Legislature(2023 - 2024)BARNES 124

03/07/2024 10:15 AM House ENERGY

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10:15:32 AM Start
10:16:33 AM HB368
11:31:19 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 368 ELECTRICAL ENERGY & ENERGY PORTFOLIO STDS TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
Bills Previously Heard/Scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE SPECIAL COMMITTEE ON ENERGY                                                                              
                         March 7, 2024                                                                                          
                           10:15 a.m.                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative George Rauscher, Chair                                                                                           
Representative Stanley Wright                                                                                                   
Representative Mike Prax                                                                                                        
Representative Calvin Schrage                                                                                                   
Representative Jennie Armstrong                                                                                                 
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Tom McKay                                                                                                        
Representative Thomas Baker                                                                                                     
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 368                                                                                                              
"An Act relating to clean energy standards and a clean energy                                                                   
transferable tax credit; and providing for an effective date."                                                                  
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 368                                                                                                                  
SHORT TITLE: ELECTRICAL ENERGY & ENERGY PORTFOLIO STDS                                                                          
SPONSOR(s): ENERGY                                                                                                              
                                                                                                                                
02/20/24       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/20/24       (H)       ENE, FIN                                                                                               
02/22/24       (H)       ENE AT 11:00 AM BARNES 124                                                                             
02/22/24       (H)       -- MEETING CANCELED --                                                                                 
02/27/24       (H)       ENE AT 11:00 AM BARNES 124                                                                             
02/27/24       (H)       Heard & Held                                                                                           
02/27/24       (H)       MINUTE(ENE)                                                                                            
02/29/24       (H)       ENE AT 10:15 AM BARNES 124                                                                             
02/29/24       (H)       Heard & Held                                                                                           
02/29/24       (H)       MINUTE(ENE)                                                                                            
03/05/24       (H)       ENE AT 10:15 AM BARNES 124                                                                             
03/05/24       (H)       Scheduled but Not Heard                                                                                
03/07/24       (H)       ENE AT 10:15 AM BARNES 124                                                                             
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
BRANDON SPANOS, Acting Director                                                                                                 
Tax Division                                                                                                                    
Department of Revenue                                                                                                           
Anchorage, Alaska                                                                                                               
POSITION   STATEMENT:     Provided  invited   testimony  on   the                                                             
department's fiscal note for HB 368.                                                                                            
                                                                                                                                
DANIEL HECKMAN, Regulatory Manager                                                                                              
Golden Valley Electric Association                                                                                              
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Provided invited testimony on HB 368.                                                                    
                                                                                                                                
KERIANN BAKER, Chief Strategy Officer                                                                                           
Homer Electric Association                                                                                                      
Homer, Alaska                                                                                                                   
POSITION STATEMENT:  Provided invited testimony on HB 368.                                                                    
                                                                                                                                
JULIE ESTEY, Chief Strategy Officer                                                                                             
Matanuska Electric Association (MEA)                                                                                            
Palmer, Alaska                                                                                                                  
POSITION STATEMENT:  Provided invited testimony on HB 368.                                                                    
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
10:15:32 AM                                                                                                                   
                                                                                                                                
CHAIR  RAUSCHER  called the  House  Special  Committee on  Energy                                                               
meeting  to  order  at 10:15  a.m.    Representatives  Armstrong,                                                               
Schrage,  and  Rauscher  were  present  at  the  call  to  order.                                                               
Representatives Prax  and Wright  arrived as  the meeting  was in                                                               
progress.                                                                                                                       
                                                                                                                                
        HB 368-ELECTRICAL ENERGY & ENERGY PORTFOLIO STDS                                                                    
                                                                                                                                
10:16:33 AM                                                                                                                   
                                                                                                                                
CHAIR RAUSCHER  announced that the  only order of  business would                                                               
be  HOUSE  BILL  NO.  368,  "An  Act  relating  to  clean  energy                                                               
standards  and  a  clean  energy  transferable  tax  credit;  and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
10:18:04 AM                                                                                                                   
                                                                                                                                
