SB 257-ELECTRIC UTILITY REGULATION  [Includes discussion of SB 217.] 2:11:44 PM CHAIR BJORKMAN reconvened the meeting and announced the consideration of SENATE BILL NO. 257 "An Act relating to the Regulatory Commission of Alaska; relating to public utilities; relating to electric reliability organizations; relating to the Alaska Energy Authority; relating to the Railbelt Transmission Organization; and providing for an effective date." CHAIR BJORKMAN noted that Senate Labor and Commerce Standing Committee had held several meetings on SB 257 and taken invited and public testimony on the bill. He said during the last meeting there was a motion to adopt a CS to SB 257 and there is an objection still in place. 2:12:29 PM KONRAD JACKSON presented the summary of changes in the committee substitute for SB 257 from Version D to Version H: [Original punctuation provided.] Summary of Changes Ver D to Ver H Senate Bill 257 Sections 1 and 2: No changes. Section 3: Amends AS 42.05.762 by removing the requirement that the Electric Reliability Organization (ERO) participate in integrated grid planning by the Railbelt Transmission Organization (RTO) and returning to the current language found in statute. Amends AS 42.05.762 by inserting new subsection 4 adding the duty that the ERO shall consider the cost to the consumer when prioritizing reliability and stability of the interconnected bulk-electric system. Amends AS 42.05.762 Deletes the description of the governing board. (Inserted in new section 4) Section 4: AS 42.05.763 Governance of an Electric  Reliability Organization. Inserts new section which includes the language deleted above and further expands the qualifications which must be met to serve on the ERO board of directors. 2:14:22 PM MR. JACKSON continued reading the summary of changes in the committee substitute from Version D to Version H for SB 257: [Original punctuation provided.] Renumber the following sections accordingly. Section 5: (renumbered former section 4) No Change. Section 6: (renumbered former section 5) Amends AS  42.05.770 Regulations. To require nondiscriminatory standards for interconnection and caps the cost recovery of the ERO to $1.2 million. Section 7: (former section 6) No Change. Old Section 7 is deleted. Section 8: (former section 8) No Change. Section 9: No Change. Section 10: Amends AS 44.83 Railbelt Transmission  Organization AS 44.83.700 is amended by replacing paragraph (c) with language expressly stating that provisions of AS 44.83.700-44.83.750 do not alter the rights and obligations of a utility regulated by the RCA. And, renumbers the following paragraph. AS 44.83.710(a)(6) is amended by deleting "grid" and replacing with "transmission". (a)(8) is deleted (moved below), the following paragraph is renumbered. Renumbered (a)(9) is amended by adding reference to AS 44.83.72 2:16:11 PM MR. JACKSON corrected a discrepancy, noting that "44.83.72" should read "44.83.720." He continued reading the summary of changes in the committee substitute from Version D to Version H for SB 257. [Original punctuation provided.] Deletes and replaced former (b) granting optional authorities to the organization: Old paragraph 8 is moved to new subparagraph (b)(1) Renumbers old 44.83.710 (b) to subparagraph (b)(2) 2:16:47 PM MR. JACKSON continued reading the summary of changes in the committee substitute from Version D to Version H for SB 257. [Original punctuation provided.] Inserts new paragraph (c) prohibiting the conveyance by the RTO of any backbone transmission asset, without legislative approval, prior the effective date of the conveyance. Inserts new paragraph (d) requiring the RTO ensure that work performed on new construction and maintenance of backbone assets is prioritized to give first preference to the Railbelt utility in the area where the work is performed. Further, the RTO must compensate the utility for reasonable and necessary expenses incurred and that work shall be subject to existing collective bargaining agreements. Former paragraph (c) is renumbered to subparagraph (e) with a change to reference regulations necessary to implement AS 44.83.700-44.83.750. Sec. 44.83.720 Revenue Mechanism: Old paragraph (a) is deleted and replaced with language combining old (a) & (a)(1). Renumbers the following paragraphs. Old paragraph (a)(2) is renumbered to subparagraph (b) and is amended to more clearly define the RTO cost recovery methodology and be approved by the commission. Old paragraph (b) is renumbered (c) and amended to more fully describe the cost recovery methodology to be used by the RTO, to define recoverable backbone transmission system costs and how these costs will be shared among member utilities. These include accounting for ancillary backbone services, backbone system congestion and disruption of backbone connectivity for more than 24 hours. Inserts new paragraph (d) requiring a Railbelt utility pass the commission approved transmission costs directly and transparently to the utility's customers. 2:19:16 PM MR. JACKSON continued reading the summary of changes in the committee substitute (CS) from Version D to Version H for SB 257: [Original punctuation provided.] Sec. 44.83.730 Integrated transmission planning: Old paragraph (a) is amended by deleting the term "integrated grid plan" and replacing it with "the Railbelt to integrated transmission plan for the backbone transmission system." 