ALASKA STATE LEGISLATURE  HOUSE SPECIAL COMMITTEE ON ENERGY  February 11, 2025 1:41 p.m. DRAFT MEMBERS PRESENT Representative Ky Holland, Co-Chair Representative Donna Mears, Co-Chair Representative Cathy Tilton Representative George Rauscher Representative Mia Costello MEMBERS ABSENT  Representative Bryce Edgmon Representative Chuck Kopp COMMITTEE CALENDAR  PRESENTATION(S): REGULATORY COMMISSION OF ALASKA - HEARD PREVIOUS COMMITTEE ACTION  No previous action to record WITNESS REGISTER JOHN ESPINDOLA, Chair Regulatory Commission of Alaska Anchorage, Alaska POSITION STATEMENT: Co-presented a PowerPoint regarding the Regulatory Commission of Alaska and answered committee questions. JOHN SPRINGSTEEN, Commissioner Regulatory Commission of Alaska Anchorage, Alaska POSITION STATEMENT: Co-presented a PowerPoint regarding the Regulatory Commission of Alaska and answered committee questions. JULIE VOGLER, Utility Master Analyst Regulatory Commission of Alaska Anchorage, Alaska POSITION STATEMENT: Co-presented a PowerPoint regarding the Regulatory Commission of Alaska and answered committee questions. RICHARD GAZAWAY, Administrative Law Judge Regulatory Commission of Alaska Anchorage, Alaska POSITION STATEMENT: Answered committee questions during the presentation. BECKI ALVEY, Advisory Section Manager Regulatory Commission of Alaska Anchorage, Alaska POSITION STATEMENT: Commented on two upcoming projects. ACTION NARRATIVE 1:41:21 PM CO-CHAIR DONNA MEARS called the House Special Committee on Energy meeting to order at 1:41 p.m. Representatives Holland, Mears, Tilton, Rauscher, and Costello were present at the call to order. ^PRESENTATION(S): Regulatory Commission of Alaska PRESENTATION(S): Regulatory Commission of Alaska    1::47 PM CO-CHAIR Mears announced that the only order of business would be a presentation by the Regulatory Commission of Alaska. 1:43:05 PM JOHN ESPINDOLA, Chair, Regulatory Commission of Alaska (RCA), co-presented the PowerPoint regarding the Regulatory Commission of Alaska. He stated that RCA is a quasi-judicial body. He pointed out its authority on slide 2, which read as follows [original punctuation provided]: • AS 42.04 (Regulatory Commission of Alaska) • AS 42.05 (Alaska Public Utilities Regulatory Act) • AS 42.06 (Pipeline Act) • AS 42.08 (In-State Pipeline Contract Carrier) • AS 42.45 (Rural & Statewide Energy Programs) 1:44:16 PM JOHN SPRINGSTEEN, Commissioner, Regulatory Commission of Alaska, co-presented the RCA PowerPoint. He proceeded with slide 3 and noted that the discussion would be centered on natural gas and liquified natural gas (LNG). He stated that RCA's jurisdiction and framework would be defined versus the jurisdiction of other key agencies, such as the Federal Energy Regulatory Commission (FERC), the Department of Natural Resources (DNR), and the Alaska Oil and Gas Conservation Commission (AOGCC). He noted that independent power producers and state-owned transmission would be outside the scope of RCA. He continued that RCA has regulatory authority inside the state over public utilities and pipelines. This authority has expanded to include natural gas storage and LNG storage. On slide 4, titled "RCA Jurisdiction for Electric Utilities," he illustrated some of the specific areas of focus for RCA. 1:47:55 PM COMMISSIONER SPRINGSTEEN, in response to a question from Representative Costello, agreed that RCA would not initiate actions on behalf of consumers. He explained that the utilities would present their plans to RCA, and it would either approve or suspend the plan. If suspended, the plan would be moved to a docket. He noted that LNG import facilities would be under FERC. He pointed out that RCA would be involved with reviewing contracts between LNG importers or producers and utilities in the state. COMMISSIONER SPRINGSTEEN, in response to a question from Co- Chair Holland concerning RCA jurisdiction, deferred to Julie Vogler. JULIE VOGLER, Utility Master Analyst, Regulatory Commission of Alaska, responded that, when approving long-term gas supply agreements prior to 2010, if RCA found an unjustified rate that was charged by a utility, it would order a corrected rate. She continued that since 2010, when approving gas supply agreements, RCA would rely on AS 42.05.141(d), which read as follows: (d) When considering whether the approval of a rate or a gas supply contract proposed by a utility to provide a reliable supply of gas for a reasonable price is in the public interest, the commission shall (1) recognize the public benefits of allowing a utility to negotiate different pricing mechanisms with different gas suppliers and to maintain a diversified portfolio of gas supply contracts to protect customers from the risks of inadequate supply or excessive cost that may arise from a single pricing mechanism; and (2) consider whether a utility could meet its responsibility to the public in a timely manner and without undue risk to the public if the commission fails to