Legislature(2015 - 2016)CAPITOL 17

01/28/2016 11:00 AM ENERGY

Note: the audio and video recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.

Download Mp3. <- Right click and save file as
Download Video part 1. <- Right click and save file as

Audio Topic
11:06:16 AM Start
11:06:29 AM HB187
12:28:54 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Time Change --
*+ HB 187 RAILBELT ELECTRICAL TRANSMISSION AUTH. TELECONFERENCED
Heard & Held
         HB 187-RAILBELT ELECTRICAL TRANSMISSION AUTH.                                                                      
                                                                                                                                
11:06:29 AM                                                                                                                   
                                                                                                                                
CO-CHAIR COLVER announced  that the only order  of business would                                                               
be HOUSE BILL  NO. 187, "An Act creating  the Railbelt Electrical                                                               
Transmission  Authority;  and  relating  to  the  duties  of  the                                                               
Regulatory Commission of Alaska."                                                                                               
                                                                                                                                
CO-CHAIR  COLVER stated  the committee's  intent  to hear  public                                                               
testimony on HB 187, and outlined the meeting schedule.                                                                         
                                                                                                                                
11:07:28 AM                                                                                                                   
                                                                                                                                
[The committee treated  the hearing on HB 187 as  open for public                                                               
testimony.]                                                                                                                     
                                                                                                                                
11:08:34 AM                                                                                                                   
                                                                                                                                
CHRIS ROSE,  Executive Director, Renewable Energy  Alaska Project                                                               
(REAP), informed the committee REAP  is a coalition of utilities,                                                               
both  on and  off of  the Railbelt,  independent power  producers                                                               
(IPPs), Native  corporations, and  non-governmental organizations                                                               
that are  all promoting renewable  energy and  energy efficiency.                                                               
His organization  has been  active for  twelve years,  has sixty-                                                               
eight members,  and has been working  for two years on  the issue                                                               
of  a  system operator,  because  renewable  power providers  are                                                               
unable  to access  the Railbelt  grid  due to  access issues  and                                                               
pancake tariffs.   He explained  the issues of access and pancake                                                               
tariffs remain because  all of the utilities in  the Railbelt are                                                               
allowed  to charge  a transmission  tariff for  the use  of their                                                               
service  territory.    For  example,  Cook  Inlet  Region,  Inc.,                                                               
attempted  to sell  wind power  from Fire  Island Wind  to Golden                                                               
Valley  Electric Association  (GVEA) and  even though  buyers and                                                               
sellers  were willing,  "the transmission  tariffs really  killed                                                               
the deal."   In  addition, REAP and  consumers are  interested in                                                               
economic dispatch  and regional planning  as well.  He  said that                                                               
REAP  is happy  with the  bill  and happier  that the  Regulatory                                                               
Commission of  Alaska (RCA), Department of  Commerce, Community &                                                               
Economic Development (DCCED),  is involved; in fact,  RCA and the                                                               
bill have  tasked the  utilities in  the same  manner.   Mr. Rose                                                               
also  encouraged continued  voluntary efforts  by the  utilities.                                                               
To   reiterate,  REAP   seeks   the  following:     a   universal                                                               
transmission tariff  so that  all parties  pay equally  to access                                                               
the  grid; open  and  nondiscriminatory access  to  the grid;  an                                                               
impartial  and independent  system  operator; economic  dispatch;                                                               
and a  system operator  regulated by RCA.   Currently,  there are                                                               
several  different  balancing  areas  in the  Railbelt,  but  one                                                               
balancing  area for  the  Railbelt  is needed  in  order to  have                                                               
economic  dispatch  and  efficiency  in the  system.    Mr.  Rose                                                               
provided a  brief history, saying  that the fragmentation  of the                                                               
Railbelt happened over  time for a variety  of reasons, including                                                               
how  the   transmission  system   was  built,   which  encouraged                                                               
fragmentation.    A lot  of money has  been spent on  studies and                                                               
efforts  to  consolidate,  and  there  has  been  contention  and                                                               
litigation  between the  utilities; however,  new generation  has                                                               
created  more urgency  for an  efficient distribution  of energy.                                                               
Mr. Rose  opined RCA must  consider the  key question:   does the                                                               
current institutional structure allow  for maximum benefit to the                                                               
consumers?  In April 2014,  the legislature appropriated $250,000                                                               
to RCA for a study, which  was completed by the Alaska Center for                                                               
Energy and Power (ACEP) in 2015,  and followed by RCA's report of                                                               
findings.   Findings and  recommendations were  as follows:   the                                                               
need  for reform  and for  an entity  with the  responsibility to                                                               
build transmission for the benefit of  the whole; the need for an                                                               
independent transmission company;  RCA authority for transmission                                                               
and  generation;   RCA  explicit  authority  for   an  integrated                                                               
Railbelt  plan;  and  that  the  utilities'  provide  reports  in                                                               
September and December  [2015].  Mr. Rose  acknowledged that REAP                                                               
has  not  been involved  in  the  transmission company  (Transco)                                                               
process, and  the amount of  transmission needed in  the Railbelt                                                               
is unknown; however, the independent  system operator (ISO) needs                                                               
to be  formed first,  or simultaneously with  the Transco,  as it                                                               
will facilitate regional planning.                                                                                              
                                                                                                                                
