Legislature(2015 - 2016)CAPITOL 17

02/26/2015 10:15 AM ENERGY

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Audio Topic
10:20:48 AM Start
10:22:07 AM Presentation: Alaska Housing Finance Corporation
10:25:37 AM HB58
11:20:50 AM HB78
12:01:54 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 58 ELIGIBILITY FOR AK ENERGY EFFIC LOANS TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 78 REGULATORY COMMISSION OF ALASKA TELECONFERENCED
Heard & Held
+ Overview Presentation: TELECONFERENCED
Follow-up Report by the Alaska Housing Finance
Corporation by John Anderson, Alaska Housing
Finance Corporation
             HB 78-REGULATORY COMMISSION OF ALASKA                                                                          
                                                                                                                                
11:20:50 AM                                                                                                                   
                                                                                                                                
CO-CHAIR VAZQUEZ announced that the  next order of business would                                                               
be HOUSE  BILL NO.  78, "An  Act bearing the  short title  of the                                                               
'Alaska  Competitive Energy  Act of  2015'; and  relating to  the                                                               
Regulatory Commission of Alaska."                                                                                               
                                                                                                                                
11:21:47 AM                                                                                                                   
                                                                                                                                
JAMES  BERTRAND, Law  Partner, Stinson  Leonard Street,  informed                                                               
the committee he  is also the co-chair of the  Energy Division at                                                               
the law firm of Stinson Leonard  Street, and his testimony was on                                                               
behalf   of  Chugach   Electric  Association,   Inc.  (CEA),   an                                                               
electrical  cooperative   in  Anchorage.     He   provided  brief                                                               
background  information on  his experience  in electrical  energy                                                               
issues, including  the restructuring of transmission  systems and                                                               
the impacts of universal system  operators (USOs) and independent                                                               
system  operators  (ISOs)  on  utilities  and  independent  power                                                               
producers (IPPs).    Mr. Bertrand stated he is  familiar with the                                                               
proposed  regulations  under   consideration  by  the  Regulatory                                                               
Commission  of  Alaska (RCA)  to  bring  Alaska regulations  into                                                               
compliance  with the  federal structure,  and  offered to  answer                                                               
questions in this regard.                                                                                                       
                                                                                                                                
11:24:54 AM                                                                                                                   
                                                                                                                                
CAROLYN ELEFANT,  Owner, Law Office of  Carolyn Elefant, speaking                                                               
on behalf  of the Alaska  Independent Power  Association (AIPPA),                                                               
informed  the committee  her firm  focuses  on energy  regulatory                                                               
issues.    She provided  a  brief  background of  her  experience                                                               
working  at the  Federal Energy  Regulatory Commission  (FERC) in                                                               
the field of  the regulation of transmission  and wholesale power                                                               
sales for  utilities that are  connected to the  interstate grid.                                                               
Ms. Elefant  stated that the  Public Utility  Regulatory Policies                                                               
Act (PURPA)  and the emergence  of open access  transmission have                                                               
transformed  the electric  utility  industry.   In  fact, in  the                                                               
Lower 48,  a trend is to  move to a further  modernization of the                                                               
utility industry which includes power  supplied by IPPs and self-                                                               
generation through net metering.   She said she has been involved                                                               
with   regulatory  proceedings   before   RCA   related  to   its                                                               
implementation  of PURPA.   Regarding  the proposed  legislation,                                                               
Ms. Elefant  said the  changes she has  observed in  the electric                                                               
industry in  the Lower 48,  resulting from PURPA and  open access                                                               
transmission policies,  differ somewhat  from Alaska  where there                                                               
is a  harsh climate  and rural  and remote  communities; however,                                                               
Alaskan ratepayers pay some of  the highest electricity rates, in                                                               
spite  of Alaska's  sources of  power such  as wind,  hydropower,                                                               
marine hydrokinetic  and solar.   She  opined that  marketing the                                                               
state's alternative  power sources would reduce  rates, diversify                                                               
power  supply, and  foster competition.  Furthermore, competitive                                                               
energy markets would attract financing  for new technologies, and                                                               
competition depends on the  availability of access, opportunities                                                               
for IPPs and non-utility generators, and transparency.                                                                          
                                                                                                                                
