02/22/2010 03:30 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| SB220 | |
| SB277 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 220 | TELECONFERENCED | |
| *+ | SB 277 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
February 22, 2010
3:38 p.m.
MEMBERS PRESENT
Senator Bill Wielechowski, Co-Chair
Senator Charlie Huggins, Vice Chair
Senator Bert Stedman
Senator Gary Stevens
Senator Thomas Wagoner
MEMBERS ABSENT
Senator Lesil McGuire, Co-Chair
Senator Hollis French
COMMITTEE CALENDAR
SENATE BILL NO. 220
"An Act declaring a state energy policy; relating to energy
efficiency and alternative energy; establishing the energy
efficiency grant fund, an emerging energy technology fund, a
renewable energy production tax credit, and an energy use index;
and relating to a fuel purchasing cooperative, to energy codes
and efficiency standards, to energy conservation targets in
public buildings, to a state agency energy use reduction plan,
to the alternative energy revolving loan fund, and to the
renewable energy grant fund."
- HEARD AND HELD
SENATE BILL NO. 277
"An Act exempting from regulation by the Regulatory Commission
of Alaska and by municipalities generators of electricity from
renewable energy resources that sell electricity to regulated
utilities."
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 220
SHORT TITLE: ENERGY EFFICIENCY/ ALTERNATIVE ENERGY
SPONSOR(s): RESOURCES
01/19/10 (S) READ THE FIRST TIME - REFERRALS
01/19/10 (S) RES, FIN
01/20/10 (S) RES AT 3:30 PM BUTROVICH 205
01/20/10 (S) Heard & Held
01/20/10 (S) MINUTE(RES)
01/21/10 (S) RES AT 3:30 PM BUTROVICH 205
01/21/10 (S) -- MEETING CANCELED --
01/25/10 (S) RES AT 3:30 PM BUTROVICH 205
01/25/10 (S) Heard & Held
01/25/10 (S) MINUTE(RES)
01/27/10 (S) RES AT 3:30 PM BUTROVICH 205
01/27/10 (S) Heard & Held
01/27/10 (S) MINUTE(RES)
02/03/10 (S) RES AT 3:30 PM BUTROVICH 205
02/03/10 (S) <Bill Hearing Postponed>
02/11/10 (S) RES AT 3:30 PM BUTROVICH 205
02/11/10 (S) <Bill Hearing Postponed to 2/15/10>
02/15/10 (S) RES AT 3:30 PM BUTROVICH 205
02/15/10 (S) Heard & Held
02/15/10 (S) MINUTE(RES)
02/17/10 (S) RES AT 3:30 PM BUTROVICH 205
02/17/10 (S) <Bill Hearing Canceled>
02/18/10 (S) RES AT 3:30 PM BUTROVICH 205
02/18/10 (S) Heard & Held
02/18/10 (S) MINUTE(RES)
02/22/10 (S) RES AT 3:30 PM BUTROVICH 205
BILL: SB 277
SHORT TITLE: PUB. UTILITY EXEMPTION: RENEWABLE ENERGY
SPONSOR(s): ENERGY
02/12/10 (S) READ THE FIRST TIME - REFERRALS
02/12/10 (S) RES, JUD
02/22/10 (S) RES AT 3:30 PM BUTROVICH 205
WITNESS REGISTER
GREG WINEGAR, Director
Division of Investments
Department of Commerce, Community and Economic Development
(DCCED)
POSITION STATEMENT: Explained Amendment K.11 to CSSB 220(RES)
version K.
MIKE PAWLOWSKI
Aide to Senator McGuire
Alaska State Legislature
Juneau, AK
POSITION STATEMENT: Commented on CSSB 220(RES) version K and SB
277.
SHARON LONG
Aide to Senator Huggins
Alaska State Legislature
Juneau, AK
POSITION STATEMENT: Explained Senator Huggins' amendment to CSSB
220(RES) version K.
BRIAN KANE, Legislative Attorney
Legislative Affairs
Alaska State Legislature
Juneau, AK
POSITION STATEMENT: Answered questions about Senator Huggins'
amendment to CSSB 220 (RES) version K.
SARAH FISHER-GOAD
Alaska Energy Authority (AEA)
Anchorage, AK
POSITION STATEMENT: Had no comments on the Huggins' amendment,
but she answered questions on how it pertains to either Power
Project Fund or the AEA statutes.
BOB PICKETT, Chairman
Regulatory Commission of Alaska (RCA)
Anchorage, AK
POSITION STATEMENT: Commented on CSSB 220(RES) version K and SB
277.
STEWART GARY, Assistant Attorney General
Representing the RCA
Department of Law (DOL)
Juneau, AK
POSITION STATEMENT: Answered questions about RCA's role in CSSB
220(RES) version K and commented on SB 277.
DANIEL PATRICK O'TIERNEY, Chief Assistant Attorney General
Supervisor, Regulatory Affairs And Public Advocacy Section
Department of Law (DOL)
Juneau, AK
POSITION STATEMENT: Commented on SB 277.
JAMES KEEN, Chief
Engineering Section
Regulatory Commission of Alaska (RCA)
Anchorage, AK
POSITION STATEMENT: Commented on SB 277.
ETHAN SCHUTT
Cook Inlet Region, Inc. (CIRI)
Anchorage, AK
POSITION STATEMENT: Provided CIRI context for SB 277.
ACTION NARRATIVE
3:38:43 PM
CO-CHAIR BILL WIELECHOWSKI called the Senate Resources Standing
Committee meeting to order at 3:38 p.m. Present at the call to
order were Senators Wagoner, Huggins and Wielechowski. Senator
Stedman arrived at 3:40.