11:15:01 AM                                                                                                                   
                                                                                                                                
MR. ROSE  noted that the  American Transmission Company  (ATC) is                                                               
catalyzing  the   Transco  process   through  models,   and  REAP                                                               
encourages like speed in the development  of the ISO.  The second                                                               
finding noted that the complexity of  the ISOs found in the Lower                                                               
48 is  not required  for Alaska,  and REAP  agrees.   He stressed                                                               
REAP favors  merit-order dispatch  which puts the  most efficient                                                               
generators on first  in one balancing area.   The commission also                                                               
found  that  the  Railbelt must  have  a  universal  transmission                                                               
tariff,  open  access,  and  economic  dispatch,  beginning  with                                                               
voluntary power pooling.   In order to determine the  cost of the                                                               
aforementioned,  RCA required  quarterly  reports,  the first  of                                                               
which  is due.    He  said RCA  agreed  to  review the  quarterly                                                               
reports during 2016, and to  develop a governance structure and a                                                               
system  operator.    The   independent  governance  structure  is                                                               
important to  the members of  REAP.   The third RCA  finding said                                                               
the commission  is skeptical that  the utilities  will accomplish                                                               
the  Railbelt  project on  a  voluntary  basis because  of  their                                                               
history  of  unsuccessful  attempts,  a  lack  of  trust,  and  a                                                               
reliance   on   legislative   appropriations.      However,   RCA                                                               
recommended giving the  utilities a chance to  complete a Transco                                                               
and an ISO within established  timelines.  The fourth RCA finding                                                               
and  recommendation was  to  the lack  of  reliability rules  and                                                               
standards and recommended that  the Intertie Management Committee                                                               
(IMC)  resolve  its  differences,  particularly  with  the  Homer                                                               
Electric  Association   (HEA).     The  fifth  RCA   finding  and                                                               
recommendation  was  that the  issues  are  challenging, and  the                                                               
commission needs significant resources  to implement its findings                                                               
and recommendations.   Mr. Rose concluded,  noting the importance                                                               
of hearing from  all of the parties, and that  REAP would like to                                                               
see  alignment within  the  six utilities.    He restated  REAP's                                                               
concern that  the Transco  process is  outpacing the  process for                                                               
developing a system  operator.  Also outstanding  is the question                                                               
of whether  the governance structure  will be an  independent, or                                                               
unified, system  operator, and Mr.  Rose stressed  the importance                                                               
of  the distinction  between the  two structures.   He  suggested                                                               
forming  a bigger  board to  dilute the  utilities' power  on the                                                               
board,  and a  transition time  of five  years to  phase out  the                                                               
presence of the  utilities.  Mr. Rose stressed  REAP's desire for                                                               
an impartial and independent governing board.                                                                                   
                                                                                                                                
11:21:32 AM                                                                                                                   
                                                                                                                                
CO-CHAIR COLVER  asked for a synopsis  of the RCA ruling  on grid                                                               
access for independent power producers (IPPs).                                                                                  
                                                                                                                                
MR. ROSE  said RCA  Docket R-13-001  was related  in part  to the                                                               
definition of  avoided cost under  the Public  Utility Regulatory                                                               
Policy Act  of 1978  (PURPA), which  was congressional  action to                                                               
balance competition  between fossil and renewable  fuels.  Public                                                               
utility  commissions in  most states  have  interpreted PURPA  to                                                               
mean  that qualified  facilities can  sell renewable  power to  a                                                               
utility  if  they can  beat  the  avoided  cost of  the  utility.                                                               
However,  in  Alaska, how  to  determine  the utilities'  avoided                                                               
costs was  disputed until  said RCA ruling  which directs  RCA to                                                               
consider incremental avoided cost.   He concluded that access for                                                               
IPPs is now  more open to the market, but  the issue of pancaking                                                               
tariffs remains unresolved.                                                                                                     
                                                                                                                                
