HB 182-RAILBELT ENERGY & TRANSMISSION CORP.  CO-CHAIR MILLETT announced the next order of business would be HOUSE BILL NO. 182, "An Act establishing the Greater Railbelt Energy and Transmission Corporation and relating to the corporation; relating to transition, financial plan, and reporting requirements regarding planning for the initial business operations of the Greater Railbelt Energy and Transmission Corporation; relating to a report on legislation regarding the Regulatory Commission of Alaska and the Greater Railbelt Energy and Transmission Corporation; authorizing the Alaska Energy Authority to convey the Bradley Lake Hydroelectric Project and the Alaska Intertie to the Greater Railbelt Energy and Transmission Corporation; and providing for an effective date." 4:35:48 PM REPRESENTATIVE RAMRAS withdrew his objection made at the hearing of 3/18/10. CO-CHAIR MILLETT withdrew her motion to adopt the committee substitute (CS) for HB 182, 26-GH1041\E, Bailey, 3/18/10, made at the hearing of 3/18/10. She then moved to adopt CSHB 182 26- GH1041\S, Chenoweth/Bailey, 3/24/10, as the working document. 4:36:41 PM CO-CHAIR EDGMON objected for discussion purposes. CO-CHAIR MILLETT explained that the working document was drafted for the Senate. 4:36:50 PM JIM STRANDBERG, Project Manager, Alaska Energy Authority (AEA), Department of Commerce, Community, & Economic Development (DCCED), informed the committee he was speaking to the bill on behalf of the administration. Referring to the meeting on 3/18/10, he said there were questions raised regarding the financial status of the utility companies. He presented documents from Seattle-Northwest Securities that looked at the financial condition of the utilities. 4:39:46 PM CO-CHAIR MILLETT advised there are attachments to the working document. 4:40:29 PM MR. STRANDBERG related that the administration was pleased with the effort on the part of the Railbelt utilities to create a new corporation to respond to the energy future. The Alaska Energy Authority (AEA) and the governor's office were partners in the effort, and assisted in the first step to get all six utilities at their board, CEO, and technical levels to work together. He said this was a positive action and he expressed his hope the committee would consider the bill as such. 4:42:41 PM CO-CHAIR EDGMON observed Homer Electric Association (HEA) had backed away from the CS. 4:43:30 PM MR. STRANDBERG said his understanding was the matter would be addressed by testimony at the Senate Resources Standing Committee meeting. 4:44:05 PM CO-CHAIR EDGMON asked what would happen if all six utilities are not in agreement. MR. STRANDBERG acknowledged AEA was also concerned. 4:44:57 PM CO-CHAIR MILLETT offered to provide copies of a letter from HEA to the committee. 4:45:36 PM BRIAN BJORQUIST, Senior Assistant Attorney General, Labor and State Affairs Section, Department of Law (DOL), informed the committee his primary clients are AEA and the Alaska Industrial Development & Export Authority (AIDEA), Department of Commerce, Community, & Economic Development (DCCED). 4:47:09 PM CO-CHAIR MILLETT asked Mr. Bjorkquist to point out major items that were not in the original bill. 4:47:12 PM MR. BJORKQUIST agreed. He explained that this legislation creates an energy and transmission corporation modeled after a generation and transmission (G&T) cooperative. In this type of entity, public utilities collectively plan for, develop, and implement their G&T needs; however, the public utilities remain distribution utilities providing electricity to their retail customers. The original bill created one specific corporation, but the CS creates a statutory scheme, an energy and transmission corporation, and also provides authority for the Greater Railbelt Energy and Transmission Corporation (GRETC) to be formed. The [CS] provides that four or more municipal or cooperative electric utilities form together to acquire or operate a project from AEA, to plan for an interconnected system, and to create an energy and transmission corporation, if it is first approved by the legislature. Section 13 of the work draft provides the legislature authority for this specific corporation to be formed. Mr. Bjorkquist pointed out that this change from the original bill was for two reasons: (1) to avoid a constitutional issue regarding local and special legislation; (2) to shift the model for the corporation from the Commercial Fishing and Agriculture Bank (CFAB), which is a specific