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