Legislature(2009 - 2010)Anch LIO Rm 220
09/01/2009 02:00 PM House ENERGY
| Audio | Topic |
|---|---|
| Start | |
| Cook Inlet Natural Gas Contingency Plans | |
| 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
Anchorage, Alaska
September 1, 2009
2:13 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
COOK INLET NATURAL GAS CONTINGENCY PLANS
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
MARK SLAUGHTER, Manager
Gas and Supply
ENSTAR Natural Gas Company
Anchorage, Alaska
POSITION STATEMENT: Gave a slide presentation dated 9/1/2009
and answered questions regarding Cook Inlet Natural Gas
Contingency Plans.
REPRESENTATIVE LES GARA
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Asked questions during testimony on Cook
Inlet Natural Gas Contingency Plans.
SENATOR GENE THERRIAULT
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Asked questions during testimony on Cook
Inlet Natural Gas Contingency Plans.
GEORGE VAKALIS, Municipal Manager
Municipality of Anchorage
Anchorage, Alaska
POSITION STATEMENT: Testified during the hearing on Cook Inlet
Emergency Contingency Plans.
BRADLEY EVANS, CEO
Chugach Electric Association (CEA)
Anchorage, Alaska
POSITION STATEMENT: Gave a slide presentation titled "Incident
Management Gas Supply Interruption" and answered questions
during the hearing on Cook Inlet Gas Emergency Contingency
Plans. Offered his personal opinion in response to a question.
PHIL STEYER, Director
Government Relations & Corporate Communications
Chugach Electric Association (CEA)
Anchorage, Alaska
POSITION STATEMENT: Testified during the hearing on Cook Inlet
Emergency Contingency Plans.
CHRIS ROSE, Executive Director
Renewable Energy Alaska Project (REAP)
Anchorage, Alaska
POSITION STATEMENT: Gave a slide presentation titled
"Diminishing Gas Deliverability & Energy Efficiency in
Anchorage" and answered questions during the hearing on Cook
Inlet Gas Emergency Contingency Plans.
ACTION NARRATIVE
CO-CHAIR CHARISSE MILLETT called the House Special Committee on
Energy meeting to order at 2:13 p.m. Representatives Tuck,
Dahlstrom, Ramras, Johansen, Petersen, Edgmon, and Millett were
present at the call to order. Also in attendance was Senator
Therriault (via teleconference). Representative Gara arrived as
the meeting was in progress.
2:13:58 PM
^Cook Inlet Natural Gas Contingency Plans
Cook Inlet Natural Gas Contingency Plans
CO-CHAIR MILLETT announced that the committee would hear
presentations regarding Cook Inlet Natural Gas Contingency
Plans.
2:15:12 PM
MARK SLAUGHTER, Manager, Gas and Supply, ENSTAR Natural Gas
Company, directed the committee's attention to slide 2, titled
"Cook Inlet Gas Infrastructure." He indicated that the blue
lines on the map were ENSTAR gas pipelines; the red lines were
Marathon Oil Corporation (Marathon) or Unocal Corporation
(Unocal) pipelines; and the yellow lines were either
ConocoPhillips Company (ConocoPhillips) or Cook Inlet Gas
Gathering System (CIGGS) pipelines. The map also indicated the
location of power plants and natural gas storage reservoirs in
Cook Inlet. Mr. Slaughter noted that ENSTAR's pipeline system
includes the following: the Beluga pipeline that is a 100-mile,
20-inch diameter pipeline that moves ENSTAR and Anchorage
Municipal Light & Power (ML&P) gas to Anchorage; the Kenai "A"
and "B" pipelines that are 75 mile, 12-inch pipelines that
travel from Soldotna to Anchorage; and a 22-mile, 8-inch
pipeline that connects to the A and B pipelines. He showed the
committee the location of the Kenai-Kachemak Pipeline (KKPL)
that is owned by Marathon and Unocal and operated by Marathon;
the location of the Kenai Nikiski Pipeline (KNPL) that is a 20-
inch line from the Kenai gas fields to Nikiski; the location of
the CIGGS undersea pipeline; and the location of the Marathon
Beluga Pipeline. Mr. Slaughter recalled that last year ENSTAR
had two contracts that were not approved by the Regulatory
Commission of Alaska (RCA). In order to replace the denied
contracts, ENSTAR subsequently secured two, two-year contracts
with Marathon and Conoco to meet the remainder of its gas needs
through December 31, 2010. He presented slide 3, titled "Gas
Supply-Winter 2009/2010 Outlook," and said beginning January 1,
2011, approximately one-third of ENSTAR's gas supply will not be
under contract. Initially, ENSTAR had its gas supply under
contract through 2013, but those contracts were not approved by
the RCA. At this time ENSTAR is buying gas under five
contracts; however, in January, the small Beluga contract will
end.
2:19:26 PM
REPRESENTATIVE RAMRAS referred to slide 3 and asked for the
anticipated percentage of growth for the Southcentral region
from 2009 through 2018.
MR. SLAUGHTER responded that ENSTAR projects a steady growth of
1-1.5 percent. The dynamic of forecasting gas supply is
uncertain partly because of the effect of third parties that
market gas and ship on ENSTAR's pipeline, and partly because of
the effect of the military base contracts. Currently, loads are
projected at a lower increase than the historical high of 3
percent per year. In further response to Representative Ramras,
he said when customers convert from gas to alternative fuels it
is called "curtailment." Mr. Slaughter continued to explain
that ENSTAR is seeking additional gas volumes that are needed to
meet its customers' needs beyond 2010. Moreover, ENSTAR faces
curtailment if the company does not have sufficient gas under
contract because customers who convert to other sources of
energy will be lost.
2:23:18 PM
CO-CHAIR MILLETT asked for the number of customers ENSTAR
anticipates will be lost by curtailment if it does not find a
gas supply.
MR. SLAUGHTER stated that ENSTAR is missing contracts for one-
third of its portfolio; in fact, ENSTAR would lose its entire
commercial base without additional contracts. In further
response to Co-Chair Millett, he explained that because of the
priority listing, large and small commercial customers are lost
first and then it is determined by "ageing." For example,
customers returned to ENSTAR in 2009, 2008, and 2006, with the
exception of buildings such as schools and churches, would be
lost next. In further response, he noted that customers need as
much notice as possible before they are taken off of natural
gas; a lack of notice last December led to very irate customers.
