2006 when  the heat  and electrical                                                               
loads were  constant, and Agrium, Inc.  and the Phillips/Marathon                                                               
Kenai Liquefied Natural Gas (LNG)  export plant loads were known.                                                               
However,  slide  4  also  indicated   that  in  the  future,  the                                                               
industrial  load will  be undefined,  and the  Southcentral power                                                               
demand remains less than  5 percent of a 4.5 Bcf  main line.  She                                                               
remarked, "The  days of  cheap gas  in Cook  Inlet are  over, and                                                               
it's  time  that   we  want  the  deliverability   issues  to  be                                                               
resolved."  Slide 5 was  a graph that projected future industrial                                                               
demand of 280  million cubic feet per day (MMcf/d)  from a yet to                                                               
be  identified industry,  and that  residential, commercial,  and                                                               
power  demands will  be  relatively  constant.   Slides  6 and  7                                                               
indicated  ENSTAR  Natural  Gas   Company  and  Chugach  Electric                                                               
Association gas  supplies begin  to run  into shortages  in 2011.                                                               
Slide 8  was the "needle peak  chart" and she noted  the gas peak                                                               
demand is on a 20:1 ratio,  but the electric load is more stable.                                                               
Ms.  Pease related  Commonwealth North  feels legislators  have a                                                               
unique opportunity to  make progress in energy  resources for the                                                               
state; however,  there needs to  be a clear, concise  policy that                                                               
optimizes resources and  encourages economic development, growth,                                                               
and capital investment in the state's infrastructure.                                                                           
                                                                                                                                
3:19:20 PM                                                                                                                    
                                                                                                                                
MS.  PEASE referred  to  an  energy study  by  the Alaska  Energy                                                               
Authority,   Department  of   Commerce,  Community,   &  Economic                                                               
Development  (AEA) and  displayed slide  10 that  was a  chart of                                                               
energy by resource  type.  She questioned the  conclusions of the                                                               
study  because coal  is not  included as  one of  the sources  of                                                               
energy and,  as a matter of  fact, Cook Inlet Region  Inc. (CIRI)                                                               
is  investing in  a coal  gasification installation.   Also,  the                                                               
chart  shows a  steep decline  in the  production of  natural gas                                                               
between [2023]  and [2026], with  an increase in  energy provided                                                               
by hydroelectric power.  She said  this is significant as at this                                                               
time natural  gas or fuel  oil is filling  this need.   She said,                                                               
"If [hydroelectric power] is indeed  the assumption that is being                                                               
made  for the  integrated resource  plan that's  going to  be the                                                               
baseline for  the utilities ...  there needs  to be some  sort of                                                               
policy  guidance....  Are we  still  going  to continue  to  have                                                               
thoughts  of  gas coming  from  the  North Slope,  or  additional                                                               
drilling and development in Cook  Inlet?"  Ms. Pease acknowledged                                                               
that  in any  case, huge  capital investments  are needed,  as is                                                               
consideration  of the  end-user  costs and  sustainability.   She                                                               
continued  to   explain  that  Commonwealth  North   divided  the                                                               
timeframe  for policy  decisions into  three periods:  now--being                                                               
prepared, having  a plan,  conservation, and  the ability  to use                                                               
diesel   for   some  electrical   generation;   intermediate--gas                                                               
storage, import  liquefied natural  gas (LNG), drill  more wells,                                                               
in-state   gas  line,   and  renewable   energy;  long-term--most                                                               
options,  main line,  North Slope  gas  into Southcentral,  large                                                               
scale renewable  projects, and  large price tags.   She  said she                                                               
was  very  pleased to  note  that  the intermediate-term  propane                                                               
project  solution   would  greatly  benefit  Fairbanks   and  the                                                               
Interior; in  fact, the Alaska Natural  Gas Development Authority                                                               
(ANGDA),  Office  of  the Commissioner,  Department  of  Revenue,                                                               
proposes having the private sector  build a gas extraction plant,                                                               
trucking  propane  to Fairbanks,  and  barging  propane to  river                                                               
communities.    All  three  of the  North  Slope  producers  have                                                               
expressed interest  in this  proposal.  On  the subject  of long-                                                               
term future solutions, she advised  that there are a great number                                                               
of options, albeit all at a  high price.  She urged the committee                                                               
to  consider  that  the  best  model for  energy  projects  is  a                                                               
private-public partnership mix that keeps the cost semi-                                                                        
sustainable for the economy, while  encouraging investment by the                                                               
private  sector.   Slide 20  was  a map  indicating the  regional                                                               
energy demands  across Alaska.   Ms. Pease spoke of  the in-state                                                               
bullet gas  line, and relayed that  the cost of a  bullet line is                                                               
greatly  reduced by  the construction  of a  main line;  however,                                                               
without that alternative  the cost of 250  million standard cubic                                                               
feet per day  (MMscf/d) results in a tariff of  $6-$7 in addition                                                               
to the  price of gas.   She re-stated  that the capital  costs of                                                               
the development of hydroelectric energy  are very high, and there                                                               
is  a need  to realize  that an  over-arching energy  policy must                                                               
define the "renewable energy mix that we want going forward."                                                                   
                                                                                                                                
