Legislature(2023 - 2024)BUTROVICH 205
04/19/2024 03:30 PM Senate RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| SB217 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 217 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
April 19, 2024
3:31 p.m.
MEMBERS PRESENT
Senator Click Bishop, Co-Chair
Senator Cathy Giessel, Co-Chair
Senator Bill Wielechowski, Vice Chair
Senator Scott Kawasaki
Senator James Kaufman
Senator Forrest Dunbar
Senator Matt Claman
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SENATE BILL NO. 217
"An Act relating to the taxation of independent power producers;
and increasing the efficiency of integrated transmission system
charges and use for the benefit of ratepayers."
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 217
SHORT TITLE: INTEGRATED TRANSMISSION SYSTEMS
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
02/02/24 (S) READ THE FIRST TIME - REFERRALS
02/02/24 (S) RES, L&C, FIN
03/04/24 (S) RES AT 3:30 PM BUTROVICH 205
03/04/24 (S) Heard & Held
03/04/24 (S) MINUTE(RES)
03/13/24 (S) RES AT 3:30 PM BUTROVICH 205
03/13/24 (S) Heard & Held
03/13/24 (S) MINUTE(RES)
03/25/24 (S) RES AT 3:30 PM BUTROVICH 205
03/25/24 (S) Heard & Held
03/25/24 (S) MINUTE(RES)
04/19/24 (S) RES AT 3:30 PM BUTROVICH 205
WITNESS REGISTER
ANGELA RODELL, Staff
Senator Cathy Giessel
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented the sectional analysis for SB 217.
JOEL GROVES, Chair
Railbelt Reliability Council
Anchorage, Alaska
POSITION STATEMENT: Presented an overview of the Railbelt
Reliability Council.
TONY IZZO, Chief Executive Officer (CEO)
Matanuska Electric Association
Palmer, Alaska
POSITION STATEMENT: Testified by invitation on SB 217
ACTION NARRATIVE
3:31:10 PM
CO-CHAIR CATHY GIESSEL called the Senate Resources Standing
Committee meeting to order at 3:31 p.m. Present at the call to
order were Senators Kawasaki, Dunbar, Claman, and Co-Chair
Giessel.
SB 217-INTEGRATED TRANSMISSION SYSTEMS
3:31:48 PM
CO-CHAIR GIESSEL announced the consideration of SENATE BILL NO.
217 "An Act relating to the taxation of independent power
producers; and increasing the efficiency of integrated
transmission system charges and use for the benefit of
ratepayers."
3:32:00 PM
CO-CHAIR GIESSEL solicited a motion.
3:32:06 PM
SENATOR CLAMAN moved to adopt the Committee Substitute (CS) for
SB 217, work order 33-GS2489\B, as the working document.
3:32:18 PM
CO-CHAIR GIESSEL objected for purposes of discussion.
3:32:30 PM
At ease
3:32:51 PM
CO-CHAIR GIESSEL reconvened the meeting.
3:32:56 PM
SENATOR CLAMAN moved to adopt the Committee Substitute (CS) for
SB 217, work order 33-GS2489\S, as the working document.
3:33:09 PM
CO-CHAIR GIESSEL objected for purposes of discussion.
3:33:17 PM
ANGELA RODELL, Staff, Senator Cathy Giessel, Alaska State
Legislature, Juneau, Alaska, presented the sectional analysis
for SB 217:
[Original punctuation provided.]
CS FOR SENATE BILL 217 (RES)
INTEGRATED TRANSMISSION SYSTEMS
SECTIONAL ANALYSIS (Version S)
Section 1: Amends AS 42.04.020(a) to clarify and
update the qualifications of individuals nominated to
serve as a commissioner for the Regulatory Commission
of Alaska (RCA).
Section 2: Amends AS 42.05.254(a) to increase the
regulatory surcharge used to fund operations of the
RCA.
Section 3: Amends AS 42.05.381 by clarifying that the
RCA may consider diversity of energy supply, promotion
of load growth or enhanced energy reliability or
security in determining if an electric utility's rate
is just and reasonable.
Section 4: Amends AS 42.05 by adding a new subsection
that provides for a net billing system which allows
customers to receive export rate credits for electric
energy produced and requires the RCA to set through
regulation the export rate credit annually based on
seasonal and time variations, and other relevant
factors.
3:34:56 PM
MS. RODELL continued her presentation of the sectional analysis
of SB 217:
[Original punctuation provided.]
Section 5: Amends AS 42.05.431(b) by requiring that
power purchase agreements subject to RCA approval must
pass through any tax benefits to consumers.