2:25:59 PM
MR. SLAUGHTER presented slide 4, titled "Cook Inlet Peak Day
Comparison." The chart indicated that the last significantly
cold day was 2/3/99, with an average daily temperature of -19
degrees F, and ENSTAR moved about 272 million cubic feet (mmcf)
of gas in one day. On 1/3/09, the average daily temperature was
-11 degrees F; however, 314 [mmcf/d] was required. He pointed
out that in 1999, the Nikiski liquefied natural gas plant (LNG)
and the Agrium, Inc. fertilizer plants were operational and
there was plenty of gas available. However, by 2009, the
fertilizer plant was closed and the LNG plant had reduced its
need from 224 [mmcf/d] to 40 [mmcf/d] of gas. In addition, the
source of the gas had changed to a combination of gas from
storage volumes and from well supplies. The Department of
Natural Resources (DNR) estimated there is 380 mmcf/d of well
deliverability from the Cook Inlet this year and Mr. Slaughter
concluded that in two years 120 mmcf/d of deliverability was
lost.
MR. SLAUGHTER returned to the subject of ENSTAR's present
situation. Slide 5, titled "ENSTAR 2009/2010 Supply Portfolio"
indicated that the peak for 2009 is forecast at 270 mmcf/d and
that the peak forecast for 2010 is 282 mmcf/d. ENSTAR's 2009
suppliers are: Beluga River Unit Producers, ConocoPhillips,
Marathon APL-4, Marathon APL-7, and Union. In 2010, the four
suppliers will be: ConocoPhillips, Marathon APL-4, Marathon
APL-7, and Union. He reminded the committee that ENSTAR has
been investing in its infrastructure since 2007; in fact,
these investments have been designed to increase the flow of gas
from wherever it is available to the areas that need it on peak
days. Mr. Slaughter then presented slide 7, titled "ENSTAR
Operations." Regarding emergency interruptions, he assured the
committee that ENSTAR is staffed 24 hours per day, 7 days per
week, 365 days per year, and its central operations center in
Anchorage responds to gas emergencies. In addition, there are
regional offices in Soldotna and Wasilla, and emergency control
locations in Wasilla and Sterling. ENSTAR maintains a
proprietary communications network with equipment staged in
various locations in the state, and thus is not dependent on
other communications companies in the event of an emergency.
2:32:12 PM
REPRESENTATIVE DAHLSTROM asked whether ENSTAR's proprietary
communications network is tied in with the U.S. Department of
Homeland Security (USDHS).
MR. SLAUGHTER responded that ENSTAR participates in emergency
preparedness with the Alaska Partnership for Infrastructure
Protection (APIP); however, ENSTAR manages its own microwave
communication system that is also used by AT&T. In addition,
ENSTAR leases lines through GCI for other communication needs.
In further response, he noted that the statewide emergency
organizations have not been meeting as often this year.
2:34:06 PM
MR. SLAUGHTER presented slide 8, titled "ENSTAR Standard
Operation Procedures" and said that ENSTAR is regulated by the
U.S. Department of Transportation Pipeline and Hazardous
Materials Safety Administration (PHMSA) which audits its
standard operating procedures annually. The operations plans
are designed to cover operator qualification programs, a
disruption in gas supply, gas leaks, damages, natural disasters,
and fires. Slide 10 was a chart of ENSTAR's emergency response
call-tree.
2:35:25 PM
REPRESENTATIVE RAMRAS asked whether residential or commercial
gas heat customers can restart their heat plants on their own.
MR. SLAUGHTER informed the committee that when ENSTAR receives a
call that an appliance is out, it sends a serviceman to check on
the gas supply, but then advises the customer to call a
contractor to relight the appliance. Relighting an appliance is
simple, unless there is some sort of disruption or limit on the
flow of gas.
REPRESENTATIVE RAMRAS gave the example of an involuntary
curtailment of the system, affecting more than 1,000 homes, and
asked if each home would have to be manually lit.
MR. SLAUGHTER replied yes, but steps would occur prior to a
curtailment of service of that degree. Last week, testimony
before the RCA from the electric utilities indicated that the
utilities "believe that they could shed, we could stop 75
percent of their load and send that to ENSTAR." He continued to
explain that ENSTAR has no back-up and it cannot build diesel-
fired plants. However, during an extreme case such as
Representative Ramras' example, ENSTAR can call on its mutual
aid assistance agreements with the Western Energy Utility
Institute (WEI) and its sister companies in Michigan and New
Mexico.
2:40:12 PM
MR. SLAUGHTER clarified that the 2009 gas supply is contracted;
however, there is always the possibility of equipment failures.
He then presented slide 11, titled "Cook Inlet Gas Supply
Coordination" that indicated the three primary users of gas in
Cook Inlet are Chugach Electric Association (CEA), ENSTAR, and
Anchorage Municipal Light & Power (ML&P). To facilitate
coordination of the gas supply, ENSTAR normally hosts an annual
shippers/producers meeting; shippers issue forecast demands on
an annual, monthly, and daily basis; and gas flows are
coordinated on ENSTAR pipelines and on the Marathon pipeline
system. Mr. Slaughter presented slide 12, titled "ENSTAR
Contingencies" and displayed the Gas Emergency Agreement Letter
that was recently executed by ENSTAR, CEA, ML&P, and Golden
Valley Electric Association (GVEA). The agreement outlines the
steps the utilities will take in the event of a disruption of
gas supply. These steps include: curtailment of interruptible
deliveries; rerouting; the use of back-up agreements; the
importation of electricity; and conservation by consumers. He
discussed other contingencies that are part of ENSTAR's delivery
contracts.
2:44:00 PM
REPRESENTATIVE DAHLSTROM asked for information about any other
agreements to help provide gas to health facilities, hospitals,
treatment homes, schools, or residences with 24-hour home
medical care.
