Legislature(2009 - 2010)BARNES 124
03/30/2010 03:00 PM House ENERGY
| Audio | Topic |
|---|---|
| Start | |
| HB182 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 182 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ENERGY
March 30, 2010
3:10 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
HOUSE BILL NO. 182
"An Act establishing the Greater Railbelt Energy and
Transmission Corporation and relating to the corporation;
relating to transition, financial plan, and reporting
requirements regarding planning for the initial business
operations of the Greater Railbelt Energy and Transmission
Corporation; relating to a report on legislation regarding the
Regulatory Commission of Alaska and the Greater Railbelt Energy
and Transmission Corporation; authorizing the Alaska Energy
Authority to convey the Bradley Lake Hydroelectric Project and
the Alaska Intertie to the Greater Railbelt Energy and
Transmission Corporation; and providing for an effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 182
SHORT TITLE: RAILBELT ENERGY & TRANSMISSION CORP.
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
03/12/09 (H) READ THE FIRST TIME - REFERRALS
03/12/09 (H) ENE, L&C, FIN
03/26/09 (H) ENE AT 3:00 PM BARNES 124
03/26/09 (H) Heard & Held
03/26/09 (H) MINUTE(ENE)
04/09/09 (H) ENE AT 3:00 PM BARNES 124
04/09/09 (H) Heard & Held
04/09/09 (H) MINUTE(ENE)
03/18/10 (H) ENE AT 3:00 PM BARNES 124
03/18/10 (H) Heard & Held
03/18/10 (H) MINUTE(ENE)
03/23/10 (H) ENE AT 3:00 PM BARNES 124
03/23/10 (H) -- MEETING CANCELED --
03/25/10 (H) ENE AT 3:00 PM BARNES 124
03/25/10 (H) Heard & Held
03/25/10 (H) MINUTE(ENE)
03/30/10 (H) ENE AT 3:00 PM BARNES 124
WITNESS REGISTER
BRIAN BJORKQUIST, Senior Assistant Attorney General
Labor and State Affairs Section
Department of Law (DOL)
Anchorage, Alaska
POSITION STATEMENT: Presented the changes to HB 182.
JANET REISER, Board Member
Chugach Electric Association, Inc. (Chugach Electric)
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 182.
JOE GRIFFITH, General Manager
Matanuska Electric Association, Inc., (MEA)
Palmer, Alaska
POSITION STATEMENT: Testified in support of HB 182.
KATIE HURLEY, Board Member
Matanuska Electric Association, Inc. (MEA)
Palmer, Alaska
POSITION STATEMENT: Testified in support of HB 182.
KIT JONES, Board Member
Matanuska Electric Association, Inc. (MEA)
Palmer, Alaska
POSITION STATEMENT: Testified in support of HB 182.
LARRY DEvILBISS, Board Member
Matanuska Electric Association, Inc. (MEA)
Palmer, Alaska
POSITION STATEMENT: Testified in support of HB 182.
BOB PICKETT, Chairman
Regulatory Commission of Alaska (RCA)
Anchorage, Alaska
POSITION STATEMENT: Presented his personal observations during
the hearing on HB 182.
CAITLIN HIGGINS, Executive Director
Alaska Conservation Alliance (Alliance)
Anchorage, Alaska
POSITION STATEMENT: Testified during the hearing on HB 182.
ACTION NARRATIVE
3:10:21 PM
CO-CHAIR CHARISSE MILLETT called the House Special Committee on
Energy meeting to order at 3:10 p.m. Present at the call to
order were Representatives Millett, Johansen, Petersen, Tuck,
and Edgmon. Representatives Dahlstrom and Ramras arrived as the
meeting was in progress.
3:10:46 PM
HB 182-RAILBELT ENERGY & TRANSMISSION CORP.
3:10:47 PM
CO-CHAIR MILLETT announced that the only order of business would
be HOUSE BILL NO. 182, "An Act establishing the Greater Railbelt
Energy and Transmission Corporation and relating to the
corporation; relating to transition, financial plan, and
reporting requirements regarding planning for the initial
business operations of the Greater Railbelt Energy and
Transmission Corporation; relating to a report on legislation
regarding the Regulatory Commission of Alaska and the Greater
Railbelt Energy and Transmission Corporation; authorizing the
Alaska Energy Authority to convey the Bradley Lake Hydroelectric
Project and the Alaska Intertie to the Greater Railbelt Energy
and Transmission Corporation; and providing for an effective
date." She stated the committee substitute (CS) for HB 182, 26-
GH1041\S, Chenoweth/Bailey, 3/24/10, was the working document
before the committee.
