Legislature(2009 - 2010)BARNES 124
02/24/2009 03:00 PM House ENERGY
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| Regulatory Commission of Alaska Presentation on How Agency Regulates Existing Sources of Energy & Its Potential Role in Regulating New Sources of Energy in Alaska | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ENERGY
February 24, 2009
3:06 p.m.
MEMBERS PRESENT
Representative Bryce Edgmon, Co-Chair
Representative Charisse Millett, Co-Chair
Representative Nancy Dahlstrom
Representative Kyle Johansen
Representative Jay Ramras
Representative Pete Petersen
Representative Chris Tuck
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
Regulatory Commission of Alaska presentation on how agency
regulates existing sources of energy & its potential role in
regulating new sources of energy in Alaska
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
ROBERT PICKETT, Chairman
Regulatory Commission of Alaska (RCA)
Department of Commerce, Community & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: Provided a presentation on the RCA's role
in regulating energy in Alaska.
ACTION NARRATIVE
3:06:40 PM
CO-CHAIR BRYCE EDGMON called the House Special Committee on
Energy meeting to order at 3:06 p.m. Representatives Petersen,
Tuck, Dahlstrom, Ramras, Johansen, Millett, and Edgmon were
present at the call to order.
^Regulatory Commission of Alaska presentation on how agency
regulates existing sources of energy & its potential role in
regulating new sources of energy in Alaska
CO-CHAIR EDGMON announced that the only order of business would
be a presentation by the Regulatory Commission of Alaska (RCA).
3:07:36 PM
ROBERT PICKETT, Chairman, Regulatory Commission of Alaska (RCA),
Department of Commerce, Community & Economic Development
(DCCED), stated that his topic today, "RCA Role in Regulating
Existing and New Sources of Energy in Alaska," is timely
considering the dramatic fluctuation in the energy market over
the last 12 months. Furthermore, the state has many critical
regulation issues to address at this time. Mr. Pickett
explained that the RCA is charged with regulating a wide range
of economic activities in the state, and has a direct impact on
more than $1 billion of economic activities. Currently, the RCA
monitors 651 Certificates of Public Convenience and Necessity
(CPCNs). He informed the committee that the RCA was created by
the legislature in 1999 with the broad authority to regulate
public utilities and pipeline carriers throughout the state.
The commission consists of five commissioners appointed by the
governor and confirmed by the legislature for a six-year term.
Under AS 42.05.141(a), the regulatory commission may do all
things necessary or proper to regulate every public utility
engaged, or proposing to engage, in a utility business inside
the state. Mr. Pickett also provided the statutory definition
for a public utility and noted the clear definition is needed to
determine what new energy projects may be exempted from, or
subject to, RCA jurisdiction.
3:11:25 PM
CO-CHAIR EDGMON asked for clarification on the RCA's ability to
oversee fuel suppliers and distributors.
MR. PICKETT responded that there appears to be some statutory
authority to engage with these actions; however, the RCA is
already laden with responsibilities.
3:12:09 PM
CO-CHAIR EDGMON called attention to the high fuel prices in
Western Alaska and the disparity of fuel prices in different
regions of the state. He asked whether the RCA, if sufficiently
staffed, could oversee the transportation and delivery of fuel.
MR. PICKETT acknowledged oversight may be possible; in fact,
through the Power Cost Equalization program (PCE), the RCA
currently has some level of review with the electric utilities.
3:12:57 PM
MR. PICKETT returned to his presentation and directed attention
to "Definition of Public or General Public" in AS 42.05.990(3);
and "Certificate of Public Convenience and Necessity (CPCN)" in
AS 42.05 (public utilities) and AS 42.06 (Pipeline Act).
3:14:42 PM
REPRESENTATIVE RAMRAS inquired as to the legal meaning of "fit,
willing, and able" in the context of building a [gas pipeline]
and recognizing the ability of an entity, such as the Alaska
Natural Gas Development Authority (ANGDA), or ENSTAR Natural Gas
Company (ENSTAR), to qualify for a certificate to provide
pipeline services.
MR. PICKETT advised "fitness" encompasses the administrative and
managerial ability for the enterprise being proposed; for
example, the service area. There is also a financial "fitness"
test to determine whether the financial capability exists to
complete the project and provide the pipeline service. Further,
"able" measures the ability of the project sponsor.