MR. SLAUGHTER answered that the tariff [agreement] is clear
regarding the priority of delivery during a disruption to the
gas supply. For those on the ENSTAR system at the time of the
disruption, industrial customers are turned off first, then
commercial customers, and lastly hospitals, residences,
churches, and schools. In further response to Representative
Dahlstrom, he clarified that all residential homes are part of
the final protected class of customer. Furthermore, ENSTAR
Tariff Section 1200 directs how additional costs associated with
a disruption are paid as approved by the RCA.
2:46:00 PM
MR. SLAUGHTER added that the final contingency under the
transportation shipping agreement allows that a third party
shipper can be penalized 2.5 times the most expensive price of
gas if they do not provide an appropriate quantity of gas for
their own customers. He then presented slide 13, "Gas Supply
Interruption Incident Response Overview." The overview is being
developed with the goal of putting in place short-, mid-, and
long-term response plans for the electric utilities in the event
of a disruption in the gas supply. He stressed that the long-
term responses also need the participation of state and local
governments. Slide 14, titled "Actions & Next Steps" listed the
following deadlines: utilities update RCA on 8/26/09; gas and
electric system operator tabletop scheduled for 9/10/09; ENSTAR
annual shippers/producer meeting scheduled for 9/17/09; and
coordination with the Municipality of Anchorage beginning 9/1/09
and continuing to 11/13/09. Mr. Slaughter concluded the
following: Cook Inlet deliverability continues to decline;
mutual aid planning and coordination is not a long-term
solution; coordinated customer awareness and education efforts
are ongoing; utilities, producers, and local and state
governments must work together for long-term solutions; and
regulatory and fiscal certainty are required to achieve long-
term solutions.
2:50:34 PM
REPRESENTATIVE RAMRAS asked whether Senator Therriault would be
able to speak about these issues to the energy committee after
assuming his new position with the administration.
SENATOR THERRIAULT answered that he was not sure at this point.
2:51:19 PM
REPRESENTATIVE RAMRAS then referred to slide 3 and asked whether
the "undesignated" gas was going to come from new sources in the
inlet or imports.
MR. SLAUGHTER informed the committee that ENSTAR is working with
DNR to reevaluate the gas supply in Southcentral; nevertheless,
gas is available in the near-term if ENSTAR is able to enter
contracts. If ENSTAR is unsuccessful in entering contracts, the
needed investments in infrastructure will not be made. He
opined that entities were opposed to the proposed ENSTAR
contracts that would have guaranteed the availability of gas for
the next five years at low prices. When it becomes necessary,
ENSTAR will import LNG.
2:53:03 PM
REPRESENTATIVE RAMRAS asked for further details about the plan
for a supply of gas in 2013-2014, and the source of the
aforementioned LNG.
MR. SLAUGHTER explained that ENSTAR will contract for gas in
2011-2012; however, according to DNR the total production in
Cook Inlet in 2013-2014 will not meet the estimated demand of 87
BCF/d. Therefore, ENSTAR has to make some significant
investments in the near future for storage to ease "swing" in
deliverability requirements. He opined it is too early to say
where imported gas will come from. In further response, he
said, "The inexpensive options have basically been presented and
rejected. Where that gas [comes from] will all depend on, as we
move down that path, and evaluate it, but there's significant
investment that has to be made in order to have, ... storage
facilities that can receive gas, have to contract for that gas,
you have to evaluate [and] make sure the docks can receive the
gas, and where it comes from [is] the free market."
2:57:19 PM
REPRESENTATIVE RAMRAS asked when ENSTAR will have to begin to
commit capital, and to make plans, in order to deliver foreign
LNG to Southcentral by 2014.
MR. SLAUGHTER advised that ENSTAR is now developing storage
because storage is necessary whether there is additional
production in Cook Inlet, or there is a bullet line, a spur
line, or a big line. Frankly, significant decisions will be
made this year as ENSTAR contracts for gas. Because Cook Inlet
is a small market, without a spur line, a bullet line, or an
industrial anchor tenant, there is basically no reason for
producers to look for gas.
2:59:05 PM
REPRESENTATIVE DAHLSTROM asked where the gas will be stored.
MR. SLAUGHTER said ENSTAR is working with the owners of
identified storage reservoirs in Cook Inlet.
3:00:23 PM
REPRESENTATIVE TUCK asked how soon pipeline storage can be at a
comfortable capacity.
MR. SLAUGHTER advised that ENSTAR is working with ANR Pipeline
Company (ANR) to have a storage system up and running for the
2011-12 system. However, there are many issues to overcome such
as securing a field and obtaining regulatory approvals.
3:01:52 PM
REPRESENTATIVE TUCK then asked how the cost of storage will
affect rate-payers.
MR. SLAUGHTER advised that ENSTAR does not have the costs yet.
He assumed that gas would be less expensive in the summer, but
warned that the cost of storing gas is not cheap, and costs will
not return to the "days of 2000, when we were in $2 gas."
3:03:26 PM
REPRESENTATIVE TUCK asked for the reasons that the 2013
contracts were not approved.
MR. SLAUGHTER explained that ENSTAR was unlucky in that when
presenting the contracts, gas prices were at unprecedented high
levels. In the summer of 2008, some thought ENSTAR was the
market price-setter for gas and parties intervened to oppose the
contracts for their own advantage in negotiations. He opined
that if ENSTAR had those contracts, it would be paying $4.36 in
2010 for ConocoPhillips Alaska, Inc. (ConocoPhillips), and $5.02
for the Marathon Oil Corporation (Marathon) contract.
3:05:17 PM
REPRESENTATIVE PETERSEN referred back to ENSTAR's contingency
plans. He observed that the plan calls for consumers to be
educated on conservation measures and asked how this will be
done, and whether similar plans elsewhere have been successful.
MR. SLAUGHTER explained that the education methods will be a
joint effort between the utilities. In the 1980s there were
joint communication actions which will be revamped for present
day use. Information will be made public about voluntary
curtailments-like what happened in Juneau-when rates went up and
people consumed less power.
3:07:06 PM
REPRESENTATIVE RAMRAS asked whether the first calendar year of
gas supply problems is anticipated to be 2013 or 2014.