3:11:16 PM
BRIAN BJORKQUIST, Senior Assistant Attorney General, Labor and
State Affairs Section, Department of Law (DOL), referred to page
3, line 16, of the proposed CS that authorized the formation of
the corporation. He explained that this section allows four or
more municipal or cooperative public utilities, that are first
authorized by law, to form. Section 13, page 21, line 17,
provides the required authorization to form the Greater Railbelt
Energy and Transmission Corporation (GRETC) from four or more of
the public utilities listed in the bill. Subsection (b)
provides a contingency that the corporation must agree to
conduct a management audit of the corporation after three, six,
and ten years, and provides criteria for the audit. Section 14
provides a conditional effective date for the bill and most of
the amendments; under that section if the utilities provide a
letter of intent to the Alaska Energy Authority (AEA) by
7/30/10, the authorization to form the corporation takes effect.
Also on page 3, lines 20-25, there are two initial purposes for
the formation of the corporation: (1) to acquire, operate, or
maintain power and transmission projects from the AEA; (2) to
plan for, recommend, coordinate, and otherwise address power
generation and transmission (G&T) needs for the service
territory of the corporation. Mr. Bjorkquist stated this
provision is critical and is tied to replacing some of the void
that will be caused by the termination of the Alaska Intertie
Agreement.
3:15:38 PM
CO-CHAIR MILLETT asked Mr. Bjorkquist to explain how this
structure is different from a joint action agency (JAA).
3:15:58 PM
MR. BJORKQUIST explained that the JAA statute pertains to
projects acquired from the AEA, and was enacted to assist in the
divestiture of the Four Dam Pool Power Agency project. House
Bill 182 adds the purpose of planning for the interconnected
service territory of the corporation, and has a greater public
function. For example, the Four Dam Pool projects were isolated
projects, and the JAA legislation focused on the acquisition of
the projects. Furthermore, a JAA can be a joint venture between
two or more public utilities to deal with a project or projects.
3:18:39 PM
CO-CHAIR MILLETT referred to AS 42.45.310, and pointed out that
a JAA can request revenue bonds from the Alaska Industrial
Development & Export Agency (AIDEA). She asked for the
difference between the purposes of a JAA and GRETC, beyond the
fact that GRETC is authorized to own fuel storage, fuel
resources, leases, land, pipelines, and to limit the abilities
of independent power producers (IPPs). She asked for the
reasons to form under GRETC instead of a JAA.
3:19:51 PM
MR. BJORKQUIST clarified that GRETC legislation also deals with
issues such as electrically interconnected utilities, and
obligates long-range regional planning functions-including the
integrated resource plan (IRP)-and long-range fuel supply,
capital improvement, and financial management plans. These
regional planning functions are add-ons to GRETC that are not
part of the JAA legislation or statutory scheme, because the JAA
legislation was established for isolated projects without a need
for regional planning. Mr. Bjorkquist stressed the importance
of the regional planning component within GRETC.
3:21:18 PM
CO-CHAIR MILLETT asked whether a JAA could adopt an IRP, and
form under a memorandum of understanding (MOU) without a [new]
statute.
3:21:37 PM
MR. BJORKQUIST emphasized that the provisions in HB 182 are
mandated, thus the utilities are required to complete regional
planning. Without HB 182, all the utilities can "elect" to plan
on a regional basis, but historically, comprehensive planning
has not happened.
3:22:15 PM
REPRESENTATIVE JOHANSEN opined that the legislature, AEA, or the
governor could require an IRP. He then asked whether there is
another JAA in place in the state at this time.
3:22:58 PM
MR. BJORKQUIST said he was not aware of another JAA operating;
however, there has been interest by the Railbelt utilities to
form one in anticipation of the divestiture of Bradley Lake and
the termination of the Alaska Intertie Agreement.
3:23:27 PM
CO-CHAIR MILLETT stated a JAA was formed 7/26/05 by Anchorage
Municipal Light & Power (ML&P) and Golden Valley Electric
Association (GVEA) called the Alaska Railbelt Energy Authority
(AREA). She expressed interest in why this JAA failed and how
GRETC will accomplish what the utilities could not do "on their
own."
3:24:34 PM
MR. BJORKQUIST returned to page 3, line 30, and said another
purpose of the corporation is to be the primary recipient of
state financial assistance. In other words, this is a provision
that the utilities must coordinate and consolidate before
Railbelt energy funds are made available.
3:25:22 PM
CO-CHAIR MILLETT surmised that the reason to form GRETC is to
have access to the Railbelt energy funds.
3:25:34 PM
MR. BJORKQUIST said yes, and added that there is other state
financial assistance, as well. Page 4, line 3, subsection (c),
provides for specific types of planning regarding the adequacy
of fuel supply, the adequacy of G&T assets, and diversity in
generation resources, renewable energy-based generation, and
renewable energy generation resources.
3:26:24 PM
CO-CHAIR MILLETT asked for the meaning of "diversity in
generation resources."
3:26:31 PM
MR. BJORKQUIST responded it means different fuel supplies,
rather than having all of the energy generation from oil or gas.
