Legislature(2015 - 2016)CAPITOL 17

02/03/2015 10:15 AM House ENERGY

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10:17:08 AM Start
10:18:37 AM Presentation: Institute of the North
11:02:04 AM HJR8
11:30:33 AM Presentation: Institute of the North - Conclusion
11:38:42 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
"Lessons Learned from the Arctic Energy Summit"
by Nils Andreassen, Executive Director, Institute
of the North
Heard & Held
         HJR  8-FEDS ALLOW STATE TO MAKE ENERGY CHOICES                                                                     
11:02:04 AM                                                                                                                   
CO-CHAIR COLVER announced  that the next order  of business would                                                               
be HOUSE  JOINT RESOLUTION NO.  8, Urging the  federal government                                                               
to empower the state to  protect the state's access to affordable                                                               
and reliable electrical generation.                                                                                             
11:03:19 AM                                                                                                                   
JOSHUA BANKS,  Staff, Representative Dave Talerico,  Alaska State                                                               
Legislature,  introduced  HJR  8   on  behalf  of  Representative                                                               
Talerico,   sponsor.     Mr.  Banks   explained  that   the  U.S.                                                               
Environmental Protection  Agency (EPA)  Clean Power  Plan applies                                                               
to all fossil fuel power  plant generation - including coal, gas,                                                               
oil, and naphtha  - by plants that produce power  in excess of 25                                                               
megawatts (MW),  with the exception  of power plants  at military                                                               
bases in Alaska  and at the University of Alaska  (UA).  Although                                                               
well-intentioned,  the  plan would  likely  lead  to much  higher                                                               
electricity  costs as  indicated  by a  study [entitled,  "Energy                                                               
Market  Impacts of  Recent Federal  Regulations  on the  Electric                                                               
Power  Sector," and  dated 11/14]  provided within  the committee                                                               
packet.  He said the study  states that nationwide there could be                                                               
an  increase in  electrical costs  as high  as 37  percent.   The                                                               
Clean  Power  Plan  is  based   on  inaccurate  assumptions;  for                                                               
instance, that the  largest source of carbon  emissions in Alaska                                                               
is from  power plants.  In  fact, power plants in  Alaska account                                                               
for  about 25  percent of  carbon  emissions.   The remaining  75                                                               
percent of stationary source carbon  in Alaska is from operations                                                               
on  the North  Slope.    Another assumption  is  that lower  cost                                                               
natural gas and renewable energy  sources are available; however,                                                               
in  the  near-term  these  sources   are  not  available  in  the                                                               
Interior.    In fact,  even  if  natural  gas were  available  in                                                               
Fairbanks, the current  projected cost is $20.00  per million Btu                                                               
(MMBTU).    The final  purpose  of  HJR  8  would be  to  protect                                                               
Alaska's  sovereignty.     The   Tenth  Amendment  to   the  U.S.                                                               
Constitution states:   "The  powers not  delegated to  the United                                                               
States by the  Constitution, nor prohibited by it  to the States,                                                               
are reserved to the States respectively,  or to the people."  Mr.                                                               
Bates opined  the powers of  Congress or the executive  branch do                                                               
not include  the power to  regulate carbon emissions  in America.                                                               
Therefore, this is the states'  responsibility.  He expressed his                                                               
belief that the  State of Alaska has the means  to make effective                                                               
decisions to deal with the problems  of climate change, and to do                                                               
so without  hurting Alaskans.   The resolution urges  the federal                                                               
government to leave decisions in  regulating energy production at                                                               
the  state  and  local  level  in  order  to  protect  access  to                                                               
affordable and  reliable electrical  generation.  Mr.  Banks said                                                               
he  expected some  changes  would be  made  to HJR  8  as it  was                                                               
currently written.                                                                                                              
11:07:25 AM                                                                                                                   
REPRESENTATIVE NAGEAK directed  attention to the bill  on page 1,                                                               
lines 9-10, which read:                                                                                                         
     WHEREAS the Regulatory Commission of Alaska should be                                                                      
     empowered to make decisions with methodology based on                                                                      
     the lowest production costs for electrical generation;                                                                     
REPRESENTATIVE  NAGEAK   asked  whether  the  rationale   of  the                                                               
resolution was to get more coal generation.                                                                                     
11:08:14 AM                                                                                                                   
REPRESENTATIVE TALERICO  was unsure about the  intent to generate                                                               
more coal-fired power, but the intent  was to maintain what is in                                                               
production at  this time.   In the Interior, the  most affordable                                                               
power is from coal.   Although power production is available from                                                               
other  areas  of the  state,  the  "bottleneck"  is the  lack  of                                                               
transmission lines at  the electrical intertie.   He recalled the                                                               
committee's  previous  discussion   of  "pancake"  rate  tariffs.                                                               
Currently in the  Interior, coal-fired power costs  4.9 cents per                                                               
kilowatt hour  (kWh), and hydroelectric  (hydro) power  costs 5.8                                                               
cents per  kWh due to  the pancake tariff rates.   Representative                                                               
Talerico  said his  concern  was  for the  cost  to customers  in                                                               
Fairbanks  which  is  then passed  along  to  surrounding  remote                                                               
REPRESENTATIVE NAGEAK  referred to  testimony last year  that the                                                               
cost of power generation in rural  Alaska could be reduced by the                                                               
use of  microgrids to connect  nearby communities.   He suggested                                                               
considering  the idea  proposed  by the  Alaska Village  Electric                                                               
Cooperative,  Incorporated   (AVEC).    He  then   asked  for  an                                                               
explanation  of the  benefits of  placing  a 1.5  percent cap  on                                                               
electricity rate increases.                                                                                                     
REPRESENTATIVE  TALERICO  said  the  issue of  a  cap  was  being                                                               
