Legislature(2021 - 2022)BARNES 124

03/17/2022 10:15 AM House ENERGY

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10:21:02 AM Start
10:21:38 AM HB301
11:29:50 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
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Heard & Held
-- Testimony <Invitation Only> --
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                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE SPECIAL COMMITTEE ON ENERGY                                                                              
                         March 17, 2022                                                                                         
                           10:21 a.m.                                                                                           
MEMBERS PRESENT                                                                                                               
Representative Calvin Schrage, Chair                                                                                            
Representative Matt Claman                                                                                                      
Representative Tiffany Zulkosky                                                                                                 
Representative George Rauscher                                                                                                  
Representative Zack Fields                                                                                                      
MEMBERS ABSENT                                                                                                                
Representative Chris Tuck                                                                                                       
Representative James Kaufman                                                                                                    
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 301                                                                                                              
"An Act relating to the establishment of a renewable portfolio                                                                  
standard for regulated electric utilities; and providing for an                                                                 
effective date."                                                                                                                
     - HEARD & HELD                                                                                                             
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HB 301                                                                                                                  
SHORT TITLE: UTILITIES: RENEWABLE PORTFOLIO STANDARD                                                                            
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
02/04/22       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/04/22       (H)       ENE, L&C, FIN                                                                                          
03/08/22       (H)       ENE AT 10:15 AM BARNES 124                                                                             
03/08/22       (H)       Heard & Held                                                                                           
03/08/22       (H)       MINUTE(ENE)                                                                                            
03/10/22       (H)       ENE AT 10:15 AM BARNES 124                                                                             
03/10/22       (H)       Heard & Held                                                                                           
03/10/22       (H)       MINUTE(ENE)                                                                                            
03/15/22       (H)       ENE AT 10:15 AM BARNES 124                                                                             
03/15/22       (H)       Heard & Held                                                                                           
03/15/22       (H)       MINUTE(ENE)                                                                                            
03/17/22       (H)       ENE AT 10:15 AM BARNES 124                                                                             
WITNESS REGISTER                                                                                                              
BRAD JANORSCHKE, General Manager                                                                                                
Homer Electric Association, Inc.                                                                                                
Homer, Alaska                                                                                                                   
POSITION  STATEMENT:    Co-provided   a  PowerPoint  presentation,                                                            
discussed proposed amendments, and answered questions on HB 301.                                                                
BRIAN HICKEY, Chief Operating Officer                                                                                           
Chugach Electric Association, Inc.                                                                                              
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:    Co-provided   a  PowerPoint  presentation,                                                            
discussed proposed amendments, and answered questions on HB 301.                                                                
DANIEL HECKMAN, Regulatory Analyst                                                                                              
Golden Valley Electric Association                                                                                              
Fairbanks, Alaska                                                                                                               
POSITION  STATEMENT:    Co-provided   a  PowerPoint  presentation,                                                            
discussed proposed amendments, and answered questions on HB 301.                                                                
ACTION NARRATIVE                                                                                                              
10:21:02 AM                                                                                                                   
CHAIR  CALVIN  SCHRAGE  called  the  House  Special  Committee  on                                                            
Energy meeting  to order  at 10:21  a.m.  Representatives  Claman,                                                              
Rauscher,  and  Schrage  were  present   at  the  call  to  order.                                                              
Representatives  Zulkosky and  Fields arrived  as the meeting  was                                                              
in progress.                                                                                                                    
         HB 301-UTILITIES: RENEWABLE PORTFOLIO STANDARD                                                                     
10:21:38 AM                                                                                                                   
CHAIR SCHRAGE announced  that the only order of  business would be                                                              
HOUSE BILL  NO. 301, "An  Act relating  to the establishment  of a                                                              
renewable  portfolio standard  for  regulated electric  utilities;                                                              
and providing for an effective date."                                                                                           
10:22:26 AM                                                                                                                   
BRAD  JANORSCHKE,  General Manager,  Homer  Electric  Association,                                                              
Inc. (HEA), thanked the committee and introduced the co-                                                                        
10:22:54 AM                                                                                                                   
BRIAN   HICKEY,   Chief  Operating   Officer,   Chugach   Electric                                                              
Association,   Inc.  ("Chugach"),   thanked   the  committee   and                                                              
expressed  interest in  Renewable  Portfolio  Standards (RPS)  and                                                              
the decarbonization of the economy.                                                                                             
10:23:17 AM                                                                                                                   
DANIEL  HECKMAN,   Regulatory  Analyst,  Golden   Valley  Electric                                                              
Association  (GVEA),  thanked  the  committee  and  expressed  his                                                              