3:30:07 PM                                                                                                                    
                                                                                                                                
MS.   PEASE  presented   Commonwealth  North's   recommendations:                                                               
continued  customer  awareness,   educational  conservation,  and                                                               
curtailment  plans; support  for  gas storage  to help  utilities                                                               
meet  deliverability  challenges;  establish a  clear  regulatory                                                               
standard for review  of gas supply contracts;  implement a policy                                                               
of fuel diversification including  other energy alternatives such                                                               
as hydroelectric, coal, propane,  wind, and geo-thermal, with the                                                               
long-term goal of reduced dependence  on diesel for much of rural                                                               
Alaska; encourage  development of  oil and natural  gas potential                                                               
and the construction of a natural gas pipeline.                                                                                 
                                                                                                                                
3:33:22 PM                                                                                                                    
                                                                                                                                
MS. PEASE  suggested that the action  to be taken now  is for the                                                               
state to continue the energy  dialogue and establish a pro-active                                                               
approach and reasoned  policy action on energy  issues in Alaska.                                                               
She  advised   that  the  policy   direction  developed   by  the                                                               
legislature  will  ensure  there  is  economic  development,  the                                                               
investment   of  capital   in   the   economy,  and   sustainable                                                               
opportunities for growth.                                                                                                       
                                                                                                                                
3:34:30 PM                                                                                                                    
                                                                                                                                
CO-CHAIR    MILLETT    observed   that    Commonwealth    North's                                                               
recommendations  are   in  alignment   with  the   energy  policy                                                               
developed by the stakeholders group.  Alaskans are in agreement.                                                                
                                                                                                                                
3:35:03 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  EDGMON appreciated  the reference  to rural  Alaska and                                                               
its need for the diversification  of fuel sources.  Energy issues                                                               
have  manifested  an  inter-dependence between  business  flowing                                                               
into  Anchorage  from  rural  Alaska   and  the  availability  of                                                               
affordable power in Southcentral.                                                                                               
                                                                                                                                
REPRESENTATIVE   RAMRAS  spoke   of  a   proposed  $250   million                                                               
development  in the  Interior involving  the Alaska  Gasline Port                                                               
Authority  (AGPA),  Golden  Valley Electric  Association  (GVEA),                                                               
Fairbanks Natural Gas, and ENSTAR  to install millions of dollars                                                               
of  gas  fittings  to  accept  trucked natural  gas.    He  asked                                                               
Commonwealth  North   to  provide  an  addendum   to  its  report                                                               
analyzing the proposed project.                                                                                                 
                                                                                                                                
3:37:18 PM                                                                                                                    
                                                                                                                                
MS.  PEASE responded  that  Commonwealth  North will  immediately                                                               
begin looking at rural and Interior LNG issues.                                                                                 
                                                                                                                                
3:37:42 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  PETERSEN asked  whether  using  methane from  the                                                               
Anchorage  landfill   to  generate  electricity  will   become  a                                                               
reality.                                                                                                                        
                                                                                                                                
3:38:10 PM                                                                                                                    
                                                                                                                                
MS.  PEASE  said  this  resource will  become  available  at  the                                                               
beginning of 2012.                                                                                                              
                                                                                                                                
3:38:31 PM                                                                                                                    
                                                                                                                                
CO-CHAIR MILLETT  asked for  a re-statement  of comments  made at                                                               
the  Regulatory   Commission  of  Alaska  (RCA),   Department  of                                                               
Commerce,  Community, &  Economic Development,  meeting regarding                                                               
pending legislation.                                                                                                            
                                                                                                                                