REPRESENTATIVE  CLAMAN  referred  to discussion  related  to  the                                                               
development of  a unified system  operator versus  an independent                                                               
system   operator,  and   opined   the  biggest   issue  is   the                                                               
representation on  the board,  rather than its  label.   He asked                                                               
whether  the  real   priority  for  REAP  is   that  the  utility                                                               
representation will be in a minority position on the board.                                                                     
                                                                                                                                
11:24:10 AM                                                                                                                   
                                                                                                                                
MR.  ROSE  advised in  a  true  independent system  operator  the                                                               
utilities would  not have  representation on  the board,  and the                                                               
utility expertise would come from  paid utility executives out of                                                               
other  jurisdictions.   In  Alaska, REAP  suggested  that if  the                                                               
utilities   are  part   of   the   governance  structure,   their                                                               
representation  should be  balanced  by a  group of  stakeholders                                                               
representing a vast  range of interests who are  appointed to the                                                               
board.                                                                                                                          
                                                                                                                                
REPRESENTATIVE  CLAMAN  expressed  his  belief that  it  will  be                                                               
necessary to have utilities on the board for their expertise.                                                                   
                                                                                                                                
MR. ROSE said, "REAP has  acknowledged that expertise ... if they                                                               
are on  the board,  we'd just  like to have  some other  folks as                                                               
well."                                                                                                                          
                                                                                                                                
11:25:36 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  NAGEAK  inquired as  to  who  initially paid  for                                                               
facilities and power lines, the power companies or the state.                                                                   
                                                                                                                                
MR.  ROSE   stated  that   most  of   the  generation   and  some                                                               
transmission has  been funded by individual  power companies, the                                                               
cooperatives, and the municipalities of  the Railbelt.  The state                                                               
has also built  and owns some transmission, such  as the Northern                                                               
Intertie  between Healy  and Willow,  and the  undersea cable  to                                                               
connect  Fire Island  Wind to  the  Chugach Electric  Association                                                               
system.    In  further  response  to  Representative  Nageak,  he                                                               
confirmed that the rates differ in each jurisdiction.                                                                           
                                                                                                                                
11:26:59 AM                                                                                                                   
                                                                                                                                
CO-CHAIR  VAZQUEZ  asked Mr.  Rose  to  explain how  the  present                                                               
congestion  on the  Railbelt grid  affects  the renewable  energy                                                               
industry.                                                                                                                       
                                                                                                                                
MR. ROSE explained  that for variable resources such  as wind and                                                               
solar,  there are  issues for  integrating those  sources into  a                                                               
grid,  especially in  a small  balancing area.     Increasing the                                                               
balancing area to include the  entire region would allow variable                                                               
sources  to come  into the  grid at  any time.   For  example, in                                                               
Iowa, 35  percent of  electricity comes from  wind, which  can be                                                               
done without storage because there  is a very big balancing area,                                                               
and wind can be easily integrated whenever it's available.                                                                      
                                                                                                                                
11:28:34 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  WOOL   surmised  RCA   is  skeptical   about  the                                                               
neutrality or  independence of a  system operator, and  whether a                                                               
board that includes  the utilities may not  be independent enough                                                               
to satisfy  RCA.  He asked  Mr. Rose to envision  the composition                                                               
of the board.                                                                                                                   
                                                                                                                                
MR.  ROSE said  RCA's skepticism  was related  to the  utilities'                                                               
ability  to  voluntarily  reform  the Railbelt  system,  not  how                                                               
independent  the  governance  board   should  be.    He  directed                                                               
attention to a  letter found in the committee packet  from RCA to                                                               
the legislature,  dated 6/30/15,  which addressed ISOs  and their                                                               
status  necessary to  make impartial  decisions.   The commission                                                               
has  indicated   it  will  assess  quarterly   reports  from  the                                                               
utilities over  the next  year to  determine what  the governance                                                               
and organizational structures should be.                                                                                        
                                                                                                                                