SB 220-ENERGY EFFICIENCY/ ALTERNATIVE ENERGY
3:39:29 PM
CO-CHAIR WIELECHOWSKI announced SB 220 to be up for discussion
purposes only since the committee didn't have a quorum [CSSB
220(RES), labeled 26-LS1197\K, was before the committee]. He
said they had a couple of amendments before them; the first
[labeled 26-LS1197\K.11, Kane] was to create a new loan program
within the Department of Commerce, Community and Economic
Development (DCCED) for businesses interested in alternative
energy and energy efficiency.
26-LS1197\K.11
Kane
AMENDMENT K.11
OFFERED IN THE SENATE BY SENATOR MCGUIRE TO:
CSSB 220(RES), Draft Version "K"
Page 12, line 3, through page 13, line 18:
Delete all material and insert:
"* Sec. 17. AS 45.88.010(a) is amended to read:
(a) There is established in the Department of
Commerce, Community, and Economic Development the
alternative energy conservation revolving loan fund to
carry out the purposes of AS 45.88.010 - 45.88.090.
Loans made under AS 45.88.010 - 45.88.090 are to be
used
(1) to develop means of energy production
utilizing one or more alternative energy systems; and
(2) to purchase, construct, and install
energy conservation improvements in commercial
buildings [ENERGY SOURCES OTHER THAN FOSSIL OR NUCLEAR
FUEL, INCLUDING, BUT NOT LIMITED TO, WINDMILLS, WATER
AND SOLAR ENERGY DEVICES].
* Sec. 18. AS 45.88.010 is amended by adding a new
subsection to read:
(e) The Alaska energy conservation revolving
loan fund consists of
(1) money appropriated to the fund by the
legislature;
(2) gifts, bequests, or contributions from
other sources;
(3) principal and interest payments or
other income earned on loans or investments in the
fund and appropriated to the fund; and
(4) money chargeable to principal or
interest that is collected through liquidation by
foreclosure or other processes on loans made under
AS 45.88.010 - 45.88.090 and appropriated to the fund.
* Sec. 19. AS 45.88.020(a) is amended to read:
(a) The department may
(1) make loans for the purchase,
construction, and installation, in commercial
buildings that are located in the state, of
(A) alternative energy systems; and
(B) energy conservation improvements;
(2) adopt regulations necessary to carry
out the provisions of AS 45.88.010 - 45.88.090,
including regulations to establish reasonable fees for
services provided and charges for collecting the fees;
(3) collect the fees and collection charges
established under this subsection.
* Sec. 20. AS 45.88.025 is amended by adding a new
section to read:
Sec. 45.88.025. Eligibility. To be eligible for a
loan under AS 45.88.010 - 45.88.090, an applicant must
(1) physically reside in the state and
maintain a domicile in the state during 12 consecutive
months prior to the date of application for a loan and
may not have
(A) declared or established residency in
another state; or
(B) received residency or a benefit based
on residency from another state;
(2) be at least 51 percent owned by
individuals described in (1) of this section if the
applicant is a corporation, joint venture, or
partnership; or
(3) be a nonprofit organization under
AS 10.20.
* Sec. 21. AS 45.88.030(a) is repealed and
reenacted to read:
(a) A loan made under AS 45.88.010 - 45.88.090
may not exceed $50,000. If the requested loan amount
exceeds $30,000, the applicant must deliver to the
department a document from a financial institution
stating that
(1) the applicant has been denied a loan
for the same purpose; or
(2) the loan from the financial institution
is contingent on the applicant also receiving a loan
from the fund.
* Sec. 22. AS 45.88.030(e) is amended to read:
(e) The rate of interest for a loan under
AS 45.88.010 - 45.88.090 shall be the prime rate, as
defined by AS 44.88.599, plus one percentage point,
but may not be less than five percent a year [FOR AN
ALTERNATIVE ENERGY SYSTEM IS FIVE PERCENT FOR THE
FIRST $15,000 OF THE LOAN AND 15 PERCENT FOR THE
AMOUNT OF THE LOAN THAT EXCEEDS $15,000].
* Sec. 23. AS 45.88.030 is amended by adding a new
subsection to read:
(f) A loan under AS 45.88.010 - 45.88.090 must
be secured by a mortgage or other security instrument
in the real property to be improved and a lien on the
improvements financed with the loan.
* Sec. 24. AS 45.88.090(a) is amended to read:
(a) In AS 45.88.010 - 45.88.090,
(1) "alternative energy system"
(A) [(1)] means a source of thermal,
mechanical or electrical energy that [WHICH] is not
dependent on oil or gas or a nuclear fuel for the
supply of energy for space heating and cooling,
refrigeration and cold storage, electrical power,
mechanical power, or the heating of water;
(B) [(2)] includes
(i) [(A)] an alternative energy property as
defined by 26 U.S.C. 48(a)(3)(A) (Sec. 301, P.L. 95-
618, Internal Revenue Code);
(ii) [(B)] a method of architectural design
and construction which provides for the collection,
storage, and use of direct radiation from the sun;
(iii) [(C)] a woodstove with a catalytic
converter or a catalytic converter for a wood stove;
[AND]
(iv) [(D)] a steam, hot water, or ducted
hot air central heating system that uses wood or coal
for fuel; and
(v) a high efficiency wood pellet stove;
(C) [(3)] does not include
(i) [(A)] a stove that uses only wood,
coal, or oil for fuel; or
(ii) [(B)] a fireplace or fireplace insert;
(2) "commercial building"
(A) means a building that is intended to be
used for commercial purposes;
(B) does not include
(i) a residential structure or mobile home
that contains one to four family housing units; or
(ii) individual units of condominiums or
cooperatives;
(3) "energy conservation improvement" means
(A) structural insulation;
(B) thermal windows and doors;
(C) a furnace replacement burner designed
to achieve a reduction in the amount of fuel consumed
as a result of increased combustion efficiency;
(D) a device for modifying flue openings
designed to increase the efficiency of operation of
the heating system;
(E) an electrical or mechanical furnace
ignition system that replaces a gas pilot light;
(F) an automatic energy-saving setback
thermostat;
(G) a meter that displays the cost of
energy usage;
(H) caulking and weather stripping of doors
and windows;
(I) insulating shades and shutters;
(J) air and water recuperators."