MR. SLAUGHTER predicted if storage is on-line for 2011,
sufficient gas supply will probably extend through 2012;
however, his expectation is dependent upon how much gas the
producers make available. Undoubtedly, there is more gas to be
found in Cook Inlet, albeit at a [higher] free market price. In
further response to Representative Ramras, Mr. Slaughter advised
that ENSTAR is currently working on a contingency plan for the
importation of foreign LNG because of the significant time that
will be required to negotiate delivery and to educate the RCA,
the state, and the community, as to what is involved.
3:09:27 PM
REPRESENTATIVE RAMRAS expressed his interest in learning the
source of the imported gas.
MR. SLAUGHTER said areas of British Columbia, the Lower 48,
Sakhalin [Russia], Australia, and Indonesia, have gas.
3:10:36 PM
SENATOR THERRIAULT asked whether the contracts that were denied
would have locked ENSTAR into deliverability for the "out
years," but at more of a market price.
MR. SLAUGHTER further explained that the contracts were based on
various trading indices, but were not full deliverability on the
out years. Therefore, the producers were not willing to
contract for ENSTAR's entire 1:12 summer to winter peak swing
ratio. If the contracts had been approved, ENSTAR would still
have to develop storage, but not under the timeline it now
faces. In further response to Senator Therriault, he said the
proposed contract with ConocoPhillips limited ENSTAR at the
first quarter of 2011, and the Marathon contract proposed full
deliverability through the first quarter of 2011. Beyond that,
the proposed contracts gave ENSTAR the responsibility to
"flatten our profile" by developing storage for the 2011-2012
season.
3:12:56 PM
REPRESENTATIVE DAHLSTROM asked whether Mr. Slaughter would agree
that cheap gas is gone and only expensive gas is left, or if
there is no more gas.
MR. SLAUGHTER agreed that easy, less expensive gas is gone; in
fact, given the present cost of drilling, the easy gas has been
found and the cheap options are "off the table."
3:14:44 PM
REPRESENTATIVE RAMRAS observed that ENSTAR was previously moving
forward on building a bullet line independently. He asked
whether ENSTAR was still prepared-in its strategic plan-to
pursue a bullet line after it invests in the infrastructure
necessary for gas storage.
MR. SLAUGHTER stressed that importing gas into Cook Inlet
includes gas from a bullet line or a spur line from the North
Slope, and/or LNG imports. ENSTAR is working with Harry Noah,
the governor's advisor on the in-state gas pipeline project, who
is taking the lead on the in-state gas pipeline. He expressed
indifference as to where the gas comes from, as long as ENSTAR
can execute a contract with a producer.
REPRESENTATIVE RAMRAS remarked:
Quite frankly, I do care where gas comes from. I have
100,000 people that I and some of my colleagues
represent ... and so it's a big darn deal to me
whether that gas comes from the North Slope of Alaska
or whether it's foreign LNG that's imported from
Australia, ... Russia, or Indonesia.... I have a
community that's been tied to diesel for decades and
decades since we converted from coal in the '50s. I
have a community that is struggling under the [Fine
Particulate Matter] Pm 2.5 mandate that's imposed by
the [Environmental Protection Agency (EPA)] that is
resulting in a constrained economy....
REPRESENTATIVE RAMRAS further described how the limited supply
of natural gas has cost his constituents 800 new service jobs
and prevented over $50 million in property tax revenue and new
economic growth in the Fairbanks area. He said, "I would like
to be on record as saying ... those folks in the interior, and
... in Western Alaska, and ... along the road system do care
where that gas is going to come from." He pointed out the
divergent interests between the industry that is concerned with
supplying gas to its customers, and the residents and policy
makers of Alaska who ought to be concerned with where the gas
comes from and how each community in Alaska moves forward for
the next 50 years.
3:20:05 PM
REPRESENTATIVE GARA informed the committee of the need for the
state to have a plan in place to reduce energy use and avoid
rolling black-outs this winter. He asked whether the state has
a plan for safely reducing the use of energy in state buildings,
facilities, and schools, rather than "cutting people off" on
cold, high demand days.
MR. SLAUGHTER deferred the question to Phil Steyer, Director of
Government Relations and Corporate Communications, CEA.
3:22:26 PM
CO-CHAIR MILLETT asked Senator Therriault to inform the
administration of the committee's interest in a plan to reduce
energy use in state facilities during peak demand.
SENATOR THERRIAULT surmised when the RCA denied the ENSTAR
contracts, it seemed that the commission went beyond regulating
what the utility was charging for transportation of the
resource, to regulating the commodity price for the resource
that was being delivered. He asked if ENSTAR has an opinion on
whether the statutes or regulations need to be modified in order
to prevent this situation.
MR. SLAUGHTER advised that a review of past RCA rulings has
revealed a "shifting of standards as to how they have evaluated
the contracts." ENSTAR would like the RCA to return to the
previous standard that was applied and "leave a reliable gas
supply at a reasonable price that's available in the market."
He acknowledged that the RCA had recently approved CEA's
contract with ConocoPhillips and ENSTAR is hopeful that this is
an indicator for future contracts. In further response to
Senator Therriault, he said that the burden of proof is on
ENSTAR to supply sufficient information to support its proposed
contracts. Referring to the Department of Law (DOL), Division
of Regulatory Affairs & Public Advocacy (RAPA), he said RAPA did
not oppose the CEA/ConocoPhillips contract, although it did
present testimony at the ENSTAR hearings in opposition to some
of the terms and conditions.
3:26:53 PM
GEORGE VAKALIS, Municipal Manager, Municipality of Anchorage,
informed the committee that the Municipality of Anchorage is
looking at solutions to a possible interruption in its supply of
natural gas with a three-pronged approach: a long-range solution
that includes the alternatives discussed today, and study by a
mayor's task force; intermediate solutions such as gas storage,
propane, and LNG; and an immediate short-term fix for
occurrences this winter. During a recent meeting with all of
the utilities supplying Anchorage, the utilities agreed that the
most likely scenario this winter would be a disruption in the
flow of natural gas due to equipment failure. He explained that
emergency management by the municipality falls under either a
short-term solution to a temporary equipment failure, or a long-
term solution to address a major disruption that cannot be
quickly repaired. Mr. Vakalis said one obvious solution for a
short period of time is the use of conservation measures. In
fact, the utilities have provided suggestions to reduce energy
consumption by residents, businesses, and industrial users.