3:16:36 PM
REPRESENTATIVE RAMRAS recalled that this is the contention he
had when ANGDA presented its $250 million [proposal]. He opined
that ANGDA did not meet the fit, willing, and able threshold.
Representative Ramras requested further discussion on this topic
at the conclusion of the presentation.
3:17:40 PM
MR. PICKETT, continuing his presentation, "Statutory Exemptions
- Electric" then reviewed exemptions from certification that
are: any utility making less than $50,000 unless their
customers petition for regulation; any joint action agency; and
utilities that have received a Qualifying Facility (QF)
designation from the Federal Energy Regulatory Commission
(FERC).
3:18:45 PM
REPRESENTATIVE TUCK asked whether a joint action agency that is
exempt from certification is also exempt from RCA authority.
MR. PICKETT concurred. Then, in further response to
Representative Tuck, he clarified that if the joint action
agency is exempt under the statute provision, it is also exempt
from the CPCN certification by the RCA.
3:19:51 PM
REPRESENTATIVE PETERSEN asked for an example of a joint action
agency.
MR. PICKETT related his understanding that it is a provision
under statute in which utilities can come together and create an
entity for the production of energy for resale to a local
distribution utility.
REPRESENTATIVE PETERSEN further asked whether the joint action
agency clause applies to the governor's proposed consolidation
of the Railbelt utilities.
MR. PICKETT said he did not believe so, although he said he has
not seen the most recent version of the proposed legislation. A
previous version of the proposed legislation contained a role
for the RCA.
3:21:08 PM
MR. PICKETT continued with the slide entitled "Statutory
Exemptions - Electric" and discussed the exemptions from
economic regulation that are: utilities owned by a political
subdivision, with exception of a utility competing with a
regulated utility; utilities making between $50,000 and $500,000
that have a deregulation election; cooperatives that have a
deregulation election; and utilities that receive a QF
designation from FERC. Mr. Pickett listed utilities that the
RCA regulates: natural gas distribution; natural gas pipelines;
electric power generation, transmission, and distribution; water
and sewer; telephone; and solid waste. Pipelines regulated by
the RCA are: crude oil pipelines; petroleum product pipelines;
and natural gas pipelines.
3:22:50 PM
REPRESENTATIVE RAMRAS recalled the energy committee meeting in
Kotzebue during which public testimony was heard on the state's
energy plan. Witnesses testified that food prices in Kotzebue
were higher than food prices in Nome. Moreover, it was lamented
that unlike Fairbanks, there is often only one purveyor of fuel
oil in rural communities. He asked Mr. Pickett for progressive
steps that could be taken by the RCA to better regulate single-
distributors of fuel oil. Representative Ramras remarked:
... what kind of statute, what kind of committee bill
could we do, what kind of remedy could the RCA produce
... if we had, if we gave you the statutory authority
and we gave you whatever manpower was necessary? It
is entirely unacceptable, in this legislator's point
of view, what's going on out in the Bush as it relates
to the price of fuel, and with no other distributor
there, what is clearly a monopoly ...
MR. PICKETT affirmed that the RCA has seen the high fuel prices,
although the PCE subsidy acts like a shock absorber to take
away some of the dramatic increase in the cost of electricity.
However, there is no such protection for heating fuel. He
advised that [a remedy] would start with directives and
regulations from the legislature, then would be decided by the
concurrence of at least three of five commissioners. Mr.
Pickett opined the RCA, given sufficient impetus, could look
into this situation; however, the RCA is driven by statutory
deadlines that must be met with its existing staff. In fact,
the agency is already dealing with unfunded mandates from the
state and federal governments. He concluded that the RCA must
comply with what the legislature directs.
3:28:25 PM
REPRESENTATIVE RAMRAS encouraged the committee to explore
expanding the statutory authority for the RCA, through
legislation, so that it may address the issue of fuel provided
by a sole source in the rural communities of Alaska.
3:29:26 PM
CO-CHAIR EDGMON announced the March 12th energy committee
hearing will be on the subject of fuel prices. He expressed his
hope that the testimony from fuel providers regarding shipping
and storage will provide answers to questions that simple
economics do not.