Renumber the following bill sections accordingly.
Page 13, line 19, following "45.88.010(c),":
Delete "45.88.030(e)"
Insert "45.88.030(c), 45.88.030(d),"
Page 14, following line 10:
Insert a new bill section to read:
"* Sec. 31. The uncodified law of the State of
Alaska is amended by adding a new section to read:
REVISOR'S INSTRUCTION. The revisor of statutes
shall change the heading of art. 1 of AS 45.88 from
"Alternative Energy Revolving Loan Fund" to
"Alternative Energy Conservation Revolving Loan
Fund.""
GREG WINEGAR, Director, Division of Investments, Department of
Commerce, Community and Economic Development (DCCED), explained
that Amendment K.11 makes two fundamental changes to the bill.
It adds conservation improvements as an eligible purpose along
with alternative energy systems, which was in the original bill.
The other major change is that the bill now targets commercial
buildings as residential structures are eligible for a similar
type of loan through AHFC. The thinking on commercial buildings
was to avoid duplication as AHFC already has a program for
residential type loans. So this bill will now target commercial
buildings that are owned by Alaskan residents.
SENATOR STEDMAN joined the committee.
MR. WINEGAR said the loan limit was changed from $30,000 to
$50,000 and this would allow borrowers to not only put in an
energy system but also to take advantage of loans for
conservation-type things.
3:41:38 PM
MIKE PAWLOWSKI, aide to Senator McGuire, said Mr. Winegar did a
great job of explaining the purpose of the amendment. He pointed
out that language in Section 21, on page 2, lines 22-28, asks
applicants to work with their financial institution as a
commercial entity if the loan is over $30,000; they have to
present a "turn down letter" to the department, something that
is done in other programs to maintain where the state is
supplementing rather than competing with the regular commercial
loan sector.
3:43:12 PM
SENATOR STEVENS joined the committee.
CO-CHAIR WIELECHOWSKI remarked that he was very happy to see the
definition of "energy conservation improvement." Finding no
further questions, he set Amendment K.11 aside.
CO-CHAIR WIELECHOWSKI said that Sharon Long would explain the
next amendment for its sponsor, Senator Huggins.
3:43:46 PM
SHARON LONG, aide to Senator Huggins, explained that this
conceptual amendment strives to delete prohibitions in current
Alaska statutes which prevent consideration of nuclear projects
as part of the energy alternative projects by inserting
"nuclear" after "including" on page 2, line 24 of CSSB 220(RES)
version K.
She explained another amendment by Senator Huggins labeled 26-
LS1197\K.10
26-LS1197\K.10
Kane
AMENDMENT K.10
OFFERED IN THE SENATE TO: CSSB 220(RES), Draft
Version "K"
Page 1, line 5, following "loan fund,":
Insert "to nuclear waste material, to nuclear
energy production and facilities, to the definition of
'power project' or 'project' as it relates to rural
and statewide energy programs and the Alaska Energy
Authority, to the definition of 'alternative energy
system,'"
Page 3, line 18:
Delete "sec. 15"
Insert "sec. 20"
Page 3, following line 20:
Insert new bill sections to read:
"* Sec. 4. AS 18.45.020 is amended to read:
Sec. 18.45.020. United States licenses or permits
required. A person may not manufacture, construct,
produce, transfer, acquire, or possess a special
nuclear material, by-product material, special nuclear
material facility, by-product material facility,
production facility, or utilization facility, or act
as an operator of a production facility or utilization
facility, wholly within the state without first
obtaining a license or permit for the activity in
which the person proposes to engage from the Nuclear
Regulatory Commission if the commission requires a
license or permit to be obtained by persons proposing
to engage in the activities.
* Sec. 5. AS 18.45.025(a) is amended to read:
(a) A person may not construct a nuclear fuel
production facility, nuclear utilization facility,
utilization facility, reprocessing facility, or
nuclear waste disposal facility in the state without
first obtaining a permit from the Department of
Environmental Conservation to construct the facility
on land designated by the legislature under (b) of
this section.
* Sec. 6. AS 18.45.025(b) is amended to read:
(b) The legislature shall designate by law the
land in the state on which a nuclear fuel production
facility, nuclear utilization facility, utilization
facility, nuclear reprocessing facility, or nuclear
waste disposal facility may be located. In designating
the land in the state on which
(1) a nuclear utilization facility or
utilization facility may be located, the legislature
shall act in the interest of regulating the economics
of nuclear energy;
(2) a nuclear fuel production facility,
[NUCLEAR UTILIZATION,] nuclear reprocessing facility,
or nuclear waste disposal facility may be located, the
legislature shall act to protect the public health and
safety.