approve a rate or a gas supply contract proposed by the utility. MS. VOGLER, in response to a follow-up question, clarified that this statute only applies to gas sales supply agreements, as seen on slide 4. She explained that when an electric utility enters into a power purchase agreement, the utility would submit a tariff filing with RCA for approval. The filing would be the power purchase agreement, with cost recovery through a cost of power adjustment. She noted that this would be for an electric utility, as for a gas utility, it would be a gas-cost adjustment. MR. ESPINDOLA, in response to a follow-up question, confirmed Co-Chair Holland's understanding that in a gas supply agreement RCA's jurisdiction would be limited, accepting any negotiated agreement between a producer and a utility; however, in a power purchase agreement, a tariff filing with proposed rates would be required. He pointed out that RCA would be able to analyze this for fairness and request changes, if necessary. 1:54:53 PM RICHARD GAZAWAY, Administrative Law Judge, Regulatory Commission of Alaska, responded to a series of questions from Representative Rauscher. Concerning net metering versus net billing, he stated that the net metering program is a net billing program. He explained that net metering is when bill credits are at the retail rate. He explained that for the net billing program, customers can have a reduction in their rate up to the level of consumption, and then the rate reverts to the power purchase agreement rate. He continued that essentially utilities are open to proposals up to a certain limit, and this limit depends on its interconnected network, but usually utilities are agnostic if it is a renewable resource. He pointed out that examples of resources that qualify are solar and wind. 1:57:36 PM MR. ESPINDOLA pointed out that before the meeting RCA had received a list of questions from Co-Chair Mears' office. He stated that the remainder of the slides would address these questions. He moved to slide 5, titled "What does the RCA see as its role in supporting affordable energy production in Alaska for the Railbelt?" He stated that RCA has statutory authority to regulate public utilities and pipeline carriers unless the entity is exempt under AS 42.05.711. He stated that this would protect ratepayers while allowing regulated entities to charge rates that allow cost recovery and a reasonable rate of return. He stated that RCA would do everything possible within its jurisdiction to ensure just, fair, and reasonable rates. MR. ESPINDOLA noted that RCA does not play a direct role in driving energy production; however, Senate Bill 123 [passed during the Thirty-First Alaska State Legislature] expanded RCA's authority. He noted that this legislation created the Electric Reliability Organization (ERO), which serves the Railbelt. He stated that ERO's responsibilities include preparing a resource plan to evaluate the Railbelt utilities in meeting service requirements, and it precludes electric utilities from building large facilities without first obtaining preapproval from RCA. He continued that RCA plays a role in approving power purchase agreements between regulated electric entities and independent power producers, and it calculates Power Cost Equalization amounts. 2:00:10 PM COMMISSIONER SPRINGSTEEN moved to slide 6 and slide 7, titled "What is the RCA's responsibility to managing Alaska's remaining natural gas resources?" He reiterated that, as a quasi-judicial body, RCA does not have a direct role in managing natural gas resources; however, it plays an indirect role by encouraging energy conservation measures and approving power purchase agreements. In addition, the RCA has oversight authority over natural gas storage, and it would approve gas supply contracts between producers and regulated utilities. He pointed out that the oversight of the management of natural resources would fall within the purview of DNR and AOGCC, as both entities employ engineers with the appropriate background to deal with natural gas resources. 2:01:23 PM CO-CHAIR HOLLAND expressed the understanding that DNR manages the remaining natural gas resources in the state are by using royalty relief. He questioned RCA's view of royalty relief. He questioned whether the same shield that allows producers and buyers to develop their own contracts would protect this. COMMISSIONER SPRINGSTEEN responded that this is a docketed matter at RCA, and he is obliged not to discuss it. He stated that it is public knowledge that there is a best interest finding for DNR to provide royalty relief. He expressed the understanding that producers would provide the best rate with royalty relief. MR. ESPINDOLA, in response to a follow-up question concerning the RCA's role in protecting consumers, stated that RCA has no role in regard to royalty relief. COMMISSIONER SPRINGSTEEN, in response to a follow-up question concerning whether royalty relief would benefit the public or the producer, pointed out that he is one of five commissioners, and all the commissioners would need to be involved in the review of the negotiated agreement between the involved parties. He pointed out these parties are representing their members in the negotiations, so they would "press" the matter of royalty relief to benefit their members. 