These measures could help to mitigate the problem for awhile;
therefore, the municipality will release an education plan in
October informing consumers of measures they can take in this
event. Also, the educational materials will include information
about the effects of lower pressures should the shortage of gas
continue. Mr. Vakalis stressed that the first step is
conservation, and the "alert notification system" will be used
in October to notify residents to begin to take the conservation
measures. The success of these measures will be an indication
to the utilities of the effect of conservation on the amount of
energy needed. He continued to explain that in November, the
municipality will hold a tabletop exercise with all of the
utilities to determine how well they are able to handle such an
emergency. He concluded that Anchorage is doing everything
possible to encourage conservation and to develop a plan through
the tabletop exercise. More importantly, the municipality is
looking at a plan to address a major disruption during the
winter months.
3:34:13 PM
[CO-CHAIR Millett handed the gavel to Representative Dahlstrom.]
REPRESENTATIVE TUCK asked how the educational information will
be communicated to the public.
MR. VAKALIS responded that the municipality is coming up with a
plan to use the media, the municipality, the school district,
and the University of Alaska (UA) television channels, as well
as internet and other electronic means of communication. This
plan will be used to educate and to alert residents of the need
to start conserving. The municipality will also monitor weather
conditions and will determine the best way to communicate with
the utilities regarding pressure readings. In further response
to Representative Tuck, he said that the municipality will alert
the entire city of Anchorage and areas in the Railbelt.
Additionally, Anchorage will share with Kenai and Mat-Su
emergency management organizations information about the alert
program and the best methods to conserve and will also invite
their participation in the tabletop exercise.
3:37:38 PM
REPRESENTATIVE RAMRAS applauded Mr. Vakalis for encouraging
conservation efforts and mentioned the effectiveness of the
"green star" program for businesses.
[Representative Dahlstrom returned the gavel to Co-Chair
Millett.]
3:39:09 PM
CO-CHAIR MILLETT asked for the best way the state and the
legislature could help the municipality with its tabletop
exercise.
MR. VAKALIS observed that the municipality has a great working
relationship with the Alaska Division of Homeland Security &
Emergency Management (DHS&EM). However, it may be the role of
the state and legislature to develop the long-term solution,
whether the solution is hydroelectric, tidal, wind, or
conversion to coal. In the short-term, he encouraged the
committee to support the development of gas and the most
feasible alternatives. In further response to Co-Chair Millett,
he said that after educating the residents on conservation
measures, he plans to ask the major users of energy, such as the
Ted Stevens Anchorage International Airport, hospitals, and
large facilities to develop their own conservation measures.
3:42:42 PM
REPRESENTATIVE RAMRAS observed that Cook Inlet gas will not be
sufficient to provide natural gas to Anchorage in the future.
He asked whether the municipality will develop a policy position
regarding where it intends to obtain its gas supply in the
future.
MR. VAKALIS opined it is inconceivable that Alaska cannot draw
from its own resources to provide energy for the state.
3:43:55 PM
REPRESENTATIVE GARA suggested that community service
announcements and direct notification to industrial users will
be more effective than posting flyers to encourage conservation
measures. He expressed his concern that the media plan to
encourage conservation measures will not include the entire
Railbelt. Furthermore, there should be actual agreements with
the large commercial users and the nonresidential users.
MR. VAKALIS stressed that "the plan is to get 'buy-in'." The
municipality will pay for advertisements to educate the public,
in addition to posting flyers and producing radio announcements.
He assured Representative Gara that whatever goes over the media
waves in Anchorage will be seen and heard in most of the
Railbelt. Furthermore, the municipality will be providing
information to the emergency management agencies of the Kenai
and Mat-Su Boroughs.
3:46:31 PM
BRADLEY EVANS, CEO, Chugach Electric Association (CEA), informed
the committee that CEA plans for many emergency events from
weather incidents to volcano activity, and including gas supply
interruption. Chugach Electric Association also maintains a
trained staff that is available 24/7, and has redundancy and
backup systems to call on during emergencies. System operating
rules would provide flexibility during a gas supply
interruption, and the coordination between utilities regarding
risk management has resulted in planning for other contingencies
also. He displayed slide 5, titled "Corporate Incident
Management Plan Provides Incident Response Oversight" and noted
that CEA's corporate incident management plan is a management
document that includes notification procedures, call-trees,
situation assessments, return to normal transitions, and other
information. Slide 6, titled "Additional Chugach and Inter-
Utility Plans" listed additional CEA and inter-utility plans
ranging from business continuity to strategic alliances with
petroleum providers. Inter-utility plans include an intertie
operating agreement, joint planning, gas coordination, cost
sharing, and participation in the Alaska Partnership for
Infrastructure Protection. Mr. Evans presented slide 7, titled
"Gas Supply Interruption Incident Response Overview" that
identified the responses of systems operations, voluntary
consumer response, and short-, mid-, and long-term consumer
interruptions.
3:51:45 PM
CO-CHAIR MILLETT asked about the possibility of increasing
hydroelectric power (hydro) generation in response to a gas
supply interruption.
MR. EVANS explained that the hydro generation from Bradley Lake
is not normally dispatched to its maximum capability.
Furthermore, although wattage from Bradley Lake may not be
available for every incident, additional megawatts from it and
the intertie can be shifted to full capability, thereby
incrementally reducing the amount of production needed from a
gas turbine.
3:53:16 PM
REPRESENTATIVE TUCK asked whether energy generated by hydro or
natural gas is cheaper to provide.
MR. EVANS advised that this is a very complex economic dispatch
problem. Hydro cannot be run "full out" all year because
production is limited by the supply of water.
3:54:29 PM
REPRESENTATIVE GARA asked Mr. Evans to compare the energy usage
of residential and nonresidential consumers during high peak
periods of a cold snap.