3:26:38 PM
MR. BJORKQUIST, in further response to Co-Chair Millett,
clarified that this section is for planning and making
recommendations; in fact, the diversity in generation resources
would be focused more on the generating assets that would use
various types of fuels.
3:27:43 PM
CO-CHAIR MILLETT asked whether Sec. 42.50.[090] provides
authority for the corporation to own, manufacture, purchase,
acquire, accumulate, transmit, meter, and dispatch energy.
3:28:05 PM
MR. BJORKQUIST indicated yes. He called attention to page 4,
line 19, and said this provision clarifies that the corporation
will operate on a not-for-profit basis and will offer services
at uniform standard-not necessarily postage stamp rates-due to
the differences in the cost of providing services to various
customers. Page 4, lines 26-27, provide that the corporation is
for a public service.
3:29:38 PM
CO-CHAIR MILLETT recalled interest in the corporation's
interconnection policy because promoters of renewable energy
projects are unsure of whether the standards GRETC may adopt may
exclude renewable projects from the grid.
3:30:23 PM
MR. BJORKQUIST referred to page 18, lines 7-9, and said this
provision ensures that others can participate in the
transmission system by giving the RCA jurisdiction over joint
use and interconnection of the facilities. Furthermore, this
provision will apply "forever" and empowers the RCA to order
GRETC to allow an IPP to put power on the transmission system.
He opined the provision demonstrates that GRETC can not close
off the Railbelt system to others. It is very clear that the
corporation is subject to this jurisdiction even after it
otherwise ceases to be subject to RCA regulation in 2015.
3:32:28 PM
CO-CHAIR MILLETT asked for the purpose of [subsection] (g) that
provides for the corporation adopting its own interconnection
criteria.
3:32:51 PM
MR. BJORKQUIST explained that subsection (g) allows GRETC to
establish a base of standards that can be arbitrated by the RCA
in the case of disputes.
3:33:36 PM
MR. BJORKQUIST, in further response to Co-Chair Millett, said
currently there is one interconnection standard within the
Alaska Intertie Agreement applicable throughout the Railbelt and
followed by the utilities voluntarily, or by agreement.
3:34:20 PM
CO-CHAIR MILLETT questioned whether the standards are approved
by the RCA.
3:34:40 PM
MR. BJORKQUIST said he was unsure. The proposed statute on
interconnection requires that the utilities first negotiate with
each other, and then go to the RCA in the case of impasse. He
continued to page 5, line 2, and said it provides that the board
of directors includes two directors from each of the public
utility members of the corporation, and one public director
appointed by the governor from nominees supplied by directors on
the board. Also on page 5 are provisions for the operation of
the board. Proposed Sec. 42.50.040, on page 7, line 6, is the
provision that establishes the hiring of employees. Page 7,
line 17, is the provision that addresses membership. Mr.
Bjorkquist pointed out the public utility members will have
directors on the board, and other members could include public
utilities that choose not to be public utility members, or those
that do not qualify. A public utility member must be a public
utility or a cooperative.
3:36:59 PM
CO-CHAIR MILLETT asked whether the chief executive officer (CEO)
is appointed from the board or outside of the board.
3:37:20 PM
MR. BJORKQUIST answered that the CEO is from outside of the
board. In further response to Co-Chair Millett, he guessed that
there are no specific requirements of the CEO because the
selection will be made by the sophisticated directors of the
utilities.
3:39:01 PM
REPRESENTATIVE TUCK asked whether the CEO can be an employee of
a non-voting member utility.
3:39:43 PM
MR. BJORKQUIST said correct. He added that the CEO can not be a
director, but could be an employee of one of the public, or
member, utilities.
3:39:47 PM
CO-CHAIR EDGMON asked whether the [CS] has been scrutinized by
tax experts as to its not-for-profit status.
3:40:16 PM
MR. BJORKQUIST acknowledged that this topic has not been vetted,
but it is understood by the utilities that there will be tax
issues. He then noted that one change from the original bill
regarding membership is that members can be added, or can
withdraw, after the initial formation of the corporation.
3:42:05 PM
REPRESENTATIVE DAHLSTROM asked what would happen if half of the
members want to withdraw.
3:42:29 PM
MR. BJORKQUIST advised that if the criteria were met, the
members could withdraw, and the consequence is that the
corporation would have fewer than the designed number of
members. In further response to Representative Dahlstrom, he
reminded the committee that the purpose of the bill is to give
an opportunity for the Railbelt utilities to work together even
if the utilities withdraw, and the goals of the corporation are
not met.
3:43:48 PM
REPRESENTATIVE DAHLSTROM assumed that if a utility withdraws and
it has received a benefit it would be liable.
3:44:23 PM
MR. BJORKQUIST referred to page 8, line 3, and pointed out that
in order for a member to withdraw, it must pay liabilities.