Section 6: Amends AS 42.05 by adding a new section
that exempts small projects, under 15,000 kilowatts,
from RCA approval.
Section 7: Amends AS 42.05.762 by adding the
requirement that the electric reliability organization
(ERO) prioritize reliability and stability of the
system served by the ERO while also taking into
account cost to the consumer.
Section 8: Amends AS 42.05.770(1) requiring that an
ERO tariff include nondiscriminatory for
interconnection and repeals portion of the tariff to
include standards for transmission system cost
recovery.
Section 9: Amends AS 42.05.772 by adding that a load-
serving entity that would otherwise be exempt from
regulation under this chapter, shall adhere to the
ERO's reliability standards, coordinate with the ERO,
and if applicable, coordinate with the Railbelt
Transmission Organization (RTO) to integrate
reliability standards into the load-serving entity's
operational procedures.
Section 10: Amends AS 42.05.790 by adding that the
definition of "Railbelt" has the same meaning given in
AS 44.83.750 and "Railbelt Transmission Organization"
means the transmission organization established by AS
44.83.700.
3:36:46 PM
MS. RODELL continued her presentation of the sectional analysis
of SB 217:
[Original punctuation provided.]
Section 11: Amends AS 42.06.286(a) to increase the
regulatory surcharge used to fund operations of the
RCA.
Section 12: Amends AS 43.98 to add new subsections
providing for the tax exemption of electricity sold
wholesale by independent power producers and new
utilities in unserved areas to cooperative or
municipal utilities.
Section 13: Amends AS 44.83.030 to create a stand-
alone eight-member board of directors for the Alaska
Energy Authority (AEA) that includes the commissioner
of Commerce, Community & Economic Development, the
commissioner of Revenue and six members of the public
that meet specific qualifications.
Section 14: Amends AS 44.83.030 to allow the
commissioners the ability to designate a deputy or
director to act in the commissioner's place; sets the
public member term at three years; and provides for
the governor to immediately appoint a member to fill
and unexpected vacancy.
Section 15: Amends AS 44.83.040(a) to require the
authority to elect a chair and vice chair every two
years, requires that five members to constitute a
quorum and that actions taken, and motions and
resolutions adopted require an affirmative vote of
five members.
Section 16: Amends AS 44.83.080 by adding to the
powers of the AEA the ability to carry out the duties
and powers assigned under AS 44.83.700-44.83.750 and
added the ability to acquire energy storage systems by
construction, purchase, gift or lease.
Section 17: Amends AS 44.83 by adding a new subsection
creating the RTO. AS 44.83.700
(a) establishes the RTO under the AEA for the purpose
of developing a backbone transmission system for the
Railbelt.
(b) establishes the governance structure that provides
for oversight of the RTO, creating a management
committee that is composed of members representing
each of the utilities, the executive director of the
AEA and as ex-officio, non-voting member, the Chief
Executive Officer of the ERO; requires the RTO to
establish a conflict resolution process, and
facilitates public participation in the operations of
the RTO.
(c) clarifies the RTO cannot limit, extend, or alter
the rights conferred by a certificate of public
convenience and necessity.
3:39:30 PM
MS. RODELL continued her presentation of the sectional analysis
of SB 217:
[Original punctuation provided.]
AS 44.83.710 sets out the powers and duties of the RTO
including managing Railbelt backbone transmission
assets, follow reliability standards established by
the ERO, ensure safe, resilient, reliable, efficient,
and economical operation and development of the
integrated transmission system, preserve
nondiscriminatory open access, maintain capacity
rights of legacy transmission owners and perform
integrated transmission planning. The RTO is also
given the authority to purchase, lease or acquire
backbone transmission assets; construct, own, and
operate new transmission assets; establish tariffs
subject to the approval of the RCA and enter into
contracts, agreements, and partnerships that enhance
safety, reliability, and efficiency of the Railbelt
integrated transmission system. The RTO may not
exchange, donate, sell or convey a backbone
transmission asset without the prior approval of the
Legislature. Work performed on new construction and
maintenance shall be prioritized to the utility and
must be subject to the terms and conditions of
existing collective bargaining agreements.
3:40:25 PM
MS. RODELL continued her presentation of the sectional analysis
of SB 217:
[Original punctuation provided.]
AS 44.83.720 creates a revenue mechanism, subject to
the approval of the RCA, whereby the RTO shall hold
and administer an open access transmission tariff;
shall adopt a transmission cost recovery methodology
that ensures the reliability and sufficient capacity
of the integrated transmission to support and promote
the economy. In addition, the cost recovery
methodology must eliminate per-unit wholesale
transmission charges and pool backbone transmission
costs and allocate those costs to end users.
