ALASKA STATE LEGISLATURE  HOUSE SPECIAL COMMITTEE ON ENERGY  February 9, 2023 10:18 a.m. DRAFT MEMBERS PRESENT Representative George Rauscher, Chair Representative Tom McKay Representative Stanley Wright Representative Mike Prax Representative Calvin Schrage Representative Ashley Carrick MEMBERS ABSENT  Representative Josiah Patkotak COMMITTEE CALENDAR  PRESENTATION(S):UPDATE BY UTILITY COMPANIES - HEARD PREVIOUS COMMITTEE ACTION  No previous action to record WITNESS REGISTER ARTHUR MILLER, CEO Chugach Electric Association Anchorage, Alaska POSITION STATEMENT: Offered information and answered questions during the Update by Utility Companies presentation. JOHN BURNS, CEO Golden Valley Electric Association Fairbanks, Alaska POSITION STATEMENT: Offered information and answered questions during the Update by Utility Companies presentation. TONY IZZO, CEO Matanuska Electric Association Palmer, Alaska POSITION STATEMENT: Offered information and answered questions during the Update by Utility Companies presentation. ACTION NARRATIVE 10:18:08 AM CHAIR GEORGE RAUSCHER called the House Special Committee on Energy meeting to order at [10:18] a.m. Representatives Rauscher, McKay, Wright, Prax, Schrage, and Carrick were present at the call to order. ^PRESENTATION(S):UPDATE BY UTILITY COMPANIES PRESENTATION(S):UPDATE BY UTILITY COMPANIES    [Contains discussion of HB 50.]   10:20:09 AM CHAIR RAUSCHER announced that the only order of business would be a presentation titled: "Update by Utility Companies." [The presentation was a continuation from 2/2/23.] 10:23:08 AM ARTHUR MILLER, CEO, Chugach Electric Association, gave a price comparison analysis for the price of Cook Inlet natural gas and the Henry Hub market price. He stated that over the years the Railbelt utilities have fared better in pricing than the Henry Hub market price. 10:26:18 AM MR. MILLER stated that there are areas in regard to renewable energy in which the Railbelt utilities are working together and others in which they are acting independently. He said that Chugach Electric has placed a high emphasis on transitioning to renewable sources of energy. He said that Chugach Electric has explored renewable energy opportunities and is currently studying the possibilities for a large-scale wind and a large- scale solar project. He said that one of the challenges with renewable energy sources was integrating them into the current system. He said that Chugach Electric has a goal of reducing its carbon emissions by 35 percent by 2030 and 50 percent by 2040, provided that it would not create a substantial increase in electric rates. 10:31:01 AM MR. MILLER stated that Chugach Electric and Matanuska Electric have collaborated on installing a 40 megawatt (MW) battery in Anchorage, Alaska. He said that Chugach Electric has increased its number of customers in the net metering program in order to increase its ability to integrate renewable sources of energy into the system. 10:33:05 AM JOHN BURNS, CEO, Golden Valley Electric Association, stated that all of the utilities are working on adding renewables to their systems, but said that the primary obligation of the utilities is to ensure that customers have the lowest rates possible. He said that the utilities want to add renewable energy sources but will not do so in a way that affects reliability or cost. He said that in 2003, Golden Valley Electric Association installed a 25 MW battery, the largest at the time. Golden Valley is in the process of replacing that battery, but the prices of batteries have continued to increase while Golden Valley customers already pay the highest rates on the Railbelt. He stated that integrating 25 MW of electricity generated by wind has not brought down the rates for Golden Valley because of regulatory and integration costs. 10:37:01 AM MR. BURNS stated that Golden Valley built a solar farm in 2018 with a capacity of half a MW, and it is continuing with a community solar program. Golden Valley currently has 681 members participating in the program. He said that the utilities continue to pursue renewable sources of energy, but they prioritize reliability and costs. He added that transmission of electricity would be a major factor in how well the utilities would be able to perform in their goals of using more renewable sources of energy. He said that the greatest constraints on transmission are in Southcentral Alaska, and he advised that's where the transmission work should begin. He stated that improving transmission would require a large initial investment, and he compared the eventual payoff to the initial cost and later payoff of the Bradley Lake hydroelectric project. 10:41:49 AM MR. BURNS answered a question from a previous meeting by stating that coal is the cheapest form of energy generation currently available. He said that Golden Valley currently has plans to shut down the Healy 2 coal power plant because of issues with its reliability. 10:45:14 AM TONY IZZO, CEO, Matanuska Electric Association, stated that the four biggest issues facing the Railbelt utilities are natural gas supply, diversification of energy generation, transmission, and legislative action. He said that Matanuska Electric Association (MEA) has a goal to reduce carbon usage by 28 percent by 2028 and has already achieved a reduction of 27 percent. He said that a major contributor to this is the Willow Solar Farm, which provides 1.2 MW of electricity generation. He said that the Willow Solar Farm is a part of Renewable Independent Power Producers (IPP), which MEA has partnered with on renewable energy projects. He said that MEA is working with Renewable IPP to build a 6 MW solar farm, which will be the largest in the state. He said that the amount of energy generated by the new solar project is not a large amount but added that it still contributes towards the goal of energy diversification. He said that the Renewable IPP projects allow MEA to have greater efficiency without having to run its own sources of energy generation at maximum capacity. He said that the shares of energy for the utilities from Bradley Lake are based on the historical demands of each system. The utilities are working together to find the most efficient ways to generate energy regardless of the source. He said that MEA will use Chugach Electric's Anchorage battery because of the scale involved in having its own battery. 