support for a sustainable, renewable standard for the Railbelt.                                                                 
10:23:52 AM                                                                                                                   
MR.   JANORSCHKE   began  the   Railbelt   utilities'   PowerPoint                                                              
presentation  [included  in  the  committee packet]  on  slide  3,                                                              
which  showed a  brief overview  of HB  301.  He  shared that  the                                                              
Railbelt  utilities  sent a  letter  to  the governor  in  January                                                              
[2022], relating  their support  of diversifying  the energy  mix.                                                              
As 85 percent  of Railbelt electricity comes from  natural gas, he                                                              
expressed the opinion  that, from a business perspective,  none of                                                              
the Railbelt utilities  want to be dependent on one  resource.  In                                                              
example, he referenced  that Harbor Electric requested  bids three                                                              
years ago  for a five-year  natural gas  contract.   He emphasized                                                              
that there  had been only one bid  to meet 85 percent  of members'                                                              
needs.   He said that when  a fuel component  represents one-third                                                              
of the  electric bill,  "it is hard  to look a  member in  the eye                                                              
and  say, 'I  got you  the  best deal  possible.'"   He  expressed                                                              
appreciation  of the supplier,  but from  a business  perspective,                                                              
"it is  putting a lot  of eggs in one  basket."  He  explained the                                                              
biggest  challenge  would  be  the lack  of  transmission  in  the                                                              
system.   He  stated,  with support,  a  more robust  transmission                                                              
system could be  built, which would enable diversification  of the                                                              
generation  portfolio to  include other resources.   He  expressed                                                              
the opinion that  the only way forward, so the  ratepayers are not                                                              
carrying  all  of the  burden,  would  be participation  from  the                                                              
10:27:11 AM                                                                                                                   
MR. JANORSCHKE  referenced slide  4, which addressed  specifics of                                                              
the  proposed  legislation.   He  pointed  out the  importance  of                                                              
having   achievable   goals.     He   stated   that   transmission                                                              
constraints are one  of the largest hurdles for  the utilities and                                                              
the independent  power  producers, who  need to  put power  on the                                                              
grid  without upward  pressure on  rates.   He  argued that  using                                                              
economies of  scale would be  the only  way not to  pressure rates                                                              
upward  while  incorporating  renewable   energy.    Economies  of                                                              
scale, whether  wind or  solar, mean a  large number  of resources                                                              
are  in  a  single  location.   He  emphasized  that  the  current                                                              
transmission system could not handle this.                                                                                      
10:29:14 AM                                                                                                                   
REPRESENTATIVE  RAUSCHER expressed the  opinion that  some "lofty"                                                              
goals  have been  set out  in HB  301.   In regard  to 80  percent                                                              
renewables by 2040,  he questioned the percentage  [of renewables]                                                              
HEA is currently using.                                                                                                         
MR.  JANORSCHKE  responded that  HEA  is  using about  15  percent                                                              
renewable  energy.    He  clarified,  while  renewable  energy  is                                                              
referred  to as non-firm  energy, hydroelectric  is considered  to                                                              
be firm energy.   He indicated that 15 percent of  HEA's needs are                                                              
met  by  the  Bradley  Lake  and  Battle  Creek  facilities.    He                                                              
expressed the opinion that most utilities "love hydropower."                                                                    
10:30:35 AM                                                                                                                   
MR. HICKEY  stated  that [slide  5] summarizes  [the focus  of the                                                              
proposed amendments  that the Railbelt utilities  submitted to the                                                              
governor].   Highlighting  some  of  the points  in  the list,  he                                                              
began  by   expressing  the  opinion   that  caps  on   costs  and                                                              
reliability should  be incorporated  in the proposed  legislation.                                                              
To  stop consumer  costs  from becoming  too  high, he  maintained                                                              
that the Regulatory  Commission of Alaska (RCA) should  be able to                                                              
suspend  RPS  if costs  exceed  a  certain threshold.    Directing                                                              
attention to  another point,  he voiced  the opinion that  targets                                                              
and  timelines  should  be  based   on  analysis  and  achievable.                                                              
Referencing the  results from Senate  Bill 123 [passed  during the                                                              
Thirty-First  Alaska State  Legislature],  he  stated, since  that                                                              
time, "thousands  of hours" have been spent developing  a Railbelt                                                              
Reliability  Council  (RRC).    He indicated  that  RRC  has  been                                                              
incorporated,  and  an  application  for  certification  has  been                                                              
completed  and will  be submitted  to RCA, with  the intention  of                                                              
making RRC  the electric  reliability organization  (ERO)  for the                                                              
Railbelt.   He  voiced  that,  in this  role,  RRC  would vet  the                                                              
pathways  forward  into a  "decarbonized"  future,  with the  work                                                              
done through a consensus  process.  He explained that,  to pass an                                                              
integrated   resource  plan,   the  consensus   would  entail   an                                                              
agreement  between utility  members  and stakeholders.   As  there                                                              
has only  been one application,  he expressed the belief  that RRC                                                              
would  be ERO for  the Railbelt,  and this  organization would  be                                                              
active as early as this fall.                                                                                                   
MR. HICKEY,  making another point,  mentioned that  RPS milestones                                                              