AS 44.83.730 requires the RTO to engage in integrated
transmission planning at least every ten years. The
plan must use a whole-system approach which
articulates the strategic trajectory, capital funding
requirements and outlook for the Railbelt transmission
system and shall take into consideration technological
advancements, load growth, fuel supply among others.
AS 44.83.740 requires the RTO to identify existing
backbone transmission assets and that the Railbelt
utilities will transfer management of those assets to
the RTO by July 1, 2026.
AS 44.83.750 defines "backbone transmission system" as
the assets of the interconnect electric energy
transmission network that serves the Railbelt; defines
"commission" as the RCA; defines "interconnected
electric energy transmission network" as the same
definition as that used for the ERO in 42.05.790;
defines "Railbelt" as the area of Alaska that ranges
from the Kenai Peninsula to Interior Alaska, connected
by a common electric transmission backbone; defines
"railbelt utility" to mean a public utility
certificated to operate in the Railbelt; and defines
transmission organization to the RTO established in
this bill.
Section 18: Sets the directive for AEA and the RCA to
adopt the necessary regulations to implement the
changes.
3:42:15 PM
MS. RODELL continued her presentation of the sectional analysis
of SB 217:
[Original punctuation provided.]
Section 19: Requires AEA to immediately begin an
initial transmission plan and capital improvement
program.
Section 20: Allows members serving as commissioners to
the RCA to continue to serve until their individual
term has expired and a successor appointed and
qualified.
Section 21: Creates a transition for the initial
appointment of two public members of the AEA Board to
a one-year term, two additional public members to a
two-year term, and the remaining two members to a
three-year term.
Section 22: Sections 18 and 19 take effect
immediately.
Section 23: All other sections take effect July 1,
2024.
3:43:06 PM
CO-CHAIR GIESSEL removed her objection and CSSB 217, work order
33-GS2489\S was adopted.
3:43:15 PM
CO-CHAIR GIESSEL announced invited testimony on SB 217.
3:44:26 PM
JOEL GROVES, Chair, Railbelt Reliability Council, Anchorage,
Alaska, presented an overview of the Railbelt Reliability
Council (RRC). He briefly described his work in the industry and
as an RRC board member.
3:45:52 PM
MR. GROVES moved to slide 2 and provided a presentation outline:
[Original punctuation provided.]
Presentation Outline
• L48 / Alaska EROs
• RRC Mission
• Structure
• Implementation / Status
• Funding / Historical Spend
3:46:30 PM
MR. GROVES moved to slide 3 and summarized the differences
between electric reliability organizations (ERO) in the Lower 48
and Alaska. He explained that EROs governing the Lower 48 were
created by Congress in the 2005 Energy Policy Act and are under
the jurisdiction of the Federal Energy Regulatory Commission
(FERC) and the North American Electrical Reliability Corporation
(NERC). He pointed out that there are six regional EROs and
added that the scope of Lower 48 EROs is limited to reliability
standards (i.e. the rules governing how the bulk electric system
is operated). He explained that Alaska does not fall under
federal ERO jurisdiction; Alaska's ERO were created by the
legislature in 2020. He said that the railbelt utilities created
voluntary reliability standards in 2018 (updated in 2018 and
based on NERC standards) which remain in effect. He emphasized
that these are voluntary, with no mandatory enforcement or
compliance requirements.
MR. GROVES referred to SB 123, which created a reliability
standard framework (this included a monitoring and standard
enforcement program and enhanced grid reliability). He explained
that this is administered through the Regulatory Commission of
Alaska (RCA) through regulation and certificate. He added that
RRC is the current certificated ERO for the railbelt. He stated
that Alaska's ERO serves a smaller group than those in the Lower
48. Additionally, while Lower 48 EROs are limited to reliability
standards, Alaska's ERO also has a planning function.
3:49:08 PM
CO-CHAIR GIESSEL asked him to translate the acronyms on slide 3.
MR. GROVES defined the following acronyms on slide 3:
• Electric Reliability Organization (ERO)
• Railbelt Reliability Council (RRC)
• Federal Energy Regulatory Commission (FERC)
• North American Electrical Reliability Corporation
(NERC)
• Regulatory Commission of Alaska (RCA)
CO-CHAIR GIESSEL offered her understanding that RRC is the
Alaska ERO; therefore, these two terms (ERO and RRC) can be
considered interchangeable within the state. She asked if this
is a correct statement.