3:39:28 PM                                                                                                                    
                                                                                                                                
MS.  PEASE clarified  that Commonwealth  North has  not passed  a                                                               
resolution  or  made  recommendations  on  proposed  legislation;                                                               
however,  the   report  states   Commonwealth  North   is  highly                                                               
supportive of  the effort,  and calls for  a policy  direction of                                                               
all  of the  best components  of the  proposed legislation.   She                                                               
said the public process and  consumers' interests must be kept at                                                               
the  forefront  of  any  discussion  on  jointly  operated  power                                                               
generation.   Ms.  Pease  gave the  example  of Ontario,  Canada,                                                               
where the  utilities have  integrated the  private sector  with a                                                               
traditional  public-type cooperative.   However,  merging all  of                                                               
the  utilities requires  an  organization, such  as  the RCA,  to                                                               
monitor  the entity  at  the outset,  and  then deregulate  after                                                               
protecting consumers' interests.                                                                                                
                                                                                                                                
3:42:08 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RAMRAS supported deregulation.                                                                                   
                                                                                                                                
3:42:25 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHANSEN stated that  with great power comes great                                                               
responsibility.   The proposed legislation  must be  analyzed and                                                               
understood  by legislators.   He  appreciated the  fact that  the                                                               
information supplied  was helpful, but stressed  the necessity of                                                               
consumer  protection and  oversight.   He  said he  has not  been                                                               
satisfied  with  the  utilities'   responses  in  the  past,  and                                                               
emphasized  that he  will not  support  the proposed  legislation                                                               
without regulation for consumer protection.                                                                                     
                                                                                                                                
3:45:00 PM                                                                                                                    
                                                                                                                                
MS. PEASE  opined that a level  of investment in Cook  Inlet must                                                               
be maintained.   She said she would urge  deregulated gas storage                                                               
and  less   regulatory  oversight  over  gas   supply  contracts;                                                               
however, at the beginning of this  new model, the state must "get                                                               
it right."                                                                                                                      
                                                                                                                                
3:45:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHANSEN  also appreciated  Commonwealth  North's                                                               
support of getting the private sector market involved.                                                                          
                                                                                                                                
3:46:34 PM                                                                                                                    
                                                                                                                                
CO-CHAIR EDGMON asked whether  supply-side mega-projects, such as                                                               
an in-state gas  line and the Susitna  Hydroelectric Project, can                                                               
proceed concurrently.                                                                                                           
                                                                                                                                
3:47:45 PM                                                                                                                    
                                                                                                                                
MS. PEASE  opined there will be  difficulties doing mega-projects                                                               
concurrently due to capacity and financial constraints.                                                                         
                                                                                                                                
          HB 182-RAILBELT ENERGY & TRANSMISSION CORP.                                                                       
                                                                                                                                
3:48:20 PM                                                                                                                    
                                                                                                                                
CO-CHAIR MILLETT announced that the  next order of business would                                                               
be HOUSE BILL NO. 182,  "An Act establishing the Greater Railbelt                                                               
Energy  and   Transmission  Corporation   and  relating   to  the                                                               
corporation;   relating  to   transition,  financial   plan,  and                                                               
reporting  requirements   regarding  planning  for   the  initial                                                               
business   operations  of   the  Greater   Railbelt  Energy   and                                                               
Transmission  Corporation; relating  to a  report on  legislation                                                               
regarding  the Regulatory  Commission of  Alaska and  the Greater                                                               
Railbelt  Energy and  Transmission  Corporation; authorizing  the                                                               
Alaska Energy Authority to convey  the Bradley Lake Hydroelectric                                                               
Project and  the Alaska Intertie  to the Greater  Railbelt Energy                                                               
and  Transmission Corporation;  and  providing  for an  effective                                                               
date."    She  identified  the   working  document  as  Committee                                                               
Substitute    (CS)    for    HB   182,    version    26-GH1041\S,                                                               
Chenoweth/Bailey, dated 3/24/10.                                                                                                
                                                                                                                                