BRANDON  SPANOS, Acting  Director,  Tax  Division, Department  of                                                               
Revenue (DOR),  provided invited  testimony on DOR's  fiscal note                                                               
for HB 368.  He stated  that the fiscal note is indeterminant for                                                               
costs and revenue.                                                                                                              
                                                                                                                                
10:18:35 AM                                                                                                                   
                                                                                                                                
The committee took a brief at-ease.                                                                                             
                                                                                                                                
10:18:49 AM                                                                                                                   
                                                                                                                                
MR. SPANOS continued  his invited testimony.  He  stated that the                                                               
clean energy transferable tax credit  proposed by HB 368 would be                                                               
administered by the  Tax Division.  He explained  that the credit                                                               
could  be  taken  against  the tax  for  electric  and  telephone                                                               
cooperative  taxes  or  any  of   the  other  20-plus  tax  types                                                               
administered by DOR.   The department would be  required to issue                                                               
a clean  energy transferrable  tax credit  certificate to  a load                                                               
servicing  entity as  defined under  AS 42.05.790  for qualifying                                                               
clean energy production that is  produced under AS 42.05.910, and                                                               
DOR  would publish  the  name and  contact  information for  each                                                               
person provided a certificate.   The tax credit certificate could                                                               
be sold, assigned, exchanged,  conveyed, or otherwise transferred                                                               
in whole  or in part  to a tax paying  entity to use  against the                                                               
entity's tax obligations.   Any portion not used  by the taxpayer                                                               
could be  used in a  later tax  period or further  transferred to                                                               
another taxpayer.   A clean energy transferable  tax credit would                                                               
need to be used within five years  of being issued by DOR and DOR                                                               
would  be required  to  split  the certificate  or  the value  of                                                               
multiple certificates into specific  denominations at the request                                                               
of  the  holder of  the  certificate  so  that the  holder  could                                                               
utilize or  transfer the various  amounts.  The  department would                                                               
be   required  to   combine   multiple   certificates  into   one                                                               
certificate at the  request of the holder of  the certificate, an                                                               
example  being a  taxpayer that  buys multiple  certificates from                                                               
different  entities  and  wanting  to utilize  them  in  one  tax                                                               
return.  The department would  need to track the expiration dates                                                               
of the original certificates and  include those dates and amounts                                                               
in the  certificates that  are split or  combined.   Splitting or                                                               
combining the certificates would not  change or extend the period                                                               
in  which  each   credit  that  is  included   in  that  combined                                                               
certificate must  be used.  As  well, HB 368 would  grant DOR the                                                               
authority  to draft  regulations to  administer the  transferable                                                               
credit program.                                                                                                                 
                                                                                                                                
10:21:28 AM                                                                                                                   
                                                                                                                                
MR. SPANOS addressed the bill's  revenue impact.  He related that                                                               
when  he  wrote  the  first  fiscal  note,  the  revenue  impacts                                                               
couldn't be determined  due to the short timeframe  to create the                                                               
fiscal  note and  the  lack  of knowledge  about  how much  clean                                                               
energy would  be produced resulting in  clean energy transferable                                                               
tax credits.  Further, he  advised, it's impossible to know which                                                               
tax programs those credits would  be claimed against and reduced,                                                               
or whether  it would  be general  fund or  designated fund.   The                                                               
bill  would have  indeterminant  negative impact  on overall  tax                                                               
revenue.                                                                                                                        
                                                                                                                                
MR.  SPANOS  explained that  the  main  challenge in  creating  a                                                               
precise  fiscal estimate  is  figuring out  how  much new  energy                                                               
might be eligible  for the credit because it  depends on specific                                                               
projects, ownership, implementation dates,  capacity, how much of                                                               
a project's  capacity then translates  into energy  provided, and                                                               
timing in  claiming, transferring, and applying  a credit against                                                               
a  tax return.   Compiling  a statewide  list and  modeling would                                                               
therefore be a  significant undertaking and is not  in DOR's area                                                               
of expertise.  He said the  department's next fiscal note will be                                                               
updated with a  simple example and the assumption  that 1 percent                                                               
of  the state's  total energy  production would  be converted  to                                                               
qualifying  projects  each year.    The  fiscal impact  would  be                                                               
$130,000 in  credits the first  year and $1.3 million  in credits                                                               
the tenth  year.  These are  credits generated with a  lag in the                                                               
timing  of  reducing the  taxes  because  they would  be  applied                                                               
against taxes in later years.                                                                                                   
                                                                                                                                