Also, a public utility member can withdraw, but remain a member
so it would not have to pay liabilities in a lump sum, or
provide for payment. He continued to page 8, line 21, that was
the provision for articles of incorporation, and stated that
articles of incorporation are necessary to prove the existence
of the corporation to the U.S. Department of Commerce, and for
business purposes. Page 9, line 12, provides for bylaws, and
page 9, line 22, provides for the indemnification of officers
and employees. Page 9, line 25, provides for the general powers
of the corporation. He described some of the conditions by
which the corporation may sell energy power at retail to
industrial customers.
3:47:29 PM
CO-CHAIR MILLETT observed that the corporation will sell power
to the utilities for distribution. She asked whether GRETC can
sell directly to an industrial anchor.
MR. BJORKQUIST clarified that GRETC can sell power to an
industrial customer with the consent of the utility in the
affected service area, and to industrial customers outside of
service areas.
3:48:28 PM
CO-CHAIR EDGMON asked, "And do this as a not-for-profit
corporation?"
3:48:37 PM
MR. BJORKQUIST said yes. He continued to page 11, line 8, that
allows the corporation the power of eminent domain as a public
utility, except to take a G&T asset from another public utility.
3:49:17 PM
CO-CHAIR MILLETT questioned whether eminent domain could be
exercised over a private company that owns a pipeline, a gas
storage facility, or a lease.
3:49:55 PM
MR. BJORKQUIST said he was unsure and would research the
question.
3:50:33 PM
CO-CHAIR MILLETT provided an example of GRETC exercising eminent
domain for the public good over a facility in which a private
entity has invested millions of dollars.
3:51:25 PM
MR. BJORKQUIST said this was "theoretically possible" but,
exercising eminent domain requires full payment of value-
including the profitability of the asset-which is difficult to
ascertain.
3:52:07 PM
CO-CHAIR MILLETT further asked about eminent domain over a
depreciated pipeline with access to a gas lease in which GRETC
is interested.
3:52:22 PM
MR. BJORKQUIST clarified that the issue in eminent domain is the
fair market value, whether or not an asset has been depreciated.
3:52:32 PM
CO-CHAIR MILLETT pointed out that interest in the exploration of
Cook Inlet by private industry may be ruined by the presence of
a state-funded oil and gas company.
3:53:14 PM
MR. BJORKQUIST suggested that this topic may be addressed by the
last set of amendments that remove the power of exploration from
the corporation. Nevertheless, the acquisition of fuel supply
is necessary for any utility that generates power.
3:53:55 PM
REPRESENTATIVE JOHANSEN noted on page 12, line 9, GRETC may
create subsidiary corporations. He asked whether subsidiary
corporations are subject to the same conditions and powers as
the parent corporation.
3:54:51 PM
MR. BJORKQUIST opined GRETC is limited to perform the 25 powers
of the corporation and other duties authorized by HB 182, thus
it could not expand into other areas by a subsidiary
corporation. The purpose of creating a subsidiary corporation
is to assist in the financing of a project. He then continued
to page 12, line 15, that addressed public utility powers and
regulation, and noted that GRETC is subject to RCA general
regulation for the first five years. In addition, the
corporation may not have retail sales of electric power except
to an industrial customer with certain conditions, and it is not
required to obtain a certificate under AS 42.05.221. This
section will be amended by provisions found in Sec. 7 and Sec. 8
of the [CS], that provide exemptions from regulation, regulatory
cost charge, and rate regulation in 2015. Further, Sec. 8 adds
a new subsection that makes clear that the corporation will
comply with principles and requirements of the RCA as if the
corporation were a regulated public utility. Mr. Bjorkquist
explained that these provisions deal with recordkeeping and
documenting information regarding rates.
3:57:44 PM
CO-CHAIR MILLETT asked for the location of the five-year sunset.
3:57:57 PM
MR. BJORKQUIST stated on page 23, lines 7-8 identify which
sections take effect 8/16/2015. Therefore, the exemption from
rate regulation "sunrises" in 2015. He returned to page 12, and
the sections dealing with regional planning. In combination,
the provisions relate to advantages to ratepayers and future
rates by regional planning for projects. Regional planning will
provide information to the corporation and members, ratepayers,
and the legislature. Furthermore, the legislature will provide
oversight so it will need information to evaluate funding
requests. In fact, on page 14, lines 11-14, subsection (b)
addresses the ways in which the corporation can obtain state
financing; however, the bill does not obligate the state to
provide a specific type of financial assistance, or any type of
financial assistance, and there is no limit to the "strings" the
state can impose on financing in the form of terms and
conditions. Although there is an expectation that the state
will provide financing, there will be negotiations over the
terms and conditions thereof.
4:02:08 PM
CO-CHAIR EDGMON asked:
By definition, the corporation, obviously, would tie
in the subsidiary corporation ... is that sort of
unspoken?
