ALASKA STATE LEGISLATURE  HOUSE SPECIAL COMMITTEE ON ENERGY  February 14, 2023 10:16 a.m. DRAFT MEMBERS PRESENT Representative George Rauscher, Chair Representative Tom McKay Representative Mike Prax Representative Calvin Schrage Representative Ashley Carrick MEMBERS ABSENT  Representative Josiah Patkotak Representative Stanley Wright COMMITTEE CALENDAR  PRESENTATION(S) REGIONAL RAILBELT COORDINATION - HEARD PREVIOUS COMMITTEE ACTION  No previous action to record WITNESS REGISTER CURTIS THAYER, Executive Director Alaska Energy Authority Anchorage, Alaska POSITION STATEMENT: Co-presented a presentation titled Regional Railbelt Coordination. BRIAN HICKEY, Executive Director Regional Railbelt Coordination Juneau, Alaska POSITION STATEMENT: Co-presented a presentation titled Regional Railbelt Coordination. ACTION NARRATIVE  10:16:46 AM CHAIR GEORGE RAUSCHER called the House Special Committee on Energy meeting to order at 10:16 a.m. Representatives Carrick, Schrage, Prax, McKay, and Rauscher were present at the call to order. ^PRESENTATION(S) REGIONAL RAILBELT COORDINATION PRESENTATION(S) REGIONAL RAILBELT COORDINATION    10:17:48 AM CHAIR RAUSCHER announced that the only order of business would be a presentation, titled "Regional Railbelt Coordination." 10:18:58 AM CURTIS THAYER, Executive Director, Alaska Energy Authority, stated that there is currently "historic" alignment among the Railbelt utilities and the Alaska Energy Authority (AEA). He stated that upgrading the transmission lines on the Railbelt is a necessary step in moving towards a higher usage of renewable energy sources. He said that 166 million dollars have already been contributed by the utilities towards upgrading transmission. He said that a decrease in price per kilowatt (kW) on the Railbelt would also benefit rural Alaska due to the power cost equalization (PCE) program. 10:22:33 AM BRIAN HICKEY, Executive Director, Regional Railbelt Coordination, gave a brief overview of his PowerPoint, titled "Modernizing the Railbelt Grid," [hardcopy included in the committee packet], presentation as shown on slide 2. MR. HICKEY continued to slide 3 and stated that as part of the Grid Modernization and Resiliency Plan (GMRP), there would be consideration of connecting the Copper Valley Electric Association with the Railbelt. He stated that 75 percent of Alaska's population lives on the Railbelt, and he said that 80 percent of Alaska's electricity is generated on the Railbelt. He stated that the Railbelt only has 3 single transmission lines, resulting in a single contingency line that allows for the transfer of only 10 percent of the peak load. He said that any time one of those transmission lines is out of service, it results in that area being cut off from the rest of the Railbelt. 10:26:19 AM REPRESENTATIVE SCHRAGE asked about the relationship between lowering energy costs on the Railbelt and energy funding for communities in rural Alaska. MR. HICKEY answered that he would provide more information on the subject later on in the presentation. 10:28:35 AM MR. HICKEY continued to slide 4 and stated that the Railbelt utilities are aligned on the challenges facing the Railbelt. He continued to slide 5 and stated that the utilities, the AEA, and the Regulatory Commission of Alaska have created a vision that seeks a "collaborative future." MR. HICKEY continued to slide 6 and stated that the utilities and regulators have created a 12-15 year plan that will upgrade transmission along the Railbelt and cost approximately $2.9 billion. He said that all of the proposed transmission lines would undergo the National Environmental Policy Act (NEPA) process. He said that phase 1 of the plan would build transmission from Bradley Lake to Lake Lorraine, including both a rebuild of the current system and a second transmission line. MR. HICKEY stated that the rebuilding of the current transmission lines and building of an additional system of transmission lines is a necessary step in utilizing new and renewable sources of energy generation. 10:33:03 AM MR. HICKEY added that he has spoken with the U.S. Department of Energy (DoE) about his belief that Alaska's electrical grid would be a good place to test decarbonization of a grid due to the smaller size and subsequent cost. MR. HICKEY continued to slides 7 and 8 and stated that the reason the transmission project matters is that Alaska currently lacks reliability in its transmission lines. He said that the amount of natural gas available is decreasing and the Railbelt needs to look at other sources of energy generation, which requires improvements in transmission. He said that the improvements in transmission and energy storage will increase efficiency and lower energy costs. He said the PCE program is tied to cost of energy on the Railbelt, and that lowering costs on the Railbelt allows for more money to be contributed toward the PCE. 10:34:54 AM REPRESENTATIVE PRAX asked if the transmission project plan took the possibility of a natural gas pipeline from the North Slope into account. MR. HICKEY answered that transmission upgrades are necessary regardless of the source of energy. In response to a follow-up question, he stated that the location and cost of the transmission was being considered. REPRESENTATIVE PRAX expressed his concern that decarbonization is shifting dependance on hydrocarbons for dependence on the minerals needed for renewable energy storage. 10:37:48 AM CHAIR RAUSCHER asked about the possibility of buying 10 micro- nuclear reactors as opposed to more transmission lines. He wondered if this would have a greater impact on reducing rates. He acknowledged that the plan was very unlikely to occur. MR. HICKEY answered that for the economy of scale to support such an action, it would require the participation of all Railbelt utilities. He added that enacting such a plan would still require the transmission lines to be upgraded, because the utilities would need to be connected when the reactor located in their respective areas were down for maintenance. 10:40:21 AM MR. HICKEY continued with slide 8, noting that the Railbelt has critical infrastructure, including: the Ted Stevens Anchorage International Airport, which is the fourth busiest cargo airport in the world; five military bases; mines for rare Earth minerals; and a federally designated strategic seaport. MR. HICKEY moved to slide 9 and gave the background for the current transmission line proposals. He said that Governor Mike Dunleavy "challenged" the Railbelt Utilities and AEA to create a plan to serve the future of the Railbelt. With the passage of the Bipartisan Infrastructure Law, there is increased opportunity for federal funding to aid in building new transmission. He said that the GMRP was developed to improve the economy of scale and give the Railbelt opportunities for energy source diversification, adding that an additional effect would be reduction of electric rates. 