11:29:38 AM                                                                                                                   
                                                                                                                                
MS.  ELEFANT continued  to explain  that in  the Lower  48, PURPA                                                               
opened competition by requiring  utilities to purchase power from                                                               
smaller non-utility  generators -  which are known  as qualifying                                                               
facilities  (QFs) -  at  the  same price  as  power from  another                                                               
utility, or as self-generated power.   This price is known as the                                                               
avoided  cost.   The  two  goals  of  PURPA  are:   to  stimulate                                                               
competition  and to  be ratepayer  neutral.   For example,  using                                                               
avoided cost ensures that ratepayers  are not paying any more for                                                               
power  than if  the utility  generated the  power.   In addition,                                                               
PURPA addressed  the question of  open access to  transmission by                                                               
implementing  regulations  directing  states  to  develop  robust                                                               
interconnection   policies  to   ensure   QFs   have  access   to                                                               
interconnection.   Ms. Elefant stressed  that PURPA  also fosters                                                               
private investment, thus projects  must be economically feasible,                                                               
and to this end, a utility  is required to provide information on                                                               
its avoided cost for the perusal of  IPPs.  In 35 years PURPA has                                                               
had some  opposition; however,  after some  changes were  made in                                                               
2005,  PURPA  continues to  apply  in  areas  where there  is  no                                                               
competitive market,  such as  Alaska.    In addition,  other laws                                                               
apply in  Alaska that provide open  access to the grid  for IPPs;                                                               
FERC  regulates  the  nation's transmission  grid,  and  in  1996                                                               
issued  Order No.  888 which  required all  utilities to  provide                                                               
open access  to their transmission lines  on a non-discriminatory                                                               
basis.  Federal Energy Regulatory  Commission Order No. 888 was a                                                               
landmark order and as a  result robust power markets have evolved                                                               
along with new technologies and economic development.                                                                           
                                                                                                                                
MS.  ELEFANT observed  that the  proposed legislation  would have                                                               
Alaska enjoy the benefits of  competition and the characteristics                                                               
of  access, opportunity,  and transparency  that have  benefitted                                                               
other  jurisdictions.    The  bill   provides:    opportunity  by                                                               
ensuring IPPs  can sell power  into the  grid; non-discriminatory                                                               
access    to     transmission;    transparency     on    avoided,                                                               
interconnection, and  integration costs.  She  concluded that the                                                               
proposed  legislation would  promote  competition and  diversity,                                                               
and lower rates for consumers.                                                                                                  
                                                                                                                                
11:37:25 AM                                                                                                                   
                                                                                                                                
CO-CHAIR  COLVER  asked  for  the  differences  between  Alaska's                                                               
transmission systems and those of the Lower 48                                                                                  
                                                                                                                                
MS.  ELEFANT  answered that  in  the  Lower 48,  transmission  is                                                               
regulated  on  the  federal level  because  there  is  interstate                                                               
interconnection; however,  distribution systems are  regulated by                                                               
the  states.    In  Alaska,  the  state  has  full  control  from                                                               
transmission to  the user.  In  parts of the Lower  48, there are                                                               
problems  with power  congestion,  which must  be  managed in  an                                                               
equitable manner.                                                                                                               
                                                                                                                                
REPRESENTATIVE CLAMAN asked for  a description of the differences                                                               
between HB 78 and PURPA.                                                                                                        
                                                                                                                                
MS. ELEFANT explained that HB  78, along with regulatory changes,                                                               
would bring  Alaska in alignment with  PURPA.  The bill  does not                                                               
replace PURPA,  but ensures compliance with  components of PURPA;                                                               
for example, HB 78 requires  utilities to make their avoided cost                                                               
available to  IPPs and their investors  for competitive purposes.                                                               
Regarding  interconnection, PURPA  recognizes  the importance  of                                                               
non-discriminatory  interconnection  and  integration  costs,  as                                                               
does HB  78, although  HB 78  goes further  regarding integration                                                               
costs.   In  addition, HB  78 gives  QFs access  to transmission,                                                               
which differs slightly from PURPA.                                                                                              
                                                                                                                                
11:42:53 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE CLAMAN  recalled hearing  that Alaska may  be sued                                                               
for noncompliance, but PURPA has been  in effect for 35 years and                                                               
there has been  no lawsuit against Alaska.  Alaska  does not have                                                               
an interstate  commerce issue, and  is quite a distance  from the                                                               
Lower 48.                                                                                                                       
                                                                                                                                
MS.  ELEFANT  clarified  that  PURPA does  apply  to  states  and                                                               
territories  that are  not  interconnected to  the  grid such  as                                                               
Alaska,  Hawaii,  Texas, Puerto  Rico,  and  the Virgin  Islands.                                                               
Alaska is exempt from some  of the federal requirements like open                                                               
access  because the  source  of Order  No. 888  is  found in  the                                                               
Federal  Power Act  and it  applies  to interstate  transactions.                                                               
She remarked:                                                                                                                   
                                                                                                                                