2:05:52 PM COMMISSIONER SPRINGSTEEN continued to slide 7 and directed attention to the potential for a pipeline to deliver natural gas from the North Slope to Southcentral Alaska. He stated that RCA's role in this would be limited to determining whether the applicant is technically fit, willing, and able to design, operate, and maintain the pipeline. He stated that RCA would do all the necessary reviews, as it has done with other pipelines in the state. He stated that the legislature has directed the Alaska Gasline Development Corporation to access whether applicants have financial and managerial fitness, and whether it would provide public convenience and necessity; therefore, RCA would not have a role in these assessments. COMMISSIONER SPRINGSTEEN continued to slide 8 and slide 9, titled "In the face of Cook Inlet gas shortages, what is being done to ensure utilities are meeting their obligations to consumers?" He stated that RCA calls public meetings with utilities to ensure utilities are meeting obligations to consumers. He stated that these meetings would also address any plans the utilities may have in the event of a natural gas shortage. He added that RCA has called for presentations regarding natural gas supplies, as well as presentations on alternative energies. COMMISSIONER SPRINGSTEEN noted that Hilcorp announced in 2022 that it would be unable to meet future natural gas demands from Cook Inlet. In reaction to this, he said the Railbelt utilities set up a working group to address a path forward, and RCA called for meetings to address Cook Inlet natural gas storage, as seen on the slides. He discussed ENSTAR's presentation in June 2023, which related that demand forecast could not be met beyond the mid-2030s. He stated that since January 2024, RCA has been requesting updates from the Railbelt utilities on the possibility of forced outages. In addition to natural gas supply updates, RCA has called for presentations on alternative energies, such as advanced nuclear energy, coal with carbon capture, and renewable energy. He noted that more updates from the utilities have been requested. 2:09:59 PM MS. VOGLER co-presented the RCA PowerPoint and moved to slide 10 to address Railbelt utility projects that have been approved by RCA. Projects include a 2023 storage expansion agreement between ENSTAR Natural Gas Company and Cook Inlet Natural Gas Storage (CINGSA). She stated that this expansion was completed in 2024. She noted that in 2024, RCA conditionally approved an application filed by the Alaska Pipeline Company to expand its service area to connect to a future LNG terminal at Port MacKinzie. She continued that in 2024 RCA approved a special contract so ENSTAR could provide gas to Homer Electric. 2:12:18 PM CO-CHAIR HOLLAND, concerning the Cook Inlet natural gas shortage, questioned RCA's authority to require utilities to take specific action, as opposed to just requesting presentations on the topic. MR. ESPINDOLA deferred to Mr. Gazaway. 2:13:19 PM MR. GAZAWAY expressed doubt that he could provide a precise answer. He stated that the RCA can "generally ? make utilities do what they can to provide reasonably reliable service." He explained that when it comes to mandating how electricity is generated, there are requirements about using renewable energy, but the composition of the generation portfolio has never been a requirement by RCA. CO-CHAIR HOLLAND, concerning affordable energy production, questioned RCA's understanding of affordable energy. He questioned any definition, assessment, or analysis concerning this. MR. ESPINDOLA responded that on the upcoming slide 15 "just and reasonable" would be addressed, which would frame this question and its response. 2:14:59 PM MR. ESPINDOLA moved to slide 11, titled "What is the RCA's role in relation to the RTO and RRC?" He mentioned the Railbelt Transmission Organization (RTO). He paraphrased from the slide, which read as follows [original punctuation provided]: • The RCA's role with the Railbelt Reliability Council: Certificate the RRC (Docket E-22-001) Review Tariff Filings (3 AAC 46.320-.430) Review Integrated Resource Plans (AS 42.05.780(b)) Review RRC Surcharge Filings (3 AAC 46.160 and 4 AAC 46.320-.430) Review Rule Filings (AS 42.05.762) Holds an Ex-officio Seat (AS 42.05.762(4)(A)) • The RCA's role with the Railbelt Transmission Organization: Certificate the RTO (AS 44.83.700(d)) (Docket U-24- 042) Review Transmission Cost Recovery Mechanism (AS 44.83.710) Review Open Access Transmission Tariff (AS 44.83.710) MR. ESPINDOLA stated that after the passage of House Bill 307 [passed during