3:30:41 PM
MR. PICKETT addressed the slide entitled "RCA's Role in Current
Energy Supply Issues." There are three areas of energy issues
to be discussed; the first is Cook Inlet natural gas supplies.
The RCA does not regulate the producers of natural gas in Cook
Inlet, although it does evaluate the gas sale agreements (GSAs)
between the utilities and the producers to ensure just and
reasonable terms. The RCA standard of review considers whether
the utility acted in a prudent manner, whether the terms of the
GSA are reasonable, and whether the GSA ensures reliable and
reasonably priced utility service. As directed by AS
42.05.431(a), the RCA is required to determine whether a GSA, or
a particular term within such an agreement, is unjust,
unreasonable, unduly discriminatory, or preferential. This
determination must be viewed in the context of the Cook Inlet
which is unique among regional natural gas markets in the U.S.
in that it is a stranded gas market.
3:32:54 PM
CO-CHAIR MILLETT recalled that the RCA recently approved a 22
percent rate increase for ENSTAR Natural Gas Company in
Anchorage and asked whether the aforementioned considerations
were the basis for that determination.
MR. PICKETT said no. He explained the increase is a result of
legacy gas contracts. In fact, the RCA did not approve ENSTAR's
latest five-year contracts by Marathon Oil Corporation and
ConocoPhillips Alaska, Inc.; therefore, under the terms of its
tariff, and as long as it did not exceed the weighted average
cost of gas, ENSTAR was able to enter into two-year agreements
without RCA approval. He pointed out that the 22 percent
increase is for a bundle of contracts, such as those going back
to 2002, and legacy contracts that are tied to petroleum
indices.
3:34:31 PM
REPRESENTATIVE PETERSEN asked whether the RCA is currently
reviewing agreements between ENSTAR and the producers at Cook
Inlet that might impact prices of natural gas in the Railbelt
area.
MR. PICKETT advised the only gas supply agreement currently
before the commission is an emergency supply provision from
Chugach Electric Association. He was unsure whether ENSTAR has
received responses in its search for gas.
3:35:20 PM
REPRESENTATIVE TUCK provided a document from ENSTAR, entitled
"Facts about higher gas costs." The document stated ENSTAR
income comes from the transportation of natural gas, not from
the sale of gas.
MR. PICKETT agreed. He added that ENSTAR does not put a "mark-
up" on the sale of gas, but would have no business without gas.
In further response to Representative Tuck, he said that trying
to determine ENSTAR'S profit from a diagram would be a mistake.
He would need to look at ENSTAR's financials to determine its
profit from the transportation of gas and ENSTAR's financing
structure is unknown to him. The gas sale agreements need to
generate cash, but more information is needed to verify ENSTAR's
profit margin.
REPRESENTATIVE TUCK again referred to the document and gave an
example using a transportation company that is delivering hay.
He said in that case, the transportation company only charges
for the delivery of the hay; however, the ENSTAR document
indicates the cost of delivering the gas to customers is $0.10,
with an additional $0.03 for taxes and $0.04 for "ENSTAR
income." Representative Tuck surmised the profit margin would
be $0.04 divided by 17, and asked for the formula used by the
RCA to determine profit margin.
MR. PICKETT explained that when the RCA investigates a rate
case, it reviews a full range of numbers, such as the actual
depreciated cost of the system and other aspects of the business
as a whole. He pointed out ENSTAR would have some expense in
securing the supply of the natural gas and financing charges;
however, he could not say how much those expenses would be.
3:39:28 PM
CO-CHAIR EDGMON observed the RCA organizational chart indicates
there are three staff for financing and certification
processing. Referring to Mr. Pickett's earlier testimony that
the RCA regulates over $1 billion worth of commerce, he asked
whether there was a lot of work for three staff.
MR. PICKETT agreed and noted that several vacancies have been
difficult to fill; the RCA legislative task force reported on a
classification study underway that is addressing the positions
the RCA has not been able to fill. He concluded that the RCA is
"very leanly staffed."
3:41:04 PM
MR. PICKETT, in response to Co-Chair Edgmon, affirmed that the
rate of return for a utility company or a pipeline carrier is an
important part of the certification process. He further
explained the RCA reviews the capital structure - the split
between debt and equity - of a company and what are reasonable
returns on equity in comparable enterprises.