10:52:10 AM MR. IZZO stated that MEA created an electric vehicle charging program in which they provided 50 level 3 chargers at no cost to the customer. He said that in exchange, the customer would provide data to MEA in order for them to gain a better understanding of how electric vehicle charging affects the power grid. He said that MEA wants to know what the demand for electric vehicle charging is at certain times so that it can manage its load management. He said that MEA has chosen not to place a limit on net metering, and he added that 414 members now make up 3 percent of MEA's total load. 10:54:13 AM CHAIR RAUSCHER asked Mr. Burns when he expects the Healy 2 plant to be fully shut down. MR. BURNS answered that the original plan was to have it shut down by the end of 2024 but said that the plan is dependent on being able to secure another 30-50 MW for Golden Valley Electric Association. He said that both commercial and residential members want Golden Valley to reduce its emissions, and he said that one measure the utility is taking to achieve this is adding a selective catalytic reduction (SCR) system to Healy 1. He said that Golden Valley also plans on adding large scale wind projects and a large battery for storage. 10:56:48 AM CHAIR RAUSCHER asked about the effectiveness of Senate Bill 123, passed in 2020, [during the Thirty-First Alaska State Legislature]. MR. MILLER answered that the Railbelt Reliability Council (RRC) is still in the process of being formed. He said that its certificate of public convenience & necessity (CPCN) had been approved by the Regulatory Commission of Alaska. The operating tariff for the RRC is still under review, which he said is a normal procedure. He related that there is a budget and inception rate under review, which would allow the RRC to hire a CEO and begin operations. 10:59:17 AM REPRESENTATIVE PRAX asked if the transmission line upgrade was a key component for the accomplishment of the utilities' other goals. MR. BURNS answered that transmission is "vitally important." He added that the utilities are more focused on the efficiency of the power generation they receive than the specific location of its generation. REPRESENTATIVE PRAX asked about the balance between the cost of power transmission and the cost of power generation. MR. BURNS answered that a good transmission system allows the different utilities the flexibility to use cheaper forms of generation when it's available. REPRESENTATIVE PRAX asked if transmission upgrades are necessary to take full advantage of a conceptual project like Susitna Dam. MR. BURNS answered that generating power is the first step, and once that occurs the focus can shift to better transmission. 11:03:58 AM REPRESENTATIVE PRAX remarked that there were previous transmission projects that had failed in the past and suggested that the utilities should provide a picture of what the transmission plan would really look like. MR. BURNS answered that there is a plan in place for transmission system upgrades. 11:06:38 AM REPRESENTATIVE CARRICK asked if the three energy storage facilities represented the full amount of energy storage, and she asked if there is a point in which energy storage becomes a barrier for transmission. MR. IZZO answered that the Kenai and Fairbanks storage facilities are operational, and the Anchorage facility is not yet finished. He said that there is a deficit in energy storage batteries partially because the majority of the Railbelt's energy comes from natural gas. He said that there are currently limitations with battery technology, and he noted that the utilities do not have the same kind of resources available in the Lower 48. 11:11:45 AM REPRESENTATIVE CARRICK asked how the state should invest in energy storage. MR. IZZO answered that the utilities do not rely only on a single powerplant in a single location, but he said that the transmission system is lacking. He explained that having a better transmission system reduces the burden of energy storage and allows the utilities to receive energy generated by the others, helping lower the cost for members. 11:15:49 AM REPRESENTATIVE WRIGHT asked what the life expectancy of the batteries is and if there were any possible alternatives. MR. BURNS answered that long-duration energy storage can last up to 50 years. 11:16:43 AM REPRESENTATIVE SCHRAGE asked what the RRC's role has been in the discussions about energy storage and transmission. MR. MILLER answered that the nine utility stakeholders are represented on the RRC board. In response to a follow up question, Mr. Miller stated that the evaluation process is still ongoing, and he said that the other stakeholders' involvement has been minimal. He said that the utilities have expressed their interest to the federal government for transmission projects. 