* Sec. 7. AS 18.45.025(c) is repealed and reenacted
to read:
(c) The Department of Environmental Conservation
shall adopt regulations governing the issuance of
permits required by (a) of this section. However, a
permit may not be issued until the municipality with
jurisdiction over the proposed facility site has
approved the permit."
Renumber the following bill sections accordingly.
Page 7, following line 28:
Insert a new bill section to read:
"* Sec. 15. AS 42.45.990(4) is amended to read:
(4) "power project" or "project" means a
plant, works, system, or facility, together with
related or necessary facilities and appurtenances,
including a divided or undivided interest in or a
right to the capacity of a power project or project,
that is used or is useful for the purpose of
(A) electrical or thermal energy production
[OTHER THAN NUCLEAR ENERGY PRODUCTION];
(B) waste energy utilization and energy
conservation; or
(C) transmission, purchase, sale, exchange,
and interchange of electrical or thermal energy,
including district heating or interties;"
Renumber the following bill sections accordingly.
Page 12, following line 2:
Insert a new bill section to read:
"* Sec. 22. AS 44.83.990(6) is amended to read:
(6) "power project" or "project" means a
plant, works, system, or facility, together with
related or necessary facilities and appurtenances,
including a divided or undivided interest in or a
right to the capacity of a power project or project,
that is used or is useful for the purpose of
(A) electrical or thermal energy production
[OTHER THAN NUCLEAR ENERGY PRODUCTION];
(B) waste energy utilization and energy
conservation; or
(C) transmission, purchase, sale, exchange,
and interchange of electrical or thermal energy,
including district heating or interties;"
Renumber the following bill sections accordingly.
Page 13, following line 18:
Insert a new bill section to read:
"* Sec. 27. AS 46.11.900(1) is amended to read:
(1) "alternative energy system"
(A) means a source of thermal, mechanical,
or electrical energy that is not dependent on oil or
gas [OR A NUCLEAR FUEL] for the supply of energy for
space heating and cooling, refrigeration and cold
storage, electrical power, mechanical power, or the
heating of water;
(B) includes
(i) an alternative energy property as
defined by 26 U.S.C. 48(a)(3)(A); and
(ii) a method of architectural design and
construction that provides for the collection,
storage, and use of direct radiation from the sun;"
Renumber the following bill sections accordingly.
Page 13, line 19:
Delete "AS 45.88.010(c)"
Insert "AS 18.45.027; AS 45.88.010(c)"
Page 13, line 20:
Delete "sec. 15"
Insert "sec. 20"
Page 13, line 21:
Delete "sec. 11"
Insert "sec. 16"
Page 13, lines 21 - 22:
Delete "sec. 12"
Insert "sec. 17"
Page 13, line 27:
Delete "sec. 13"
Insert "sec. 18"
MS. LONG explained that new language on page 1, line 5, aligns
the title of the bill with the changes that are made later in
it. The amendment inserts a new Section 4 that speaks to federal
licensing and permits; AS 18.45 only speaks to federal aspects
of atomic energy. It includes "special nuclear material
facility, by-product material facility" in order to cover more
projects or activities in this section for which a license or
permit may be needed from the Nuclear Regulatory Commission
(NRC).
She continued explaining that it adds new sections 4, 5, 6 and 7
on page 3 of the bill.
CO-CHAIR WIELECHOWSKI interrupted to ask if lines 14-18 in
Section 4 on page 1 of the amendment that say, "A person may not
manufacture, construct, produce, transfer, acquire, or possess a
special nuclear material, by-product material, special nuclear
material facility..." meant that they are expanding what a
person cannot produce.
MS. LONG answered yes; it repeals the prohibitions "if the
commission requires a license or permit to be obtained by
persons proposing to engage in these activities." [page 1, lines
20-21 of Amendment K.10].
CO-CHAIR WIELECHOWSKI asked Brian Kane, Legislative Drafting
Attorney, to explain what that language was attempting to do.
3:47:27 PM
BRIAN KANE, Legislative Affairs Attorney, explained that these
sections in AS 18.45 have a lot of terms that were previously
used and mismatched throughout - sometimes it would have a full
phrase with "facilities" and sometimes "facility" wasn't there.
The goal here was to cover every possibility that the Nuclear
Regulatory Commission could cover, because as it stood it was
just special nuclear material and by-product material. Adding
"facility" adds the possibility of a special nuclear facility or
by-product material facility in connection with the actual
material. Then a person has to obtain that permit from the
federal government before they can take any further steps.
CO-CHAIR WIELECHOWSKI asked him to talk about the interplay
between federal and state regulation regarding nuclear
facilities and energy.
MR. KANE answered that he had done some reading on the Atomic
Energy Act and said that basically the federal government has a
pretty long and complex list of permits and applications to even
start the process of putting together a nuclear facility or
producing any kind of nuclear energy. Basically the Atomic
Energy Act preempts everything a state could do with the
exception of economic regulation, which comes a little later in
this amendment. The idea is to fulfill all of the federal
obligations first, then you would proceed to the different state
permitting processes.
CO-CHAIR WIELECHOWSKI said it seems that section 4 is changing
that you couldn't own a special nuclear material facility
without getting permission from the Nuclear Regulatory Agency.
MR. KANE answered yes; it's just making that clear by adding it
to the list of things the federal permit is required for.
3:50:57 PM
MS. LONG explained that she found out that the state has no
regulations and no permit requirements right now for nuclear
energy. The Nuclear Regulatory Commission has a step process
where a person first has to have a licensed nuclear power unit.