11:30:31 AM                                                                                                                   
                                                                                                                                
BRADLEY   EVANS,  Chief   Executive  Officer,   Chugach  Electric                                                               
Association,  Inc.  (CEA),  informed   the  committee  CEA  is  a                                                               
privately-held    electric    cooperative   owning    generation,                                                               
transmission,  and  distribution   assets  serving  approximately                                                               
200,000  customers through  over 82,000  meters in  Southcentral,                                                               
and the  seller of wholesale  power in the open  Railbelt market.                                                               
In addition, CEA is the  only electric utility that interconnects                                                               
all   of   the   Railbelt  utilities   via   its   privately-held                                                               
transmission  system.    Mr.  Evans  provided  a  brief  personal                                                               
history of his extensive experience  in the industry, and said he                                                               
has  studied  regional transmission  operators  and  ISOs in  the                                                               
Lower 48 as  they are related to planning and  integration of the                                                               
generation and transmission assets in  the Railbelt.  He stressed                                                               
that CEA supports  the concept of an  independent, unified system                                                               
operator (USO) for  the following reasons:  a USO  allows for the                                                               
economic dispatch  of electric power  in the Railbelt which  is a                                                               
crucial economic engine for success;  a USO would provide for the                                                               
identification  and  implementation   of  cost-effective  systems                                                               
upgrades; a USO would  provide independent nondiscriminatory open                                                               
access and  the implementation of uniform  reliability standards;                                                               
a USO would  condition the interconnection of  new facilities and                                                               
integration   into  the   grid.     Further,  CEA   supports  the                                                               
implementation  of a  Transco that  supports the  functions of  a                                                               
USO,  invests  private capital,  and  develops  and implements  a                                                               
unified transmission tariff  applied on an equitable  basis.  Mr.                                                               
Evans said  CEA recognizes that  short-term rate  adjustments may                                                               
be  necessary.   Both  a  USO and  a  Transco  are necessary,  as                                                               
possible  losses  to  utilities   may  be  recouped  by  economic                                                               
dispatch,  although   projections  indicate   there  will   be  a                                                               
"transition phase."  The Transco  would be similar to those found                                                               
in the  Lower 48.   In 2013, CEA was  the first to  introduce the                                                               
concepts of  a USO, open  access, system-wide  economic dispatch,                                                               
unified   transmission  tariffs,   and  the   potential  customer                                                               
benefits of  a rationalized Railbelt  electric system.   Further,                                                               
CEA hosted the  first workshop in Alaska on  grid restructure and                                                               
unified   operations   in   collaboration   with   the   American                                                               
Transmission   Co.  (ATC),   which  was   attended  by   over  50                                                               
participants, and  which inspired  many further public  events on                                                               
this topic.                                                                                                                     
                                                                                                                                
11:35:38 AM                                                                                                                   
                                                                                                                                
MR.  EVANS continued,  noting CEA  is responding  to instructions                                                               
from  RCA  regarding   quarterly  updates.    In   light  of  the                                                               
aforementioned  recent progress  and  activities, he  recommended                                                               
that  the  committee hold  HB  187  for  two  reasons:   (1)  the                                                               
legislation would halt the current  efforts by interested parties                                                               
to   restructure,   would   overturn   the   current   regulatory                                                               
instructions,  and would  result in  budgetary problems;  (2) the                                                               
authority proposed  by HB 187 may  not be needed.   The latter is                                                               
important  to utilities  that  have  relayed their  restructuring                                                               
efforts  to their  rating agencies,  because their  restructuring                                                               
efforts  did not  include  the mandates  of HB  187.   Mr.  Evans                                                               
opined that  lenders are more comfortable  with voluntary efforts                                                               
and  collaboration, and  he is  unsure of  their reaction  to the                                                               
legislation.    He  said  he  appreciated  the  interest  of  the                                                               
committee  and its  continued attention  to the  progress of  the                                                               
utilities,  RCA,  and  the  stakeholders.     He  encouraged  the                                                               
committee to  revisit HB 187 in  the event the utilities  fail to                                                               
bring  change to  the Railbelt  electric utility  infrastructure.                                                               
Mr.  Evans said,  "I encourage  the legislation,  I just  ask for                                                               
time."                                                                                                                          
                                                                                                                                
11:39:29 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE NAGEAK  asked whether  rating agencies  have found                                                               
discernable differences between the Railbelt utilities.                                                                         
                                                                                                                                
MR. EVANS said  CEA and Anchorage Municipal Light  & Power (ML&P)                                                               
are the  only rated utilities  in the Railbelt region  of Alaska.                                                               
The  other Railbelt  utilities obtain  financing through  federal                                                               
funds and other  sources; utilities are rated in  order to access                                                               
capital through the public and private market.                                                                                  
                                                                                                                                
REPRESENTATIVE   WOOL  recalled   earlier  testimony   that  REAP                                                               
supports a [USO]  board with minimal or no  representation by the                                                               
utilities.  He asked for CEA's stance in this regard.                                                                           
                                                                                                                                