the Thirty-Third Alaska State Legislature], RCA opened Docket U-24-026 to investigate the process for certification of a regional transmission organization. In 2024, RCA issued an order for RTO to file an application for the required certificate, which is now pending before RCA. He stated that a decision on this would be made before June 2025. After this process is complete, RTO would then submit a transmission cost recovery mechanism and an open access transmission tariff for review by RCA. 2:17:14 PM COMMISSIONER SPRINGSTEEN moved to slide 12, titled "What is the RCA's responsibility to managing Alaska's remaining natural gas resources and future development?" He noted that the first part of the question was addressed [on slide 7], and he reiterated that RCA is a quasi-judicial body with the role of providing oversite of tariffs and rates of public utilities, state pipelines, and some natural gas storage. He stated that the oversight of the state's natural resources would be under DNR, while oil and natural gas extraction would be under AOGCC. Concerning future development, he stated that RCA would promote energy conservation with the review and approval authority on certain projects. He stated that this would help displace the use of natural gas. He directed attention to Ms. Vogler, who would expand on this topic with the next slide. 2:18:01 PM MS. VOGLER stated that, other than promoting alternatives to utility consumption, RCA has limited control to reduce natural gas usage. In managing the state's remaining natural gas resources, she pointed out that in 2010 RCA had adopted net metering regulations, while in 2024 it opened a regulations docket to consider limiting the aggregate limit of net metering facilities. She stated that in 2022 RCA had approved a charging rate for electric vehicles (EVs), which eliminated demand charges, as this reduced demand on the system. She continued that RCA has approved cost recovery for contracts of power purchases with independent power producers (IPPs). She listed examples of these agreements. MS. VOGLER pointed out that RCA has pending dockets related to renewable energy generation, including a petition by Solstice Energy for a solar farm, with a request from Homer Electric to purchase this power. She stated that RCA has received an application from Juneau Hydropower, Inc. to expand its territory. She stated that because of Senate Bill 152 [passed during the Thirty-Third Alaska State Legislature] RCA has opened a regulations docket concerning community energy facilities. 2:20:41 PM CO-CHAIR MEARS, concerning cases that promote conservation efforts, questioned whether RCA would open dockets in order to promote conservation. She questioned whether a rate case would be a challenge to utilities to come forward on conservation efforts. MS. VOGLER explained that a rate case refers to a nonfuel component of electric rates. Concerning net metering and other aspects, she stated that RCA would open the regulations on its own, such as it did with EV charging. She stated that RCA had done this because of a request from stakeholders. She explained that power purchase agreements would be filed by the electric utilities. She noted that the dockets pending before RCA for review were pursued by the utility. CO-CHAIR MEARS expressed the understanding that RCA can look at more than just the cost of service to promote conservation. MR. ESPINDOLA expressed agreement with Co-Chair Mears, and he provided an example. 2:23:02 PM REPRESENTATIVE RAUSCHER expressed the opinion that the state does not have a gas shortage; rather, it has an availability problem. REPRESENTATIVE COSTELLO questioned an "open action transmission tariff." MR. ESPINDOLA responded that this is geared to independent power producers to plug into the Railbelt system through the tariff process. He deferred to Mr. Gazaway. MR. GAZAWAY explained that this is a nondiscriminatory tariff that allows people to access the transmission network on the same terms, conditions, and rules, as set forth by the transmission organization as a tariff. CO-CHAIR HOLLAND expressed the understanding that Docket U-24- 003 would increase the cap to 20 percent for net metering. He expressed the understanding that [SB 32] would also increase this cap. He questioned whether the docket and the proposed legislation would accomplish the same result. MR. ESPINDOLA expressed the understanding that SB 32 would allow utilities that are managed by a co-op board to operate under 15 megawatts without RCA approval. In response to a follow-up question concerning the difference between the proposed legislation and the docket, he deferred to Mr. Gazaway. MR. GAZAWAY responded that these are two different things. He explained that the metered cap would concern generation installed by customers, and the cap would be the amount that could be absorbed by the system. Concerning SB 32, he stated that this is tied into Eligible Renewable Energy Resource rules, which have large-project preapproval requirements. CO-CHAIR HOLLAND pointed out the growing number of rate cases, IPP purchase power agreements, and the diversity of utilities. He questioned whether RCA currently has the tools needed to work on the cases. MR. ESPINDOLA stated that this question would be answered on slide 14. REPRESENTATIVE RAUSCHER, concerning the same issue, pointed out that SB 32 could create concerns. 