2:19:41 PM MR. JACKSON corrected a discrepancy, noting that "Railbelt to integrated" should read "Railbelt integrated." He continued reading the summary of changes in the CS from Version D to Version H for SB 257. [Original punctuation provided.] Paragraph (b) is amended to require the integrated transmission plan to fully articulate the details of the plan. Paragraph (c) is amended by replacing the term "grid plan" with "integrated transmission plan" Sec. 44.83.740 Transfer management of assets: Is unchanged. Sec. 44.83.750 Definitions: Old paragraph (1) "backbone transmission system" is revised to more clearly define the system and adds a reference to assets that are considered distribution or radial facilities under the standards of the Federal Energy Regulatory Commission which shall not be considered part of the backbone system. No further changes are made to this section. Former Section 11: Is deleted. The following sections of the act are renumbered. Section 11: Applicability and Transition: EROs Adds new section to the uncodified laws of the State regarding (a) board member terms and qualification language allowing current board members who do not meet the qualifications, to retain their seat until a successor is appointed, referenced in Section 4 of the Act. And, (b), AS 44.05.770(3) apply to costs incurred by an ERO on or after the effective date of section 6 of the Act. 2:21:45 PM MR. JACKSON continued reading the summary of changes in the CS from Version D to Version H for SB 257: [Original punctuation provided.] Former section 12 is deleted and replaced with: Section 12: Transition Language: Agreements between  AEA and Railbelt Utilities Adds a new section to the uncodified laws of the State defining the agreement which will be established between the Alaska Energy Authority (AEA) and the Railbelt utilities referenced in Section 10 of the Act. The contents of this agreement are further described in this section. Section 13: Transition Language: Integrated  Transmission Plan and Capital Improvement Program Amends old section 13 which adds a new section to the uncodified laws of the State which instructs the AEA to immediately assume the integrated transmission planning duties under AS 44.83.700 in Section 10 of the Act following establishment of the governance structure under sect. 12 of the Act. Amends the section by replacing the term "integrated grid planning" with "integrated transmission" and adding the term "transmission" where appropriate. Section 14: Transition language: Regulatory Commission  of Alaska Members Adds a new section to the uncodified laws of the State regarding the terms and qualifications of members of the Regulatory Commission of Alaska as detailed in Section 1 of the Act. Section 15: Immediate Effective date clause for sections 12 and 13 of the Act. Section 16: Effective date clause providing that except for sec. 15, this act takes effect July 1, 2024. 2:23:28 PM CHAIR BJORKMAN shared with the committee the background behind the CS and some of the rationale and methodology used to draft the CS. He said portions of the current CS for SB 217 that were similar or having to do with portions of SB 257 were incorporated into SB 257 to: • add qualifications to membership on the ERO board. • cap cost recovery to the ERO board. • make sure there was language to protect any utility from islanding events or constraints within the system. 2:24:20 PM CHAIR BJORKMAN thanked Senator Giessel for incorporating pieces of SB 217 into SB 257 and for her willingness to consider language to prevent any utility from having to pay for costs incurred by the Railbelt Transmission Organization (RTO) for which they experience no benefit. He mentioned a letter of concern by the Homer Electric Association that provided more detail and which was available on BASIS. 2:25:59 PM At ease 2:26:18 PM CHAIR BJORKMAN reconvened the meeting and removed his objection. 2:26:26 PM CHAIR BJORKMAN [finding no further objection,] CSSB 257, version H, was adopted as the working document. 2:26:39 PM CHAIR BJORKMAN solicited a motion. 2:26:42 PM SENATOR DUNBAR moved to adopt Amendment 1, workorder 33- LS1047\H.1, for CSSB 257. 33-LS1047\H.1 Walsh 4/26/24 AMENDMENT 1 OFFERED IN THE SENATE BY SENATOR DUNBAR TO: CSSB 257(L&C), Draft Version "H" Page 7, line 31, through page 8, line 3: Delete all material and insert: "(1) provide for oversight of the transmission organization by a management committee that is made up of (A) representatives from each of the Railbelt utilities; (B) the executive director of the authority; (C) the chief executive officer of the applicable electric reliability organization, or the chief executive officer's designee; (D) an individual who represents a person, other than a public utility, that owns or operates a facility for the generation of electricity; and (E) an individual who represents a labor organization engaged in collective bargaining with a Railbelt utility;" 2:26:50 PM CHAIR BJORKMAN objected for purposes of discussion. 