3:49:54 PM                                                                                                                    
                                                                                                                                
BRUCE TANGEMAN,  Chief Financial  Officer, Doyon  Utilities (DU),                                                               
informed the  committee his testimony intends  to familiarize the                                                               
committee with  his company, and to  request "equal participation                                                               
in  the  GRETC  process  currently under  consideration  by  this                                                               
legislature."  Mr. Tangeman explained  that DU is not included as                                                               
a  member  of the  joint  utility  taskforce  or the  work  group                                                               
because it  is not a  municipal or cooperative  electric utility.                                                               
However, DU  owns and operates three  Railbelt electric utilities                                                               
located at  Fort Wainwright in  Fairbanks, Fort Greely  in Delta,                                                               
and Fort Richardson in Anchorage.   In 2007, DU was awarded three                                                               
50-year  contracts  with the  Army  to  privatize twelve  utility                                                               
systems  on  the Army  posts  including  electric generation  and                                                               
distribution,   heat   distribution,  water   distribution,   and                                                               
wastewater  collection, thus  saving the  Army an  estimated $950                                                               
million.   Doyon  Utilities is  responsible to  maintain, repair,                                                               
replace, and construct  new assets as needed  to provide services                                                               
to approximately 45,000 soldiers,  family members, and civilians.                                                               
Mr.  Tangeman  noted  that investments  in  the  utilities  occur                                                               
through DU  shareholders, which has  totaled $135  million during                                                               
the  past two  years,  and  by the  investment  of federal  funds                                                               
through the  Army.   He said  DU is concerned  about its  lack of                                                               
participation in  the GRETC  process for two  main reasons:   (1)                                                               
withholding  the  wholesale rate  from  the  Army may  negatively                                                               
influence the  Base Realignment and  Closure (BRAC)  process that                                                               
keeps the posts open; (2)  the proposed legislation presumes that                                                               
funding for capital  projects will come from the  state, and from                                                               
a  funding  perspective,  there   should  be  more  diversity  in                                                               
investment.   Mr. Tangeman advised  that DU should have  an equal                                                               
seat at the  table and not as a non-voting  member without a role                                                               
in management or  investment.  In fact,  by precluding meaningful                                                               
involvement by DU and the Army  in GRETC, the state would prevent                                                               
private  or  federal  investment  in capital  projects,  and  the                                                               
efficiencies gained from a joint  utility effort would be limited                                                               
by  the exclusion  of three  electric  utilities.   He urged  the                                                               
committee  to  consider  whether  the present  structure  of  the                                                               
legislation serves the best interests of the Railbelt residents.                                                                
                                                                                                                                
3:56:36 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK asked  about the  three power  utilities and                                                               
the source of their power generation.                                                                                           
                                                                                                                                
3:56:59 PM                                                                                                                    
                                                                                                                                
MR.  TANGEMAN answered  that DU  owns and  operates a  coal-fired                                                               
power plant  for Fort Wainwright,  the Army purchases  power from                                                               
Golden  Valley Electric  Association (GVEA)  for Fort  Wainwright                                                               
and Fort Greely,  and it has a contract  with Anchorage Municipal                                                               
Light & Power  (ML&P) for Fort Richardson.   Doyon Utilities owns                                                               
the infrastructure.                                                                                                             
                                                                                                                                
3:57:30 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  MILLETT invited  Mr. Tangeman  to  explain the  changes                                                               
proposed by DU.                                                                                                                 
                                                                                                                                
3:57:55 PM                                                                                                                    
                                                                                                                                
MR. TANGEMAN suggested  the most important change to  the bill is                                                               
to  strike  "municipal"  and  "cooperatives,"  and  replace  this                                                               
language with  "public utilities."   Also, the CS  authorizes his                                                               
company  to invest,  but not  to address  "where that  funding is                                                               
going to go  and how it is  going to be used."   In addition, the                                                               
Army  should not  be  charged  retail rates.    His said  another                                                               
concern  is over  the requirement  of  a two-thirds  vote by  the                                                               
GRETC board to allow participation in capital projects.                                                                         
                                                                                                                                
4:00:19 PM                                                                                                                    
                                                                                                                                
CO-CHAIR EDGMON  asked whether a  profit-driven entity  can "mix"                                                               
in a not-for-profit structure.                                                                                                  
                                                                                                                                
4:00:53 PM                                                                                                                    
                                                                                                                                
MR.  TANGEMAN  clarified  that  50  percent of  DU  is  owned  by                                                               
Fairbanks  Sewer Water  Inc. (FSW),  and 50  percent is  owned by                                                               
Doyon Properties, Inc.                                                                                                          
                                                                                                                                