MR. SPANOS stated  that DOR's implementation cost  and impacts of                                                               
the bill couldn't be determined at  the time he first drafted the                                                               
fiscal  note.   The main  administrative burden,  he related,  is                                                               
transferring  credits and  being  like a  broker  for those  that                                                               
would be  purchasing the credits,  which he thinks could  be done                                                               
with  existing   resources  under  the   aforementioned  numbers.                                                               
However,  he advised,  if those  numbers were  to climb,  the Tax                                                               
Division would  need to determine  if it would be  cost efficient                                                               
to  automate   some  of  those   processes,  such   as  utilizing                                                               
electronic  certificates rather  than paper  certificates because                                                               
that would be  simpler to track and do  the splitting, combining,                                                               
and reissuing.   The  Tax Division  would also  explore utilizing                                                               
the   web  interface   for  certificates   to  be   applied  for,                                                               
transferred, combined,  and split because that  would lighten the                                                               
administrative burden.  The Tax  Division would need more time to                                                               
research the cost  of that interface and there would  likely be a                                                               
cost  to buildout  that interface  and a  module, but  likely the                                                               
division wouldn't need additional personnel to administer.                                                                      
                                                                                                                                
10:25:32 AM                                                                                                                   
                                                                                                                                
CHAIR RAUSCHER asked  whether the new fiscal note  would be large                                                               
if a transmission line must be  built, and a commission is needed                                                               
to  track the  electrons running  through the  line and  how they                                                               
correspond with the utility companies.                                                                                          
                                                                                                                                
MR. SPANOS requested  clarification as to whether  there would be                                                               
additional credits  because of how  it is transmitted  or whether                                                               
specific credit  would be  applied in  addition to  the utilities                                                               
generating a new source of energy.                                                                                              
                                                                                                                                
CHAIR RAUSCHER  said he is asking  whether DOR would need  to put                                                               
in another  fiscal note for  tracking the happenings of  that and                                                               
the money going back and forth.                                                                                                 
                                                                                                                                
MR.  SPANOS  replied  he  can't   comment  because  he  needs  to                                                               
understand it  better.   He said  it would cost  more for  DOR to                                                               
administer if  the credits were  much larger because  there would                                                               
be  a  lot  more  buying,  selling,  splitting,  and  merging  of                                                               
credits, and  an additional person  might be required  to oversee                                                               
that.  Also,  there is more of an administrative  burden when the                                                               
credits  being claimed  are used  against multiple  tax programs.                                                               
However,  he  continued, putting  this  credit  program into  the                                                               
division's system  and building  out a web  interface would  be a                                                               
one-time cost,  and the program could  grow as large as  it needs                                                               
to and  not cost  any more  to do  that administrative  piece, it                                                               
would just be if more person hours are needed.                                                                                  
                                                                                                                                
10:28:01 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE PRAX pointed out that  tax credits mean that money                                                               
thought to be available for  something else won't be available if                                                               
a credit  is issued.   He submitted  that there was  some buyer's                                                               
remorse with the oil and gas tax  credits.  He asked if DOR would                                                               
soon come up with an order of magnitude impact.                                                                                 
                                                                                                                                
MR. SPANOS  answered that DOR  intends to include in  its updated                                                               
fiscal note  an example  of 1 percent  of current  electric power                                                               
generation being converted  to a tax credit.   Under that general                                                               
example  which  doesn't look  at  specific  projects, the  credit                                                               
would be $130,000 in year one and $1.3 million in year 10.                                                                      
                                                                                                                                
10:29:44 AM                                                                                                                   
                                                                                                                                
CHAIR RAUSCHER stated that there are  no plans to put oil and gas                                                               
into HB 368.                                                                                                                    
                                                                                                                                
