SB 220-RCA REGULATE NATURAL GAS STORAGE FACILITY  3:33:22 PM CO-CHAIR BISHOP announced the consideration of SENATE BILL NO. 220 "An Act relating to the Regulatory Commission of Alaska and regulation of the service of natural gas storage." 3:33:50 PM CO-CHAIR BISHOP announced invited testimony. 3:34:10 PM TONY IZZO, CEO, Matanuska Electric Association (MEA), Anchorage, Alaska, invited testimony for SB 220, said MEA is Alaska's oldest electric cooperative and serves the fastest growing and second largest population center in the state. He emphasized that the state is at a critical time with regard to energy. The Southcentral region recently experienced declining gas reserves coupled with colder than normal temperatures and record demand for heat and power, almost resulting in rolling blackouts. Cook Inlet has reached a point where there's no ability to secure firm gas contracts beyond the expiration of existing contracts. However, utilities require firm gas that can be delivered for home heating and power production. Natural gas storage is a proven method by which gas volumes available during off-peak periods like the summer months can be saved, set aside, and stored for periods of higher demand. Gas storage needs will continue to increase as gas volumes decline while the future of reliable power in the Southcentral area depends upon having more storage. MEA aims to diversify its energy sources and is reviewing various options including wind, solar, nuclear, and carbon sequestration. It hopes to reach its goal of 50 percent clean energy by 2050. 3:36:25 PM MR. IZZO said pending legislation would require high percentages of non-firm power like wind and solar. Even with aggressive legislative targets, MEA's annual gas demand would drop from 5.6 billion cubic feet per year to almost three billion cubic feet in 2040, which is approximately a 50 percent reduction. However, a substantial three billion cubic feet would still be required in a scenario that achieved 80 percent renewable power. Gas storage would allow MEA to manage a diversified mix of energy including non-firm renewables like wind and solar. 3:37:20 PM MR. IZZO stated that as the CEO for a regulated utility, he fully supports the regulation of third-party storage. While significant gas storage exists in Cook Inlet, the majority is non-regulated. It is essentially used to meet contractual obligations by producers. He supports legislation that clarifies that any provision of third-party storage must be subject to economic regulation by the Regulatory Commission of Alaska (RCA). Having gas storage regulated by the RCA provides the necessary transparency and will ensure that rates for storage are reasonable. SB 220 is an important step to offset declining energy security. 3:38:20 PM CO-CHAIR BISHOP asked for confirmation of his understanding that the goal of a 2 bcf reduction is targeted for 2030. 3:38:32 PM MR. IZZO replied that the goal was established last year and is subject to change, but the objective is to reach 50 percent clean, diversified, and carbon-free energy through any means by 2050. 3:39:07 PM CO-CHAIR BISHOP asked if despite MEA's goals, must MEA maintain spinning reserves with base load power or hard assets that do not rely on renewable energy sources. 3:39:29 PM MR. IZZO replied that is correct. 3:39:44 PM CO-CHAIR BISHOP concluded invited testimony on SB 220. 3:39:50 PM CO-CHAIR BISHOP opened public testimony; finding none, he closed public testimony. 3:40:20 PM CO-CHAIR GIESSEL stated she was asked whether the Marathon facility and its energy storage tanks on the Kenai Peninsula would be subject to RCA regulations under SB 220. According to the Department of Law's (DOL) interpretation, Section 3 of SB 220 would give RCA jurisdiction over gas storage service in a situation where a small producer like Furie stores gas with Hilcorp. She conveyed that Mr. Izzo mentioned there is a huge amount of additional storage besides CINGSA in Cook Inlet which is held by Hilcorp. Under the first scenario, if Furie stores gas with Hilcorp, RCA's jurisdiction would extend over Hilcorp's facilities for gas storage because two different entities store gas for commercial purposes. Under the second scenario, if Marathon imported LNG and stored it in its own storage tanks and it took that gas and sold it to ENSTAR, they would not be regulated. Under the third scenario, if ENSTAR imported LNG, stored it at Marathon, and used its own gas, it would be covered under SB 220. One entity would own the gas while the other one would store it, so that would fall under this regulation. 3:43:21 PM CO-CHAIR BISHOP held SB 220 in committee and turned the gavel over to Co-Chair Giessel.