MR. GROVES replied that this is partially correct. He explained
that RRC is not the Alaska ERO but is the ERO for the Railbelt
bulk electrical system. He noted that RRC is currently the only
ERO in Alaska under the ERO regulations. He suggested that more
may exist in the future, under other jurisdictions.
CO-CHAIR GIESSEL expressed appreciation for this clarification.
3:51:23 PM
MR. GROVES advanced to slide 4 and explained the ERO statutory
mandate:
[Original punctuation provided.]
ERO Statutory Mandate
• Develop and Enforce Reliability and Security
Standards. AS 42.05.762(1); AS
42.05.765(a)(2)
• Develop a comprehensive Integrated Resource
Plan (IRP) for the Railbelt Bulk Electric
System. AS 42.05.762(2)
• Develop and administer non-discriminatory
open access transmission and interconnection
standards. AS 42.05.770(1)(A)
• Develop and administer transmission system
cost recovery standards. AS 42.05.770(1)(B)
MR. GROVES said that, with the exception of the first point,
these are addressed by SB 217.
3:52:43 PM
CO-CHAIR GIESSEL expressed appreciation for the inclusion of an
image of the Alaska railbelt. She compared this to the image on
slide 3 and briefly discussed their similarities and
differences.
3:53:27 PM
MR. GROVES said that in the Lower 48, the grid is more of a web.
He contrasted this with the Alaskan "grid" which is linear. He
briefly described the pathways of the Alaska transmission grid
and acknowledged that this is not a robust transmission system.
He opined that referring to it as a "grid" is a mild
exaggeration.
3:54:15 PM
CO-CHAIR GIESSEL opined that the single extension cord backbone
of Alaska's transmission grid is not very reliable and commented
that RRC is a "reliability" corporation.
3:54:32 PM
MR. GROVES opined that the electrical utilities have done a
great job providing reliable service over the decades; however,
the existing institutional framework has limitations. He added
that SB 217 would implement reforms in an effort to match the
necessary institutional maturation of the railbelt. He added
that RRC was created to advance these reforms.
3:55:13 PM
MR. GROVES moved to slide 5 and explained the mission and vision
of the RRC:
[Original punctuation provided.]
RRC's Vision & Mission
VISION: A safe, environmentally responsible, reliable,
and affordable regional bulk electric system.
MISSION: Serve the public interest and provide the
greatest long-term value to the Railbelt by working
collaboratively and transparently to establish and
uphold protocols that sustainably balance safety,
reliability, cost and environmental responsibility
MR. GROVES said the RRC mission statement is a work in progress.
3:56:12 PM
MR. GROVES moved to slide 6 and spoke to the RRC structure and
its governance:
[Original punctuation provided.]
RRC Structure & Governance
• 501(c)(4) Non-Profit Corporation
• Combination balanced stakeholder / independent
Board of Directors
• 13 Voting Directors
• 6 utilities (CEA, GVEA, HEA, MEA, Seward,
Doyon Utilities)
• Alaska Energy Authority
• 2 independent power producers
• 1 seat advocating for residential-small
commercial ratepayer interests
• 1 seat large commercial and/or industrial
ratepayer interests
• 1 seat representing environmental ratepayer
interests
• 1 independent, non-affiliated seat
• 2 Ex-Officio Directors - RCA and RAPA
• Each seat consists of two individuals, a primary
and an alternate Director
MR. GROVES said he occupies one of the independent power
producer seats.
3:57:48 PM
SENATOR CLAMAN asked if the board has a super majority voting
requirement and, if so, whether this is a statutory requirement.
MR. GROVES replied that the board does have a super majority
voting requirement for specific measures (e.g. annual budget).
He explained that this means 9 of the 13 voting directors must
approve the measure. All other measures require a simple
majority, which is 7 of 13 voting to approve. He said that this
is not a statutory requirement but was implemented when RRC was
created.
3:59:20 PM
CO-CHAIR GIESSEL asked what RAPA is.
MR. GROVES replied that this is the Regulatory Affairs and
Public Advocacy Agency (RAPA), which advocates for the public
interest with regard to utilities.
CO-CHAIR GIESSEL asked how 13 voting directors was determined.
MR. GROVES replied that, in 2019, when SB 123 was under
consideration, the railbelt utilities formed a memorandum of
understanding (MOU) that established a 12-person implementation
committee for RRC (i.e. the Railbelt Reliability Corporation
Implementation Committee (RRC IC)). RRC IC consisted of 6
utilities and 6 non-utility seats. He explained that this was a
prototype for the RRC board, which later evolved into a 13-
person board.
