ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
February 25, 2010
4:07 p.m.
MEMBERS PRESENT
Senator Lesil McGuire, Co-Chair
Senator Bill Wielechowski, Co-Chair
Senator Hollis French
Senator Gary Stevens
MEMBERS ABSENT
Senator Charlie Huggins, Vice Chair
Senator Bert Stedman
Senator Thomas Wagoner
COMMITTEE CALENDAR
SENATE BILL NO. 203
"An Act relating to a tax credit for a facility to store Cook
Inlet gas for sale and delivery in the state; relating to an
exemption from the oil and gas exploration, production, and
pipeline transportation property tax for a facility that stores
Cook Inlet gas for sale and delivery in the state; and providing
for an effective date."
- MOVED CSSB 203(RES) OUT OF COMMITTEE
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."
- MOVED CSSB 277(RES) OUT OF COMMITTEE
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."
- SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
BILL: SB 203
SHORT TITLE: COOK INLET GAS STORAGE FACILITIES
SPONSOR(s): SENATOR(s) FRENCH, WIELECHOWSKI
01/19/10 (S) PREFILE RELEASED 1/8/10
01/19/10 (S) READ THE FIRST TIME - REFERRALS
01/19/10 (S) RES, FIN
02/08/10 (S) RES AT 3:30 PM BUTROVICH 205
02/08/10 (S) Heard & Held
02/08/10 (S) MINUTE(RES)
02/11/10 (S) RES AT 3:30 PM BUTROVICH 205
02/11/10 (S) Heard & Held
02/11/10 (S) MINUTE(RES)
02/25/10 (S) RES AT 4:00 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
02/22/10 (S) Heard & Held
02/22/10 (S) MINUTE(RES)
02/25/10 (S) RES AT 4:00 PM BUTROVICH 205
WITNESS REGISTER
KEVIN BANKS, Division Director
Division of Oil and Gas
Department of Natural Resources (DNR)
Anchorage, AK
POSITION STATEMENT: Provided information on SB 203.
MICHAEL PAWLOWSKI
Aide to Senator McGuire
Alaska State Legislature
Juneau, AK
POSITION STATEMENT: Provided information on SB 277.
STUART GOERING, Assistant Attorney General
Representing the Regulatory Commission of Alaska (RCA)
Department of Law
Anchorage, AK
POSITION STATEMENT: Provided information on SB 277.
ACTION NARRATIVE
4:07:35 PM
CO-CHAIR BILL WIELECHOWSKI called the Senate Resources Standing
Committee meeting to order at 4:07 p.m. Present at the call to
order were Senators French, McGuire, Stevens and Wielechowski.
SB 203-COOK INLET GAS STORAGE FACILITIES
4:08:02 PM
CO-CHAIR WIELECHOWSKI announced that the first order of business
to come before the committee was SB 203.
SENATOR FRENCH moved to adopt the proposed committee substitute
(CS) for SB 203, labeled 26-LS1114\T, as the working document.
There being no objection, version T was before the committee.
SENATOR FRENCH said on page 2, lines 10-16, of Version T,
clarify that the Regulatory Commission of Alaska (RCA) will only
regulate gas storage facilities that apply for and receive a tax
credit. Version T also addresses the Department of Revenue's two
concerns regarding double dipping. On page 2, lines 24-26 ensure
that a facility receives only one credit at the time of the
first purchase, construction or acquisition of a gas storage
facility. On page 2, line 29 now reads "an expenditure incurred"
which is more familiar and comfortable language than "cash
expenditure or a payment". The provision requiring pre-
authorization of credit on page 3, lines 18-26, of Version P,
was completely removed. A taxpayer will claim the credit when
filing their return. Finally, the provision amending AS
43.56.210(5) was removed from the bill.
4:11:53 PM
KEVIN BANKS, Director, Division of Oil and Gas, Department of
Natural Resources (DNR), Anchorage, commented that having the
RCA oversee a facility that receives this tax credit is a good
idea. DNR, in dealing with leasing of new storage facilities,
has engaged the applicants with a proposal that they provide
third party access in exchange for the right to store gas in
state oil and gas leases and that the RCA's fee will be some
percentage of their cost of service.
4:15:13 PM
CO-CHAIR WIELECHOWSKI asked if the administration supported or
opposed SB 203.
MR. BANKS replied the administration is neutral.
CO-CHAIR WIELECHOWSKI said SB 203 could go a long way to solve
some problems with gas in Cook Inlet. He thanked Senator French
and noted that the CS was before the committee without
objection.
SENATOR FRENCH moved to report SB 203, 26-LS1114\T, from
committee with individual recommendations and accompanying
fiscal notes. There being no objection CSSB 203(RES) moved from
the Senate Resources Standing Committee.
SB 277-PUB. UTILITY EXEMPTION: RENEWABLE ENERGY
4:16:54 PM
CO-CHAIR WIELECHOWSKI announced the next order of business to
come before the committee was SB 277.
SENATOR FRENCH moved to adopt the proposed committee substitute
(CS) for SB 277, labeled 26-LS1353\P, as the working document of
the committee.
SENATOR WIELECHOWSKI objected for discussion purposes.