should  be  coordinated  with  the   planned  replacement  of  the                                                              
existing Railbelt  generators.  He expressed the  expectation that                                                              
most of  the generation in  the Railbelt  will be "rolled  off the                                                              
books by 2060,"  depreciating current assets by 2030  or 2060.  He                                                              
suggested that  coordinating the  targets with depreciation  would                                                              
eliminate   the  prospect   of  "stranded   investment"  and   the                                                              
associated  cost.    He  stated that  because  the  utilities  are                                                              
cooperatives,  costs would go  right to the  consumers.   If there                                                              
are events  outside  the control  of the utilities,  he said,  RCA                                                              
should  be  required to  take  this  into  account and  allow  the                                                              
utilities to skip targets.                                                                                                      
10:34:28 AM                                                                                                                   
MR.  HICKEY gave  examples  of the  challenges  for the  utilities                                                              
concerning  the  timelines  in HB  301.    He stated  if  specific                                                              
timelines are  required, the  utilities would  need help  from the                                                              
legislature  to fast-track permits.   In  terms of compliance,  he                                                              
argued  that the  collected  fines  should be  used  to invest  in                                                              
infrastructure   supporting  renewable  energy.     In   terms  of                                                              
compliance difficulties,  he emphasized the following  points: the                                                              
Railbelt  grid is  small  and isolated,  utilities  make the  only                                                              
electricity  available,  and limited  transfer  capability  exists                                                              
between Kenai  to Anchorage.   In his  next point, he  maintained,                                                              
if  the wind  implemented in  Fairbanks is  to be  used in  Homer,                                                              
transmission  interconnections  would need  to  be  enhanced.   He                                                              
estimated  that this would  need billion-dollar  investments.   He                                                              
then addressed  his opinion  that HB 301  leans toward the  use of                                                              
purchase  power   agreements  (PPAs),  which  would   enhance  the                                                              
development of resources  outside of the utilities.   He expressed                                                              
the opinion  that this  could be cost  effective, but  he reasoned                                                              
it may  be more cost  effective to do  this internally.   He said,                                                              
"The legislation  should be  balanced as to  whether the  asset is                                                              
developed  within  the  utilities'  structure  or  purchase  power                                                              
arrangements with other entities."                                                                                              
MR. HICKEY moved  to [slide 6], which began the  listed amendments                                                              
presented to  the governor.   He stated  that [Amendment  1] would                                                              
shift  the  [RPS]  requirement  for each  utility  to  a  regional                                                              
requirement.     He  explained   that  a  target   for  individual                                                              
utilities would  create competition for resources;  otherwise, the                                                              
resources  would be  developed together,  generating economies  of                                                              
scale.   Because  of  the permitting  and  the  design issues,  he                                                              
expressed  the  opinion  that  the 2025  target  in  the  proposed                                                              
legislation would  not be achievable.   He stated  that [Amendment                                                              
2  on slide  7] would  remove  this, and  other  targets would  be                                                              
adjusted.   He maintained,  [per  Amendment 3  and Amendment  4 on                                                              
slide 8],  that PPAs and internal  development should be  done "on                                                              
an equal footing."                                                                                                              
10:38:13 AM                                                                                                                   
MR.  HICKEY, in  response  to Representative  Rauscher,  explained                                                              
that  in 2010  the  upgrades to  the  transmission  system in  the                                                              
Alaska  Energy   Authority's  (AEA's)   resource  plan   had  been                                                              
estimated to be  around $900 million.  He voiced  the opinion that                                                              
the  current cost  would  be  closer to  $2.5  billion.   He  said                                                              
bringing this  amount to  the utilities  and the ratepayers  would                                                              
be a "bridge too far."                                                                                                          
10:39:22 AM                                                                                                                   
MR.  HECKMAN,  beginning  on  slide 9,  stated  that  Amendment  5                                                              
addresses  concerns  on  costs and  reliability  in  the  proposed                                                              
legislation.  He  explained that it would give  RCA oversight over                                                              
RPS.   If RCA  finds RPS to  be contrary  to the public  interest,                                                              
RCA will  have the ability  to suspend RPS,  in whole or  in part.                                                              
He continued, if  the cost to comply [with RPS]  exceeds a certain                                                              
percentage, RCA would  be allowed to stay a requirement  to comply                                                              
with  RPS.   He  informed the  committee  that  the definition  of                                                              
"public  interest" exists  in  statute and  commission  precedent.                                                              
He said this  [amendment] pivots back  to the idea that  ERO would                                                              
be the  proper mechanism  for RPS considerations.   In  making the                                                              
decision  to stay a  requirement  to comply with  RPS, he  stated,                                                              
RCA  would  take   into  consideration  impacts   to  reliability,                                                              
resiliency, and security.                                                                                                       
MR.  HECKMAN, [moving  to slide  10], stated  that [Amendment  6],                                                              
would change  language in  relation to  noncompliance issues.   He                                                              
explained, in  relation to an  RPS noncompliance issue,  RCA would                                                              
be required  to consider events  and circumstances outside  of the                                                              
control  of  the load-serving  entities.    He stated  that  [RCA]                                                              