4:02:19 PM
MR. BJORKQUIST opined a subsidiary corporation would not have
the powers of GRETC, for example, the ratemaking powers. He
concluded, "So there's a limitation on what it can do and a
limitation in the other statutory scheme as to what powers the
subsidiary could have."
4:03:36 PM
CO-CHAIR MILLETT observed that GRETC legislation does not
mention whether AIDEA revenue bonds could be requested. She
asked why AIDEA is not a bonding source.
4:04:01 PM
MR. BJORKQUIST recalled the expectation that AIDEA will finance
the sale of the Four Dam Pool Power Agency. He advised that the
use of AIDEA or AEA financing is not precluded by the lack of
language in HB 182.
4:05:04 PM
MR. BJORKQUIST returned to page 12, and said lines 25-30 refer
to an IRP and require the corporation to provide a report
explaining any deviation from an existing state plan. The
provision will provide a degree of transparency and political
accountability in that it provides pertinent information, and
also that if GRETC deviates from the state energy plan it must
explain why, in writing. On page 14, line 15, changes to the
previous workdraft removed provisions dealing with producing oil
or gas.
4:06:51 PM
CO-CHAIR MILLETT asked whether "direct ownership of
transportation and storage facilities" remained in the bill.
4:07:04 PM
MR. BJORKQUIST advised page 14, lines 17-18, still include that
language. In further response to Co-Chair Millett, he said the
definition of a transportation facility is something like a
pipeline that could move a fuel source, and a storage facility
could be a variety of means to store a fuel source;
additionally, there is nothing in the language that would limit
the type of fuel storage. Returning to the CS, tax provisions
begin on page 14, line 22, and the intent of the tax provision
is that the corporation maintains a tax-neutral stance towards
local government. Public utilities are exempt from municipal
taxes because they are governmental entities, and cooperatives
are exempt from local property taxes by statute, and pay an
electric cooperative tax instead. The corporation is exempt
from taxes unless it sells electricity at retail; therefore, in
the case of the sale of electricity at wholesale to a
cooperative, the cooperative pays a tax to the state on its
sales that is reimbursed to the local government, thus becoming
a payment in lieu of taxes.
4:09:42 PM
CO-CHAIR EDGMON asked whether severance and royalty taxes are
factored into that provision.
4:10:05 PM
MR. BJORKQUIST stated that the provision currently applies to
electric cooperatives in Alaska and he was unsure how severance
and royalty taxes apply.
4:10:27 PM
CO-CHAIR EDGMON surmised this issue must be addressed in the
future.
4:10:34 PM
REPRESENTATIVE JOHANSEN referred to page 13, line 23, that
establishes a schedule for review of the long-range plan every
five years. He asked whether the intent is to wait for five
years because "they have five years to get all of these plans
out to the public and to the legislature."
4:11:45 PM
MR. BJORKQUIST opined that is not the intent of the bill; in
fact, the reference is to establish a schedule for reviewing the
long-range fuel supply plan, and for an up-date at least once
every five years. He called attention to subsection (a), that
directs the corporation to adopt a plan, and subsection (b),
that schedules the review and update, without a timeframe for
when the initial plans are to be provided.
4:13:02 PM
CO-CHAIR MILLETT assumed the review will be done by the public
and the legislature.
4:13:26 PM
MR. BJORKQUIST observed that the review is by the board, and
after the board updates the plan, it is made available to the
governor, the legislature, ratepayers, and members, at least
every five years.
4:14:37 PM
CO-CHAIR MILLETT inquired about other state entities that come
up for long-range financial management plan reviews.
4:14:56 PM
MR. BJORKQUIST pointed out GRETC is a private, not a state,
corporation and the reason for the reports is that one of the
primary purposes of GRETC is to be the vehicle for the utilities
to come to the state for financial assistance.
4:15:40 PM
CO-CHAIR MILLETT questioned whether the legislature and the
state should fund an organization without annual reviews.
4:17:07 PM
MR. BJORKQUIST pointed out the provisions on page 15, line 28,
that call for an annual audit to be submitted to the governor
and the legislature. In addition, page 14, line 27, provides
for the board to publish an annual report on the Internet that
includes any other information requested by the legislature.
4:18:28 PM
REPRESENTATIVE JOHANSEN asked what type of legislative request
for information is required.
4:19:02 PM
MR. BJORKQUIST opined the request from the legislature would be
a resolution.
4:19:30 PM
CO-CHAIR EDGMON asked for the intent behind the "long-range
capital improvement plan."
4:19:54 PM
MR. BJORKQUIST explained that the long-range capital improvement
plan looks at the activities of the corporation 10 years in the
future. This ties in with the long-range financial management
plan after decisions are made about what facilities to build.
4:20:55 PM
CO-CHAIR EDGMON observed this is influenced by the six
utilities.
