SB 149-UTILITIES: RENEWABLE PORTFOLIO STANDARD  3:20:03 PM CHAIR BJORKMAN reconvened the meeting and announced the consideration of SENATE BILL NO. 149 "An Act relating to generation of electricity from renewable energy resources; relating to a renewable portfolio standard; relating to power cost equalization; and providing for an effective date." 3:20:28 PM SENATOR BILL WIELECHOWSKI, District K, Alaska State Legislature, Juneau, Alaska, sponsor of SB 149 he said the bill establishes a renewable portfolio standard to address the ongoing energy challenges in Cook Inlet. Despite significant incentives over the past 15 yearsincluding royalty relief and other measures aimed at developing local gas resourcesthe state has only achieved 1215 percent of energy from renewable sources, far below the nonbinding 50 percent goal set in 2010 under House Bill 306. SB 149 seeks to diversify Alaska's energy portfolio, promote affordable and reliable power, and provide incentives for independent power producers and utilities to invest in renewable energy. He said by doing so, it aims to reduce dependence on gas, ensure stable energy supplies for residents and businesses, and strengthen the overall resilience and sustainability of the state's energy system, particularly in the Railbelt region. 3:24:09 PM HUNTER LOTTSFELDT, Staff, Senator Bill Wielechowski, Alaska State Legislature, Juneau, Alaska, provided the sectional analysis for SB 149: [Original punctuation provided.] Sectional Analysis Version N Section 1 - Amends Section 42.05.780: Requires integrated resource plans to include options by which each load-serving entity may satisfy the renewable portfolio standard. Section 2 - Amends Section 42.05.785(a): Adds a new subsection (4) clarifying the regulatory commissions pre-approval process for large energy facilities and that project approval must not be detrimental to a load-serving entities ability to comply with a renewable portfolio standard. 3:25:14 PM MR. LOTTSFELDT continued with the sectional analysis for SB 149: Section 3 Amends Section 42.05.785(c): Exempts pre-approval for renewable energy projects that help a load-serving entity meet the renewable portfolio standard. Note that section 7 repeals this exception on December 31, 2030. Section 4 Adjusts the numbering of section 42.05.785(e) and adds the definition for "renewable energy resource" within the pre-approval for large energy facilities section. Section 5 - Creates new article under Sec. 42.05 entitled Article 11A. Renewable Portfolio Standard (RPS). AS 42.05.900 requires load-serving entities subject to the standards of an electric reliability organization (ERO) to comply with the renewable portfolio standard; diversifying their current generation portfolio by increasing the proportion of megawatt hours (MWh) of renewable electricity generated. AS 42.05.905 incentivizes the development of projects to meet the goals of a renewable portfolio standard. AS 42.05.910 - Governs the use of renewable energy credits and qualifies which uses may count towards meeting the target goals. Sec. 42.05.915 Establishes a noncompliance fine for a load-serving entity that fails to meet the RPS. Qualifies what conditions merit a waiver for The Regulatory Commission of Alaska (RCA) for failure to meet the target goals. Sec. 42.05.920 - Establishes an exemption for individual load serving entities if the aggregate generation of renewable electricity of all load- serving entities in an interconnected electric transmission network meets the goal required by the standard. Sec. 42.05.925 - Provides for definitions. 3:28:01 PM MR. LOTTSFELDT continued with the sectional analysis for SB 149: Section 6 Amends AS 42.45.110(a) excluding revenue from the sale of recovered heat, or revenue from the sale of renewable energy credits, for Power Cost Equalization. Section 7 Establishes a sunset for AS 42.05.785(c)(3) Section 8 Establishes an effective date of July 1, 2025.   MR. LOTTSFELDT stated that the new committee substitute (CS) change would change in AS 42.05.910 [Renewable electricity credits] 3:28:38 PM CHAIR BJORKMAN announced invited testimony on SB 149. 3:29:00 PM ERIN MCKITTRICK, representing self, Seldovia, Alaska, testified by invitation on SB 149 and moved to slide 2: [Original punctuation provided.] Primary questions  • Are the goals in SB 149 achievable? • What are the potential savings or costs to customers? 3:30:03 PM MS. MCKITTRICK moved to slide 3 and explained that the graph shows past and present Railbelt energy sources, with current renewables, mainly hydro and some wind and solar making up a small portion compared to fossil fuels like gas, coal, and oil. The dashed lines indicate the renewable energy targets proposed in SB 149. 3:30:40 PM MS. MCKITTRICK moved to slide 4 and explained the graph. She stated that the Railbelt could meet the first renewable energy target in SB 149 through several planned projects, including the Little Mount Susitna and Chugach Creek wind farms, the Puppy Dog Lake solar project, and the Dixon Diversion hydro expansion at Bradley Lake. Together, these projects would exceed the first target and come close to meeting the second, with multipliers in SB 149 boosting their credited renewable contribution. 3:32:42 PM MS. MCKITTRICK moved to slide 5 and spoke about the details of the projects found on slide 4. She explained that the chart details several renewable projectschosen because they've been thoroughly studied, can be completed by 2038, and integrate smoothly with the existing grid without major new transmission infrastructure. The modeled wind projects alone would meet the 2030 target, while combining all projects would nearly reach the 2035 goal. 3:34:47 PM MS. MCKITTRICK moved to slide 6 and explained that if no new renewable projects are developed and the state remains at 15 percent renewable energy, utilities would need to pay about $30 million in compliance fees each year. She said this could increase rates by roughly 5.5 percent during the first target period and 8.5 percent in the second. 