4:01:26 PM                                                                                                                    
                                                                                                                                
CO-CHAIR EDGMON re-stated his question.                                                                                         
                                                                                                                                
4:01:32 PM                                                                                                                    
                                                                                                                                
MR.  TANGEMAN  observed  that DU  is  an  economically  regulated                                                               
utility  as is  ML&P,  Alaska Electric  Light  and Power  Company                                                               
(AEL&P),  and  GVEA.    In addition,  like  other  utilities,  DU                                                               
operates under a certificate of  public convenience and necessity                                                               
(CPCN),   has  customers,   and  is   supervised  by   Regulatory                                                               
Commission of Alaska (RCA), Department  of Commerce, Community, &                                                               
Economic Development, oversight.                                                                                                
                                                                                                                                
4:02:51 PM                                                                                                                    
                                                                                                                                
CO-CHAIR EDGMON  gave the example  of DU benefitting  from public                                                               
funds as  a participant in GRETC.   He also asked  whether DU has                                                               
an opinion on RCA oversight of GRETC.                                                                                           
                                                                                                                                
4:03:06 PM                                                                                                                    
                                                                                                                                
MR. TANGEMAN, referring to the  RCA oversight of GRETC, explained                                                               
that  DU  won  its  contract   as  one  of  the  largest  utility                                                               
privatizations  with  the  federal   government  because  of  the                                                               
"bundling  aspect"  of the  12  utilities,  and also  because  DU                                                               
proposed a regulated  model.  Doyon Utilities'  business model is                                                               
transparent, and allows the Army  access to its business records.                                                               
He opined the Army "love[s]  the regulatory aspect," and would be                                                               
a strong supporter of GRETC  regulation.  In response to Co-Chair                                                               
Edgmon's first question, Mr. Tangeman said  DU is asking to be on                                                               
the  same  footing  with the  other  utilities  participating  in                                                               
GRETC, and to receive the same benefits.                                                                                        
                                                                                                                                
4:05:08 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE PETERSEN  asked whether DU  anticipates regulatory                                                               
complications because its contracts are with the military.                                                                      
                                                                                                                                
4:05:38 PM                                                                                                                    
                                                                                                                                
MR.  TANGEMAN  assured  the  committee   DU  will  research  this                                                               
question.                                                                                                                       
                                                                                                                                
4:06:07 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK questioned whether  state regulation can have                                                               
jurisdiction over military properties.                                                                                          
                                                                                                                                
4:06:41 PM                                                                                                                    
                                                                                                                                
MR. TANGEMAN explained that in  the contract the Army agreed that                                                               
the  RCA would  be  the independent  third  party overseeing  the                                                               
contract.                                                                                                                       
                                                                                                                                
4:07:25 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK further asked whether the RCA agreed.                                                                       
                                                                                                                                
4:07:42 PM                                                                                                                    
                                                                                                                                
MR.   TANGEMAN   indicated  yes.      In   further  response   to                                                               
Representative Tuck,  he said  a CPCN  is the  regulated document                                                               
issued by the RCA that allows DU to operate as a utility.                                                                       
                                                                                                                                
4:08:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  asked whether DU  obtained its CPCN  as part                                                               
of its contract with the Army.                                                                                                  
                                                                                                                                
4:08:30 PM                                                                                                                    
                                                                                                                                
MR. TANGEMAN  responded that  regulation by the  RCA was  part of                                                               
the proposal to the Army by DU.                                                                                                 
                                                                                                                                
4:09:09 PM                                                                                                                    
                                                                                                                                
MIKE O'MEARA,  Homer Spokesman, HEA Member's  Forum, informed the                                                               
committee  he  represents  "just  some  of  the  people  who  are                                                               
involved  in paying  the  bills  for all  of  this  stuff."   Mr.                                                               
O'Meara said  HEA Member's Forum  has been  in favor of  a GRETC-                                                               
type  organization  in  order to  increase  Railbelt  operational                                                               
efficiencies through  greater collaboration among  the utilities.                                                               
However,  his group  is  concerned  that there  has  not been  an                                                               
opportunity  for  ratepayers  to  be  involved  in  drafting  the                                                               
legislation.     HEA   Member's   Forum's  recommendations   are:                                                               
regulation  by the  RCA should  be over  time and  not short-term                                                               
because   the   RCA   supports  ratepayers'   interests;   better                                                               
participation by ratepayers in governance  of the system; savings                                                               
in costs  by greater efficiency and  energy conservation; support                                                               
for  achieving  the  ultimate goal  of  renewable  energy;  state                                                               
funding  should be  adequate for  the function  of GRETC  without                                                               
placing an undue burden on the participating utilities.                                                                         
                                                                                                                                