MR.  EVANS said  CEA  envisions an  independent  USO board  whose                                                               
members have  no agenda outside  of the operation of  the system.                                                               
In fact,  one who represents  a specific sector would  not likely                                                               
be placed  on the board, but  would exert influence on  the board                                                               
through steering  committees.  The preferred  board would consist                                                               
of current  industry experts from the  Railbelt and stakeholders,                                                               
who would be a blending  of interests through a transition phase.                                                               
A future goal  may be that the utilities do  not have a majority.                                                               
Furthermore, outside  experts are  not needed, but  the utilities                                                               
are needed  to supply resident  expertise so that  the regulators                                                               
know the system.   Mr. Evans expressed his belief  that the state                                                               
cannot populate  a truly  independent board  with members  who do                                                               
not  have other  interests.   He acknowledged  that CEA  and REAP                                                               
disagree on this  point, which is up for public  debate; CEA does                                                               
support a  mix of independent, segment  stakeholders, and utility                                                               
members on  the board  who have been  through a  rigorous vetting                                                               
process.                                                                                                                        
                                                                                                                                
11:44:55 AM                                                                                                                   
                                                                                                                                
BRIAN HICKEY, Executive Manager,  Grid Development, CEA, directed                                                               
attention  to a  document entitled,  "Restructuring Opportunities                                                               
in the Railbelt,"  dated 1/28/16, found in  the committee packet.                                                               
He provided a short personal  background of his experience in the                                                               
industry.  Mr.  Hickey said that the progress that  has been made                                                               
over the  last three  years, and especially  during the  last six                                                               
months, is  unprecedented, due to  the impetus provided by  a RCA                                                               
study  which was  funded by  the  legislature; in  fact, all  six                                                               
utilities are  rationally discussing  both a  Transco and  a USO.                                                               
The   current  effort   is  to   establish  two   entities:     a                                                               
transmission-only  utility  with   regional  authority  and  rate                                                               
recovery for  planning, financing, and operating  and maintaining                                                               
the  Railbelt  transmission  system;   and  a  non-asset  owning,                                                               
revenue neutral, stakeholder governed  USO under the authority of                                                               
RCA,  with regional  responsibility for  economic dispatch,  cost                                                               
settlement and  benefit allocation, planning  and interconnection                                                               
protocols,  and  maintaining  reliability  standards  [slide  2].                                                               
Challenges to  the Railbelt  grid are:   no mechanism  for making                                                               
regional  decisions;  a  lack   of  regional  economic  dispatch;                                                               
coordination    between   multiple    grid   operators    creates                                                               
difficulties;  a lack  of a  unified transmission  tariff impedes                                                               
independent  project  developments;  difficult to  make  regional                                                               
transmission  improvements   without  equitable   cost  recovery;                                                               
difficult  to maintain  universal reliability  standards with  no                                                               
uniform rules  of the road [slide  3].  To solve  these problems,                                                               
at the  behest of  all six Railbelt  utility managers,  the chief                                                               
executive   officer   of    the   Alaska   Railbelt   Cooperative                                                               
Transmission  and  Electric   Company  (ARCTEC)  is  facilitating                                                               
discussions related to staffing the  governing structure of a USO                                                               
[slide 4].                                                                                                                      
                                                                                                                                
11:51:34 AM                                                                                                                   
                                                                                                                                
MR.  HICKEY  continued to  slide  5,  just  to  add that  CEA  is                                                               
seriously  responding  to the  6/30/15  letter  from RCA  to  the                                                               
legislature.   Five utilities have  executed a  joint development                                                               
agreement and formed a steering  committee tasked with developing                                                               
a Transco  through the work  of nine subcommittees:   governance;                                                               
operations   and   maintenance,  and   transitional   agreements;                                                               
economic dispatch  based on agreed-upon models;  cost and benefit                                                               
allocations  and analysis,  including establishing  protocols and                                                               
agreed-upon ratios for reallocation  to offset higher costs borne                                                               
by certain utilities and avoid  "rate shock"; conform reliability                                                               
standards  between Homer  Electric Association  and the  Intertie                                                               
Management Committee; HR and  organizational structure, which has                                                               
completed  an  organizational  chart  with  staffing  and  costs;                                                               
finance,  which  has  created  a five-year  model  of  a  unified                                                               
company   with    all   of   the   Railbelt    assets   combined;                                                               
communications,   which  handles   press   releases  to   public;                                                               
regulatory, which  has completed a  draft unified tariff  for the                                                               
Railbelt  [slide   6].    Mr.   Hickey  said  a  report   on  the                                                               
subcommittees' work  was submitted  to RCA  on [12/31/15]  and is                                                               
available  to the  committee.   He praised  the influence  of the                                                               
American Transmission  Co., which has  been integral in  the work                                                               
of the  subcommittees, and "had the  ability to bring all  of the                                                               
utilities  together."    Finally, he  summarized  the  completion                                                               
schedule as  follows:  documents  will be presented  to governing                                                               
boards in  the late  second or  early third  quarter of  2016; if                                                               
approved, the  restructuring process  would begin in  early 2017;                                                               
and  the statutory  change request  from RCA  to the  legislature                                                               
would be  possible in  the 2017  session [slide  7].   Mr. Hickey                                                               
restated CEA's request to hold HB 187 in committee [slide 8].                                                                   
                                                                                                                                