REPRESENTATIVE  PRAX replied  he  understands  that but  asserted                                                               
it's the  same thing    a  tax credit.   One percent  at $130,000                                                               
isn't a big  deal, he allowed, but this will  likely be much more                                                               
than 1  percent, which is a  big deal that the  legislature won't                                                               
be able  to talk about  5-10 years from now.   It needs  to enter                                                               
the  conversation, he  maintained,  because a  decision is  being                                                               
made that  will affect revenue in  the same way that  the oil and                                                               
gas tax credits affected the income stream of the state.                                                                        
                                                                                                                                
CHAIR RASCHER  said he appreciates  the comment, but  tax credits                                                               
encourage   investment  and   development   that  bring   people,                                                               
businesses, and  jobs, and therefore  they pay for  themselves in                                                               
the long run.                                                                                                                   
                                                                                                                                
CHAIR RAUSCHER thanked  Mr. Spanos for his  testimony and invited                                                               
the next witness to testify.                                                                                                    
                                                                                                                                
10:31:37 AM                                                                                                                   
                                                                                                                                
DANIEL  HECKMAN,  Regulatory   Manager,  Golden  Valley  Electric                                                               
Association (GVEA),  provided invited  testimony on  HB 368.   He                                                               
stated  he   is  representing   GVEA  from  an   operational  and                                                               
regulatory perspective  because GVEA's board of  directors hasn't                                                               
yet taken a position  on HB 368 for a clean  energy standard.  He                                                               
said  HB 368  has  improvements  from the  bill  for a  renewable                                                               
portfolio standard  which has mandates  that would  affect GVEA's                                                               
ability to recover  costs of penalties that could  be imposed for                                                               
not meeting specific and prescriptive  goals.  Those improvements                                                               
include not  being prescriptive  as to a  certain type  of energy                                                               
source,  utilizing an  incentive-based mechanism  in the  form of                                                               
renewable tax  credits to achieve the  legislation's goals rather                                                               
than harmful  penalties, setting  dates that are  more achievable                                                               
and realistic, and specifically  recognizing that the buildout of                                                               
an adequate  transmission system is required  and entities should                                                               
not  be  subject   to  the  clean  energy   standard  before  the                                                               
transmission lines are upgraded  to the minimum standard required                                                               
to ensure seamless end-to-end electrical energy transmission.                                                                   
                                                                                                                                
MR.  HECKMAN  urged  that  the   legislature  provide  the  state                                                               
matching  funds  required to  receive  the  $206.5 million  grant                                                               
awarded by  the [US]  Department of Energy  to the  Alaska Energy                                                               
Authority (AEA)  to reduce  the transmission  constraints between                                                               
the  Kenai and  Anchorage areas.   This  funding, he  said, is  a                                                               
first piece  for helping  to build  out adequate  transmission to                                                               
allow  the Railbelt  electric utilities  to  share site  specific                                                               
renewable  resources.    He  expressed  GVEA's  support  for  the                                                               
Senate's recent bill for a  Railbelt transmission organization to                                                               
oversee and govern  the Railbelt electric system.   He urged that                                                               
any  provisions pertaining  to net  metering and  net billing  be                                                               
addressed  in  stand-alone  legislation  due  to  the  regulatory                                                               
considerations involved.                                                                                                        
                                                                                                                                
MR.  HECKMAN stated  that under  its  strategic generation  plan,                                                               
GVEA  is  actively continuing  its  efforts  to de-carbonize  its                                                               
power generation  regardless of any  statewide mandate.   He said                                                               
GVEA  needs flexibility  to pursue  all options  and alternatives                                                               
that are in  the best interests of its members,  and state policy                                                               
and legislation should be the same.                                                                                             
                                                                                                                                
10:38:00 AM                                                                                                                   
                                                                                                                                
CHAIR RAUSCHER  requested elaboration on GVEA's  net metering and                                                               
net billing position.                                                                                                           
                                                                                                                                
MR.  HECKMAN  responded  that the  GVEA  board  believes  broader                                                               
regulatory and operational  aspects need to be  considered and so                                                               
a stand-alone approach should be taken.                                                                                         
                                                                                                                                