4:01:22 PM
CO-CHAIR GIESSEL asked if Mr. Groves was an original member of
the board.
MR. GROVES replies yes. He briefly explained his role on the
board and that of the previous board chair.
4:02:10 PM
MR. GROVES advanced to slide 7 and discussed a graphic depicting
the current vision for the future structure of RRC. He stated
that the board of directors is full and RRC is currently seeking
a Chief Executive Officer (CEO). He added that, once the CEO is
on board, the remaining staffing spots (related to various
business and engineering functions) will be filled in. He noted
that the bottom portion of the chart shows what the board has
envisioned; however, he acknowledged that the CEO may choose to
rework this in order to make RRC as efficient as possible.
4:03:18 PM
MR. GROVES advanced to slide 8 and discussed the history of the
Alaska ERO project:
[Original punctuation provided.]
A BRIEF HISTORY OF THE ALASKA ERO PROJECT
KEY MILESTONES PREDECESSORS TO FULFILLING MANDATES
• Funded April 2023 (12 months ago)
• Rules approved Jan. 2023 (15 months ago)
• Tariff approved Nov. 2023 (5 months ago)
• Final 2023 surcharge approval Nov. 2023 (5 mon.
ago)
• CEO & Staff hiring (in progress)
MR. GROVES explained that RRC has spent the past four years
addressing regulatory requirements in order to begin focusing on
the work it was created to do. He pointed out that the
information on the slide is divided into three sections: higher
authorities, RRC organizational work, and RRC mission work. He
briefly discussed the timeline, beginning with the formation of
the Railbelt Reliability Corporation Implementation Committee
(RRC IC), the passage of SB 123, and the process of drafting and
implementing the necessary regulations. He stated that the
regulations became effective in December 2021, and this
initiated a 90-day application window in which RCA would accept
applications for entities to become the registered ERO for the
railbelt.
4:05:31 PM
MR. GROVES stated that RRC IC submitted its application in March
of 2022. RCA undertook a 6-month investigation to consider the
application, giving final approval in September 2022. At that
time, RRC IC was certified to act as the ERO for the railbelt.
He said that the initial budget and initial tariff proposal were
filed in 2023. Both were suspended by RCA into an investigation
docket. He explained the process of consolidation, settlement,
and the scope of these dockets. Funding for RRC was approved in
April of 2023. The proposed budget and tariff received final
approval from RCA in November. He emphasized that this was a 4-
year process and RRC's regulatory approval was only finalized
over the past 5-15 months. The CEO search began in the summer of
2023 and is ongoing. He briefly discussed this process. He said
that, as a result of the delay in finding a CEO, RRC hired a
chief administrative officer (CAO) and a chief technical officer
(CTO) on an interim basis. He stated that reliability standards
will move through the process for approval in an attempt to
expedite the mission of the ERO while the search for a CEO
continues.
4:09:52 PM
SENATOR KAWASAKI asked how large the ERO is.
4:10:09 PM
MR. GROVES replied that the ERO currently does not have staff or
employees and is made up of the board of directors. He explained
that the board of directors is a working board at this time (and
will be a governing board in the future). He gave a brief
overview of the board make up, including 13 board members and 13
alternate board members. In addition, there are several
consultants, as well as the CTO and CAO. He added that the ERO
does not have a physical location and meets in online spaces or
rented meeting spaces. He surmised that, when fully established,
the ERO would have between 5-10 employees.
4:11:46 PM
SENATOR CLAMAN stated that he has heard criticism regarding
RRC's slow progress. He asked Mr. Groves to respond to this. He
asked whether RRC expects a faster pace going forward.
4:12:17 PM
MR. GROVES replied that he has also heard this, and expressed
strong disagreement with the notion that RRC has not
accomplished anything. He reframed the criticism and commented
that an information vacuum may be responsible for this
misunderstanding. He referred to the information on slide 8 and
argued that RRC has been working hard for several years to meet
regulatory requirements in order to reach the starting line. He
questioned how this process could have gone faster and said that
he would have preferred a faster process. He shared several ways
RRC attempted to expedite the process and pointed out that RCA
chose to take the process step-by-step. He reiterated that the
process itself takes time. In terms of future timing, he shared
the anticipated timing of reliability standards and the IRP and
noted that some of these must be done one at a time (which takes
longer than when done in tandem). He emphasized that RRC is
eager to begin work. He referred to concerns around gas supplies
in Cook Inlet and said that many stakeholders on the board would
like to see the IRP already completed in order to have more
guidance on how to address this issue. He argued that an IRP
takes time.