would be  given no discretion,  but it  would have the  ability to                                                              
revise  and expand  these options  through  its judicial  process,                                                              
which is currently in statute.                                                                                                  
MR. HECKMAN,  [moving to  slide 11 and  Amendment 7],  stated that                                                              
currently the  proposed legislation would  not allow for  the cost                                                              
of noncompliance  fines to  be included  in load-serving  entities                                                              
rates.    He explained  the  Railbelt  is  made up  of  electrical                                                              
cooperatives  which are  entirely different  business models  than                                                              
investor-owned  utilities, and  the consumers  eventually pay  for                                                              
the  cost of  electricity.   Language  would  be  modified so  the                                                              
noncompliance  fine must  be used,  either  through the  Renewable                                                              
Energy Fund  (REF), or  another fund, to  invest in  the renewable                                                              
energy infrastructure in the electrical region of the utility.                                                                  
10:43:34 AM                                                                                                                   
REPRESENTATIVE   ZULKOSKY  questioned   the   capital  needed   to                                                              
implement  the proposed legislation  and  whether the state  would                                                              
be expected to  invest.  She expressed the understanding  that the                                                              
utilities would need some level of investment, likely from REF.                                                                 
MR.  HECKMAN  stated that  the  amendment  did not  express  this;                                                              
although,  there  are significant  capital  costs  which would  be                                                              
incurred  in  order  to  comply  with RPS.    He  added  that  the                                                              
National  Renewable Energy  Laboratory's  (NREL's)  study did  not                                                              
address  these costs.    He  expressed uncertainty  whether  funds                                                              
would come from REF.  He deferred to his colleagues.                                                                            
MR.   JANORSHKE  expressed   agreement   with   Mr.  Heckman,   as                                                              
significant investment  would be  needed for transmission  issues.                                                              
He  mentioned  Mr.  Hickey's  reference  to over  $2  billion  for                                                              
improvements  in a transmission  plan.   He expressed  the opinion                                                              
that if  the utilities have  to fund these improvements,  "they're                                                              
never going  to happen,"  as most of  the utilities  are sensitive                                                              
about rates.   He acknowledged that  some comments have  been made                                                              
which convey  that the  utilities had  overbuilt in recent  years.                                                              
He argued that those  in the industry, who run  the systems, "know                                                              
there  is nothing  further  from  the truth."    He described  the                                                              
three load-serving  areas as separated  by avalanche  chutes, vast                                                              
mountains, and  public lands.  Between  these areas, he  said, "We                                                              
have  a   simple  extension  cord,"   so  utilities  have   to  be                                                              
independent  and produce  their  own power,  as  the power  "never                                                              
goes out  when it  is 60  above, it  is always  30 below when  the                                                              
power  goes out  for  a long  period  of time."    In example,  he                                                              
referenced an older  power system, which has been  retained in the                                                              
event of  a local  active volcano  producing fly  ash.   The older                                                              
system would  be used as a reserve  to save the newer  system.  He                                                              
said the  older system "may  burn a lot of  fuel ... but  with fly                                                              
ash in the area  you don't care, you save your  good stuff ... and                                                              
run the old stuff."                                                                                                             
10:47:18 AM                                                                                                                   
REPRESENTATIVE  ZULKOSKY,  with  a follow-up  question,  mentioned                                                              
AEA's initial presentation,  and its reference to  $261 million in                                                              
transmission  line and  energy-storage projects  for the  proposed                                                              
legislation.   She suggested  that [these  funds] could  also help                                                              
achieve  some  other  projects  and goals.    She  questioned  the                                                              
utilities'  involvement in  the assessment  and the timeframe  for                                                              
capital projects needed to achieve the goals of HB 301.                                                                         
MR.  JANORSCHKE   responded  that  there  have   been  discussions                                                              
between  Railbelt   utilities,  AEA,   and  the  Bradley   Project                                                              
Management  Committee.  He  said the  utilities concur  with AEA's                                                              
analysis   on  the   transmission  upgrades,   pointing  out   the                                                              
bottleneck  between Soldotna  and Anchorage.   He described  HEA's                                                              
Tesla   batteries,    which   would    help   provide    frequency                                                              
stabilization for  the Bradley Lake  facility.  He added  that the                                                              
batteries  also  help  with  real-time   reserves  and  create  an                                                              
opportunity  in the future  to integrate  non-firm resources.   He                                                              
said,  "There is  a lot the  state can  do to  help the  utilities                                                              
resolve some  issues and make some  of the milestones ...  in this                                                              
proposed legislation a reality."                                                                                                
10:50:41 AM                                                                                                                   
MR.   HICKEY,  also   responding   to  Representative   Zulkosky's                                                              
question, expressed  the belief that  [$261 million] would  not be                                                              
the final  amount, as  the numbers  AEA provided  were step  1 and                                                              
step  2  out  of  the 14-step  process  to  build  assets  in  the                                                              
Railbelt.    He  stated  that  this   sum  would  only  provide  a                                                              
[transmission]  line halfway  from  the Bradley  Lake facility  to                                                              
Anchorage.  Listing  other projects, he stated that  Kenai needs a                                                              
new line, the  central region of the Railbelt  needs improvements,                                                              