discussed  with  state  agencies, the  Regulatory  Commission  of                                                               
Alaska (RCA), and the utilities.   He said he asked the co-chairs                                                               
to hold  the resolution in  order to gather more  information and                                                               
create a better document; furthermore,  various agencies would be                                                               
bringing recommendations to the bill sponsors.                                                                                  
REPRESENTATIVE NAGEAK  directed attention to page  1, lines 14-15                                                               
which read:                                                                                                                     
     WHEREAS   utilities,    communities,   residents,   and                                                                    
     commercial  entities  should   be  protected  from  any                                                                    
     attempts  to  close a  coal-fired  power  plant in  the                                                                    
     state; and                                                                                                                 
REPRESENTATIVE  NAGEAK asked  for examples  of coal-fired  plants                                                               
that would be closed.                                                                                                           
REPRESENTATIVE  TALERICO   referred  to  an   [unidentified]  EPA                                                               
document  provided in  the  committee packet,  noting  it is  300                                                               
pages  long.   His  interpretation  of  the  document -  and  his                                                               
primary concern  - was  that the plan  calls for  reducing carbon                                                               
pollution  by  focusing on  the  power  producing industry.    In                                                               
Alaska, most  of the  carbon produced is  not from  power plants,                                                               
unlike  in the  Lower 48.   Coal  power plants  are the  cheapest                                                               
sources of energy in the Interior,  and if they become "a target"                                                               
the  price of  energy would  rise without  an impact  on Alaska's                                                               
carbon emissions.                                                                                                               
11:14:17 AM                                                                                                                   
MR. BANKS  directed attention to page  23 of a study  provided in                                                               
the committee  packet entitled, "Energy Market  Impacts of Recent                                                               
Federal  Regulations  on the  Electric  Power  Sector" and  dated                                                               
11/14.   Energy Ventures  Analysis estimated  a reduction  in the                                                               
generation of  coal from  31 percent  in 2012,  to 20  percent in                                                               
2020,  likely   requiring  the   closure  of   coal-fired  plants                                                               
throughout the country.                                                                                                         
REPRESENTATIVE  NAGEAK observed  his district  has the  cleanest-                                                               
burning coal in  the world and he supports  generating power with                                                               
coal using  the best technology;  however, the industry  needs to                                                               
be proven.  Coal-fired plants  should not be closed, but improved                                                               
for  the  benefit  of  the environment  and  consumers,  and  the                                                               
federal government should help pay.                                                                                             
CO-CHAIR  VAZQUEZ  informed  the   committee  it  would  hear  an                                                               
upcoming presentation regarding microgrids.                                                                                     
11:17:18 AM                                                                                                                   
CO-CHAIR  COLVER  opened  public  testimony  on  HJR  8.    After                                                               
ascertaining no one wished to  testify, public testimony was left                                                               
CO-CHAIR  VAZQUEZ   stressed  the  importance  of   reliable  and                                                               
affordable energy to  the well-being and economic  success of the                                                               
REPRESENTATIVE WOOL  directed attention  to the  bill on  page 2,                                                               
line 2, which read:                                                                                                             
     WHEREAS  the  loss   of  other  traditional  electrical                                                                    
     generation methods  may cause natural gas  plants to be                                                                    
     overused or  used in ways that  exceed their engineered                                                                    
     design; and                                                                                                                
REPRESENTATIVE  WOOL inquired  as  to whether  natural  gas is  a                                                               
traditional method  of electrical generation, and  if natural gas                                                               
plants have been shown to be exceeding their engineered design.                                                                 
REPRESENTATIVE TALERICO  advised that coal-fired  generators have                                                               
been  around in  the Interior  since  before World  War II;  this                                                               
method is  a traditional  source along  with diesel  and naphtha.                                                               
In the event  25 MW of daily production were  shut down in Healy,                                                               
and another  20 MW in Fairbanks,  it would be difficult  - if not                                                               
impossible - to energize the  grid.  He expressed his willingness                                                               
to  make   additions  or  deletions   to  the  language   of  the                                                               
REPRESENTATIVE  WOOL asked  if the  proposed improvements  to the                                                               
electrical grid would change the priorities of HJR 8.                                                                           
11:23:30 AM                                                                                                                   
REPRESENTATIVE  TALERICO  opined  improvements to  the  grid  are                                                               
critical  to   the  economy;  however,  affordability   is  still                                                               
important.  The  cost of oil and natural gas  fluctuates, but the                                                               
coal market remains  more stable.  He stressed the  value of many                                                               
diversified  sources  of  energy production  coming  together  to                                                               
provide stability in energy costs.                                                                                              
REPRESENTATIVE  NAGEAK  expressed   his  passion  about  lowering                                                               
energy  costs.   During  the  previous  legislative session,  the                                                               
committee  discussed  biomass,  natural  gas,  coal,  hydropower,                                                               
tidal, and geothermal  sources of energy that are  available on a                                                               
regional basis; in  fact, most regions have  different sources on                                                               
a  local   basis,  like   biomass,  run-in-the-river,   and  coal                                                               
generation.  He  encouraged the committee to  focus on developing                                                               
resources that are available in each region.                                                                                    
CO-CHAIR VAZQUEZ  will request related testimony  from the Alaska                                                               
Power Association.   She urged for research on the use of coal.                                                                 
11:29:52 AM                                                                                                                   
HJR 8 was held over.