Legislature(2023 - 2024)BARNES 124

02/02/2023 10:15 AM House ENERGY

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

Document Name Date/Time Subjects
Energy Committee Schedule 30 Jan-3 Feb 2023.pdf HENE 2/2/2023 10:15:00 AM
Committee Schedule Jan 30-Feb 3
Railbelt Legislative Presentation.FINAL v2.pdf HENE 2/2/2023 10:15:00 AM
Railbelt Legislative Presentation