and  a line  from  Anchorage  to  Healy needs  to  be  built.   He                                                              
estimated   that  $2.5  billion   would  be   needed.     Per  Mr.                                                              
Janorschke's other  point, he said,  in a power-pool  arrangement,                                                              
Chugach and  the Matanuska  Electric Association are  constructing                                                              
a   70-megawatt  battery   in   Anchorage   designed  to   provide                                                              
reliability  and correct frequency-control  issues concerning  the                                                              
Bradley  Lake facility.   He  emphasized the  necessity to  repair                                                              
this  problem.    He  added  that  this  battery  fix  could  also                                                              
integrate more renewables and reduce the fuel burn.                                                                             
REPRESENTATIVE  ZULKOSKY, after hearing  the details  of achieving                                                              
the goals  in HB 301,  expressed the  realization that  this would                                                              
take decades of work.                                                                                                           
MR. HICKEY responded in the affirmative.                                                                                        
10:54:05 AM                                                                                                                   
REPRESENTATIVE  RAUSCHER  questioned [GVEA's]  current  percentage                                                              
of renewables.                                                                                                                  
MR. HECKMAN  responded that  he does not  have the exact  numbers.                                                              
He stated  that GVEA has a  26 percent carbon-reduction  goal.  He                                                              
offered  to  follow  up  after  the  meeting  with  the  requested                                                              
REPRESENTATIVE  RAUSCHER,  directing  a question  to  Mr.  Hickey,                                                              
asked whether the  Fire Island Wind Farm goals were  achieved.  He                                                              
requested any details Mr. Hickey may have.                                                                                      
MR. HICKEY  responded that  slide [19]  in the presentation  shows                                                              
the  actual cost  of the  various  non-dispatchable renewables  on                                                              
the Railbelt  grid.  He explained  that the Fire Island  Wind Farm                                                              
was built  as a "hedge" on  the projection of rising  fuel prices,                                                              
but fuel prices  have not risen as projected.  Noting  that a part                                                              
of the graph's legend  is missing, he indicated the  brown line in                                                              
the middle  of the  graph represents the  Fire Island  Wind Farm's                                                              
cost going  back to 2013.   He stated that Chugach's  avoided cost                                                              
is below this and is depicted as the red-dotted line.                                                                           
MR.  HICKEY, in  response to  a  follow-up question,  stated if  a                                                              
"hedge"  is bought  and prices rise,  this would  be considered  a                                                              
"win."   He  explained  that because  the price  of  fuel has  not                                                              
risen  as  fast as  projected,  the  [Fire  Island Wind  Farm]  is                                                              
costing money;  however,  risks for potential  higher [fuel]  cost                                                              
have been mitigated.                                                                                                            
REPRESENTATIVE  RAUSCHER  commented  that  the discussion  of  [HB
301]  has  been  based on  projected-fuel  [prices],  not  capital                                                              
costs.  He  stated that the Fire  Island Wind Farm [was  built] on                                                              
projected-fuel  cost, but  the results  "came up  different."   He                                                              
pointed out the  difficulty in basing the proposed  legislation on                                                              
a projection, and he posited whether this "is a good idea."                                                                     
10:58:01 AM                                                                                                                   
REPRESENTATIVE  FIELDS  commented  that  Mr.  Hickey  has  already                                                              
partly  answered  his question.    Continuing, he  questioned  the                                                              
difference between  shovel-ready projects  in the Railbelt,  which                                                              
would total  $995 million,  and projects  that "we actually  need"                                                              
that  are not  shovel ready.   He  expressed  the assumption  that                                                              
some projects,  which are  not shovel  ready, are actually  needed                                                              
for  integration  and  renewables.   He  questioned  the  projects                                                              
which would  require further  planning.   He expressed  the belief                                                              
that Mr.  Hickey anticipated around  $2.5 billion  in transmission                                                              
costs  for   integrating  intermittent   energy  sources   in  the                                                              
MR.  HICKEY   expressed  the  understanding   that  Representative                                                              
Fields was  correct.  He  pointed out the  change in the  value of                                                              
money between  2010 and 2022, which  represents a large  amount of                                                              
the costs.   He gave  examples of Chugach's  increased costs.   He                                                              
explained  that the  cost to  build transmission  in the  Railbelt                                                              
would be  about $1  million per  mile.   He described  the various                                                              
components  in the  process  to build  transmission  and said  the                                                              
$2.5 billion  is a "very, very  rough" estimate, but not  "off the                                                              
11:00:04 AM                                                                                                                   
MR. HICKEY  moved to  slide 12,  which compares  the Railbelt  and                                                              
the Lower 48.   He indicated that the state produces  an estimated                                                              
35  million metric  tons  of carbon  per  year,  and the  Railbelt                                                              
produces 7.7 percent  of this.  He expressed the  opinion that the                                                              
decarbonization  of  the  economy would  require  a  decarbonized-                                                              
electric   grid.     He   expressed  excitement   concerning   the                                                              
challenge,  referring  to [part  of  the challenge]  as  balancing                                                              
rates in a  cost-effective way.   He described a key issue  as the                                                              
transition  away from  natural gas  in Cook Inlet.   Depending  on                                                              
the utility, he  said, 70 percent of the electricity  produced [in                                                              
the  Railbelt] is  generated  from  Cook Inlet  natural  gas.   He                                                              