4:15:27 PM
SENATOR DUNBAR referred to page 11 of CSSB 217 which states that
the CEO of the reliability organization is an ex officio member
of the management committee of the RTO, with an effective date
of July 1; however, he noted that Mr. Groves expects hiring the
CEO by the end of the year. He asked for clarification.
4:16:13 PM
MR. GROVES agreed that the CEO would be hired by the end of the
year at the latest and if not by summer. He indicated that the
CEO would be hired in time to meet the requirements of the RTO
board.
4:16:39 PM
SENATOR DUNBAR asked if it would make sense to have a delegate
for the CEO who could step in to make decisions when the CEO is
not available.
4:17:19 PM
MR. GROVES replied that there are currently multiple delegates
acting as CEO in different ways. He noted that he is one such
delegate. He offered examples of situations in which the
delegates may step forward to act as CEO.
4:17:56 PM
SENATOR DUNBAR noted that, as the statute is currently written,
only the CEO can serve in this role. He suggested that the
language be changed to specifically allow for this. He opined
that RRC should have a role on the management council.
4:18:36 PM
MR. GROVES moved to slide 9 and spoke to the RRC funding
mechanism:
[Original punctuation provided.]
RRC Funding & Spend to Date
2020 to 3/31/2023:
• Funded directly by utilities through Memorandum
of Understanding.
4/1/2023 to Current:
• Surcharge invoiced to utilities.
• Cost ultimately borne by ratepayers.
• Balancing account addresses revenue / expenses.
• Annual Budget / Surcharge to RCA for review /
approval.
• 2024 / 25 budget is around $0.001 per kWh, or 0.5
percent increase in retail rates.
Future:
• CEO vision for organizational structure /
staffing / work plan.
• Stakeholder / public engagement in budget / work
plan development process.
• RCA approves all RRC Surcharges.
MR. GROVES briefly explained that the first round of funding
($2.4 million) covered consulting costs associated with
producing and facilitating RRC and noted that the participants
were uncompensated during that time. He added that this cost was
paid by the utilities and ultimately borne by ratepayers, though
he does not know the specifics of this. He explained that the
RRC surcharge went into effect April 1, 2023, and explained how
this surcharge is levied and allocated.
4:21:00 PM
MR. GROVES referred to the table on slide 9 and pointed out that
expenses were $0.9 million for April 1-December 31 of 2023. The
2024 budget has been approved on an interim, non-refundable
basis and is $3.6 million. He noted that a 2024 supplemental
budget has been filed with RCA to cover costs related to hiring
the CTO. He stated that budgets have not been developed for 2025
and beyond and said that the budget could be around $5 million.
4:24:26 PM
CO-CHAIR GIESSEL directed attention to the 2024 budget, which
shows an increase of $1.3 million. She asked for clarification
that this was related to the hiring of the CTO. She remarked
that this is a steep cost and asked what the RTO's wage is.
4:25:00 PM
MR. GROVES replied that this cost applies to multiple people. He
explained that this includes the CTO and two additional
engineers.
4:25:54 PM
CO-CHAIR GIESSEL wondered how many staff RCA has and commented
that the RRC seems to be expanding to the size of RCA. She
clarified that this is a rhetorical question. She noted that a
CEO has yet to be hired and surmised that the budget may see a
significant increase in 2025.
4:26:49 PM
MR. GROVES opined that comparing RCA and RRC is akin to
comparing apples to oranges. He said that RRC is tasked with
developing content (e.g. reliability standards and integrated
resource plans) while RCA is a review entity. He surmised that
RCA is able to do more with less because it does not create
original content. He explained that the 2024 budget assumes that
a CEO would be hired mid-year and thus includes the CEO salary
for this timeframe. He expressed hope that the proposed $5
million is close to the correct amount and that the CEO would be
cognizant of the political pressure for RRC to perform
efficiently and cost-effectively. He said that the board will be
looking to the CEO to maximize efficiency while minimizing costs
in order to maximize value to ratepayers - with the hope that
this would be done as quickly as possible. He acknowledged that
this will be a challenge.
4:28:48 PM
CO-CHAIR GIESSEL noted that Mr. Groves is currently acting as
CEO. She opined that a 13-member group is a large group to
manage and surmised that it is difficult to persuade members to
nimbly implement policy. She asked how this has worked so far.
4:29:20 PM
MR. GROVES replied that it has worked better than he expected.