You have to get an early site permit and do a lot of scientific
field work. So far, there are no small licensed nuclear power
units.
CO-CHAIR WIELECHOWSKI asked if she found that most states have a
fairly complex set of regulations on top of the federal
regulations or do they mostly rely on the federal regulations.
MS. LONG and Mr. Kane said they didn't know what the other
states are doing.
Back to the amendment, she said Section 5 speaks to the state
licensing permits and requirements and adds "nuclear utilization
facility" to conform with other definitions. Section 6 of the
amendment amends AS 18.45.025 to say that when the Legislature
designates the land in the state on which a nuclear utilization
facility may be located, it must act only in the interests of
regulating the economics of nuclear energy. This is based on a
series of court cases that Mr. Kane could explain.
MS. LONG said Section 7 of the amendment deletes a line that
states that a permit may not be issued unless approved by the
Governor, leaving only a requirement for approval by the
Department of Environmental Conservation in the municipality.
So, this section retains local approval for a project that might
be in any particular area, but removes the Governor's part in
it. Any project would still be dealing with the NRC, DEC, AEA
and a local political subdivision.
3:53:39 PM
SENATOR HUGGINS clarified that Section 7 allows some degree of
local control.
MS. LONG added that the people she talked to surmised that it
would probably be a local political subdivision that would bring
this kind of project forward to the state.
CO-CHAIR WIELECHOWSKI clarified that a permit has to go through
the DEC and the municipality with jurisdiction over the proposed
facility. If it was in Anchorage, it would have to go through
the Anchorage Assembly.
MS. LONG said yes.
CO-CHAIR WIELECHOWSKI asked what happens if it's in an area
without a local government.
MS. LONG answered that after discussions with Mr. Kane, her
sense was that they would be dealing with the NRC and DEC. A
community in the unorganized borough would go directly to the
state.
She said Section 15 adds a new section to page 7 of the bill
that amends the definition of "power project" that deletes the
exclusion of nuclear energy in relation to statewide energy
programs.
Section 22 of the amendment amends the definition of "power
project" to delete the exclusion of nuclear energy in relation
to the Alaska Energy Authority (AEA) on page 12, line 2 of the
bill. This will allow the AEA to consider power projects that
depend on a thermal, mechanical or electrical system that
depends on nuclear power. Now those projects can't be
considered.
Language on page 4, line 11, of the amendment eliminates the
prohibition of transporting nuclear waste material. Section 27
on page 3, lines 25-30 of the amendment deletes "or a nuclear
fuel" - another exclusion.
CO-CHAIR WIELECHOWSKI asked her to explain it a little bit more.
MS. LONG explained that the state currently prohibits
transportation of nuclear waste material. This would eliminate
that. A nuclear power project generates nuclear waste and that
would have to be transported somewhere. She said that the state
allows use of nuclear power for medical purposes and she needed
to check on how that was dealt with.
3:57:59 PM
MR. KANE added that AS 18.45.027 has part (A) and part (B); part
(B) actually has an exclusion for radioactive materials used in
medicine, education or scientific research as an exception to
the high level nuclear waste material that can be transported.
CO-CHAIR WIELECHOWSKI asked who would be able to transfer
nuclear material under the proposal on page 4, and if they would
have to be regulated by the RCA or the NRC.
MR. KANE answered that state law would then be silent to that
situation.
CO-CHAIR WIELECHOWSKI said it would be important to figure out
what the federal regulations are for transportation in case they
need to enact some other state law or regulation to control who
transfers nuclear material.
3:59:44 PM
MS. LONG said the remaining sections of the amendment are
renumbering.
SENATOR HUGGINS commented that Galena was attempting to look at
a small nuclear module, but every time it was brought up there,
it was suddenly found to be prohibited. This removes that
prohibition and puts the skeletal structure in place for further
regulation. He said the French use nuclear for about 7 percent
of their power and Japan is number 2 internationally and that
further, "We ought to at least have a system that allows us to
have that conversation in some reality if it comes to fruition."
CO-CHAIR WIELECHOWSKI agreed that it is a conversation that is
worth having - if it can be done safely and cost effectively.
He asked Ms. Long if she had idea of cost for building a nuclear
plant.
MS. LONG said she had no idea, but she knows that Westinghouse
and Toshiba would like to license a small unit that would be
appropriate for the Galena project. She explained that because
of court cases, the state has regulatory authority over
economics only for these things while the NRC has control over
health and safety issues.
4:02:13 PM
CO-CHAIR WIELECHOWSKI asked if the RCA or NRC would set rates on
a nuclear power plant.
MR. KANE replied that would be something the RCA could
potentially control.
CO-CHAIR WIELECHOWSKI asked Sarah Fisher-Goad if the AEA had any
comments on this amendment.
4:03:26 PM
SARAH FISHER-GOAD, Alaska Energy Authority, responded that AEA
had no comments on the amendment, but said she would answer
questions on how it pertains to either the Power Project Fund or
the AEA statutes.
CO-CHAIR WIELECHOWSKI asked for a quick overview of its
relationship to those two things.
MS. GOAD answered if this amendment were to be incorporated into
SB 220, the Power Project Fund would be an eligible financing
vehicle for a nuclear project. With respect to the AS 44.83
change that would allow "nuclear" to be included as a definition
of "power project," she mentioned that AEA has other statutes
that do not allow them to own new projects. If the desire was to
allow them to own a future new project, be it any project, the
statutes would have to be changed.