MR. EVANS said that he would provide the electrical consumption
statistics for each class of consumer at a later date. His firm
plans to inventory the capabilities of commercial users and
develop agreements for conservation and the use of alternative
fuels. The goal is to not shift the commercial customer "either
through an outage or through a commercial arrangement", but to
reduce the footprint.
PHIL STEYER, Director, Government Relations & Corporate
Communications, Chugach Electric Association (CEA), stated that
a review of CEA's annual load profile looks like a "U": high
electric loads in the winter and low in the summer. Because its
market is largely residential, the daily profile on a cold
winter day reveals peaks during the morning and early evening,
and a low at midnight. Using 1/7/09 as an example, he estimated
that if consumers avoided using electricity in the evening,
there would be a 10 percent reduction in use. Mr. Steyer opined
conservation by nonresidential consumers would be needed to
increase the savings. In response to Co-chair Millett, he
explained that CEA customers are about 80 percent residential
and 20 percent commercial, while ML&P customers are about the
opposite. However, CEA kilowatt hour sales are about evenly
split between residential and commercial customers. All
utilities have commercial customers, but the mix of customers a
utility company has may be more commercial or residential.
3:59:42 PM
MR. EVANS added that CEA planned on scheduling a "voluntary day"
in order to measure the result of taking voluntary actions. He
then returned to slide 7 and noted that the voluntary customer
actions for mid- and long-term have been discussed in previous
testimony before the committee. Mr. Evans pointed out that
voluntary consumer response "can be done under both sides of
natural gas and electric consumption."
4:01:19 PM
CO-CHAIR MILLETT inquired as to how many times CEA has reached
yellow or red levels of disruption.
MR. EVANS said that to his knowledge CEA has not reached yellow
or red levels on a large scale. He advised that CEA has joined
with many consumers for its Smart Power conservation program.
He acknowledged CEA has operated in the [up to 40 percent level]
and interruptions have been handled with operating measures that
do not impact the customer and have prevented brownouts and
blackouts.
4:03:29 PM
MR. EVANS continued to explain that it is possible to reduce the
consumption footprint operationally by maximizing resources,
emergency purchasing, and re-dispatching units. For example, a
compressor outage can be accommodated by generating more
pressure in a different way.
4:04:31 PM
REPRESENTATIVE RAMRAS referred to slide 8, titled "System
Operations Response to a Gas Supply Interruption" and asked from
where emergency gas could be purchased.
MR. EVANS explained that CEA has been able to purchase excess
capability gas from another producer. This procedure is handled
"behind the pilot's chair, so to speak."
4:05:58 PM
REPRESENTATIVE JOHANSEN asked whether very cold winters create
problems with low water levels at Bradley Lake.
MR. EVANS said that generally speaking the inflow from the lake
begins early in the summer and is reduced from October to
freeze-up. In further response, he noted that CEA has
experienced minimum lake elevations late in the year, in April
or May, but the operating groups monitor the lake level and
curtail the flow where necessary. The lake collects water from
rain, snowpack, and glacier melt.
4:08:42 PM
REPRESENTATIVE GARA recalled hearing comments about the
possibility of rolling blackouts during a very cold winter.
Considering Mr. Evans' previous testimony, he asked whether the
danger of rolling blackouts is real.
MR. EVANS agreed that the threat is real and is not limited to a
disruption in the flow of gas, but also includes problems that
can be caused by an infrastructure failure. In addition, he
reminded the committee of the uncertainties in the Cook Inlet
Emergency Management Plan regarding production from the wells in
Cook Inlet. The utilities are a "weakly interconnected system
all throughout the supply chain to make this work." He warned
that a production, delivery, or conversion problem could surface
and Alaska does not have a lot of backup.
4:11:14 PM
REPRESENTATIVE TUCK, referring to slide 8, asked for the cost
effectiveness of the six system operations responses listed on
the slide.
MR. EVANS advised that GEA normally chooses the least disruptive
response which would generally be purchasing from GVEA; however,
GVEA is also a liquids, diesel-based generation and GEA holds an
interruptible contract. He described other scenarios using
different operations responses. In further response to
Representative Tuck, he explained that the contract to provide
generation to MEA expires in 2014. In fact, how all of the
utilities manage generation going forward is under deliberation
at this time, whether "we could work something out, or we could
do something through a Railbelt energy corporation."
4:14:13 PM
REPRESENTATIVE TUCK surmised the service area may be under a
"yellow" status for three to four months this year. He asked
whether this would affect consumers' rate cost.
MR. STEYER referred to slide 7 as "our one-page attempt to put
on a single piece of paper and explain to people what this issue
is all about." There are three levels of response to resolve
problems: at the green level, the use of systems operations by
the utilities; at the yellow level, the use of voluntary action
by customers; at the red level, the use of disruptions. He
pointed out that the first response to an incident is the use of
systems operations, and remarked, "Heretofore, all problems have
been resolved [by actions] within the green area and customers
have never been asked, in my 22 1/2 years at Chugach, we've
never gotten into this middle band - voluntary actions." Only,
as a last resort, would there be consumer interruptions. In
response to Representative Gara, he said, "Sometimes people get
this page out of order." In fact, even the problems last winter
were resolved at the green level. Mr. Steyer then defined
short-term as a problem measured in hours or days; mid-term as a
problem measured in weeks or months; and long-term as a problem
measured in years.
4:18:38 PM
CO-CHAIR MILLETT said:
You said that you've only gone to one of, one thing in
the green box to this point. Is that what you said
...?
MR. STEYER clarified that last winter, during the cold snap, CEA
"really only used one of these tools in the toolbox...." He
added that other utilities, such as ENSTAR and the LNG facility,
may have used other actions.
CO-CHAIR MILLETT remarked:
I guess what I'm trying to get at is ... but if we
used all of these tools, I guess I'm trying to get to
the point ... [how] close were we to getting into the
yellow?
MR. STEYER opined that many actions were still available to the
utilities had the utilities needed them. He pointed out that
headlines and hallway conversations do not always serve
customers and constituents well.