12:00:00 PM                                                                                                                   
                                                                                                                                
KRISTEN COLLINS,  representing herself, said she  supports HB 187                                                               
because it  will save Alaskans  money on the cost  of electricity                                                               
and  would increase  the generation  of renewable  energy in  the                                                               
Railbelt.  She  encouraged legislators to keep  climate change at                                                               
the forefront  of their concerns  and said the bill  is necessary                                                               
to integrate  more renewable energy generation  and reduce carbon                                                               
emissions, and is a step forward.                                                                                               
                                                                                                                                
12:01:03 PM                                                                                                                   
                                                                                                                                
CORY  BORGESON, President  and  Chief  Executive Officer,  Golden                                                               
Valley Electric  Association (GVEA),  informed the  committee the                                                               
utilities in the Railbelt are  working in a cohesive and positive                                                               
manner to bring  changes to the Railbelt.  A  different system is                                                               
important and  needed to address  the changes in  transmission in                                                               
the region.   The Railbelt has always had  economic dispatch, but                                                               
it was simpler  when electrical generation was by  CEA, ML&P, and                                                               
GVEA.  Currently,  more regulation and a  systematic approach are                                                               
needed.  Mr.  Borgeson stated changes will  require the utilities                                                               
to  compromise, and  there  will  be "winners  and  losers."   He                                                               
expressed his belief  that while working with  ATC, the utilities                                                               
will achieve a Transco, and  ultimately a USO with an independent                                                               
board  over a  period of  time.   Mr. Borgeson  advised that  the                                                               
present  system  in  the  Railbelt   is  extremely  reliable  and                                                               
reminded the committee  that the utilities are  like public power                                                               
in  that they  are not  owned by  investors, therefore,  economic                                                               
dispatch is  in their members'  best interest.   There is  a role                                                               
for  ARCTEC related  to the  USO and  a role  for ATC  related to                                                               
transmission, the  finance aspects of economic  dispatch, and the                                                               
settlement  process.    He  concluded   that  the  utilities  are                                                               
committed to bring  forward a new system  to increase reliability                                                               
and  reap  economic  benefits  from  an  efficient  and  economic                                                               
system; however,  he cautioned  that the  needed upgrades  to the                                                               
transmission line  system in the  Railbelt will be  expensive and                                                               
will  raise rates  because  the  state will  not  help build  the                                                               
infrastructure.   Finally,  he agreed  that renewable  energy and                                                               
wind power are good, but  renewable power is expensive, and power                                                               
sourced from  independent power producers  (IPPs) will  not drive                                                               
down the cost of power.                                                                                                         
                                                                                                                                
12:06:43 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE WOOL described the  procedures related to economic                                                               
dispatch.  He  asked whether the potential  savings from economic                                                               
dispatch are known, and will be  sufficient to offset the cost of                                                               
upgrades to the Railbelt transmission system.                                                                                   
                                                                                                                                
MR. BORGESON assured the committee  that GVEA is always searching                                                               
for the  cheapest power;  integrating with  other utilities  in a                                                               
more complex system  will add savings but the  amount is unknown,                                                               
although  there have  been estimates  of $100  million per  year.                                                               
American Transmission Co.  has a model underway  that may provide                                                               
insight into the amount of  potential savings.  He confirmed that                                                               
the savings  will be utilized  to invest  into a more  robust and                                                               
reliable transmission system.                                                                                                   
                                                                                                                                