quasi- public corporation established in statute, to a private style with more freedom and flexibility as to how the utilities operate within GRETC. The utilities desire the ability to develop their own projects, rather than the expectation that the new corporation will be the sole provider of G&T services. He further explained that the process is starting "where there is nothing, basically," and this will allow for more of an evolution of the corporation instead of forcing the utilities into an entity. The legislation gives more freedom to the utilities, but with an expectation that the entity will evolve into the provider of public services in the Railbelt. Mr. Bjorkquist began a sectional analysis, and said Sections 1, 4, and 5 deal with rate regulation by the Regulatory Commission of Alaska (RCA), and municipalities. Sections 1 & 4 determine that when GRETC is not regulated by the RCA, it is also not regulated by municipalities. Section 5 provides for the exemption from regulation by the RCA. These provisions would become effective 8/16/15, five years after the organization of GRETC, thus there would be five years of full regulation by the RCA and five years into the future the exemption from rate regulation would take place. He cautioned that there is an inconsistency in the language regarding regulation, but the amendment corrects that. 4:55:03 PM CO-CHAIR MILLETT observed that GRETC would be a third party storage facility without RCA regulation. This is contradictory to proposed legislation, and she questioned the reasoning. 4:56:08 PM MR. BJORKQUIST referred to language on page 2, line 15, which deals with "related contracts for wheeling, storage, regeneration." He expressed his belief that this does not concern gas storage, but affects water storage related to hydroelectric projects. 4:57:20 PM CO-CHAIR MILLETT pointed out another reference to fuel storage on page 4, line 5. 4:57:25 PM MR. BJORKQUIST noted on page 14, lines 15-17, there was a provision for fuel supplies. He said he was unfamiliar with contradictory legislation; however, he suggested including the exemption by language on page 18, line 8, which deals with certain components that are related to regulation. 4:59:18 PM CO-CHAIR MILLETT advised that there is also a contradiction in whether the interconnection by an independent power producer (IPP) has to conform to the corporation's interconnection guidelines and standards. This sets up an adversarial role for the IPP as it would need to appeal to the RCA to get interconnection within GRETC. 5:00:24 PM MR. BJORKQUIST stated the provisions regarding where GRETC takes a role on interconnection are intended to replace a void in the interconnection reliability standards throughout the Railbelt. In fact, the Alaska Intertie Agreement is not signed by all of the Railbelt utilities, and will terminate next October. These provisions would have GRETC fill that void and become the entity to deal with interconnection standards. Furthermore, there is the provision that allows the RCA to compel interconnection. The first step for interconnection is the obligation on the utilities to negotiate terms and conditions with each other. If unsuccessful, the RCA can open a docket and compel interconnection with the terms and conditions established by the RCA. This second step is less cumbersome than litigation between parties, and he gave an example. Section 2 also deals with the RCA and provides that power sales agreements between GRETC and public utilities would not be subject to review or approval by the RCA. The provision would apply as long as there is long-term debt associated with the power project, as in the Bradley Lake, Swan Lake, and Lake Tyee projects. The purpose of Sec. 2 is to provide assurance and protection for financing. For example, if power sales agreements were subject to regulatory review, the review may affect the source of re- payment. In addition, GRETC is forward-looking, and this applies only to new projects. Section 3 deals with rate- setting, and is identical to the provision in rate-setting that would become effective in 2015. Further discussion on this section is forthcoming later in the analysis. Section 6 begins with general law on the energy and transmission corporation. 5:08:08 PM CO-CHAIR MILLETT suggested the analysis stop at page 3, line 15, Chapter 50, of the [CS]. 5:08:24 PM REPRESENTATIVE TUCK observed a title change was needed. 5:08:42 PM CO-CHAIR MILLETT announced that HB 182 was held over.