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
Association
                    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,                                                                  
titled "Railbelt Electric Energy System and Energy Transition."                                                                 
                                                                                                                                
BRAD JANORSCHKE, General Manager                                                                                                
Homer Electric Association                                                                                                      
Homer, Alaska                                                                                                                   
POSITION STATEMENT:  Co-presented a PowerPoint presentation,                                                                  
titled "Railbelt Electric Energy System and Energy Transition."                                                                 
                                                                                                                                
ARTHUR MILLER, CEO                                                                                                              
Chugach Electric Association                                                                                                    
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Co-presented a PowerPoint presentation,                                                                  
titled "Railbelt Electric Energy System and Energy Transition."                                                                 
                                                                                                                                
JOHN BURNS, CEO                                                                                                                 
Golden Valley Electric Association                                                                                              
Fairbanks, Alaska                                                                                                               
POSITION  STATEMENT:    Co-presented a  PowerPoint  presentation,                                                             
titled "Railbelt Electric Energy System and Energy Transition."                                                                 
                                                                                                                                
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 an update on utility companies.                                                                                              
                                                                                                                                
10:18:38 AM                                                                                                                   
                                                                                                                                
TONY IZZO,  CEO, Matanuska  Electric Association,  co-presented a                                                               
PowerPoint presentation, titled  "Railbelt Electric Energy System                                                               
and  Energy  Transition" [hard  copy  included  in the  committee                                                               
packet.  He 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 pointed out that electricity                                                               
for the Railbelt is cheap  compared to Alaska's rural communities                                                               
and expensive  compared to Southeast  Alaska.  He  explained that                                                               
this is because Southeast  Alaska has hydroelectric opportunities                                                               
unavailable  to the  Railbelt communities.   He  stated that  the                                                               
Railbelt  utility companies  use 41  percent of  the natural  gas                                                               
produced  from  Cook  Inlet,  with   85  percent  of  electricity                                                               
produced  by the  utilities coming  from  this natural  gas.   He                                                               
continued to slide  3 and stated that a  single transmission line                                                               
connects the four different companies  and their respective areas                                                               
of  coverage.   He  added  that the  companies  are putting  $166                                                               
million towards upgrading the transmission line.                                                                                
                                                                                                                                
10:24:05 AM                                                                                                                   
                                                                                                                                
ARTHUR MILLER,  CEO, Chugach  Electric Association,  continued to                                                               
slide 4 and  stated that the declining natural  gas production in                                                               
Cook Inlet is an upcoming  challenge in keeping electricity rates                                                               
competitive in the Railbelt.  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.                                                                              
                                                                                                                                
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 slide  6 and  slide 7  and suggested  that there                                                               
will be  a gap in  energy production starting  in 2027.   He said                                                               
that the  options for filling  the gap would include  using clean                                                               
energy when  economically possible, pursuing natural  gas options                                                               
on the  North Slope, and  importing liquefied natural  gas (LNG).                                                               
He  continued that  the transition  would require  energy storage                                                               
and upgrades  to the 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 use  of batteries will                                                               
make 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.  He added                                                               
that  the   future  would  also  require   a  diversification  of                                                               
resources.   He noted that  this would be  the third time  he has                                                               
witnessed a similar  situation, with each of  the past situations                                                               
being resolved.   He continued to slide 8 and  stated that energy                                                               
security  is a  major goal  of the  utilities.   He provided  the                                                               
definition of "energy security" as  the ability to keep the power                                                               
running.   He said that  utility companies are continuing  to set                                                               
new goals  for renewable  energy in order  to reduce  reliance on                                                               
natural gas while maintaining the same rates.                                                                                   
                                                                                                                                
MR. IZZO continued  to slide 9 and displayed a  graph showing the                                                               
historical  and  current  prices  of different  forms  of  energy                                                               
generation in Alaska, comparing these  with the prices during the                                                               
same period  for different  forms of  energy generation  in other                                                               
parts of  the country.   He  stated that the  average price  of a                                                               
megawatt on the Railbelt is still  cheaper than many of the other                                                               
regions in the state.   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  is 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.                                                                              
                                                                                                                                