12:09:25 PM                                                                                                                   
                                                                                                                                
ERIC   MYERS,   Manager   of   Business   Development,   American                                                               
Transmission   Company,  informed   the   committee   ATC  is   a                                                               
transmission-only   electric   utility  owned   by   cooperative,                                                               
municipal,  and investor-owned  electric utilities.   Founded  in                                                               
2001,  ATC was  the first  multi-state transmission-only  utility                                                               
(Transco)  in  the  U.S.    The  focus  of  ATC  is  to  build  a                                                               
transmission system  which allows  energy producers  to transport                                                               
electric  power in  a manner  similar to  the interstate  highway                                                               
system,   with   high-voltage   electricity  traveling   on   the                                                               
transmission system wire like vehicles  on the highway.  The goal                                                               
today  is to  provide  an  update on  the  progress of  voluntary                                                               
efforts by the  Railbelt's six utilities to  identify and achieve                                                               
improvement  to the  region's  transmission  assets and  benefits                                                               
from  more efficient  utilization of  generation.   In 2013,  ATC                                                               
began  to work  with each  of  the Railbelt  utilities about  how                                                               
ATC's experience  in forming a transmission-only  utility through                                                               
the collaborative  effort of all  of the utilities might  work in                                                               
Alaska.  Before  the utilities can decide to form  a Transco they                                                               
have  to commit  to the  achievable economic  benefits, including                                                               
both  local  and  regional  impacts.     In  2014,  the  Railbelt                                                               
utilities  endorsed a  set of  guiding principles  for forming  a                                                               
Transco, and assigned senior staff to  a working group.  The task                                                               
of  the  working  group  included  validation  of  the  potential                                                               
benefits of  improving economic dispatch  by a model, as  well as                                                               
to validate  dispatch analysis.  In  addition, Railbelt utilities                                                               
have committed  to working  with ATC to  complete a  process that                                                               
informs an ultimate  decision on whether to form a  Transco.  Key                                                               
objectives  of the  process  are:   validate  and  or verify  the                                                               
potential  economic benefits;  design an  effective transmission-                                                               
only  utility structure  to operate,  maintain,  and improve  the                                                               
infrastructure  under  a common  set  of  standards and  planning                                                               
criteria; identify a tariff and  cost allocation methodology that                                                               
can provide  open access to  network transmission  service, which                                                               
is  a  tariff  allocation  process; support  the  development  of                                                               
approaches  to  settling power  transactions  under  a pooled  or                                                               
unified dispatch of generation,  which is the settlement process.                                                               
Mr. Myers said the Railbelt  utilities have committed substantial                                                               
staff  and resources  to addressing  the  above; however,  before                                                               
proceeding  all  must  agree  to   completing  the  process,  and                                                               
providing  the  results  to  leaders  and  associated  governance                                                               
organizations.    Copies  of  the   progress  reports  issued  in                                                               
September and  December of  2015 were  provided in  the committee                                                               
packet.                                                                                                                         
                                                                                                                                
12:14:33 PM                                                                                                                   
                                                                                                                                
CO-CHAIR   VAZQUEZ  requested   further  identification   of  the                                                               
aforementioned documents.                                                                                                       
                                                                                                                                
MR. MYERS said the reports to  RCA were prepared on behalf of all                                                               
of the utilities and ATC, and were [dated 9/30/15 and 12/22/15].                                                                
                                                                                                                                
There followed further clarification of the documents.                                                                          
                                                                                                                                
12:16:12 PM                                                                                                                   
                                                                                                                                
DAVID  GILLESPIE,   Chief  Executive  Officer,   Alaska  Railbelt                                                               
Cooperative  Transmission   &  Electric  Company,   informed  the                                                               
committee the  members of ARCTEC  are:  GVEA,  Matanuska Electric                                                               
Association (MEA),  CEA, the  City of  Seward, and  Copper Valley                                                               
Electric Association.   Each member  exists to provide  low cost,                                                               
sustainable,  and reliable  energy service  to its  residents and                                                               
cooperative  owners.   Mr. Gillespie  noted his  complete written                                                               
testimony is included in the  committee packet; he summarized his                                                               
written statement by emphasizing  that he supported the unanimous                                                               
view  that something  needs  to be  done, and  there  is much  in                                                               
common as  to how  to do so.   He said  progress continues  to be                                                               
made, and he urged the committee not  to move HB 187, but to wait                                                               
for updates on further progress.                                                                                                
                                                                                                                                
CO-CHAIR  VAZQUEZ  asked Mr.  Gillespie  to  clarify his  present                                                               
role.                                                                                                                           
                                                                                                                                