CHAIR RAUSCHER thanked Mr. Heckman  for his testimony and invited                                                               
the next witness to testify.                                                                                                    
                                                                                                                                
10:40:19 AM                                                                                                                   
                                                                                                                                
KERIANN   BAKER,   Chief   Strategy   Officer,   Homer   Electric                                                               
Association (HEA),  provided invited  testimony on  HB 368.   She                                                               
said the bill is  a step in the right direction and  has a lot to                                                               
like,  such as  the lack  of  penalties    a cost  that would  be                                                               
passed on  to HEA members.   She advised that even  nominal costs                                                               
are  not trivial  to  those HEA  members who  are  least able  to                                                               
afford it.                                                                                                                      
                                                                                                                                
MS. BAKER related that HEA  is currently about 80 percent reliant                                                               
on  Cook  Inlet gas  with  about  15  percent provided  by  other                                                               
sources  such as  hydropower and  solar.   While the  percentages                                                               
fluctuate,  she continued,  HEA's  predominant  reliance on  Cook                                                               
Inlet gas  means the  board cannot  tell its  members it  got the                                                               
best deal, rather  the board got its members the  only deal there                                                               
was.   The  market  is  pushing all  utilities  to diversify  and                                                               
because  technology is  changing  so quickly  the  HEA board  has                                                               
decided to be  technology agnostic and has adopted  a policy that                                                               
requires HEA to become fuel and energy diverse.                                                                                 
                                                                                                                                
10:44:20 AM                                                                                                                   
                                                                                                                                
MS.  BAKER  addressed  transmission.   Currently  only  one  line                                                               
extends  from  South  Kachemak  all the  way  to  Fairbanks,  she                                                               
pointed  out, and  this lack  of  redundancy is  imprudent.   The                                                               
Railbelt comprises  80 percent of Alaska's  population of 750,000                                                               
and  spreading   the  cost  of   transmission  over   this  small                                                               
population  base  is painful.    Being  able to  freely  transfer                                                               
electrons throughout  the organization,  regardless of  where the                                                               
electrons  are  produced, would  provide  economies  of scale  so                                                               
power could be bought at the lowest cost.                                                                                       
                                                                                                                                
MS.  BAKER urged  that  HB 368  not come  into  effect until  the                                                               
transmission is  de-constrained.   Without the ability  to freely                                                               
transfer electrons, the utilities  will do independent generation                                                               
and meet the standard, she  explained, but not necessarily at the                                                               
cost  that legislators  are thinking.    She said  HEA would  not                                                               
support any  quota type system and  wants an energy policy  to be                                                               
adopted  that focuses  on energy  security and  diversity and  is                                                               
technology agnostic.   A  free and  open market  without physical                                                               
and other constraints would allow HEA to get the lowest cost.                                                                   
                                                                                                                                
10:48:51 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  PRAX opined  that  in relation  to subsidies  and                                                               
incentives the  legislature must  decide between  funding schools                                                               
and funding energy.  He asked  whether the HEA board is trying to                                                               
keep  the cost  apparent  to its  customers  rather than  chasing                                                               
after a subsidy.                                                                                                                
                                                                                                                                
MS. BAKER surmised  Representative Prax is asking  whether HEA is                                                               
in  favor of  the subsidies  in HB  368 and,  if so,  whether HEA                                                               
would speak about that to its members.                                                                                          
                                                                                                                                
REPRESENTATIVE PRAX replied yes.   For example, he continued, the                                                               
legislature  must decide  between providing  a matching  grant of                                                               
about $200 million for the  [power] line between Homer and Beluga                                                               
or funding roof  repairs for schools since only one  or the other                                                               
can be done with that amount of  money.  He asked whether the HEA                                                               
board is discussing that with HEA members.                                                                                      
                                                                                                                                