MICHAEL PAWLOWSKI, Staff to Senator McGuire, said changes in
Section 3 [on page 2, version P] respond to concerns about the
size of the projects that could be exempted from regulation
under SB 277. On page 2, lines 9-10 specify that SB 277 applies
to facilities placed into service before January 1, 2016. On
page 2, line 11 limits the size of the facilities to those
generating less than 65 megawatts of electricity. He said
Senator Stedman had been concerned about large hydro-projects
being built, particularly with state money, without regulation.
Mr. Pawlowski explained that on page 2, Section 3, paragraph
(3), lines 14-19 state that the exemption from regulation is
appropriate if the facility is not receiving tax credits or
state grants.
He said the fundamental point of SB 277 is maintained on page 2,
lines 12-13 of Version P. The power sales agreement between the
power producer and the consumers is regulated at the utility
level. The power producer will sell power to a utility and that
power sales agreement must go up for approval by the commission.
4:20:18 PM
He explained that Section 3 [page 2, version P] was also
redrafted to apply to the plant or facility rather than the
person.
SENATOR STEVENS asked for a point of reference to help
understand the magnitude of 65 megawatt plant.
MR. PAWLOWSKI said much of the larger generation in the Rail
Belt is about 60 megawatts, such as the North Pole Extension. He
said under a provision in the Federal Energy Regulatory
Commission (FERC), an 80 megawatt plant generated from renewable
energy can apply for exemptions to regulations.
4:22:48 PM
SENATOR STEVENS asked how many megawatts Bradley Lake is.
CO-CHAIR WIELECHOWSKI said he believes Bradley Lake is over 100
megawatts. Chakachumna is proposed to be 360 megawatts, Susitna
is proposed to be from 400 to 1600 megawatts and Mt. Spur is
proposed to be 100 or 150 megawatts. He said SB 277 is contained
to the smaller renewable plants.
SENATOR MCGUIRE said 65 megawatts would be around 5,000 to 6,000
households. She said the massive projects are not covered in SB
277, which should ease concerns about large hydro-electric
facilities. She said she worries that the renewable energy
companies attracted to Alaska may be discouraged by the RCA
process.
4:25:14 PM
SENATOR MCGUIRE reiterated that the philosophy behind SB 277 is
to get as much power produced in Alaska as possible, coming into
the utilities, with RCA overseeing the ultimate contract with
consumers. An extra layer of government could end up killing a
project. She encouraged committee members to consider the
broader question of renewable energy.
SENATOR FRENCH asked what the difference is between having the
RCA regulate a facility and having the RCA regulate a contract
between a facility that produces electricity and the utility
that buys the electricity.
STUART GOERING, Assistant Attorney General, representing RCA,
Department of Law, Anchorage, replied that AS 42.05, the Public
Utility Regulatory Act, generally speaks in terms of activities,
such as furnishing electricity, not in terms of facilities. The
process begins with a Certificate of Public Convenience and
Necessity (CPCN) which requires a showing that a utility
operator is fit, willing and able to provide the service and the
service is in the public's convenience and necessity. Once
certificated, the utility files a tariff for approval by the
commission that specifies the terms, rules and regulations under
which service is provided to the public.
4:30:02 PM
CO-CHAIR WIELECHOWSKI called a short at ease at 4:30 p.m. due to
static over the sound system.
SENATOR FRENCH asked if the issuance of a CPCN is more
comprehensive than passing on a wholesale power agreement.
4:32:02 PM
CO-CHAIR WIELECHOWSKI called another at ease from 4:32 to 4:33
due to static over the sound system.
4:33:35 PM
MR. GOERING said that a contract for the supply of wholesale
power between a utility and non-regulated vendor is covered by 3
AAC 52.470(e) which requires that the utility file the contract
with the commission. Prior approval is not required.
SENATOR FRENCH asked how many vendors in Alaska sell electricity
without having themselves applied for and gotten a CPCN.
MR. GOERING replied that he does not have a firm answer but they
are typically small projects. He said wholesale power sales
agreements are usually between regulated utilities. The
assumption is that the vendor is unregulated because these are
smaller projects. Under existing law, anybody who provides power
to a public utility for compensation becomes a public utility
themselves and the only way to not be a public utility is if
they are a Public Utility Regulatory Policies Act Qualifying
Facility (PURPA QF). That regulation would have to be revisited
if SB 277 is enacted into law.
4:36:31 PM
CO-CHAIR WIELECHOWSKI closed public testimony.
4:36:45 PM
CO-CHAIR WIELECHOWSKI called an at ease from 4:36 p.m. to 4:39
p.m.
4:39:30 PM
CO-CHAIR WIELECHOWSKI said the committee had a comprehensive
list of questions that had been raised by Mr. Goering, many of
which are legal in nature and better addressed by the judiciary
committee.
CO-CHAIR WIELECHOWSKI removed his objection and version P was
before the committee.
4:40:11 PM
SENATOR MCGUIRE moved to report CS for SB 277, 26-LS1353\P, from
committee with individual recommendations and accompanying
fiscal notes. There being no objection CSSB 277(RES) moved from
the Senate Resources Standing Committee.
4:40:35 PM
CO-CHAIR WIELECHOWSKI, seeing no further business to come before
the committee, adjourned the meeting at 4:40 p.m.