3:41:42 PM
REPRESENTATIVE DAHLSTROM recalled serving on the RCA task force
and learning how difficult it is for the agency to offer
competitive salaries. She asked that committee members be
provided with a copy of the recommendations made by the task
force.
3:42:29 PM
REPRESENTATIVE JOHANSEN related his discomfort discussing the
document provided by Representative Tuck, because it was just
received and he does not know its source.
3:43:21 PM
CO-CHAIR EDGMON suggested that the committee review protocol.
3:43:52 PM
REPRESENTATIVE PETERSEN recalled previous testimony that the RCA
wanted to compare the natural gas production of Cook Inlet with
four other regions in North America. He asked Mr. Pickett to
explain this comparison and discuss how it might impact the
price of natural gas in the Railbelt.
3:44:37 PM
MR. PICKETT said he would address this issue later in the
presentation. He then provided a slide entitled "Cook Inlet Gas
Market" that indicated the reserves-to-production ratio for Cook
Inlet is 10:1, which means the proven gas in Cook Inlet will
last approximately 10 years. This is in the same range as is
typical for production areas in the Lower 48, and natural gas
was found in the inlet as a by-product of oil exploration.
Another aspect unique to Cook Inlet is that it is the home of
the only plant in the U.S. that liquefies natural gas and ships
it out of the immediate area as liquefied natural gas (LNG).
The plant in Cook Inlet is the oldest LNG plant in the world and
continues to ship gas to Japan. The RCA found that Cook Inlet
is a natural gas production basin; therefore, its pricing
indices are lower than "citygate" pricing points. The
commissioners at the RCA sought to compare areas with
significant similarities and made a decision on the basis of the
record before them. He opined that Cook Inlet is considered to
be a fairly challenging geological environment, without the
normal distribution of gas fields found elsewhere; however, this
information has not been presented to the RCA.
3:48:21 PM
MR. PICKETT presented a slide entitled "Cook Inlet Market Power"
and stressed that market power is not necessarily illegal, or
proof that [an illegal] monopoly exists. ConocoPhillips Alaska,
Inc., Marathon Oil Corporation, and Union Oil of California, a
division of Chevron (Union), control the vast majority of
natural gas supplied in Cook Inlet. Of these three,
ConocoPhillips and Marathon are the largest and they also own
the Kenai LNG export facility. Thus the Cook Inlet market is
vertically integrated with the two largest producers being their
own best customers through the medium of sales to the LNG export
facility. Mr. Pickett advised RCA's Order U-08-58 found that
the continued operation of the LNG facility in Kenai is
important to the overall health of the Cook Inlet natural gas
marketplace. The next slide entitled "Pricing Cook Inlet Gas,"
indicated that Cook Inlet is not an open and transparent natural
gas market; there is no commonly accepted natural gas pricing
mechanism; since the "Henry Hub" order, a variety of pricing
proxies have been considered by the utilities, the producers,
the attorney general, and the RCA; and none of these pricing
proxies has resulted in an RCA approved GSA that currently
delivers gas to utility customers. The slide entitled "Electric
Utilities Infrastructure Needs" relates that the Railbelt
Electrical Grid Authority (REGA) Study issued in September 2008,
estimated cumulative capital investment requirements for
generation and transmission expansion and replacement needs
range from $2.5 billion to $8.1 billion over the next 30 years
with a significant amount of those investments being made in the
next 10-15 years. The slide entitled "Installed Railbelt
Generation" displayed a pie chart illustrating the many sources
of power to the Railbelt. According to the chart, power
generated by natural gas represented 63.7 percent of the total,
largely due to the contribution by the Chugach Electric
Authority (CEA) Beluga Power Plant and the Municipal Light &
Power (ML&P) Plant No. 2. The Beluga plant is in need of
capital improvements which will be costly, given the current
state of the financial markets and the degrading of utility
credit ratings. The slide entitled "Existing Railbelt
Generation & Proposed Projects" illustrated a bar graph of
existing and proposed projects. He raised the question of how
to replace the existing generation of power for the Railbelt.