SENATOR HUGGINS said it appears that under AEA's authority and
responsibility she would want a reasonable portfolio of energy
projects and capabilities to choose from, not that nuclear
should be number 1 or number 29, but it would just become one
option among others. He asked if she any difficulty with having
it as part of a portfolio.
MS. GOAD answered that this amendment allows them to consider
nuclear; right now they don't have a position with respect to
whether that should be included or not. But if this amendment
were adopted they would consider nuclear projects through either
the Power Project Fund or through administering a grant through
a program on a future project. It is a policy call that she said
she was not prepared to answer. She wanted her testimony to
describe how nuclear would be considered if it was included.
Right now they don't have nuclear projects to consider. If AEA
would have to be involved in a project like this, they would
have additional costs, but not now.
MS. LONG said Mr. Pawlowski just passed her a note that says
Title 42.05.990 (Public utilities and carriers) does say that
RCA would regulate nuclear rates.
CO-CHAIR WIELECHOWSKI asked Mr. Pickett from the RCA if he had
any comments.
4:08:09 PM
BOB PICKETT, Chairman, Regulatory Commission of Alaska (RCA),
said that other RCA members would answer those questions.
RICHARD GAZAWAY, Administrative Law Judge,
Legislation/Regulation, Regulatory Commission of Alaska (RCA),
Department of Commerce, Community and Economic Development
(DCCED), said he was trying to figure out what section of AS
42.05.990 Mr. Pawlowski was referencing when he said they would
regulate the nuclear facility.
MR. PAWLOWSKI said he was referencing AS 42.05.990 that says a
utility that serves one or more customers and makes more than
$50,000 a year is regulated by the RCA. So, presuming that a
nuclear facility sold more than $50,000 in electricity a year it
wouldn't be rate regulated by the RCA.
4:09:16 PM
STEWART GARY, Assistant Attorney General Representing the RCA,
Department of Law (DOL), agreed with that assessment. To the
extent that a nuclear facility is generating and providing
electric power for compensation it would be within the
definition of a public utility - specifically in AS
42.05.990(4)(a) which provides that every entity that owns,
operates, manages or controls any plant, pipeline, or system for
furnishing by generation, transmission or distribution,
electrical service to the public for compensation. It doesn't
specifically mention nuclear. Electrons are electrons; if
electrical power generation is being provided to the public for
compensation it's going to meet that definition.
CO-CHAIR WIELECHOWSKI asked if they see any concerns that would
require the Legislature to enact any other legislation. Should
they adopt this amendment or another one that allows for nuclear
energy production in Alaska?
MR. PICKETT answered that this amendment, specifically, hadn't
been analyzed, but probably not. He said he would look it over
by Wednesday.
4:11:22 PM
SENATOR WAGONER withdrew Amendment K.6 [introduced on 2/18/10].
He said he was going to develop it into a committee bill or wait
until next year. There were no objections and it was so ordered.
SB 277-PUB. UTILITY EXEMPTION: RENEWABLE ENERGY
4:12:10 PM
CO-CHAIR WIELECHOWSKI announced SB 277 to be up for
consideration.
MR. PAWLOWSKI, staff to Senator McGuire, explained that SB 277
addressed the section of law they were just talking about with
the Regulatory Commission of Alaska (RCA). That is the
definition of public utility, which is relatively circular. The
definition of "utility" refers to "public" which then refers to
"utility" which refers back to "public." So there is some
confusion about what the appropriate role of independent power
producers is. Traditionally, Alaska has had large locally owned
cooperatives or municipally owned utilities serving in a
regulated marketplace. Senator McGuire discovered through her
research that the rate of penetration of renewable energy
sources within regulated and unregulated markets is
fundamentally different. He said their packets contained
information about competitive electricity markets; the author
suggested that the difference in approach to a project's risk
profile is fundamentally different between a regulated
monopolistic utility versus an investor owned utility.
SB 277 attempts to exempt from the regulations that are
explicitly in statute now independent power producers that
generate entirely from renewable energy sources and then sell to
a regulated utility. The theory being that the layer of
protection available to the consumer comes at the regulated
utility level, but in a familiar way as in gas contracts in Cook
Inlet where the producer of the gas is not regulated but the
contract for gas is regulated. Looking at that type of model for
renewable power in Alaska, he said, Senator McGuire believes
will encourage the development of renewable energy in Alaska,
and removing some of what could be considered duplicative
regulation in statute could open the door for private investment
in the sector so that the goal of 50-percent renewable energy
could be met by 2020.
4:14:15 PM
He said the bill is actually fairly simple. Sections 1 and 2 on
page 1, line 10, and page 2, line 1, insert conforming language
to the exemption that is prepared in Section 3. The exemption is
from the RCA authority over the renewable energy generator when
they sell to one or more utilities that are regulated by it.
4:15:15 PM
DANIEL PATRICK O'TIERNEY, Chief Assistant Attorney General (AG),
Department of Law (DOL), Supervisor, Regulatory Affairs and
Public Advocacy Section, said he was available for questions on
SB 277. He explained that his section performs the AG's public
advocacy role in regulatory matters under AS 44.23.020(e).
CO-CHAIR WIELECHOWSKI asked if he has experience with this or
indirect regulation of power producers or energy suppliers.
MR. O'TIERNEY answered that he assumed he meant that this posed
no direct regulation on a cost basis of an independent power
producer (IPP). The IPP's provision of power would be submitted
in a contract form with the utility to the commission for
approval. The commission would engage the contract at that point
in the process. If that is what he meant, he said he had some
experience with it.