4:14:33 PM                                                                                                                    
                                                                                                                                
CHRISTINE VECCHIO,  Board Member,  MEA Ratepayers  Alliance, said                                                               
she represents  a grassroots organization formed  to provide more                                                               
information  to   the  ratepayers   in  the   Matanuska  Electric                                                               
Association (MEA)  district on energy  issues.   Her organization                                                               
participated  in the  Alaska Railbelt  Electrical Grid  Authority                                                               
(REGA) study  in 2007 and  the Railbelt Integrated  Resource Plan                                                               
(RIRP), and  she offered its perspective  on public participation                                                               
and governance  in the proposed  legislation.  The  Alaska Energy                                                               
Authority (AEA) and its consultants  worked diligently to include                                                               
stakeholders  in the  aforementioned studies,  and she  urged the                                                               
incorporation of  public participation  in the language  of GRETC                                                               
as well.   Furthermore,  her organization feels  there is  a need                                                               
for an utility  advisory group along with the  board of directors                                                               
at the  governance level  for GRETC.   This is  important because                                                               
any organization  needs public and  diverse involvement  to bring                                                               
"other  realities"  to  those  at  the  governance  level.    She                                                               
suggested an IRP  review should be done every three  years, as is                                                               
done in  Hawaii.  Ms.  Vecchio expressed her appreciation  of the                                                               
testimony from  previous witnesses  in support of  regulation and                                                               
public involvement.                                                                                                             
                                                                                                                                
4:21:19 PM                                                                                                                    
                                                                                                                                
CO-CHAIR EDGMON  referred to the audits,  reports, and regulatory                                                               
oversight  that  are already  required  in  the bill,  and  asked                                                               
whether the stakeholder group would be an addition.                                                                             
                                                                                                                                
4:22:01 PM                                                                                                                    
                                                                                                                                
MS.  VECCHIO was  unsure of  the form  of the  stakeholder group;                                                               
however, at the governance level there  is only one member of the                                                               
public appointed by the governor.   She opined one appointment is                                                               
insufficient.    In  further response  to  Co-Chair  Edgmon,  she                                                               
confirmed that the  stakeholder group would be  additional to the                                                               
regulation  and  public  participation already  included  in  the                                                               
bill.                                                                                                                           
                                                                                                                                
4:23:28 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHANSEN  referred to previous testimony  by MEA's                                                               
general  manager, and  asked whether  the  ratepayers' option  of                                                               
petitioning federal entities for relief would suffice.                                                                          
                                                                                                                                
MS. VECCHIO said a petition is  a reactive approach to a problem;                                                               
however, she is interested in  a proactive approach to the policy                                                               
and direction of the corporation in  order to avoid distrust.  In                                                               
further  response  to  Representative   Johansen,  she  said  her                                                               
preference would  be to appeal to  a state agency, rather  than a                                                               
federal agency.                                                                                                                 
                                                                                                                                
4:25:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE PETERSEN  asked whether  her concern  about public                                                               
participation would be satisfied  if the governor's appointee was                                                               
a member of a consumer group.                                                                                                   
                                                                                                                                
4:26:24 PM                                                                                                                    
                                                                                                                                
MS.  VECCHIO  observed the  appointee  would  still only  be  one                                                               
person.                                                                                                                         
                                                                                                                                