He commented on the time required to communicate with each board
member individually. He indicated that all board members
dedicate a significant amount of time to their work; however,
they have full-time jobs in addition to RRC positions. RRC has a
labor resource scarcity as a result. He stated that this would
continue to be a challenge until a CEO is brought onboard and
shared that he is looking forward to that time. He said that the
board is diverse, but members share a common vision. He shared
his hope that the board would be a smaller, independent board in
the future; however, this is not likely to be a reality until
RRC has proven its ability to do the work without input from the
utilities. He stated that this is the path taken by most boards
in the Lower 48.
4:31:57 PM
MR. GROVES advanced to slide 10 and discussed the RRC guiding
principles:
[Original punctuation provided.]
Guiding Principles
• Expedite Efficient Implementation of ERO Work
• March 2022 Tariff approval petition / motion
• Feb. 2023 Stipulated Settlement Negotiations
• CAO and CTO interim hires to arrest impact
of CEO recruitment delays
• Proactive Stakeholder Engagement
• 2024 Budget and Workplan Outreach (May to
November)
• 2025 Budget - similar engagement strategy
• Adapting 2024 Budget investigations to
include product development scope
• Transparency and Openness
• Meeting notices and protocols, website
• Collaborative Stakeholder Dialog / Leadership
4:32:20 PM
MR. GROVES stated that ERO has brought new industry stakeholders
into a leadership role, which is a new occurrence. He opined
that this is a very exciting and impactful innovation, the full
implications of which are yet to be seen. He commented that
great things may come from this.
4:33:52 PM
CO-CHAIR GIESSEL thanked Mr. Groves for his commitment to serve
on the board and acknowledged the time commitment this requires.
She expressed appreciation for his presentation.
4:34:58 PM
TONY IZZO, Chief Executive Officer (CEO), Matanuska Electric
Association, Palmer, Alaska, testified by invitation on SB 217.
He gave a brief overview of his industry experience. He stated
that MEA is supportive of the goals and concepts in SB 217 but
had concerns about specific provisions in the original
legislation. He shared his belief that the majority of these
concerns were addressed by CSSB 217. He stated that the CS
clarifies intent, adds key provisions to help enable the desired
goals and supports RCA having the necessary funding and
expertise required. He commented on RCA's workload and opined
that it is important to provide RCA with the resources needed to
ensure success. He noted that CSSB 217 provides tax parity for
independent power producers (IPP). MEA has a bias toward buying
power from IPPs and supports private sector development. He
shared his belief that providing a strong IPP sector would
result in reduced rates for consumers and would diversify the
fuel supply.
4:37:24 PM
MR. IZZO said that CSSB 217 creates an energy-focused and
diverse board of directors for the Alaska Energy Authority
(AEA), providing AEA with the authority to be a stronger force
in the transition. He expressed support of RTO as a management
committee. He noted that there are two management committees
currently, the Intertie Management Committee and the Bradley
Project Management Committee. He explained that management
committees are transparent and are subject to the open meetings
act. He expressed confidence that this transparency will extend
to the RTO structure. He noted that CSSB 217 provides RCA with
additional reasons to consider a utility's rates to be "just and
reasonable." He opined that it will be critical for factors
related to fuel supply, load growth, and enhancing energy
reliability and security to be available to RCA as they review
and approve purchase agreements going forward. He stated that
the two key agreements include developing RTO. He expressed
support of language that directs RTO to provide governance
structure and cost recovery mechanism (either date certain or
developed by RCA). He stated that RTO is essential for
management of the transmission backbone, and this backbone is
essential for the greater good of railbelt power consumers. He
added that CSSB 217 removes economic distortions and ensures
that the lowest cost power reaches all consumers.
4:41:24 PM
MR. IZZO shared his belief that, if no legislation were passed
to address this issue, current practices would remain in place.
He stated that this would result in myopic decisions, potential
limited development of projects by IPPs, more expensive small
projects, and continued dysfunction. He contrasted "high
functioning" and "dysfunctional" and said that, while the
current system is no longer "dysfunctional," it is not yet "high
functioning." He said that there may be confusion on Grid
Resilience and Innovation Partnerships (GRIP) assets and
utilities may need to decline IPP projects due to uncertainty of
pancaked wheeling charges. He opined that this would send the
message that Alaska is unable to put together the structure
needed to maximize the benefit of the current GRIP award - and a
potential second GRIP award that would allow the grid to reach
Healy.
MR. IZZO wondered what would happen if version A of SB 217 were
to pass. He asserted that this version did not resolve the real
issue. He opined that the Governor's press release on SB 217 was
in line with the Governor's energy task force's number one
recommendation on transmission unification. (He noted that he is
co-chair of the aforementioned task force.) He stated that the
energy task force's recommendations were vetted and formed with
an open process over hundreds of hours. However, version A
represents solutions formed outside of this public process.