CO-CHAIR WIELECHOWSKI asked if Enstar purchasing gas from a Cook
Inlet provider would be a correct analogy in deciding whether or
not the RCA can look at the costs of getting that gas to Enstar.
Mr. O'TIERNEY replied that he thought it was similar in the
sense that direct regulation would be focused upon a cost basis
for the purposes of determining revenue requirement and related
rate base return that yields rates in a regulated environment.
When a contract is submitted to the commission for its review,
from his perspective in practicing before the RCA, it would
apply its just and reasonable standard, but it doesn't have the
capability of scrutinizing the costs involved in providing the
service. So, it's then faced with having one party to a contract
submitting a contract and not having jurisdiction over the other
party in the contract. It's the party that has produced the
power and presumably has the related costs that normally is not
reviewed by the commission. He said he would leave it to the
Commission to speak to how it has dealt with the difficulties
involved in reviewing contracts under this standard.
CO-CHAIR WIELECHOWSKI asked if he believed the public's interest
could be adequately protected under this bill through the
process of exempting IPPs from regulation.
MR. O'TIERNEY answered that any end user of a commodity or
product wants some assurance that the price it's paying is
price-disciplined in some fashion. In a capitalist economy,
competition usually provides that price discipline and
regulation is a proxy for marketplace price competition to the
extent there is no market or there isn't an effective market to
do that job. Usually regulation is a substitute for free market
competition to the extent that there is no market or no
effective market to do that job. If he were looking at this
proposal, he would be asking the question: is there sufficient
competition in the market that would produce independent power
contracts for provisioning utilities that are sufficiently
market-disciplined. If not, then he would have some concerns and
one would ask why they wouldn't be regulating that service.
4:21:05 PM
CO-CHAIR WIELECHOWSKI asked him to submit an opinion on this
bill over the next few days.
MR. O'TIERNEY agreed and added that generally you have to be
able to compare apples to apples. So, if markets outside
involving IPPs are generally unregulated you have to compare and
contrast what our marketplace looks like for this service here
in order to be able to determine whether that is a relevant
factor in determining how to handle it in Alaska. He is not the
person to provide that analysis, but there are certainly some
who could.
CO-CHAIR WIELECHOWSKI said he is the person who is charged with
protecting consumers.
MR. O'TIERNEY said he is not an expert on IPP status in outside
jurisdictions.
CO-CHAIR WIELECHOWSKI said he understood that, but still wanted
his input.
4:22:57 PM
BOB PICKETT, Chairman, Regulatory Commission of Alaska (RCA),
said this would also mean that IPPs wouldn't file for a
Certificate of Public Convenience and Necessity (CPCN). A CPCN
makes findings, for instance, that this utility service is
actually needed by the public at this particular location, point
and time and that the financial managerial and operational
capacities are there to provide the service that is applied for.
He said the FERC issued a Notice of Inquiry a few weeks ago to
address a lot of these issues in the renewable energy arena. It
wants to promote renewable energy resources but in a way that
guarantees just and reasonable rates while eliminating the
impediments to these resources accessing the grid in the Lower
48.
As Mr. O'Tierney stated, Mr. Pickett said, Alaska has an "island
grid" that is disconnected and for all practical purposes is not
under the jurisdiction of the FERC. The FERC has taken used
market forces as a proxy for regulation in the Lower 48 and they
focus on the competitive wholesale electric markets. They
continuously monitor these markets and then enforce market rules
as needed with a fairly well established regime. They have also
come to the conclusion that system reliability is critically
important and that is the purpose of the Notice of Inquiry.
MR. PICKETT said he understood their concerns about timing with
a lot of the IPPs that many times find themselves without
significant public subsidy - whether that be from the state, the
federal government, direct subsidies or tax credits or whatever
- for projects that will not pencil out or make sense and could
not provide power at a competitive rate to the regulated
utilities. He said Fishhook, a small hydro project, petitioned
the RCA earlier for a strategy to address some of these.
4:26:10 PM
JAMES KEEN, Chief, Engineering, Regulatory Commission of Alaska
(RCA), explained that last year the Commission released two
different orders exempting small IPPs from certification on the
basis that it would see these utilities come forward through the
regulated utility they would be selling power to in a power
purchase agreement. The RCA believes it could serve the public
interest by simply looking at the power purchase agreement,
alone, regulating that rate to make sure a fair price is flowing
through to the ultimate consumers, but removing the burden of
certification and economic regulation from the IPP. This was
done in the case of Fishhook Renewable Energy, which is putting
in a small river hydro in Hatchers Pass, and South Fork Hydro in
Eagle River. Both of those would be selling power to Matanuska
Electric Association (MEA).
MR. PICKETT added that another approach is a qualifying facility
(QF) qualification under the FERC in which an IPP fills out the
application. If the FERC grants QF status, the state
jurisdiction is preempted. Then the QF will sell power to the
regulated utilities at an avoided cost basis.
4:27:55 PM
CO-CHAIR WIELECHOWSKI asked if a company is not directly
regulated, does the RCA have access to information regarding
power production costs when it is reviewing a contract between
the IPP and a regulated utility.
MR. PICKETT answered no.
CO-CHAIR WIELECHOWSKI asked if Cook Inlet natural gas had
created pricing issues for the RCA.
MR. PICKETT answered that it has created some intense
challenges. While several contracts have been recently approved,
it depends on how a case is presented, what interveners after
the filing is noticed become parties, and the strength of the
evidence presented in their arguments. Everybody's due process
rights are protected, but there is uncertainty, for sure.
CO-CHAIR WIELECHOWSKI asked if he had concerns over regulating
IPPs.