10:42:52 AM MR. HICKEY continued to slide 10, displaying a map showing Railbelt transmission and battery energy storage systems along the Railbelt. He showed the placement of the existing lines compared to the new lines being proposed. New lines would include a line going from Soldotna to Healy and another line going along the "Roadbelt", tying the Copper Valley electric system to the Railbelt. He mentioned the possibility of another potential hydroelectric project roughly the size of Bradley Lake called the Tiekel River Project. 10:44:45 AM CHAIR RAUSCHER asked if any of the new transmission lines would go through Anchorage, Alaska. MR. HICKEY answered they would. 10:45:28 AM MR. HICKEY continued that there is a new energy storage battery in Soldotna and there are plans to add one in Anchorage and Fairbanks, Alaska. On slide 11, he gave the three opportunities for federal funding: grid resilience, smart grid, and grid innovation. He noted that the application for third opportunity was put in by the State of Alaska as the eligible entity, while the first two applications were put in by Matanuska Electric Association (MEA). He moved to slide 12 and stated that the state of Alaska must be involved in the plan. The utilities doing it without funding from the state would cause significant rate increases, and receiving federal funding requires the same amount of investment from the state. 10:48:25 AM MR. HICKEY stated on slide 13 that the federal government has decided to move forward with AEA's applications on grid resiliency and smart grid. Out of 144 applications moving forward on the first topic, 10 grants will be awarded, and out of 157 applications on the second topic, 25 to 40 grants will be awarded. He said that the state is still waiting to hear back on the third topic, grid innovation. On slide 14, he said that the applications for federal funding are part of the first funding cycle in the Bipartisan Infrastructure Bill. 10:51:29 AM REPRESENTATIVE PRAX asked if it was "worth the risk" to complete parts of the project individually without knowing if the state would receive federal grants for the other applications. MR. HICKEY answered that if one were to accept the premise that this has to be the state's plan, the answer would be yes. He opined that the project needs to be completed "either way." REPRESENTATIVE PRAX commented that the effects of not receiving federal funding could be increased taxes and less state money to fund other areas. He warned that there could be consequences for completing only part of the project if this were to be the case. MR. HICKEY responded that each part of the project has its own benefit. Upgrades to the Sterling to Quartz Creek line would reduce losses of energy produced by Bradley Lake by 3 or 4 percent. In response to a follow up question, he said that the math on the projects is part of the NEPA process. 10:54:38 AM REPRESENTATIVE SCHRAGE asked how the planned funding of the project would be affected by the proposed spending caps. MR. HICKEY answered that he did not know. 10:56:19 AM REPRESENTATIVE CARRICK asked if there was a priority list for the project in the event that the legislature decided to fund only part of it. MR. HICKEY answered that part of the application process is listing the priorities within the project, and that the work on that is currently ongoing. In response to a follow up question, he said that phase 1 of the project would require $1.26 billion of state funding, which would fund the transmission line upgrades up to the central region of the Railbelt. 10:59:38 AM MR. HICKEY continued to slide 15 and said that the plan would create benefits for rural communities, and those benefit plans are part of the application process. 11:00:51 AM CHAIR RAUSCHER asked where the data for rural communities originates. MR. HICKEY responded that the Regional Railbelt Coordination group is currently collecting that data and has some available from the previous census. 11:01:39 AM MR. HICKEY skipped to slide 17 and reviewed the timeline for the grant selection process and when the proposals were submitted. He reiterated that the Regional Railbelt Coordination group has been invited to apply for the first two proposals and is waiting to hear back on the third. He stated that the amount of money for the grants would be approximately $50-$70 million for the first, $15 million for the second, and $300 million for the third. There would not be any financial commitments immediately, but the way that financial commitments would be dealt with would be bound by what was said in the application. 11:04:43 AM REPRESENTATIVE SCHRAGE asked if it would be possible to subject the amount of money allocated during the reward negotiation process to oil revenues. MR. HICKEY answered that the primary focus is to secure the funding if possible; he said that he believes the federal government would want something more specific when it comes to the numbers involved. 11:06:41 AM REPRESENTATIVE CARRICK asked about the possibility of increased energy storage needs if more renewable energy is used in the future. MR. HICKEY answered that there is more than one way to store energy, including batteries and pond storage at hydroelectric plants. He stated that grid stabilization is the current priority, as energy used from storage is quickly used. 11:10:04 AM REPRESENTATIVE SCHRAGE voiced his concern that the speed of the process could make the Railbelt Reliability Council (RCC) less effective, and he asked what impact it could have on public input. MR. HICKEY answered that the RRC should be placed in charge of the plan when it is finished being set up, but it will take some time to reach that point. He added that there will be much more time for public input when the NEPA process begins. 11:15:23 AM CHAIR RAUSCHER asked when Alaska would receive the funding if the state's application were accepted. MR. HICKEY stated that award negotiations would occur in the fall and winter of 2023, and the following NEPA process would take between three and five years. 11:17:47 AM MR. THAYER reiterated that the Railbelt is in historic alignment with the need to upgrade the transmission system. 11:18:57 AM The committee took a brief at-ease. at 11:19 a.m. 11:19:54 AM ADJOURNMENT  There being no further business before the committee, the House Special Committee on Energy meeting was adjourned at 11:20 a.m.