said,  "None of  us  like that,  but  that is  the  reality."   In                                                              
addition  to this,  he  said,  most of  the  home  heating in  the                                                              
Matanuska-Susitna  Borough and  the Municipality  of Anchorage  is                                                              
from this  source.   He stated  that moving  away from  Cook Inlet                                                              
natural gas could  impact home-heating prices.  He  said, "I think                                                              
we have  to look at  it from  a holistic perspective  - of  how we                                                              
move off of this,  and how we don't get too far  away from what we                                                              
need - to keep the lights on and  heat homes in the wintertime."                                                                
MR.   HICKEY   reiterated   that  the   Railbelt   utilities   are                                                              
cooperatives, with  no shareholders, so  the costs go  directly to                                                              
the ratepayers.   He addressed the issue concerning  redundancy in                                                              
the Railbelt grid,  expressing the opinion that the  grid does not                                                              
have  redundancies.    Concerning  isolated grids  in  Alaska,  he                                                              
stated that  these do not operate  the same as grids in  the Lower                                                              
48.   He explained  that  the things  which happen  over hours  on                                                              
large  grids would  happen within  seconds  in the  Railbelt.   He                                                              
referred  to  [electrical]  frequency  as  the  primary  operating                                                              
variable;  when there is  rapid change  [in frequency],  blackouts                                                              
happen.    As a  last  point,  he  said,  "As we  move  into  this                                                              
decarbonized  future, I  think  we have  to  be very  careful.   I                                                              
think that  technology is going  to advance rapidly over  the next                                                              
10 or  20 years."   He continued, stating  that [new]  power could                                                              
come  from small  nuclear,  electro fuel,  or  hydrogen based,  as                                                              
billions  of dollars  are being  put into research.   He  reasoned                                                              
that,  while Alaska  needs to  move  forward, the  state does  not                                                              
need to  be locked  into a  20- or 30-year  investment  when other                                                              
technology  becomes viable.   He  expressed the  opinion that  the                                                              
Susitna-Watana Hydroelectric  Project ("Susitna-Watana")  may have                                                              
to be built,  but this should be  put off as long as  possible, as                                                              
other  technologies may  be developed.   He moved  to [slide  13],                                                              
pointing  out  the "great  work"  in  NREL's study;  however,  the                                                              
study  was only  the first  step of many  steps which  need  to be                                                              
11:05:51 AM                                                                                                                   
MR.   JANORSHKE,  in   closing  the   presentation,  thanked   the                                                              
committee.    As  the  longest  serving  utility  manager  on  the                                                              
Railbelt, he  voiced excitement for  the new collaboration  in the                                                              
Railbelt.  Concerning  HEA, he related that many  investments over                                                              
the   years  have   been  made   to  utilize   natural  gas   more                                                              
efficiently;  however, he stated  that "it  does make  me nervous"                                                              
when 85  percent of the  energy comes from  a single  supplier and                                                              
resource.    He   concluded  that,  as  a  result,   the  Railbelt                                                              
utilities are actively  trying to reduce risk,  improve the system                                                              
with  non-firm and  renewable  options,  maintain  the quality  of                                                              
service, and not  raise rates.  He expressed  appreciation for the                                                              
committee's support.                                                                                                            
11:08:02 AM                                                                                                                   
REPRESENTATIVE  FIELDS  referenced  the testimony  in  a  previous                                                              
committee  meeting which  conveyed that  the grid  in Colorado  is                                                              
isolated.    In  relation  to  an  isolated  grid,  he  questioned                                                              
whether the Railbelt learned from Colorado's operations.                                                                        
MR. HICKEY  expressed his understanding  that, while  Colorado has                                                              
isolated power plants  that replicate Alaska, its  grid is heavily                                                              
connected  at the  Four Corners  to  the Western  Interconnection.                                                              
He stated  that some of the  events in Colorado have  been studied                                                              
but only in the isolated areas.                                                                                                 
REPRESENTATIVE  FIELDS, with  a follow-up  question, related  that                                                              
Colorado has intermittent  sources of energy.   When these sources                                                              
are not "cranking-out"  energy, he questioned whether  Colorado is                                                              
pulling energy from across the West.                                                                                            
MR. HICKEY responded in the affirmative.                                                                                        
REPRESENTATIVE  FIELDS expressed  shock at  the drop  in costs  in                                                              
the  Lower   48  for   wind-plus-storage  and   solar-plus-storage                                                              
[installations].   He questioned the cost  of this in Alaska.   He                                                              
suggested that the cost margin would be geographically driven.                                                                  
11:10:11 AM                                                                                                                   
MR.  JANORSCHKE  deferred the  question  to  Mr. Heckman  and  Mr.                                                              
MR.  HECKMAN explained  that GVEA  has  not issued  a request  for                                                              
proposals   (RFPs);  rather,   it   has  issued   a  request   for                                                              
information  (RFI).   He  stated  that this  was  issued with  the                                                              
intention  to get  project  proposals  from different  vendors  to                                                              
help   meet   carbon-reduction    goals,   while   not   impacting                                                              
reliability  or  rates.    He  described  GVEA  as  being  at  the                                                              
northern  end of  the  Railbelt.   He  stated  that  none of  RFIs                                                              
"moved the  mark" with  the carbon-reduction  goals, so  no action                                                              