2:28:48 PM MR. ESPINDOLA moved to slide 14, titled "What statutory changes might ensure that the RCA takes a more holistic approach?" He maintained that this topic should be addressed at the upcoming public meeting, as his colleagues would be present. He stated that statute requires that the chair of RCA be responsible for directing the administrative functions of the commission when carrying out its policies, noting that this should be done in a public setting. He expressed his intention to address this topic with all RCA commissioners during the public meeting, which is scheduled for the following morning. He expressed the understanding that it would be inappropriate for him to speak to this topic without the other members of the commission present. He stated that RCA would respond to the committee in writing after the meeting tomorrow. CO-CHAIR HOLLAND requested clarification of RCA's policy versus statute, as the committee should understand this. MR. ESPINDOLA responded that RCA is considered a policy implementer, not a policy creator. He stated that the legislature and the executive branch are responsible for creating the policies. CO-CHAIR HOLLAND expressed confusion, as questions on policies are being deferred to the public meeting, but the legislature is responsible for creating policy. He questioned how to bring the context back to the legislature for discussion, and he described this as "a circular challenge." MR. ESPINDOLA stated that if there were specific policy positions the legislature would like RCA to consider, the questions would need to be discussed in an open, public setting, with all the commissioners there. REPRESENTATIVE RAUSCHER expressed the understanding that any question would need to be fully vetted by all the commissioners. CO-CHAIR MEARS expressed the understanding that this would be the beginning of the discussions between RCA, the executive branch, and the legislature. She noted that this discussion involves "eleventh-hour" issues with the Cook Inlet gas supply. She maintained that the gaps in the gas supply need to be identified and filled. She expressed the opinion that this needs to be fully discussed, as opposed to a decision coming unilaterally from the legislative branch. She stated that RCA seems to be "looking at what's in front of you, and we do need to be looking further ahead." She expressed her appreciation to the presenters. CO-CHAIR HOLLAND expressed the understanding that the following question would be addressed at RCA's public meeting in the morning. The question concerned the rules and tools that RCA has for the integration of gas storage, utility functions, and the delivery of gas. He commented that in the middle of this integration process, there would be a new utility structure. He questioned a holistic approach that could continue reliability and affordability. MR. ESPINDOLA responded that this question is the type of feedback and information RCA is looking for to start the conversations. 2:35:42 PM MR. ESPINDOLA moved to slide 15, titled "What statutory supports does the RCA have to execute its duties?" In the context of just and reasonable, he directed attention to AS 42.05.141 and AS 42.06.140. He stated that in order to determine whether rates are just and reasonable, RCA would review the utility's proposed annual revenue required earnings, which includes administrative cost, depreciation, and a fair return on investments. CO-CHAIR HOLLAND, concerning allowed expenses, questioned the definition of "prudent nature." He questioned whether utilities would be subject to taking action to reduce the allowed expenses, because expenses could be passed to the consumer. MS. VOGLER responded that when a utility files a revenue study to RCA, it is required to submit schedules to support that the cost of services provided would be "used and useful." In response to a follow-up question concerning any cost reduction efforts RCA could take, she stated that this is possible because utilities could be investing in assets that could reduce the cost of power. She pointed out that RCA would look at this because these items would be included in the rate base, of which the utility could earn a return. 