MS. BAKER responded  that she hasn't discussed  the school budget                                                               
with HEA's members and doesn't think  [the HEA board] would.  She                                                               
offered  her   appreciation  for  the  challenge   faced  by  the                                                               
legislature  when  weighing  priorities.   She  shared  that  HEA                                                               
recently made  the agonizing decision  to raise its base  rate by                                                               
3.5 percent because HEA's inflation  rate went up 19 percent over                                                               
the several years since its rates were last raised.                                                                             
                                                                                                                                
10:53:46 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  SCHRAGE  recognized  the difficulty  involved  in                                                               
having to raise  rates but opined that rate  increases are coming                                                               
no  matter  what   is  done  because  of   Alaska's  natural  gas                                                               
situation.   He further  opined that  had utilities  raised rates                                                               
and invested in renewables awhile  back they would have been less                                                               
vulnerable  to natural  gas prices  now.   He said  he is  aware,                                                               
however,  that the  RCA would  have denied  a utility  from doing                                                               
that  because it  was cheaper  at current  natural gas  prices to                                                               
continue with the  status quo instead of  investing in renewables                                                               
and diversification.   He asked whether HEA has  had any internal                                                               
discussions in this regard.                                                                                                     
                                                                                                                                
MS.  BAKER confirmed  that  HEA would  have  been prevented  from                                                               
diversifying  fuel sources  for generation  if those  were higher                                                               
than  natural  gas.   However,  she  said, industry  is  changing                                                               
quickly, and HEA is excited  about the competitive numbers it has                                                               
been  seeing  for  all  sources.   She  urged  the  committee  to                                                               
consider setting  a time limit for  how long someone can  hold on                                                               
to  a state  land lease  without producing  the project  that was                                                               
proposed for the lease.                                                                                                         
                                                                                                                                
10:59:12 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  SCHRAGE  noted  that  tax  incentives  provide  a                                                               
carrot  instead of  a stick,  but that  the money  comes after  a                                                               
utility has made  those investments.  He asked  whether HEA needs                                                               
the  money  up  front  to   make  the  necessary  investments  in                                                               
renewables.                                                                                                                     
                                                                                                                                
MS.  BAKER  replied that  each  utility  would give  a  different                                                               
answer.   She  said HEA  is cash  positive, but  its margins  are                                                               
thinner  than it  would like  because of  investing in  a battery                                                               
energy storage  system.  She  allowed HEA doesn't have  the money                                                               
to  do everything  it  wants but  said it  has  enough to  pursue                                                               
projects  as a  group  with other  utilizes  or with  independent                                                               
power producers.                                                                                                                
                                                                                                                                
CHAIR RAUSCHER  thanked Ms. Baker  for her testimony  and invited                                                               
the next witness to testify.                                                                                                    
                                                                                                                                
11:02:08 AM                                                                                                                   
                                                                                                                                
JULIE   ESTEY,  Chief   Strategy   Officer,  Matanuska   Electric                                                               
Association (MEA),  provided invited  testimony on  HB 368.   She                                                               
said Alaska  is at a critical  point with scarcity in  gas making                                                               
the old ways  of producing power expensive,  new innovative power                                                               
options that  are either here  or on the horizon,  and renewables                                                               
that  are now  competitive.   Federal funding  is available  that                                                               
cuts  MEA's  costs   in  half  and  MEA   is  making  significant                                                               
generation  changing  impacts to  its  grid.   Sixty  to  seventy                                                               
percent of MEA  members say they want MEA to  produce more of its                                                               
power with renewables, but not if it is going to cost more.                                                                     
                                                                                                                                