has been taken.   He added that this has not  stopped the process,                                                              
and  GVEA  is  still  looking to  integrate  these  sources.    He                                                              
speculated  that, depending  on the interconnection  and  the fuel                                                              
source, the costs could be high.                                                                                                
REPRESENTATIVE  FIELDS, with a  follow-up question,  asked whether                                                              
any of the providers stated a cost.                                                                                             
MR. HECKMAN responded  that he is not at liberty  to speak to this                                                              
specific information.                                                                                                           
11:12:13 AM                                                                                                                   
MR.  HICKEY   explained  that   Chugach  had  recently   collected                                                              
responses to  its RFP.  Per  the prices, he directed  attention to                                                              
[slide  19] and  the green  line at the  top of  the graph,  which                                                              
represents  pricing of  PPAs for  wind and  solar in  Hawaii.   He                                                              
compared  this with the  brown line  at the  bottom of  the graph,                                                              
which represents  PPAs in the  Southern U.S.   He stated  that the                                                              
reason for  the price  difference is  financiers are unwilling  to                                                              
take on the avoided  cost in Hawaii because it has  no market.  He                                                              
deduced  that Alaska  would have  the same  challenge.   Comparing                                                              
the [lower]  prices in the Southern  U.S., he stated  that Chugach                                                              
has received  RFPs, but  they are  unregulated, and regulation  in                                                              
Alaska can  double the cost of  projects.  He stated  that Chugach                                                              
received  a  broad range  of  prices  from  13 proposals,  with  3                                                              
proposals being from  outside of Alaska.  He  offered that Chugach                                                              
has not acted on any of them.                                                                                                   
REPRESENTATIVE  FIELDS  questioned   whether  Mr.  Hickey  was  at                                                              
liberty to talk about the price range he has experienced.                                                                       
MR.  HICKEY  responded   that  the  price  is   somewhere  between                                                              
Chugach's avoided  cost and  the current cost  of the  Fire Island                                                              
Wind.  He pointed  out that the areas [outside  of Alaska] started                                                              
small  and "got  their  feet  under them."    He opined  that  the                                                              
[Railbelt] utilities  perform competently,  and "if  our directive                                                              
is to make this happen, we will make it happen."                                                                                
11:16:08 AM                                                                                                                   
REPRESENTATIVE  ZULKOSKY offered her  appreciation for  the candid                                                              
conversation.  She  stated that the testimony has  underscored the                                                              
lack  of resiliency  and redundancy.   She  expressed the  opinion                                                              
that rural Alaska  is years behind the Railbelt.   She underscored                                                              
the  need  for capital  projects  to  build  the  grid out  in  an                                                              
equitable way.   She referenced  the number of years  the Railbelt                                                              
utilities  have taken  to come  into alignment  with [Senate  Bill                                                              
123].   Concerning  the implementation  of HB  301, she  mentioned                                                              
the  significant  investment  Mr.  Hickey's  testimony  addressed.                                                              
She said,  "What we see in  rural Alaska is that  renewable energy                                                              
is certainly  not a magic silver  bullet for affordability."   She                                                              
stated that renewables  had been sold with this idea  for a number                                                              
of years.   Considering the required capital projects,  the actual                                                              
cost,  and the  economies of  scale, she  said [implementation  of                                                              
the proposed  legislation] would need  to be done in  a thoughtful                                                              
way, even in urban  Alaska.  She offered her  appreciation for the                                                              
consideration  of the  unique  demographics in  the  state in  the                                                              
pursuit   of  energy   diversification.      She  reiterated   her                                                              
appreciation of the "thoughtful, candid" presentation.                                                                          
11:19:01 AM                                                                                                                   
REPRESENTATIVE  FIELDS,  voicing   agreement  with  Representative                                                              
Zulkosky,  stated that  it  is important  to  approach  this in  a                                                              
thoughtful way.   He expressed hope that the  administration would                                                              
make capital  investments.   He shared that  he had done  the math                                                              
on  the transmission  cost, and,  as  a ratepayer,  he voiced  the                                                              
opinion that the  cost would be reasonable.  He  allowed that some                                                              
[ratepayers] may  not be able  to absorb  the cost.   He expressed                                                              
the opinion  that the  oil-revenue windfall could  be used  to pay                                                              
down  transmission costs,  for example.   Concerning  intermittent                                                              
energy generation  and the need for storage,  he referenced NREL's                                                              
study  and assumed  that Susitna-Watana  would not  be built.   He                                                              
expressed  the belief  that gas  generation would  be kept  online                                                              
when renewables  are not  being produced.   He questioned  whether                                                              
the only backup  energy would be gas and pump storage.   Given the                                                              
latitude and  isolation of the  grid, he questioned  whether there                                                              
would be other alternatives.                                                                                                    
MR.  JANORSCHKE  voiced  agreement   with  Representative  Fields'                                                              
comments and responded  that there are some options.   He provided                                                              
the opinion  that, considering  implementation  of RPS, gas  would                                                              
be relied  on for "many,  many, many years  to come"  because wind                                                              
and solar  are not reliable  in the winter.   He pointed  out that                                                              