11:20:00 AM REPRESENTATIVE SCHRAGE commented that he believes in the importance of collaboration within the RRC because of the natural gas situation. MR. BURNS responded that the amount of collaboration has varied and said that the goal for everyone is to lower electricity prices as much as possible. He reiterated that transmission is important regardless of timing or the source of power generation used. REPRESENTATIVE SCHRAGE asked about the overall cost benefit analysis of building more transmission lines versus building more smaller scale renewable energy projects. He asked about the future cost of natural gas in the face of a society that is trying to move towards a higher usage of renewable energy. MR. IZZO answered that the United States Department of Energy has invited the utilities to create a formal application on two of their proposals, and the utilities are waiting to hear back on another application. He said that the utilities do not expect to receive the full amount of money but hope that they receive an amount that would allow them to build the transmission upgrades and open the door to other future projects. 11:27:44 AM MR. IZZO returned to Representative Wright's question and stated in addition to lithium-ion battery storage, there is thermal storage, pumped hydro storage, and nuclear storage. He said that thermal storage is a longer duration type of storage. 11:29:11 AM MR. MILLER returned to Representative Schrage's question and stated that the natural gas situation is the greatest challenge facing the utilities. He stated that transmission is "critical", and he said that the utilities have already contributed 166 million dollars towards upgrades on the transmission and energy storage systems on the Railbelt. He said that the utilities' preference is for in-state natural gas, and that they would continue to need storage facilities for natural gas. He said that the current storage facilities have a capacity of 11 billion cubic feet (Bcf) but that the current demand is 70 Bcf. MR. MILLER stated that the utilities continue to look for new technologies. He said that with the current technology, the utilities are "driven by economics", and that rushing to 100 percent renewable energy could have a great adverse impact on rates. He stated that he wants to see the usage of renewable energy increased, but at a rate that will not affect the cost. MR. BURNS added that the utilities benefit from acting as a system rather than on their own. He said that without upgrades to the transmission system, the utilities will continue to be stuck in their own areas. 11:35:51 AM REPRESENTATIVE PRAX asked if a smaller scale natural gas pipeline from the North Slope had been reconsidered. MR. MILLER answered that there are two natural gas pipelines currently being considered. REPRESENTATIVE PRAX commented that the previous Artic Fox pipeline proposal was smaller scale than the two currently being considered and gave his opinion that Artic Fox also warranted consideration. 11:39:07 AM CHAIR RAUSCHER asked what percentage of the utilities' energy is being generated from renewable sources versus carbon sources. MR. IZZO answered that MEA generates approximately 16 percent of its energy from renewable sources and 84 percent from natural gas. He said that the percentage can vary slightly due to factors such as the amount of rainfall affecting the amount of hydroelectric power that can be generated. MR. MILLER answered that Chugach Electric generates approximately 21 percent of its energy from renewable sources and 81 percent from natural gas. He concurred with Mr. Izzo that the percentage has the potential to vary and stated that the numbers he gave are the average. MR. BURNS answered that Golden Valley Electric Association generates approximately 17 percent of its energy from renewable sources and approximately 83 percent from coal and diesel. 11:41:12 AM CHAIR RAUSCHER asked what a "realistic" percentage of energy generated by renewable sources would be by 2040. MR. MILLER answered that Chugach Electric tied its carbon reduction goal to something it believes to be achievable. He said that Chugach Electric has a goal of 24 percent renewable energy by 2030 and a 42 percent reduction on carbon by 2040. MR. BURNS answered that Golden Valley has a carbon reduction goal of 26 percent by 2030, but that number is dependent on its ability to effectively manage costs. 11:45:13 AM MR. IZZO answered that MEA supports Senate Bill 123 and the RRC. He said that MEA does not plan to build new generation on its own. He stated that MEA wants to work with the other utilities to create better reliability and efficiency. He said that these factors make him hesitant to place a specific number on carbon reductions. MR. IZZO stated that even if MEA were to achieve 40 percent renewable energy generation by 2040, it would still need 4.4 Bcf of natural gas. He said that this shows the importance of finding new sources of energy generation and upgrading transmission; without this the utilities will continue to have issues in the future. 11:50:12 AM CHAIR RAUSCHER asked what the effect would be if the government "got out of the way" and allowed the RRC to regulate new plans for the utilities going forward. MR. IZZO answered that it would be beneficial due to the RRC having the technical knowledge and tools to face the issues of Railbelt energy transmission. 11:51:04 AM REPRESENTATIVE MCKAY asked what the effect would be if HB 50 were passed and the utilities were mandated to buy carbon tax offsets. MR. MILLER answered that the costs would have to be passed on to the rate payer. MR. IZZO and MR. BURNS agreed with his statement. 11:52:54 AM ADJOURNMENT  There being no further business before the committee, the House Special Committee on Energy meeting was adjourned at 11:53 a.m.