3:54:36 PM
MR. PICKETT presented the slide entitled "Regulatory Issues,"
and explained "firm power" supplies are a predictable source of
power that can be scheduled by a utility and that offset both
fuel and generation capacity expenses such as hydroelectric, co-
generation, and geothermal. "Non-firm" power supplies are an
unpredictable source of power that can not be scheduled by a
utility. The provision of non-firm power only offsets the use
of fuel by the utility. Generation capacity must be maintained
to provide power when the non-firm power is unavailable. Some
of these sources are wind, solar, some hydroelectric, and tidal.
3:56:26 PM
CO-CHAIR MILLETT inquired as to how to account for net metering.
MR. PICKETT responded that a discussion of net metering will
follow.
3:57:12 PM
MR. PICKETT presented a slide entitled "Power Cost Equalization
(PCE) Program" and explained under the PCE program the state
pays a portion of the electric bills for consumers in 150
communities served by utilities participating in the program.
The RCA establishes the PCE rate applicable to each participant
utility's billings, regardless if the utility is otherwise
subject to RCA's economic regulation. The next slide entitled
"PCE Program" stated AS 42.45.110(c)(2) provides that the
commission will, during each fiscal year, adjust the power costs
for which PCE may be paid to an electric utility based on the
weighted average retail residential rate in Anchorage,
Fairbanks, and Juneau, and subject to the statutory ceiling.
Mr. Pickett added that the RCA processes the fuel cost filings
and performs a desk audit every three years; however, the PCE
program is actually administered by the Alaska Energy Authority
(AEA). He displayed the next slide entitled "RCA Role in
Renewable and Alternative Energy," and explained that the RCA
considered adopting federal net metering and interconnection
standards under the U.S. Department of Energy Policy Act of 2005
(EPACT). However, the commission declined to adopt any federal
standards because they did not adequately address the conditions
in Alaska. After two years of study, the RCA decided to open
docket R-09-1 to address net metering and create an Alaska rule
that will encourage the development of small scale renewable
generation while maintaining system integrity and apportioning
costs fairly among consumers and consumer-producers. The
completion of this rule is a high priority and is expected by
the end of the year. The goal in docket R-09-2 is to create an
interconnection standard that recognizes Alaskan conditions,
provides uniformity in the interconnection requirements of
Alaskan electric utilities, and simplifies the interconnection
process for small, distributed resources. Finally, the AEA
requires that all independent power producers receiving
renewable energy grants obtain a CPCN from the RCA; however, he
opined that a regulation investigation that is less than "a full
cost of service approach" is desired.
4:02:35 PM
MR. PICKETT, in response to Representative Johansen, said an
independent power producer (IPP) is a private sector entity that
is in the business of creating an electrical generation facility
that will sell electrical power to a utility at a fixed amount.
4:03:18 PM
CO-CHAIR EDGMON estimated that independent power producers will
constitute about 25 percent of the renewable energy funds
appropriated by the legislature.
MR. PICKETT agreed, although he said he had not seen the
figures.
4:03:50 PM
REPRESENTATIVE PETERSEN related his constituents are concerned
about the cost of natural gas prices and are asking whether the
cost will go down in light of the decrease in Henry Hub prices.
MR. PICKETT noted that the proposals for in-state natural gas
pipelines offer prospects for reducing the cost in the future;
also, ENSTAR is actively looking for a gas supply. He
acknowledged that the challenging economic environment, with
demand destruction and the collapse of commodity prices,
presents an unknown response from the industry.
4:05:25 PM
REPRESENTATIVE RAMRAS inquired as to whether it is possible to
join all of the utilities together when some utility customers
will see an increase in their kilowatt cost as a result. He
further asked whether the amalgamation of utilities with
different debt structures, kilowatts, and bond ratings, will
affect some utilities' credit worthiness. "How in the world are
we going to put all of these entities together? ... isn't that
going to be, certainly that'll come under some RCA jurisdiction
... ," he said.
MR. PICKETT affirmed these are challenging issues that a working
group of executives from the utilities is considering; he opined
that as new generation and transmission capacity comes on line,
this structure will be the vehicle through which [the gas is]
brought to the marketplace with the "postage stamp" rates
offered as an incentive for the utilities' participation. An
integration of all of the utilities' assets would be
[problematic]; however, that is not the plan. Mr. Pickett
remarked:
What the role of the RCA would be would, as particular
a generation and transmission capacity that's in, say
a utility's rate base, is taken out of rate base, and
perhaps put somewhere else, that would take an action
of the commission. And that would be sort of a timely
thing, and that would take the obvious cooperation of
the utility, too.