the Dixon Diversion  Hydro Project is an opportunity  which should                                                              
be  considered.     He  voiced   the  opinion  that   the  storage                                                              
capabilities of the  Bradley Lake and Battle Creek  facilities are                                                              
"fantastic" but  easy to discount.   Referring to  lightweight gas                                                              
units currently in  use, he said that because they  can be backed-                                                              
off easily,  they are considered  efficient storage units  in real                                                              
time.    He voiced  the  opinion  that  storage hydro  is  another                                                              
alternative,  and,  since  2004,  batteries have  had  a  positive                                                              
impact  on GVEA's grid.   He  stated that  the Railbelt  utilities                                                              
are continuing to  invest in batteries.  Comparing  the Railbelt's                                                              
grid to  large grids  in the Lower  48, he  explained that  when a                                                              
unit  is tripped  in the  Railbelt, every  utility is  immediately                                                              
aware,  creating  a   panic;  however, when  a  unit  trips in  an                                                              
extremely  large plant,  it  is hardly  detectable  in the  grid's                                                              
frequency.   Referring to  the Railbelt,  he said,  "It is  a very                                                              
tightrope we are walking right now."                                                                                            
11:24:05 AM                                                                                                                   
MR. HICKEY pointed  out the importance of the  distinction between                                                              
energy  and capacity:  energy  is used  in  kilowatt hours,  while                                                              
capacity  is the  amount of  energy  available for  delivery in  a                                                              
given moment.  Every  year, on an energy basis,  the Railbelt uses                                                              
about  4,800  gigawatt  hours, while  Fire  Island  Wind  produces                                                              
about  50  gigawatt   hours,  Bradley  Lake  produces   about  400                                                              
gigawatt  hours,  and Dixon  Creek  produces around  200  gigawatt                                                              
hours.   He  postulated, if  Susitna-Watana were  built, it  would                                                              
produce  2,800   gigawatt  hours  every  year.     Concerning  the                                                              
magnitude of replacing  [the entire Railbelt's]  energy generation                                                              
in 18 years,  he expressed the opinion  that there needs  to be an                                                              
understanding of the  amount of wind actually there  and its cost.                                                              
He  acknowledged   that  he  did  not  answer   the  question  and                                                              
requested Representative Fields to follow up.                                                                                   
REPRESENTATIVE    FIELDS    responded    with   a    follow    up:                                                              
notwithstanding  gas  and  developing  technologies,  he  inquired                                                              
whether there  are other  practical options  available to  provide                                                              
reliability with intermittent generation.                                                                                       
MR.  HICKEY  responded that  there  has  been  a large  amount  of                                                              
interest  in  pump   storage.    He  said  that,   generally,  the                                                              
economics  of pump  storage are  effective.   He stated that  very                                                              
large power  plants cannot be shut  down below the minimums,  so a                                                              
pump-storage  facility would  be built to  utilize the  [residual]                                                              
energy.  Qualifying  this, he stated that pump  storage losses can                                                              
be  significant,  and the  Railbelt  does  not have  large  enough                                                              
units to  explore this.   He allowed that  RPS requirements,  or a                                                              
carbon  tax,  could   change  the  economics  for   building  pump                                                              
storage.  He added  that the utilities are still  looking at pump-                                                              
storage options.                                                                                                                
11:27:41 AM                                                                                                                   
REPRESENTATIVE   CLAMAN  expressed   his   understanding  of   the                                                              
importance  of RPS and  needing a  consensus among the  utilities.                                                              
He  stated   that  while   a  consensus   is  being  worked   out,                                                              
significant  markets   focused  on  other  renewables   [could  be                                                              
considered].   Considering the  legislation may  take a  few years                                                              
and the  idea that the  gas supply is  limited, he  questioned the                                                              
most viable alternative to incorporate into the system.                                                                         
MR. Hickey  responded that  building a big  hydro [plant  would be                                                              
the solution].                                                                                                                  
MR.   HECKMAN  responded   in   the  affirmative   regarding   the                                                              
implementation of big hydro.                                                                                                    
MR. JANORSCHKE  agreed with the solution  of big hydro.   He added                                                              
that to accommodate  big hydro a robust transmission  system would                                                              
need to  be built, with  some battery storage;  this would  be the                                                              
only way to get  the economies of scale to drive  down the cost to                                                              
benefit everybody.  He referred to Mr. Heckman.                                                                                 
MR. HECKMAN  responded in  the affirmative.   He stated  that this                                                              
level of  hydro would not be  possible without a  big transmission                                                              
system  to   accommodate  the  power   and  integration   of  more                                                              
CHAIR SCHRAGE commented on the unity within the utilities.                                                                      
[HB 301 was held over.]                                                                                                         
11:29:50 AM                                                                                                                   
There being no further business before the committee, the House                                                                 
Special Committee on Energy meeting was adjourned at 10:30 a.m.                                                                 

Document Name Date/Time Subjects
HB 301 Railbelt Utilities Presentation.pdf HENE 3/17/2022 10:15:00 AM
HB 301
HB 301 Railbelt Utilities Presentation Corrected Slide 19.pdf HENE 3/17/2022 10:15:00 AM
HB 301
HB 301 Schrage Transmission Letter FINAL.pdf HENE 3/17/2022 10:15:00 AM
HB 301
HB 301 Final-transmission-plan-draft-11-18-16.pdf HENE 3/17/2022 10:15:00 AM
HB 301
HB 301 transmission-plan-economics-3-3-17.pdf HENE 3/17/2022 10:15:00 AM
HB 301