While version A addresses economic constraints, it does not
consider the technical and institutional issues plaguing the
railbelt. He acknowledged that version A would provide parity
for IPPs; however, this would be done without ensuring that the
grid is managed to the benefit of all users (i.e. 75 percent or
more of Alaskans).
4:44:51 PM
MR. IZZO emphasized that this is a critical time to eliminate
the three constraints on the railbelt grid. First, technical
constraints can be resolved with GRIP funding. This would remove
the extension cords north and south. Second, economic
constraints can be removed by eliminating wheeling. Third,
institutional constraints can be removed by forming the RTO. He
noted that the third constraint is addressed by CSSB 217 but was
not addressed by version A. He emphasized that removing one or
two constraints - but maintaining the same dysfunctional system
- would result in the same situation for Alaskans: short term
decisions and actions focused on small service territories
rather than the larger system.
4:46:32 PM
MR. IZZO offered an example to illustrate his concern and
emphasized the importance of forming a transmission entity. He
noted that GRIP opportunities are helpful; however, he opined
out that attempting to move the state upward while being dragged
down by inadequate infrastructure, antiquated systems, and
dysfunctional structures puts the state at a disadvantage and
puts its future at risk. He noted the success Iceland has
experienced in this area and pointed out that this took time and
included many challenges. He asserted that, due to the
challenges Alaska has faced, it may not be possible to achieve
the kind of success Iceland has experienced without the
legislature's leadership.
4:50:26 PM
CO-CHAIR GIESSEL referred to an Alaska Energy Authority
resolution that addressed GRIP funds. She shared her
understanding that, according to the resolution, the State of
Alaska would not be obligated to match or accept GRIP funds. She
asked for clarification of these statements.
4:51:23 PM
MR. IZZO said that he was online for the meeting in which the
resolution was discussed. He explained that the first GRIP
application did not include a fund matching commitment by the
state. He said that, while he would like the match to be
required, he appreciates the transparency of not binding future
administrations and legislatures to these significant funding
matches. He shared his understanding that these details have not
been worked out. He pointed out that the utilities also have a
role in funding infrastructure improvements. He explained the
types of projects being funded and noted that there is at least
one major project each year. He suggested that, going forward,
this funding would be addressed through bonding, state match, or
a combination.
4:53:37 PM
SENATOR CLAMAN asked Mr. Izzo's perspective on the RRC's budget
proposal. He opined that the budget is large relative to the
amount of work that has been done and expressed concern that
RRC's progress has been slow.
4:54:25 PM
MR. IZZO replied that both he and MEA supported the passage of
SB 123. He shared his belief that this was necessary
institutional reform and briefly discussed the cooperative
business model and generational planning. He shared that it has
been difficult to wait for the RRC to move through the process;
however, he emphasized that Mr. Groves has done a good job. He
said he looks forward to the hiring of a CEO. He expressed
concern about the budget and recalled reading that a potential
future budget could be as high as $10 million. He contrasted the
work done by RRC and RCA and shared his belief that - although
RCA does not create content - the work done by RCA is highly
complex. He briefly discussed the work done by RCA to underscore
this and pointed out that RCA's budget is much lower than $10
million. He expressed a degree of confidence that there will be
efforts for RRC to become an independent organization. He
surmised that RRC is in a transitional period, and this may be
costing more.
4:58:38 PM
CO-CHAIR GIESSEL [held SB 217 in committee.]
4:59:45 PM
There being no further business to come before the committee,
Co-Chair Giessel adjourned the Senate Resources Standing
Committee meeting at 4:59 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 217 CS Workdraft, version S.pdf |
SRES 4/19/2024 3:30:00 PM |
SB 217 |
| SB 217 Sectional Analysis, version S.pdf |
SRES 4/19/2024 3:30:00 PM |
SB 217 |
| SB 217 Letter of Support ORPC 4.3.24.pdf |
SRES 4/19/2024 3:30:00 PM |
SB 217 |
| SB 217 Letter of Support CIRI 3.28.2024.pdf |
SRES 4/19/2024 3:30:00 PM |
SB 217 |
| SB 217 RRC SRES Presentation 4.19.24.pdf |
SRES 4/19/2024 3:30:00 PM |
SB 217 |
| SB 217 Explanation of Changes, version A to S.pdf |
SRES 4/19/2024 3:30:00 PM |
SB 217 |