4:08:50 PM
REPRESENTATIVE RAMRAS gave an example of the six committee
members as six utilities, all with different rates to their
consumers. He asked Mr. Pickett to explain the impact of
consolidation on each of the utility's postage stamp rates.
MR. PICKETT opined that, although he has not seen the proposed
legislation, the postage stamp rate will ultimately be the
number that is assigned to it. Furthermore, the number will not
be known until the generation and transmission costs are known,
thus it is not possible to answer the question until it is known
what physical assets are proposed to be brought online.
4:11:00 PM
REPRESENTATIVE RAMRAS asked for the definition of postage stamp
rate.
MR. PICKETT answered that a postage stamp rate typically refers
to a fixed and discrete amount for some level of service that
everybody pays.
4:11:47 PM
REPRESENTATIVE PETERSEN gave an example in which a private
company developed a geothermal power plant for the generation of
electricity at Mt. Spurr. He asked whether the company would
come under RCA regulation.
MR. PICKETT responded it may or may not. Federal statutes would
have to determine whether it is a qualifying facility that would
come under regulation by the Federal Energy Regulatory
Commission (FERC).
REPRESENTATIVE PETERSEN asked whether the company would be
considered a independent entity.
MR. PICKETT clarified that if one of the utilities, or a
consortium of utilities, that are currently regulated built the
project it may not be considered an independent. This is the
case of an Anchorage utility that has an interest in the Beluga
gas field.
4:13:00 PM
REPRESENTATIVE TUCK asked for an explanation of the QF
designation.
MR. PICKETT said that he was not an expert on FERC QF
certification processes; however, he said he knew there was a
self certification process in which the independent power
producer (IPP), after meeting certain conditions, could certify
itself. He opined the process has been "tightened up" and FERC
is more involved. Qualifying facility certification has been
proposed recently for hydro projects. In further response to
Representative Tuck, Mr. Pickett said QF exemptions are
exemptions from certification and from economic regulation.
4:14:33 PM
REPRESENTATIVE RAMRAS returned to the "fit, willing, and able"
language in the CPCN certification process and opined that [the
language] is an assessment made by the RCA. Therefore, if an
entity, such as ANGDA, that offers no service, fell under the
RCA regulation as a natural gas pipeline or as a utility, "how
do you determine 'fit, willing, and able' as opposed to ... an
ENSTAR who is going to go from transmission lines in
Southcentral, and is contemplating expanding their service?" he
asked.
MR. PICKETT explained that in a filing for a CPCN, the burden to
establish worthiness will be on the entity making the filing.
He said, " ... I don't think it would be fair for me to make
specific hypothetical responses to what may become a filing."
Obviously, he continued, the commission will review what the
entity has done in the past and whether it demonstrated the
managerial and administrative capacity, and the financial
ability, to fulfill the purpose of the filing.
4:18:42 PM
REPRESENTATIVE RAMRAS then asked, if ANGDA wanted a bond filing
for $250 million, whether it would have to demonstrate through
its business plan, that it is fit, willing, and able prior to
the bond application. He said, " ... how would you, because
$250 million is not an insignificant sum of money, ... [and
ANGDA has] never moved a single molecule; they would become a
natural gas pipeline and a natural gas distribution; they want
the state to facilitate all this bonding; at what point would
the RCA insert themselves into the regulatory process? Before
[ANGDA] got the money, after they got the money, [or] with the
business plan ... ?"
MR. PICKETT responded:
Again, I can not speak for the other four
commissioners. I have my own personal philosophy, how
I would react and these exact same questions would be
made and argued in adjudication amongst the five
commissioners and we would have would have some
commissioners saying this, and we would have other
commissioners arguing the opposite side. And at the
end of the day, three of five votes would make the
determination as to the conditions under which that
certificate would be issued.
MR. PICKETT, in further response to Representative Ramras, said
that he would prefer not to say what his argument would be
during the aforementioned debate.
REPRESENTATIVE RAMRAS opined this discussion is germane to
legislative policy and, though the RCA can not speak about an
issue before it, he again asked for Mr. Pickett's opinion on the
theory presented to him.