4:21:16 PM
MR. BJORKQUIST agreed, adding that this language is part of the
legislation developed from the taskforce process. He returned
to page 18, line 20, that determines rates for electric power,
energy, and services. He said this section takes effect in
2015, and described the process to establish rates and charges,
arbitration, and litigation.
4:22:56 PM
CO-CHAIR MILLETT asked for the reason the RCA would not be
involved in the ratemaking instead of "mediated internally in
the GRETC corporation straight to litigation."
4:23:18 PM
MR. BJORKQUIST assured the committee the details of the
corporation's internal dispute resolution mechanism will be
provided in its by-laws, because internal disputes can take
place at any time. Setting of the rates, however, takes place
in 2015, after the RCA is no longer involved. Page 21, line 3,
begins Sec. 11 that authorizes AEA to contract with GRETC to
operate and maintain a power project in order to allow GRETC to
participate in the Bradley Lake Hydroelectric Project and the
Alaska Intertie. He advised that the balance of the CS is the
effective date provisions and concluded his sectional analysis.
4:25:30 PM
REPRESENTATIVE TUCK referred to the long-range capital
improvement plan and the long-range financial management plan on
page 13, and asked what projects will happen in the next five
years that would need rate regulation by the RCA.
4:25:57 PM
MR. BJORKQUIST explained that the planning function is looking
at the next 10 years and must begin immediately after the
formation of the corporation. However, there may be immediate
needs for projects that the utilities can develop more quickly.
4:27:20 PM
REPRESENTATIVE PETERSEN stated that at least four members are
needed to create the corporation. He asked whether the
corporation would continue forward with less than four after it
was established.
4:27:56 PM
MR. BJORKQUIST said yes. The organization of the corporation
requires four members but, once the corporation is organized, it
does not lose the ability to exist.
CO-CHAIR MILLETT opened the hearing to public testimony.
4:28:23 PM
JANET REISER, Board Member, Chugach Electric Association, Inc.
(Chugach Electric), informed the committee Chugach Electric is
the largest electric generating entity in the state and she
expressed the board's unqualified support of HB 182. She
emphasized the amazing process that resulted in this
legislation; in fact, the utilities have come together as they
are interested in the ratepayer situation, gas supply, and
electricity generation issues, and to take advantage of
economies of scale and to reduce regulatory risk. GRETC
legislation is in line with the REGA study and the IRP, and Ms.
Reiser urged support of the bill, and recognized the long
process and work of the utilities and the taskforce.
4:32:44 PM
REPRESENTATIVE TUCK asked what projects the utilities may
undertake within the next five years.
4:33:02 PM
MS. REISER said there are opportunities to develop renewable
energy projects, gas storage projects, and combined gas
generation projects. She also mentioned Southcentral Power
Projects (SPP) and pointed out that big ticket projects can not
be handled by individual utilities. In further response to
Representative Tuck, she said she was unsure of the GRETC
timeline.
4:34:20 PM
CO-CHAIR EDGMON asked whether the state can pursue an in-state
gas pipeline and GRETC concurrently.
4:35:02 PM
MS. REISER opined GRETC will provide the opportunity for common
planning-including for transmission-with all of the utilities,
and that GRETC and a gas pipeline project are not mutually
exclusive.
4:35:55 PM
CO-CHAIR MILLETT asked for Chugach Electric's policy on
continuing RCA oversight of GRETC if the five-year sunset were
eliminated.
4:36:28 PM
MS. REISER said, "My general feeling is ... that is not a stop-
issue for Chugach."
4:36:55 PM
MS. REISER, in further response to Co-Chair Millett, said there
has been no discussion at the board level about Chugach Electric
getting into the oil and gas business.
4:37:17 PM
JOE GRIFFITH, General Manager, Matanuska Electric Association,
Inc., (MEA), informed the committee HB 182 is a crucial bill for
the Railbelt in order to avoid very difficult times for the
electrical industry. He advised this legislation was needed ten
years ago, and the way to a new gas supply and G&T improvements
is by collective effort. Mr. Griffith requested that the
committee pass the bill in the version submitted by the
governor.
4:40:26 PM
CO-CHAIR MILLETT asked whether continuing RCA oversight for the
life of the GRETC organization was a "game-killer."
4:40:36 PM
MR. GRIFFITH said MEA sees no reason for multiple layers of
regulation in addition to what already exists; in fact, more
regulation adds unnecessary cost and delay. The five-year
agreement with the sunset clause is acceptable and "makes
sense."
4:41:36 PM
CO-CHAIR MILLETT assumed the RCA has no purpose prior to GRETC's
sixth year.
4:41:56 PM
MR. GRIFFITH disagreed, and stated there may be immediate
projects, such as for transmission needs and power plants, that
may begin soon and that are "in the regulated environment." He
cautioned against development by the utilities without
coordination through GRETC. In further response to Co-Chair
Millett, he said MEA would not pull out of the agreement if the
sunset clause on regulation by the RCA were removed.