MR. PICKETT answered that he wouldn't speak for the Commission
on adopting a formal policy on any particular piece of
legislation or offer direct input; that takes an action at a
public meeting. But just speaking from what he has seen in his
time as commissioner and chairman, it does raise some question
marks, particularly if timing is a big issue. It's going to
depend on the nature of what the IPP brings in for the
interconnection agreement, which they will have to negotiate
with a regulated utility. Price is not the only issue. System
stability is very important. On the price side, they need to
negotiate the power sale agreement with the utility and then
present it to the RCA. The agreement will be reviewed as a whole
as to its reasonableness, and whether it is in the public
interest.
SENATOR STEDMAN asked if someone was to come in and build a 50
mgW hydro, would they need at CPCN if this bill passed.
MR. PICKETT replied their read is that they would not need a
CPCN.
SENATOR STEDMAN asked if he should be concerned about that.
4:31:49 PM
STEWART GARY, Assistant Attorney General Representing the RCA,
Department of Law (DOL), clarified that his role is found in AS
42.04.040(a), where it says it the responsibility of the
Attorney General to provide legal counsel to the Commission. So,
from the Commission's perspective he would echo what Mr. Pickett
said - the IPP would not be required to apply for or receive a
CPCN from the Commission. But other questions about the extent
that other provisions might apply are open, particularly related
to interconnection.
SENATOR STEDMAN asked again if he should be concerned.
MR. GARY answered yes. The CPCN process is a gatekeeper
function. For practical purposes, it determines what someone as
an individual investor decides to build is something that the
public actually needs - the public convenience and necessity
part of it. The other aspect is the fit, willing and able part -
is the proposed party financially capable of doing it, are they
managerially capable of doing it, and are they operationally
capable of doing it. CPCNs protect the public from interruptions
in utility service. Society has come to expect public utilities
to meet a higher standard and that is to provide their services
reliably 24 by 7. The only way to do that is to put up a
threshold across which the utility has to pass. Yes, he would be
concerned.
4:34:59 PM
MR. PICKETT said he would stand by for questions.
4:35:20 PM
ETHAN SCHUTT, Cook Inlet Region, Inc. (CIRI), said he wanted to
provide some context on SB 277. It is important in making
regulatory fit amenable with the private development of
renewable resources for IPPs while striking a balance to protect
the public interest to make sure the rate is fair and the
service is reasonable.
He said that the status quo is that they only have public
utilities providing electrical service on the Railbelt. The
CPCN, the rate case and regulatory oversight functions that take
place with the RCA are entirely appropriate given that public
utilities have been established in areas where they have a
monopoly service for electricity. So to the degree that a public
utility makes good or bad business or financial judgments or
investments or that they are operationally efficient or not, the
cost and benefit of all that decision making, he said, the
bottom line is that existing public utilities have a rate case.
So, for better or worse, their decision making as it affects
their cost structure gets passed through to their customers who
can't do anything about it.
CIRI is not proposing to have retail customers, but rather
developing a project and then having to go through a negotiated
process for power sales through PPAs with two or more existing
public utilities in order to sell their power to a commercial
customer who happens to be a regulated utility. They envision as
part of that process, that the utilities will demand a certain
amount of information justifying their own costs into the
project. That same package of information that they use for
their own purposes for the negotiation will also be used in
making their case to the RCA - why this contract is allowed to
be put into their rate and be part of their rate base as part of
their regulated function.
RCA staff and lawyers have testified that they won't have any
ability to look at costs, but that from a strictly absolute
interpretation. It's a little misleading in that these utilities
aren't just going to buy power without being able to look at
certain financial and cost information.
MR. SCHUTT pointed out in the notion of a market that the cost
is not the only piece of the puzzle on the financial side. A
significant amount of risk is allocated to the IPP side of the
table that remains long after the contract has been entered
into. Some of the more significant risk that remains in the case
of a wind project is the resource risk. In their case they have
10 years, a long history, of data from Fire Island, much longer
than the two or three years that are commercially used in many
locations of two or three years. If the IPP gets that wrong in
negotiating its price of power, and the wind resource is
actually less than what the modeling indicates it should have
been, that loss falls on the IPP side of the ledger. There is no
real way to allocate that risk any differently through a long
term contract.
IPPs also maintain the long term risk of equipment failure, cost
overruns or other executional issues in the construction or
operation of the plant itself. By contrast, if this was a
project that was developed by a public utility, all of those
risks would be borne directly by the rate payer.
4:42:59 PM
MR. SCHUTT said the current structure proposed by SB 277 fairly
allocates risks and rewards for an IPP with a renewable resource
when the only customers are a regulated utility.
4:44:47 PM
CO-CHAIR WIELECHOWSKI said that he would keep public testimony
open. Finding no further questions, he adjourned the meeting at
4:44 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 220 version K.pdf |
SRES 2/15/2010 3:30:00 PM SRES 2/18/2010 3:30:00 PM SRES 2/22/2010 3:30:00 PM SRES 2/24/2010 3:30:00 PM |
SB 220 |
| SB 277 Bill Packet.pdf |
SRES 2/22/2010 3:30:00 PM |
SB 277 |
| Possible Amendment - 26-LS1197K.11.pdf |
SRES 2/22/2010 3:30:00 PM |
|
| Possible Amendment - 26-LS1197K.10.pdf |
SRES 2/22/2010 3:30:00 PM |
|
| Possible Amendment - Energy Policy_Nuclear.pdf |
SRES 2/22/2010 3:30:00 PM |