     The  fact  that  Alaska  is  not  regulated  under  the                                                                    
     Federal Power  Act, I  don't think  would enable  it to                                                                    
     make a  case ... for not  being subject to PURPA.   But                                                                    
     that  said,  certainly  a  lawsuit  or  an  enforcement                                                                    
     action is, is a very  extreme step. ... Parties will go                                                                    
     to FERC  and they  will say to  FERC, 'Hey,  this state                                                                    
     isn't complying with  PURPA ...' and FERC  will issue a                                                                    
     ruling ...  and then  FERC has  the option  of actually                                                                    
     bringing the suit in federal court.                                                                                        
                                                                                                                                
                                                                                                                                
MS.  ELEFANT advised  that  FERC has  brought  action once  under                                                               
unusual circumstances, and lawsuits happen infrequently.                                                                        
                                                                                                                                
11:46:28 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  CLAMAN   surmised  the  risk  of   a  lawsuit  is                                                               
unlikely.                                                                                                                       
                                                                                                                                
MS. ELEFANT said yes.                                                                                                           
                                                                                                                                
CO-CHAIR VAZQUEZ asked for an explanation of avoided cost.                                                                      
                                                                                                                                
MS. ELEFANT said  a utility supplies power  by self-generation or                                                               
by buying power from another utility.   Under PURPA, if a utility                                                               
buys power from an IPP QF,  the utility is "avoiding" the cost of                                                               
paying the other utility or of  producing power.   The purpose is                                                               
to ensure ratepayer  neutrality whether power comes from  a QF or                                                               
is self-generated.  In further  response to Co-Chair Vazquez, she                                                               
said transparency  means the information  on what a  utility pays                                                               
to self-generate power is made  public.  With this information, a                                                               
QF can evaluate whether a project is economically feasible.                                                                     
                                                                                                                                
CO-CHAIR VAZQUEZ asked about integration cost.                                                                                  
                                                                                                                                
MS. ELEFANT  said integration costs  are the costs  incurred when                                                               
introducing power  into the system; for  example, an intermittent                                                               
power source, such  as wind, may require payment to  keep a back-                                                               
up generator on standby service.                                                                                                
                                                                                                                                
CO-CHAIR   VAZQUEZ  asked   how  HB   78  adds   transparency  to                                                               
integration costs.                                                                                                              
                                                                                                                                
11:53:50 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE TAMMIE  WILSON, Alaska State  Legislature, sponsor                                                               
of HB 78,  informed the committee a local  attorney was available                                                               
to answer questions on Alaska issues.                                                                                           
                                                                                                                                
REPRESENTATIVE  WOOL surmised  that  PURPA is  a  set of  federal                                                               
regulations   and  FERC   is  the   agency   that  enforces   the                                                               
regulations.                                                                                                                    
                                                                                                                                
MS. ELEFANT  stated that PURPA  is a federal law  that encourages                                                               
federal  and state  cooperation.   The Federal  Energy Regulatory                                                               
Commission put  in place regulations that  set federal parameters                                                               
for PURPA;  for example,  FERC has  a regulation  that reinforces                                                               
that  utilities have  to  pay  avoided cost,  but  each state  is                                                               
responsible for  implementing its own  PURPA programs.   In fact,                                                               
if there  is a contract  between a utility  and a QF,  the state,                                                               
but not  FERC, would  look at  the contract.   A state  can adopt                                                               
regulations to  implement PURPA  as long  as the  regulations are                                                               
consistent with the parameters set by FERC.                                                                                     
                                                                                                                                
REPRESENTATIVE WOOL  expressed his  understanding that FERC  is a                                                               
federal regulatory  agency, but  because Alaska is  not connected                                                               
to the Lower 48, its regulations don't apply.                                                                                   
                                                                                                                                
MS.  ELEFANT  said  there  are  two  main  categories  that  FERC                                                               
administers.   The first  is the Federal  Power Act,  which gives                                                               
FERC authority  over power transactions  on the  interstate grid,                                                               
and  which does  not  apply to  Alaska and  Hawaii.   The  second                                                               
category,  those  regulated by  PURPA,  do  apply to  Alaska  and                                                               
Hawaii by direction from Congress.                                                                                              
                                                                                                                                
11:58:32 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE WOOL  then asked  whether FERC  determines whether                                                               
there  is  congestion, and  no  further  power  is needed  for  a                                                               
certain area.                                                                                                                   
                                                                                                                                
MS. ELEFANT said  FERC would not manage  the aforementioned issue                                                               
in  Alaska.   In  the Lower  48,  some areas  are  governed by  a                                                               
regional transmission  organization (RTO); on the  other hand, in                                                               
Idaho, or parts of the country without RTOs, the utilities make                                                                 
these decisions.                                                                                                                
                                                                                                                                
12:01:09 PM                                                                                                                   
                                                                                                                                
CO-CHAIR VAZQUEZ said public testimony on HB 78 remained open.                                                                  
                                                                                                                                
HB 78 was held over.                                                                                                            

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