2:26:52 PM SENATOR DUNBAR referred to SB 257, pages 7 and 8. He noted the Railbelt Transmission Organization (RTO) board consisted of the six railbelt utility heads, the Alaska Electrical Association (AEA) head and the Chief Executive Officer (CEO) of the Electric Reliability organization (ERO). He said his [amendment] would add two additional seats to the board. One seat would be filled by an operator or owner of a facility for the generation of electricity, otherwise known as an Independent Power Producer (IPP). He noted that IPPS are very involved in this process and are represented at the ERO. The second seat proposed by his amendment would be filled by "an individual who represents a labor organization engaged in collective bargaining with a rail belt utility". He said there were a number of labor organizations that fit that description, the largest and the one that works most with the stakeholder utilities, was the International Brotherhood of Electrical Workers (IBEW). He advocated for a representative on the transmission planning board that would actually do the work on the lines and do the work of maintaining the facilities. He noted concerns expressed regarding the relatively small size of the RTO board and that it didn't have the kind of public representation that existed at the ERO. He pointed out that the ERO was relatively large with 13 members, and a variety of public seats. He said he didn't feel those numbers were appropriate for the RTO, but that the two suggested additions would be valuable. 2:29:28 PM CHAIR BJORKMAN removed his objection, found no further objection and Amendment 1 (H.1) was adopted. 2:29:38 PM CHAIR BJORKMAN solicited a motion. 2:29:41 PM SENATOR GRAY-JACKSON moved to adopt Amendment 2, work order 33- LS1047\H.2 for CSSB 257. 33-LS1047\H.2 Walsh 4/27/24 AMENDMENT 2 OFFERED IN THE SENATE TO: CSSB 257(L&C), Draft Version "H" Page 10, following line 4: Insert a new subsection to read: "(e) A Railbelt utility that provides service exclusively on the Kenai Peninsula is not subject to the cost recovery methodology for the transmission organization until (1) the transmission line between the Kenai Peninsula and Anchorage is upgraded to a capacity of 230 kilovolts; or (2) a high-voltage submarine cable between the Kenai Peninsula and the area near Beluga is operational." Page 11, line 30: Delete "(1)" Page 12, line 5: Delete "; and" Insert "." Page 12, lines 6 - 9: Delete all material. 2:29:44 PM CHAIR BJORKMAN objected for purposes of explanation. 2:29:52 PM CHAIR BJORKMAN explained that Amendment 2 (H.2) is from him and states that the Homer Electric Association (HEA) would be excluded from the RTO cost recovery methodology until the railbelt system is fully deconstrained. He specified that deconstraint would be accomplished when there is a line that can move power on and off the peninsula at 230 kilovolts, and said, hopefully that could be done within five years. 2:30:44 PM SENATOR DUNBAR countered that the RTO would do the integrated [railbelt system] planning that would benefit the HEA going forward. He acknowledged it would take a number of years to develop those plans and asked if there was consideration for retroactive [payment from HEA to the RTO] in which the cost wouldn't apply [to HEA] for the time it takes to build the cables. He noted HEA will benefit [from the new railbelt system] just as other stakeholders will; from the work that will happen during those five years. He asked whether HEA would be delaying those charges for five years or fully exempting them. He reiterated that the RTO would take a number of years to develop the plans, and none of the rail belt utilities would benefit from those plans until they're completed. 2:32:11 PM CHAIR BJORKMAN said HEA's proposal was that they not pay administrative costs and other things that are incurred due to the RTO because HEA would not experience benefits from the RTO. He acknowledged more work was needed on SB 257 as it moves through the process with the utilities. He maintained that other areas of the state get significant benefit from their utilities being unconstrained, while Homer continues to be at a disadvantage because the bandwidth going on and off the peninsula is lower and constrained. He said members on the Kenai Peninsula should not be required to pay for increasing costs and benefits that they have no ability to experience a benefit from until they're fully integrated. He suggested members of HEA would and should pay for planning and scheduling and other administrative functions when they are benefiting from those things. He reiterated that, until HEA is deconstrained, they should not have to pay for services they're not going to benefit from. 2:33:57 PM SENATOR DUNBAR explained that there would not be any immediate financial benefit to anyone until the results of the RTOs planning work went into effect. He said the issues of islanding or deconstraining the transmission of power was unrelated to the RTO and to the cost recovery for the RTO, which would be doing the planning and integration work that goes hand in glove with the construction of [the upgraded railbelt system]. He said no one would benefit until it was fully built. He suggested the finance committee could look into whether any stakeholders would be benefiting from this cost recovery methodology in the short term and everyone [in the railbelt system] was in the same boat. 2:35:26 PM CHAIR BJORKMAN asked if there was any further committee discussion on Amendment 2 (H.2). 2:35:28 PM SENATOR GRAY-JACKSON maintained objection. 2:35:35 PM CHAIR BJORKMAN asked for a roll call vote. 2:35:50 PM A roll call vote was taken. Senators Dunbar, Merrick, Bjorkman voted in favor of Amendment 2 (H.2) and Senator Gray-Jackson voted against it. Therefore, SB 257 passed by a 3:1 vote. 2:36:13 PM CHAIR BJORKMAN announced that Amendment 2 (H.2) to CSSB 257, work order 33-LS1047\H, was adopted. 2:36:32 PM CHAIR BJORKMAN solicited the will of the committee. 2:36:33 PM SENATOR GRAY-JACKSON moved to report committee substitute (CS) for SB 257, work order 33-LS1047\H, from committee with individual recommendations and attached fiscal note(s). 2:36:53 PM CHAIR BJORKMAN found no objection and CSSB 257(L&C) was reported from the Senate Labor and Commerce Standing Committee.