4:20:31 PM
CO-CHAIR MILLETT continued to say:
If we haven't gotten to that point ... I guess my
question to you is why is the municipality planning
and why are, why do we have so many people-ENSTAR in
particular and the municipality-saying that this is a
distinct possibility, and you're telling me that we
haven't even made it through the green box and we
haven't gotten to that point. So, is there a false
sense of dire straits here? Is it warranted, are we
jumping way ahead...?
MR. EVANS assured Co-Chair Millett that the situation is real
due to the declining deliverability of Cook Inlet. Although the
precise answer regarding production in Cook Inlet is unknown,
the utilities want to have plans in place; this is prudent
utility planning and operation. He reiterated past testimony in
which he warned that the situation is going to get worse and
actions must be taken to "keep the lights on and safety first."
Today's testimony is focused on how the utilities are planning
for a contingency, however, a perfect storm could happen.
4:22:44 PM
REPRESENTATIVE JOHANSEN expressed his interest in knowing how
close this area of the state is to [voluntary consumer response]
to a gas supply interruption problem.
MR. EVANS acknowledged that at one time or another CEA has used
all of the [actions] available to [system operations].
4:24:24 PM
REPRESENTATIVE GARA relayed that he has heard that there is also
a danger of a shortage of gas availability during peak winter
usage.
MR. EVANS confirmed that sufficient gas is under contract for
this winter and there would need to be a gas supply interruption
to cause a failure. However, it is possible that a temperature
of 30 below for 20 days might exceed the capability. There are
two issues to understand, the deliverability and the volume. If
either were stretched to the breaking point - then the utilities
would use [system operations] tools to handle that.
REPRESENTATIVE GARA restated that the gas now under contract is
enough for this winter, although the systems issues are
separate.
MR. EVANS said, "There is always ... there could be a
deliverability problem here, we could exceed the ability of the
Cook Inlet to deliver gas."
MR. STEYER continued his discussion of slide 7. The short-term
system operations response, shown in green, could reduce up to
40 percent of CEA's peak daily demand for gas. Voluntary
consumer response, shown in yellow, represents another reduction
of up to 15 percent. He expressed his belief that these are
actions customers could and would do if necessary. Furthermore,
CEA is seeking ways to help its customers choose the most
valuable actions to take. To do this, CEA has organized its
customer base not only by the retail or commercial level, but
also by government or public control versus private control of a
facility. Thus, federal, state, and municipal building
management will be contacted to prearrange the planning of
voluntary responses. The remainder of retail customers may have
energy saving responses unique to each site. Mr. Steyer then
displayed slide 10, titled "Customer Interruptions" that
illustrated the information that will be provided to residential
customers.
4:31:04 PM
REPRESENTATIVE RAMRAS observed that every rural community that
the committee has visited since January is living with
[interruptions for short durations] every day.
4:31:33 PM
MR. STEYER stressed that the document presented is a draft
document and a work in progress. The goal is to develop
something simple for residents to use during the course of a
short-term interruption. He concluded by saying that the
voluntary responses and a common plan are being developed by all
six of the Railbelt utilities, ENSTAR, and the Municipality of
Anchorage.
4:33:37 PM
MR. EVANS returned to slide 7, and said after reductions by
system operations and voluntary consumer response, rotating
consumer interruptions over a peak period can save an estimated
20 percent. The minimum requirement in the transportation
system is 25 percent of the on-peak take, or 25 million cubic
feet per day (mmcf/d). A minimum amount of generation is
required to keep the backbone of the transportation system up.
He concluded by advising the committee of the upcoming electric
and gas utility tabletop exercise and the deadlines coordinated
with the Municipality of Anchorage that were listed on slide 13,
titled "Next Steps."
4:35:03 PM
CO-CHAIR MILLETT asked for the state's and legislature's role in
CEA's contingency plans and long-term solutions.
MR. EVANS expressed his belief that coordination with the state
for resources to support contingency planning, education, and
communications is critical. In the long-term, the next step is
for the Cook Inlet Resource Management Plan to provide more
answers and transparency in order to better communicate the
"pockets of information between DOR and DNR." Furthermore, the
state, as the lease-holder, needs to work with CEA and ENSTAR on
potential gas storage. Mr. Evans pointed out that CEA is also
participating in the development of an in-state bullet gas line
and other in-state resources. However, the decisions made by
CEA must be in the best interest of its consumers. He opined
that the state must make hard decisions about its investments in
infrastructure such as the bullet line and the Susitna
Hydroelectric Project. Mr. Evans said, "I personally think that
if you're going to export a BTU you should create a BTU ...
Susitna goes a long ways to do that ... in some communities
where they have an abundance of hydro, or a higher percentage of
hydro, they have more stable rates."
4:38:07 PM
REPRESENTATIVE RAMRAS agreed that the overarching concern of a
utility is to keep the lights on. He asked how to make a
transition to a bullet line supply of gas in 2015-2016, "so that
you're contributing to the volume of gas ... on day one."
MR. EVANS offered his personal opinion that there is a need for
an anchor tenant and the likely candidate is the LNG export
[plant]. Although the plant does not line up with the Alaska
Gasline Inducement Act (AGIA), the legislature must sort this
out. The other question is how much the state is prepared to
invest in its future.
4:41:48 PM
CHRIS ROSE, Executive Director, Renewable Energy Alaska Project
(REAP), informed the committee that REAP is a coalition of 65
organizations working to promote renewable energy and energy
efficiency. Mr. Rose agreed that there are short-, mid-, and
long-term solutions to this problem not only on the supply side,
but on the demand side by using conservation, weatherization,
and energy efficient construction. He advised that most of the
gas in Cook Inlet supplies residential and commercial electric
generation and pointed out that conservation requires conscious
decisions and behavioral changes, but energy efficiency reduces
the amount of energy consumed while still delivering the same
quality of services. Examples of energy efficiency are
replacing a car to improve gas mileage, or replacing a
refrigerator with an EnergyStar model. However, large scale
implementation of either needs a comprehensive strategy; in
fact, a recent study indicated that the U.S. could reduce its
energy consumption by 23 percent through energy efficiency and
conservation. Mr. Rose noted that buildings consume about 70
percent of all electricity generated, and also account for about
40 percent of the total energy use in the U.S. Furthermore, the
U. S. Department of Energy (DOE) estimates that every $1 spent
on the Building Energy Codes Program will save $50-$60 over the
lifetime of the investment. In Alaska, the legislature invested
$360 million in energy weatherization and energy rebate programs
and Alaska Housing Finance Corporation (AHFC) is estimating that
if every person in the region participated in the weatherization
program each household could save 780 therms [one therm equals
100,000 BTUs] per year. This represents roughly 5 percent of
the Cook Inlet gas load. Mr. Rose encouraged the committee to
consider how to change the way people think about energy.