2:38:40 PM COMMISSIONER SPRINGSTEEN moved to slide 16, titled "What are the various processes each natural gas project, recently announced, needs to go through at the RCA?" He noted that the two last questions of the presentation reflect recent events. He stated that this slide regards LNG import facilities, which fall under FERC. He noted that FERC would provide oversight throughout the operation of these facilities; therefore, they would be outside of RCA's jurisdiction. He added that when utilities contract with LNG importers, these contracts would be reviewed for approval by RCA. CO-CHAIR HOLLAND questioned whether FERC's oversight would be in the best interest of the utilities in the state. COMMISSIONER SPRINGSTEEN responded that, per statute, this would be under the purview of the legislature. CO-CHAIR MEARS commented that FERC has responsibility concerning planning and permitting, and it also has a fiduciary responsibility. She expressed the understanding that in LNG storage projects FERC would only be concerned with the planning and permitting side. She pointed out that there are some things without regulatory control, such as this fiduciary element. 2:41:52 PM MR. ESPINDOLA moved to slide 17, titled "What role does the RCA have in assessing multiple projects which may duplicate infrastructure and costs to customers?" When two or more public utilities are competing for identical service, he said RCA has statutory guidance under AS 42.05.221. He deferred to Mr. Gazaway. MR. GAZAWAY stated that if the competition is not in the public interest, RCA may eliminate the competition. He noted that the issue was more prevalent in the 1970s, when a framework had been created. This framework looks at RCA's jurisdiction, public need, the ability of applicants, and the internal strengths of the utilities. He added that the external strengths of the utilities would also be reviewed, which is the interface between the utility and the public. He noted that other extraneous elements would be examined, if needed. CO-CHAIR HOLLAND questioned RCA's approach to overlapping related projects, such as two LNG import facilities with some duplication. He referenced a scenario where production capacity was overbuilt. He questioned how this could be avoided in the future. MR. GAZAWAY pointed out the complexity of the question. He stated that when the framework was created, utilities were not coming to RCA for large project preapprovals, as they were not required to do this. He noted that there are times when duplicate facilities are preferred, as natural gas storage operations are looking for multiple options for more capacity. CO-CHAIR MEARS noted that there is one docketed project where each project might address a different need. She stated that public information would need to come out to understand this. She expressed concern that there could be duplicative infrastructure. 2:48:59 PM BECKI ALVEY, Advisory Section Manager, Regulatory Commission of Alaska, stated that in respect to the announcement of the two projects related to Harvest Alaska and ENSTAR, RCA has not received a filing from Harvest Alaska. If a filing is made, she said RCA would evaluate this. In regard to ENSTAR, in January 2025 it filed a proposal to evaluate future gas supplies and future gas project costs through its gas cost adjustment. This adjustment is a mechanism that allows gas utilities to recover gas costs. She stated that RCA has suspended this filing for further investigation into jurisdiction and cost recovery. CO-CHAIR MEARS clarified that this is docketed until August 2025. MR. ESPINDOLA responded that this "timeline is quick." He stated that there will be a public comment hearing soon, and this would be to discuss the questions in the docket. He noted that the filing was suspended, and a docket was opened. REPRESENTATIVE COSTELLO pointed out the importance of the issue and the impact to Alaskans. She questioned whether this docket could be expedited. MR. ESPINDOLA responded that this would be expedited, as he has taken personal control of the matter. 2:51:50 PM MR. ESPINDOLA expressed the importance of RCA fulfilling its statutory mandates of protecting the public interest. He stated that RCA strives to ensure that public utilities are solvent and able to provide safe and adequate services with just and reasonable rates that ensure suitable returns and conditions. He stated that RCA conducts public hearings, creating an accurate record of evidence, and provides access for public input. This allows RCA to work towards its goal in an open and transparent manner, which ensures accountability and trust. 2:52:39 PM The committee took an at-ease from 2:52 p.m. to 2:53 p.m. 2:53:32 PM CO-CHAIR MEARS noted the amount of information covered during the meeting, adding that there would be more information in the future with the opening of dockets. She noted RCA's important meeting tomorrow. She expressed appreciation that RCA has multiple commissioners, and the clarity used in the presentation, as "not everybody is clear on what hat they're wearing when they speak." She thanked the presenters. CO-CHAIR MEARS made closing comments. 2:55:26 PM ADJOURNMENT  There being no further business before the committee, the House Special Committee on Energy meeting was adjourned at 2:55 p.m.