MR. PICKETT advised that his approach is based on the evidence
and influenced by his personal philosophy towards financial
feasibility analysis over a period of time. In addition, he
said he has specific ideas as to capacity issues and looks to a
broader set of evidence beyond what is presented on paper; for
example, "can you walk the talk?"
4:21:54 PM
CO-CHAIR MILLETT asked for further information on the Matanuska
Electric Association (MEA) docket.
MR. PICKETT recalled the RCA opened a regulation docket in
September 2007, at the request of MEA, to explore whether a
generation and transmission cooperative should be formed. At
the same time the REGA study was undertaken, and the RCA elected
to hold the docket open in abeyance for the REGA study finding.
At the last public meeting in February, the RCA intended to
gather integrated resource plans from the utilities for review;
however, representatives of MEA requested no action and
requested instead that the RCA place in the record a piece of
proposed legislation dealing with some of the REGA issues. Thus
the RCA does not intend to take action as the REGA process
continues.
4:24:10 PM
CO-CHAIR MILLETT surmised that the proposed legislation "states
their case for their integrated [resources plan] IRP."
MR. PICKETT clarified that the proposed legislation is related
to the subject matter of the open regulation docket. He
suggested that the question of the legislation's purpose is best
addressed to the representatives of MEA.
4:24:57 PM
CO-CHAIR MILLETT further asked whether any other utility has
submitted an IRP to add to the docket.
MR. PICKETT said he would look at the docket and report back.
4:25:25 PM
REPRESENTATIVE TUCK spoke of the two proposed gas pipeline
routes and the possibility that both a "bullet line" from the
North Slope to Southcentral, and a "spur line" off of the major
pipeline to Canada, will be built. He observed that customers
for the bullet line will be consumers, industry, and the export
market; customers for the spur line will be the export market
only. Representative Tuck asked if the RCA will regulate
whether in-state consumers and industry will be able to purchase
gas from the larger [spur] line at a presumably lower price.
MR. PICKETT predicted that these pipelines will be regulated
under the Pipeline Act. He opined the intent of the support for
the in-state line is to provide an adequate supply of natural
gas at reasonable rates to consumers. The "unknowns" at this
time are the price of the gas at the wellhead, the cost of the
construction of the line, and the volume of the gas. In further
response to Representative Tuck, Mr. Pickett confirmed that
matters relating to "telecom" were missing from the presentation
because the presentation was only related to energy.
4:28:22 PM
CO-CHAIR EDGMON observed the [four] different types of dockets
that the RCA can administer are identified by (I) for
investigation; (U) for utilities; (R) for regulation; and (P)
for pipelines. He again referred to the organizational
structure of the commission and asked whether it is "lean" to
the point where the commission spends less time on investigation
than warranted.
MR. PICKETT emphasized that the burden of proof is upon the
commission for investigative dockets; therefore, there must be a
clear and compelling reason to open these dockets. He pointed
out the RCA is operating with eight staff vacancies.
4:30:08 PM
CO-CHAIR EDGMON asked about the future of the RCA as Alaska
enters into a new chapter of renewable and alternative energy.
MR. PICKETT acknowledged that the RCA is driven intensely with
statutory deadlines and expressed his preference to not be in
that position. As for the future, the RCA will work closely
with the AEA in connection with renewable and alternative
energy. He advised there will be a need for additional staff to
do the job.
4:31:25 PM
CO-CHAIR MILLETT recalled that the AEA funded 25 independent
power provider projects that require a "quasi" regulation role
by the RCA. She asked how this additional role will affect the
RCA's level of service.
MR. PICKETT stated that he requested from the AEA executive
director an outline of the specific level of regulation, beyond
[the issuance of] the CPCN, required of the RCA. In further
response to Co-Chair Millett, he agreed to supply a copy of this
outline to the committee.
4:32:47 PM
REPRESENTATIVE RAMRAS thanked Mr. Pickett for his work and his
presence before the committee.
CO-CHAIR EDGMON also thanked Mr. Pickett.
4:34:18 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Energy meeting was adjourned at 4:34 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| RCA Presentation 02242009.pdf |
HENE 2/24/2009 3:00:00 PM |