Partly because of the extreme climate, "Alaskans use more energy
per capita than probably any society on the planet." Therefore,
Alaskans should have the most incentive to reduce their
consumption of energy. He agreed with Co-Chair Millett that a
large part of Alaska's energy use is industrial.
4:47:30 PM
MR. ROSE stated that one of the fundamental barriers to
increasing energy efficiency is the sheer number of households
and electric devices. In addition, energy efficiency is not a
primary focus of our economy as it is in other states and
countries. Other barriers are: cost of improvements; lack of
cold climate research baseline data; ingrained behavior;
competing incentives such as hotel guests who do not pay extra
for the use of energy; landlords who pass energy costs on to
their tenants; and lack of choice of devices provided by others,
such as cable boxes.
4:50:02 PM
REPRESENTATIVE RAMRAS stated that the hospitality industry is
leading the marketplace of ideas in energy conservation areas,
such as providing recycling bins in rooms and saving on laundry
costs. He suggested that hotels are changing guests' behavior
when traveling and after returning home.
MR. ROSE agreed that the hospitality industry is doing so in
select places, but the point is simply that the problem still
exists.
REPRESENTATIVE RAMRAS continued to explain that hotels were
among the first to install flat panel TVs to save energy, and
suggested that the speaker is ignoring a movement in the private
sector that is changing the behavior of consumers. In fact, the
hospitality industry is "glamorizing the green movement and
changing the broad behavior of large, cross-sections of
consumers .... You make the business component sound passive
and I don't think they are." Representative Ramras opined that
private venues across the country are taking conservation steps
because it is good business management.
MR. ROSE expressed his understanding that many good things are
happening and the research proves that more can be done.
4:53:15 PM
REPRESENTATIVE JOHANSEN asked for clarification as to whether
Alaskans are the number one energy consumers in the world.
MR. ROSE said, "Yes ... I said one, one of the largest per
capita users in the world." In further response to
Representative Johansen, he explained that per capita is all of
the energy use in the state, including industrial use, divided
by the population.
4:54:07 PM
MR. ROSE continued to list realistic barriers to increasing
energy efficiency: cost of new technologies; poor building
practices and lack of building codes; and inexperience in
"green" building. Turning to ways to address these barriers, he
noted that the Cold Climate Housing Research Center has issued
the following program and policy recommendations: state
leadership, funding energy efficiency, financial incentives,
building codes and standards, baseline data, and public
education and outreach. Mr. Rose then relayed that in Juneau,
when an avalanche crippled power lines and cut off Juneau's
hydroelectric energy supply, electric energy consumption was
reduced by 30 percent. After power was restored, there remained
a sustained reduction of 8 percent. It is believed the
sustained reduction is the result of changes in lighting and
some energy efficiency improvements to freezers and appliances.
Although a catastrophe brought these changes, perhaps people can
be motivated to prevent a looming catastrophe. He suggested
competition may be a driving force. For example, the Sacramento
Municipal Utility District utility bills compare each customer's
energy usage to the consumption of 35,000 other users; this
policy resulted in an average 2 percent decrease in energy
usage. A holistitic approach to the problem helps people
understand why conservation is important and should be a
"normal" policy, and addresses the structural barriers such as
aligning utility companies' interest with energy efficiency;
access to accurate energy saving advice; incentives for
investing in new technologies; and building codes and standards.
4:58:16 PM
MR. ROSE then described the Alaska Efficiency Challenge. He
explained that the program is currently specific to Southcentral
Alaska and a website is being developed which will list 400
energy saving and efficiency measures effective in this region.
Consumers can pledge to take certain measures and the website
will immediately calculate the savings for the consumer to see.
The primary goal of this program is to work with the utilities
to monitor and verify what the consumers are doing voluntarily
to save energy, and then establish competitions between
communities, schools, and businesses, to generate "the
competitive element, the competitive spirit that people have
that really resonates with people." He opined that this
competitive spirit will combine with the desire to save money
and to save natural gas. When completed, the website will show
detailed information on each of 400 possible ways to save energy
and money. Mr. Rose concluded that "this is one piece of the
puzzle, not a silver bullet, none of these are silver bullets,
... but just another way that we could be a little bit more
energy efficient.
5:01:39 PM
REPRESENTATIVE PETERSEN asked whether the development of Fire
Island [Wind Farm} would help [CEA] and ML&P during the peak
load times.
MR. ROSE estimated that a 54 megawatt project equals about 5
percent of the overall gas generation; however, there is
increased wind in the winter that would coincide with the peak
load. He was unsure how the wind power would balance with
hydro.
CO-CHAIR MILLETT thanked the presenters.
5:03:00 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Energy meeting was adjourned at 5:03 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Customer Action Plan - short.pdf |
HENE 9/1/2009 2:00:00 PM |
|
| Alaska EE [Read-Only].pdf |
HENE 9/1/2009 2:00:00 PM |
|
| Gas Supply Interruption Presentation (9-1 House Special Committe on Energy) [Read-Only] [Compatibility Mode].pdf |
HENE 9/1/2009 2:00:00 PM |
|
| Utilities Emergency Response Overview.pdf |
HENE 8/26/2009 5:00:00 PM HENE 9/1/2009 2:00:00 PM |
|
| September 1 Agenda.pdf |
HENE 9/1/2009 2:00:00 PM |
|
| House Special Committee on Energy Sept 1 2009 Final [Compatibility Mode].pdf |
HENE 9/1/2009 2:00:00 PM |