3:35:51 PM MS. MCKITTRICK moved to slide 7 and explained that the $45 per megawatt-hour fees function as a cost cap, essentially setting the upper limit on what utilities could be required to pay under the legislation. However, this scenario represents a theoretical worst caseassuming no renewable projects are developed, no new contracts are signed, and no waivers are granted, which is highly unlikely. She said SB 149 includes multiple provisions allowing waivers for good-faith compliance efforts and permitting fees to be reinvested in renewable energy projects, customer efficiency programs, or distributed generation. Even in that extreme "straw man" situation, the cost impact would be modestabout a 1.2-cent increase per kilowatt-hour, or roughly $6 per month for an average residential customer, similar to the base rate increases seen over the past year. 3:38:23 PM MS. MCKITTRICK moved to slide 8 and explained the bar graph. She compared the potential costs of different energy sources and emphasized that the real issue is not failing to comply, but what happens if renewable targets are met. Current power from natural gas plants costs under eight cents per kilowatt-hour, but future gas prices are expected to rise sharply due to the Cook Inlet supply crisis, potentially reaching $12$16 per unit for imported LNGmaking it more expensive than most renewables. She said existing renewable projects like Bradley Lake hydro, Houston Solar, and Fire Island wind already produce cheaper power, and future wind and solar developments, even without federal tax credits, are projected to remain competitive or lower in cost than imported gas. Overall, transitioning to renewables would likely cost consumers far less than continuing to rely on increasingly expensive fossil fuels. 3:42:24 PM MS. MCKITTRICK moved to slide 9 and spoke about the following: [Original punctuation provided.] Costs may range from similar to significantly cheaper  • Future gas generation costs are expected to be substantially higher than current costs. -New Cook Inlet gas contracts start at $12.30/Mcf -Imported gas cost projections range from $12- 16/Mcf • Other fossil generation costs are already quite high • All current renewable energy is cheaper than future gas energy projections • Future renewable energy projects with tax credits are probably substantially cheaper than imported gas energy. • If tax credits end, the costs are more similar. There are likely small savings available, depending on project details and exact fuel prices. 3:43:09 PM MS. MCKITTRICK moved to slide 10, and spoke about the following: [Original punctuation provided.] • Current plans will mostly satisfy the standard. • Diversification may save money, and any potential fees would be modest. 3:44:00 PM MATTHEW PERKINS, CEO, Alaska Renewables, Fairbanks, Alaska, testified by invitation on SB 149. He stated that Alaska Renewables is a development firm building several power plants across the Railbelt, with extensive experience in technologies ranging from gas pipelines and coal mines to gas turbines, wind, and solar. The company focuses on delivering fast, cost- effective solutions to Alaska's energy security challenges and recently partnered with a major multi-billion-dollar power operator to fund its first wind projects, leveraging nationwide experience in managing power plants under harsh environmental and grid conditions similar to those in Alaska. He emphasized Alaska Renewables is not advocating for mandates or promoting their projects but are instead providing information to clarify market realities and how a well-crafted Renewable Portfolio Standard (RPS) could influence them. He noted that such a policy could attract investment capital to Alaska and highlighted the stark difference between Alaska and the rest of the U.S. in the presence of independent power producers (IPPs). 3:47:03 PM MR. PERKINS explained that, unlike the Lower 48 where about half of power generation comes from independent power producers (IPPs), Alaska's Railbelt relies on utilities for roughly 99 percent of its energy. He argued that increasing competition through more IPPs would strengthen the market, promote innovation, and benefit utilities and consumers alike. He also stressed the need for long-term regulatory stability to attract investors and support planning for infrastructure projects. Finally, he emphasized that diversifying Alaska's energy sources beyond natural gas would enhance reliability, energy security, and resilience for both communities and military bases. 3:50:14 PM SENATOR YUNDT expressed strong support for renewable energy. He asked for an explanation of how increased wind or solar generation affects the power grid, how energy storage technology is developing, and what renewable solutions work best during Alaska's winter. 3:51:03 PM MR. PERKINS replied that intermittent renewables once caused grid issues like voltage flickers and blackouts, but decades of engineering advances have largely solved those problems. He explained that proper programming and configuration ensure stable performance, while storage solutionssuch as gas, heat, and batteriescomplement renewables. Wind power, particularly in Alaska, is most productive in winter when energy demand peaks, making it a strong seasonal match for the grid's needs. 3:54:42 PM CHAIR BJORKMAN asked whether the group had evaluated the potential for renewable power and specifically inquired about Ms. McKettrick's graph and how the Susitna-Watana Dam would appear in showing progress toward renewable energy goals. 3:55:07 PM MS. MCKITTRICK replied that the Susitna-Watana Dam qualifies as a renewable project and could supply about 59 percent of the Railbelt's total power, meeting both targets. However, it was excluded from the analysis because it could not be completed before the first target date and would require roughly $1 billion in transmission upgrades. 3:56:24 PM SENATOR WIELECHOWSKI stated that he looks forward to working with committee members, utilities, and IPPs to determine whether this proposal can work for Alaska and how to ensure it provides affordable, diversified energy. 3:57:04 PM CHAIR BJORKMAN stated that he does not want to impose fines on utilities, noting that ratepayers ultimately bear those costs. He emphasized the potential of the Susitna-Watana Dam, urging Alaska to invest in its own reliable, long-term energy projects such as large hydrorather than relying on outside entities, as part of a broader vision for the state's energy future. 3:58:54 PM CHAIR BJORKMAN held SB 149 in committee.