MS. ESTEY stated  that governor and legislature  are motivated to                                                               
making changes  to the  energy pathway to  allow Alaska  to grow.                                                               
It takes a  team to find solutions, so MEA  is working with other                                                               
utilities  and stakeholders.   Tony  Izzo, MEA's  chief executive                                                               
officer,  served as  the Railbelt  utility representative  on the                                                               
governor's Energy  Security Task  Force and  was co-chair  of the                                                               
Railbelt Subcommittee.  After  dozens of meetings, presentations,                                                               
discussions, and  public process, the group  came together around                                                               
three  main  strategies  for   cost  competitiveness  and  energy                                                               
security       transmission   unification,  growing   load,   and                                                               
diversifying  power  generation.  Transmission  unification,  she                                                               
explained,  is  the most  important  step  for [Alaska's]  energy                                                               
future  regardless of  what electron  is favored.   Growing  load                                                               
spreads the same  fixed costs over more  kilowatt hours, reducing                                                               
the costs for  all, but the cost of  upgrading infrastructure for                                                               
growth   shouldn't  be   overlooked.     Diversifying  generation                                                               
provides energy security, resilience,  and ability to remain cost                                                               
competitive.   The first action for  diversification, ratified by                                                               
the  task force,  was to  develop  a clean  energy standard  with                                                               
incentives, which  HB 368 does.   Ms. Estey related that  the MEA                                                               
board has established its own goal  of 50 percent clean energy by                                                               
2050.                                                                                                                           
                                                                                                                                
11:10:09 AM                                                                                                                   
                                                                                                                                
MS. ESTEY expressed MEA's appreciation  for certain components of                                                               
HB 368:   attainable  yet aspirational goals  and a  clean energy                                                               
standard with  incentives; acknowledgement  of the key  role that                                                               
transmission  plays;  provisions  to  count  progress  and  waive                                                               
requirements if progress  is being made but the goal  has not yet                                                               
been  reached; allowing  a calculation  for net  metering energy;                                                               
allowing for energy efficiency and  fuel conservation on both the                                                               
supply  side  and  demand   side;  reinforcing  collaboration  to                                                               
achieve the goals; incentivizing  change through tax credits, and                                                               
the  net  billing concept.    Speaking  to Representative  Prax's                                                               
question, Ms. Estey  said the tax credits are modest  and may not                                                               
change the economics  or be a deal maker, but  they would benefit                                                               
MEA's  members  through the  cost  of  power.   The  net  billing                                                               
concept would provide  a mechanism for the RCA to  vary the rates                                                               
paid back  to members based on  how helpful that power  is to the                                                               
system and to the  rest of the members at any  time.  She advised                                                               
that  MEA's diversification  goals  aren't  helped by  motivating                                                               
members to  push lots of  power on a  sunny summer day  when that                                                               
power  isn't needed  in  the system;  instead,  MEA would  rather                                                               
incentivize them  to invest  in say, a  battery system,  and then                                                               
the power  can come back  to the system  when it is  more helpful                                                               
and that decreases cost for the entire membership.                                                                              
                                                                                                                                
11:16:50 AM                                                                                                                   
                                                                                                                                
MS.  ESTEY discussed  the  provisions  in HB  368  for which  MEA                                                               
suggests a  second look.  She  said the opt out  provision may be                                                               
unnecessary because  the provisions for waivers  are adequate and                                                               
because the bill  is incentive based with no penalties.   If kept                                                               
in  the bill,  she  continued, MEA  proposes  allowing for  those                                                               
long-term effects to  include reliability as well as  rates.  She                                                               
said   another  look   should  be   taken  at   the  transmission                                                               
description since two bills currently  in the Senate focus on the                                                               
transmission backbone.   She offered  MEA's support  for language                                                               
that  would align  the bill's  transmission backbone  language to                                                               
that of  SB 257.  She  suggested elimination of the  reference to                                                               
the Railbelt  transmission system as  it may not be  necessary in                                                               
this legislation.  Regarding whether coal  needs to be in HB 368,                                                               
she related that  MEA is looking at its options  to fill the gap,                                                               
especially on  April 1  when MEA's  gas contracts  go away.   She                                                               
posited  that coal  likely has  a  lower environmental  footprint                                                               
than importing  liquified natural gas  (LNG), likely has  a lower                                                               
cost and  lower risk, and  coal would  keep money in  the Alaskan                                                               
economy.     She  expressed  MEA's  appreciation   for  the  bill                                                               
acknowledging that all  options need to be on the  table and that                                                               
if MEA's  board decided to  use coal in its  diversification plan                                                               
MEA  believes it  could adequately  account  for it  in the  non-                                                               
designated  percentage of  generation  not covered  by the  clean                                                               
energy standard.                                                                                                                
                                                                                                                                
