Legislature(2009 - 2010)BARNES 124

03/25/2010 03:00 PM House ENERGY

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Audio Topic
03:07:49 PM Start
03:08:01 PM Overview: Biomass Energy
04:35:48 PM HB182
05:09:18 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Overview: Biomass Energy, by Dave TELECONFERENCED
Stancliff, Gateway School District;
Jeff Hermanns, Alaska Division of
Forestry; Thomas Deerfield, Alaska Power
& Telephone Utility
+ Bills Previously Heard/Scheduled TELECONFERENCED
Heard & Held
<Bill Hearing Rescheduled from 03/23/10>
          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                                                               
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                                                               
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.                                                                           

Document Name Date/Time Subjects
Tok DOF Hazardous Forest Fuels & Wood Energy Chris Edit.pdf HENE 3/25/2010 3:00:00 PM
CS HB 182 3-24-10.PDF HENE 3/25/2010 3:00:00 PM
HENE 3/30/2010 3:00:00 PM
HB 182
HB 182 Amendment 1.PDF HENE 3/25/2010 3:00:00 PM
HB 182