4:43:02 PM
CO-CHAIR MILLETT asked whether MEA is interested in GRETC
becoming an oil and gas company.
4:43:37 PM
MR. GRIFFITH opined the intent was never for GRETC to become an
oil and gas company, but to have the authority to get the fuels
it needs by importation, fostering drilling, owning gas in the
ground, or leasing tracts.
4:44:16 PM
REPRESENTATIVE JOHANSEN asked whether Mr. Griffith has testified
before the committee in another capacity.
4:45:11 PM
MR. GRIFFITH said he was unsure. He became MEA's general
manager in July, 2009.
4:45:17 PM
REPRESENTATIVE JOHANSEN asked for more information about the
aforementioned regulations referred to by Mr. Griffith.
[CO-CHAIR MILLETT handed the gavel to Co-Chair Edgmon.]
4:45:24 PM
MR. GRIFFITH identified existing regulation as the Sarbanes-
Oxley Act of 2002.
4:45:56 PM
REPRESENTATIVE JOHANSEN surmised federal regulation would be by
the U.S. Securities and Exchange Commission (SEC) and the
Sarbanes-Oxley Act, in lieu of regulation by the RCA.
4:47:03 PM
MR. GRIFFITH clarified that irrespective of state regulation, a
corporation with public debt is under the regulation of the SEC,
and is subject to the Sarbanes-Oxley Act. In further response
to Representative Johansen, he said when these regulations
apply, he would recommend to the board of directors that it
explain to the ratepayers the implications of SEC regulations by
issuing applicable reports and following generally acceptable
accounting principles. Mr. Griffith observed that "there are a
huge number of rules that we have to live by, no matter what."
4:49:24 PM
REPRESENTATIVE JOHANSEN then asked how the needed short-term
projects fit within the process of the long-range capital
improvement plan in GRETC. He remarked:
Would you have to go through this process and get the
GRETC corporation on board, in order to quickly move
to those projects, or are they projects that are more
dear to MEA? I'm just not sure of the timing ...
4:50:27 PM
MR. GRIFFITH said his recommendation to the board of directors
would be to conduct the planning processes required: a long-
range financial plan; a long-range capital improvement plan; a
budget. Additional crucial steps involve public debt and
require rating agencies and business plans. The construction of
these plans is one of the first steps.
REPRESENTATIVE JOHANSEN asked whether GRETC will help the six
entities cooperate.
MR. GRIFFITH expressed his belief that GRETC is the only course
of action to undertake. He said, "I can't imagine how we're
going to deal with future requirements that we face
individually."
[CO-CHAIR EDGMON returned the gavel to Co-Chair Millett.]
4:50:53 PM
KATIE HURLEY, Board Member, Matanuska Electric Association, Inc.
(MEA), stated that this is the first time the Railbelt utilities
are in agreement since the construction of the Bradley Lake
Hydroelectric Project in 1986. She described the current crises
faced by the utilities such as new generation, interties, and
fuel supplies, and opined that GRETC is needed to coordinate the
utilities, the state, and fuel supplies. MEA supports HB 182,
and she urged the committee to consider its passage.
4:52:45 PM
KIT JONES, Board Member, Matanuska Electric Association, Inc.
(MEA), informed the committee that the Railbelt must work
together, and a majority of the ratepayers want to see this
done. She pointed out that MEA also changed management, and she
urged the general manager to comment on the IRP as this report
will give the utilities direction.
4:54:09 PM
LARRY DEvILBISS, Board Member, Matanuska Electric Association,
Inc. (MEA), said that he is a seven-year member of the board.
He stressed that the MEA board is united on this issue, as is
the Railbelt, which represents three-quarters of the population
of the state. He opined the uncertainty of gas and the
depreciation of infrastructure is a "perfect storm" that will
lead to gas shortages before 2015. Mr. DeVilbiss recalled the
months of work by the taskforce.
4:57:16 PM
CO-CHAIR MILLETT stated her appreciation of the taskforce
process.