4:27:24 PM                                                                                                                    
                                                                                                                                
JIM  SYKES,  Consumer  Representative, AEA  Stakeholder  Advisory                                                               
Group;  Representative, Alaska  Public  Interest Research  Group;                                                               
Mat-Su  Energy   Issues  Coordinator,   Alaska  Center   for  the                                                               
Environment,  expressed   appreciation  to  the   committee,  the                                                               
utilities, and stakeholders for  their attention to this critical                                                               
issue.  He informed the committee  that three years ago, the REGA                                                               
study showed  the benefits  of a  unified Railbelt  energy system                                                               
even though  the stakeholders and  the utility working  group did                                                               
not meet together at the beginning  of the process, and still are                                                               
not.  However, present testimony  supports adding to the proposed                                                               
legislation the essential ingredients  of transparency and public                                                               
accountability  such as  financial  oversight, publicly  involved                                                               
governance     structure,    meaningful     regulation,    public                                                               
participation,  and  clear  mechanisms   for  issuing  equity  or                                                               
creating subsidiary corporations.   He opined financial oversight                                                               
over investments should be provided  by the AEA, rather than just                                                               
an audit.   Regarding regulation,  he said the process  should be                                                               
simplified with one  set of regulations for the  operation of the                                                               
G&T that is  accountable and transparent.  Mr.  Sykes pointed out                                                               
that there were 15 members of  the RIRP advisory group, and urged                                                               
the same  diversity for  the GRETC board  of directors;  in fact,                                                               
the current  structure calls for  a "committee of  managers," and                                                               
invites conflicts of interest.   Furthermore, in addition to more                                                               
consumer  representation,  representation for  renewable  energy,                                                               
the  elderly,  and   other  interests  is  needed.     Mr.  Sykes                                                               
acknowledged   the  need   for  urgency,   but  he   said  public                                                               
accountability issues  should not be  left behind.   He clarified                                                               
that he still supports the GRETC concept.                                                                                       
                                                                                                                                
4:33:40 PM                                                                                                                    
                                                                                                                                
CO-CHAIR EDGMON  has heard  from a variety  of groups  that there                                                               
needs to  be an  additional stakeholder  group at  the governance                                                               
level.   He asked  for information on  how utility  board members                                                               
are elected.                                                                                                                    
                                                                                                                                
4:34:45 PM                                                                                                                    
                                                                                                                                
MR. SYKES  explained that in  the Railbelt the election  of board                                                               
members  is by  about 10-15  percent  of the  shareholders.   The                                                               
elections  have  become a  hybrid  between  public and  corporate                                                               
elections,  because  few people  vote;  in  fact, public  utility                                                               
cooperatives have  lost their connection to  people, resulting in                                                               
a  low response  and low  accountability.   Although he  does not                                                               
envision a separate stakeholder  group, he suggested stakeholders                                                               
should operate on the same governing board.                                                                                     
                                                                                                                                
[CO-CHAIR MILLETT passed the gavel to Co-Chair Edgmon.]                                                                         
                                                                                                                                
4:37:26 PM                                                                                                                    
                                                                                                                                
MARY KVALHEIM  informed the  committee she  is a  Mat-Su electric                                                               
ratepayer  and  she thanked  the  committee,  the utilities,  and                                                               
stakeholders  for their  work.   She agreed  with the  concept of                                                               
Railbelt-wide  utilities,  but  stated that  her  public  service                                                               
experience  leads her  to value  public  participation in  public                                                               
issues.   She  requested  that  additional public  representation                                                               
should be  included in  the structure of  the organization.   Ms.                                                               
Kvalheim strongly urged  the committee to add  language that will                                                               
bring  regulation, and  the  knowledge  and active  participation                                                               
from the general public, to the GRETC concept.                                                                                  
                                                                                                                                
[CO-CHAIR EDGMON returned the gavel to Co-Chair Millett.]                                                                       
                                                                                                                                
4:39:43 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  MILLETT advised  that there  is no  reason to  rush the                                                               
bill through  the committee process.   The utilities  have worked                                                               
on the  legislation for nine  months, and she said  the committee                                                               
will pass  a bill out  of committee  "that this committee  ... is                                                               
behind ... [and] we are  confident that is good public policy....                                                               
Consumer  protection  is in  my  mind,  and  I  think all  of  my                                                               
colleagues  that  sit  on  this   committee  [agree],  first  and                                                               
foremost in forming a new utility."                                                                                             
                                                                                                                                
4:41:33 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  MILLETT announced  that  HB 182  was  held with  public                                                               
testimony open.                                                                                                                 
                                                                                                                                
4:43:00 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business before the committee, the House                                                                 
Special Committee on Energy meeting was adjourned at [4:43 p.m.]                                                                

Document Name Date/Time Subjects
Commonwealth North Railbelt Energy 04012010.pdf HENE 4/1/2010 3:00:00 PM
HB182CS(ENE) Fiscal Note CED-AEA-3-24-10.pdf HENE 4/1/2010 3:00:00 PM
HB 182