MS. ESTEY, regarding whether HB  368 is necessary, stated that it                                                               
is  up  to  the  legislature  as  to  what  role  it  thinks  the                                                               
government should  play in the  energy transition.  She  said MEA                                                               
received its  wakeup call  a year ago  from Hilcorp,  its primary                                                               
gas  supplier,  at  which time  scarcity  and  price  sensitivity                                                               
entered MEA's thoughts.  She  related MEA's belief that economics                                                               
and the  free market will  naturally drive a more  diverse energy                                                               
portfolio.   She said  MEA understands that  there is  benefit in                                                               
setting  a  standard  to give  clear  direction,  certainty,  and                                                               
market signals to  the broader market, which  could provide clear                                                               
direction to the  RCA and to the co-op boards  to make bold moves                                                               
towards a common  vision.  With a few adjustments,  HB 368 is the                                                               
best option  on the table  for a commonsense energy  standard and                                                               
can act  as a catalyst for  energy transmission, diversification,                                                               
and  stabilized   costs.    She   concluded  by   offering  MEA's                                                               
appreciation for  being brought to  the table  to be part  of the                                                               
solution.                                                                                                                       
                                                                                                                                
11:22:20 AM                                                                                                                   
                                                                                                                                
CHAIR  RAUSCHER  invited the  testifiers  to  suggest changes  or                                                               
corrections to  the bill.   He said  the committee would  like to                                                               
make improvements  but wants  to be  expedient in  completing the                                                               
bill this year.                                                                                                                 
                                                                                                                                
REPRESENTATIVE  PRAX agreed  about deciding  this year  and urged                                                               
that people focus on what to do with HB 368.                                                                                    
                                                                                                                                
CHAIR  RAUSCHER gave  credit to  the governor's  task force,  the                                                               
governor, the  Alaska Power Association  (APA), and  everyone who                                                               
contributed to the making of HB 368.                                                                                            
                                                                                                                                
11:25:30 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE SCHRAGE  noted that  Alaska is  only in  the first                                                               
phase  of its  grant applications  for improving  transmission in                                                               
the state and  that some proposals have been to  fund the grid at                                                               
low levels, such as $30-$40 million,  as opposed to the full $200                                                               
million in matching  funds to fully realize the  federal funds on                                                               
the  front end.   He  requested Ms.  Estey's thoughts  on whether                                                               
that  is  adequate and  whether  a  failure  to invest  in  these                                                               
projects hinders MEA's ability to best serve its customers.                                                                     
                                                                                                                                
MS.  ESTEY   replied  that  transmission  is   MEA's  number  one                                                               
priority.  She said MEA  has exactly the transmission system that                                                               
it can  afford right  now, and the  federal funding  represents a                                                               
unique  and "once  in a  generation  opportunity" opportunity  to                                                               
gain  a transmission  system that  can  provide significant  cost                                                               
savings, energy  security, and energy diversity  that would drive                                                               
economic development  in the  state and  solve problems.   Making                                                               
sure that Alaska  shows it is equally as invested  in the success                                                               
of  the  state as  is  the  federal  government  is going  to  be                                                               
critical.    Ms.  Estey  said  she doesn't  think  she  can  tell                                                               
legislators that this must be  prioritized over all else, but she                                                               
can  say that  lowering  costs of  electricity  allows for  state                                                               
dollars to stretch farther throughout the state.                                                                                
                                                                                                                                
11:29:39 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE SCHRAGE opined that  priorities are a decision for                                                               
legislators as  they look at  the budget and policies  this year.                                                               
Being able  to leverage this once-in-a-lifetime  grant of federal                                                               
dollars would be a boon to  energy security and reliability and a                                                               
boon to promoting business development.                                                                                         
                                                                                                                                
CHAIR RAUSCHER thanked the witnesses for their testimony.                                                                       
                                                                                                                                
[HB 368 was held over.]                                                                                                         
                                                                                                                                
11:31:19 AM                                                                                                                   
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business before the committee, the House                                                                 
Special Committee on Energy meeting was adjourned at 11:31 a.m.                                                                 

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