4:58:43 PM
BOB PICKETT, Chairman, Regulatory Commission of Alaska (RCA),
acknowledged the work of the taskforce and its cooperation with
AEA. He disclosed that his testimony is his personal
observation alone, and not the position of the RCA. He
announced that an upcoming RCA public meeting on the GRETC
legislation was scheduled for 3/31/10. Mr. Pickett stated that
the RCA supports the broad goals of the original GRETC
legislation such as cooperation, joint planning, and the lack of
duplication; however, protection of the public interest and
protection of the ratepayers must be integral to any
legislation. Regarding the CS for HB 182, version 26-GH1041\S,
Chenoweth/Bailey, 3/24/10, he observed that Sec. 3 is purported
to be an interim form of traditional regulation proposed for the
RCA, but he cautioned that the language of Sec. 3 is
dramatically different from traditional rate regulation. In
fact, the language more closely resembles an exemption than
regulation. In traditional ratemaking, operating expense
recovery is based on historic cost with known and measurable
adjustments. For example, the rate of return and depreciation
are set to provide funds for system expansion, capital repairs,
and overhaul and replacement. Furthermore, the resulting rates
must be just and reasonable. However, the deviations in Sec. 3
are generally these: the operating expense recovery is based on
management representations about future operations; the capital
is accumulated "as an end in itself, with the amounts collected
in any particular period determined by an unspecified
relationship to future needs;" some individual cost elements are
presumed to be just and reasonable without guidance as to how
the resulting rates will be evaluated. Mr. Pickett said written
comments will be provided to the committee after the RCA
meeting, but he advised that if Sec. 3 remains in the bill, the
RCA will require strong legislative clarification because this
language "has nothing to do with the traditional ratemaking
process." Furthermore, there are other policy and technical
questions that arose during Mr. Pickett's review of HB 182. He
questioned the underlying policy assumption throughout the bill
that auditing or corporate governance equals regulation, or that
federal regulation supplants the normal ratemaking process. Mr.
Pickett said, "Again, keep in mind I'm speaking for myself,
[and] I think nothing could be further from the truth." He
called attention to the present financial crisis, and pointed
out that there was a plethora of external auditors and
regulation regarding those affected financial institutions, "and
we all saw where this led."
5:06:13 PM
MR. PICKETT referred to page 13, lines 28-31, and noted the
corporation plans include the issuance of equity and debt. He
questioned how GRETC will issue equity as it is a not-for-profit
corporation. Regarding Bradley Lake, he acknowledged that the
project was a huge success and a benefit to Railbelt utility
ratepayers, but the success of Bradley Lake is not a model for,
or an endorsement of, all of the provisions of the GRETC
legislation. Furthermore, he noted other state projects with
significantly lower levels of success. Mr. Pickett concluded
that G&T is the biggest cost for ratepayers and capital
investment is needed for the Railbelt electrical system. If one
of the goals of GRETC is to deregulate the electrical utility
system, the ratepayers should be well aware of the situation and
be given the opportunity to speak.
5:08:52 PM
CAITLIN HIGGINS, Executive Director, Alaska Conservation
Alliance (Alliance), informed the committee the Alliance has 40
member organizations representing 38,000 Alaskans. She said
the Alliance appreciates the administration's work to find
consensus, and the positive first steps taken by the Railbelt
utilities. Furthermore, the Alliance and the Homer Electric
Association, Inc. (HEA) Members Forum encourage the legislators'
consideration of the following testimony so the organizations
may ultimately support the proposed legislation. Ms. Higgins
agreed that a central utility that plans and promotes energy
efficiency could provide the Railbelt with significant economic
gains, job growth, and needed generation projects. Furthermore,
the Alliance supports including statutory language that requires
the unified utility to evaluate conservation and renewable
energy in the development of its resource plan. In addition,
the Alliance supports ongoing regulatory and financial oversight
of the proposed unified utility by the RCA; however, this
oversight should not sunset after five years of operation and
Ms. Higgins related several benefits of ongoing RCA regulation.
She turned to the subject of governance and public input, and
urged that the board of directors of the new utility increase
citizen participation on the board, or create a separate
citizens' utility board. She said the Alliance also supports
statutory language that maintains open meeting provisions. Ms.
Higgins concluded that in order for the Alliance to support the
legislation, its members encourage the committee to consider
adding language to HB 182 in order to better address financial
and regulatory oversight, governance and public input, and
energy efficiency.
[HB 182 was held.]
5:13:15 PM
ADJOURNMENT
The House Special Committee on Energy was recessed at 5:13 p.m.
to a call of the chair. [The meeting was reconvened at 5:03
p.m. on March 31, 2010, for the purpose of adjournment, and no
legislation was heard.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB0182A.pdf |
HENE 3/23/2010 3:00:00 PM HENE 3/30/2010 3:00:00 PM |
HB 182 |
| CS HB 182 3-24-10.PDF |
HENE 3/25/2010 3:00:00 PM HENE 3/30/2010 3:00:00 PM |
HB 182 |
| CS HB 182 version S Sectional.PDF |
HENE 3/30/2010 3:00:00 PM |
HB 182 |
| CS HB 182 version S Leg. Legal Memo.PDF |
HENE 3/30/2010 3:00:00 PM |
HB 182 |
| Black & Vetch Financial Analysis RIRP.PDF |
HENE 3/30/2010 3:00:00 PM |
|
| HB 182 AK Chamber of Commerce.PDF |
HENE 3/30/2010 3:00:00 PM |
HB 182 |
| 10_03 ACA comments HB182.pdf |
HENE 3/30/2010 3:00:00 PM |
HB 182 |