MR. BURNS  added that past  decisions to build new  projects have                                                               
made  a  significant impact  on  the  future and  referenced  the                                                               
Bradley Lake  Hydroelectric Project.   He stated that  the vision                                                               
for the  Railbelt would  be a  10-to-12-year commitment  and cost                                                               
approximately $250  million.   He noted  that the  utilities have                                                               
already invested $166 million.                                                                                                  
                                                                                                                                
10:51:06 AM                                                                                                                   
                                                                                                                                
MR. BURNS  continued to slide  11 and stated that  completing the                                                               
Railbelt's 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 ratepayers.                                                                      
                                                                                                                                
MR. BURNS  continued to slide 12  and stated that there  are four                                                               
priorities  that   the  utilities   hope  the   legislature  will                                                               
accomplish.     He  listed  the  priorities:   working  with  the                                                               
utilities  to find  a long-term  and in-state  supply of  natural                                                               
gas; creating  a transmission and energy  storage infrastructure;                                                               
leveraging state  and federal funding;  and creating  an economic                                                               
path to energy sources that will reduce carbon emissions.                                                                       
                                                                                                                                
10:59:03 AM                                                                                                                   
                                                                                                                                
MR.  BURNS,  in response  to  a  series of  committee  questions,                                                               
answered  that  33 percent  of  Golden  Valley Electric's  energy                                                               
generation  comes from  coal, and  while  it has  one plant  that                                                               
works  very  well, its  second  plant,  Healy Two,  has  frequent                                                               
issues.  He  answered that the energy Golden  Valley Electric can                                                               
buy from Southcentral Alaska is  cheaper than producing energy at                                                               
Healy Two  because of Healy  Two's frequent issues.   He answered                                                               
that the situation  underscores the current need  for natural gas                                                               
availability and the need that the utilities work together.                                                                     
                                                                                                                                
11:03:45 AM                                                                                                                   
                                                                                                                                
MR.  IZZO, in  response to  a committee  question concerning  the                                                               
decline of  natural gas production  in Cook Inlet,  answered that                                                               
gas prices  increased dramatically in  the early 2000s  after the                                                               
natural  gas  supply  found  in  the 1950s  and  1960s  had  been                                                               
depleted.  He added that the  prices at the time were quite high,                                                               
and this was an incentive  for companies to fund new explorations                                                               
of natural gas reserves.  He  stated that in 2006, the prices had                                                               
another dramatic  increase because  of companies such  as Chevron                                                               
and  Marathon  leaving  the  state.    He  explained  that  these                                                               
companies left the  state because of 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                                                               
a 10-year  agreement with another undisclosed  utility would have                                                               
greatly reduced  rates, but  the deal fell  through when  the new                                                               
tax credits were vetoed.                                                                                                        
                                                                                                                                
MR. IZZO stated that this  began a period of short-term contracts                                                               
of 1 to 2 years between  utilities and natural gas producers.  He                                                               
said  that Hilcorp  "picked  up the  pieces"  by offering  5-year                                                               
contracts to supply natural gas.   He stated that this experience                                                               
has  led to  the  utilities creating  plans  to diversify  energy                                                               
sources.  He reiterated that  building up the transmission system                                                               
is   important,   as  doing   this   would   allow  for   greater                                                               
diversification.   He  added  that  diversification of  different                                                               
power sources is important because  power from different parts of                                                               
the state can be transferred.                                                                                                   
                                                                                                                                
11:14:21 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  MCKAY  stated  that  previously  he  had  been  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 five  years  is a  short                                                               
amount of  time in the  oil and gas  industry.  He  expressed the                                                               
belief that the Cook Inlet natural  gas situation may be the most                                                               
important  issue   the  legislature   faces,  as  there   is  the                                                               
possibility  that Alaska  will need  to rely  more on  coal.   He                                                               
expressed the 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 this  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 because  of time  constraints, these                                                               
questions would have to be answered at a later time.                                                                            
                                                                                                                                
11:26:04 AM                                                                                                                   
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Special  Committee on  Energy meeting  was  adjourned at  [11:26]                                                               
a.m.                                                                                                                            

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