MR. GILLESPIE  provided a short  personal background,  noting his                                                               
experience in  the electric utility  industry working  with large                                                               
and small entities.  In  further response to Co-Chair Vazquez, he                                                               
said   ARCTEC's  primary   role   is   to  facilitate   USO-based                                                               
activities, and  to implement  a USO in  the Railbelt.   Although                                                               
not  all of  the utilities  are ARCTEC  members, ARCTEC  has been                                                               
able  to  gain  the  support  and participation  of  all  of  the                                                               
utilities, and  hopes to issue a  filing with broad support.   In                                                               
response to  Co-Chair Colver, he  said the  aforementioned filing                                                               
is due  1/31/16 and  will be available  to the  committee shortly                                                               
thereafter.                                                                                                                     
                                                                                                                                
12:20:50 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE TILTON expressed her  appreciation of the progress                                                               
that has  been made by  the utilities,  and reviewed some  of the                                                               
work that has been completed.   She said she supported holding HB                                                               
187 in committee.                                                                                                               
                                                                                                                                
CO-CHAIR  COLVER  expressed  his appreciation  of  the  attention                                                               
garnered by  this issue, and  of RCA's leadership.   The proposed                                                               
legislation  is acting  as a  vehicle to  support the  utilities'                                                               
efforts  and to  encourage  the utilities  to  work together  and                                                               
resolve this issue.                                                                                                             
                                                                                                                                
CO-CHAIR VAZQUEZ  recalled that some  of the related  issues have                                                               
been a  problem for decades.   She recognized the work  of all of                                                               
the utilities  and that of the  RCA, and noted that  the Railbelt                                                               
consists of  six utilities  - reaching from  Seward and  Homer to                                                               
Fairbanks -  which provide electricity to  about three-fourths of                                                               
the state's population.                                                                                                         
                                                                                                                                
REPRESENTATIVE  TALERICO   recommended  that   the  participating                                                               
parties provide  any appropriate information to  the committee so                                                               
that  the committee  can remain  active in  the progress  on this                                                               
issue.  He  stated that one of his concerns  regarding HB 187 was                                                               
that the  major consumers of  power did not  have a voice  in the                                                               
bill.   In addition,  if there  is a  progression from  a unified                                                               
system  operator to  an independent  system operator,  an outline                                                               
for  the  progression  is  necessary.    Representative  Talerico                                                               
opined that Alaska has sufficient expertise in this matter.                                                                     
                                                                                                                                
REPRESENTATIVE CLAMAN cautioned that the  biggest issue is how to                                                               
construct the  [board] that  makes up  either the  independent or                                                               
[unified] system operator,  and opined that consumers  - large or                                                               
small -  desire that the  utilities have  a minority role  in the                                                               
number  of seats  on the  board.   This would  send a  message to                                                               
constituents  statewide   that  the   work  being  done   on  the                                                               
electrical grid in the Railbelt is what is best for Alaska.                                                                     
                                                                                                                                
CO-CHAIR  COLVER   announced  at  the  meeting   of  2/2/16,  the                                                               
committee  is scheduled  to hear  from staff  an overview  of RCA                                                               
documents,  dockets,  filings,  and  activity  to  date  on  this                                                               
matter.                                                                                                                         
                                                                                                                                
12:28:06 PM                                                                                                                   
                                                                                                                                
HB 187 was held over with public testimony open.                                                                                

Document Name Date/Time Subjects
HB187 Scheduling Memo (for 28Jan2016 Hearing_Capitol17_Rvn).pdf HENE 1/28/2016 11:00:00 AM
HB 187
HB187 Docs RCA_Findings_Reccomendatns_(6p_30June2015 (002).pdf HENE 1/28/2016 11:00:00 AM
HB 187
HB187 Docs 2nd Submittal to RCA Railbelt (22Dec2015).pdf HENE 1/28/2016 11:00:00 AM
HB 187
White Paper Railbelt Issues Grid+Iso_Uso (RSK_28Jan2016 Hearing) (1).pdf HENE 1/28/2016 11:00:00 AM
White Paper_IssuesAssoc ISO/USO/Transco Railbelt
HB187 - Prepared Remarks of Chugach Electric Association - Presented to ....pdf HENE 1/28/2016 11:00:00 AM
HB 187
House energy 1-28-16 progress report Bwe comments - Final (rsk).pptx HENE 1/28/2016 11:00:00 AM
Chugach Electric Association ppt Restructuring Opportunities in the Railbelt
HB 187 ARCTEC 1-28-2016.pdf HENE 1/28/2016 11:00:00 AM
HB 187
HB0187A BASIS referenced Jan2016.pdf HENE 1/28/2016 11:00:00 AM
HB 187
HB187 Fiscal Note (22Jan2016).pdf HENE 1/28/2016 11:00:00 AM
HB 187