Legislature(2015 - 2016)BARNES 124
04/13/2015 03:15 PM LABOR & COMMERCE
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HB 169-RCA: RAILBELT ELECTRIC UTILITY REPORT 3:19:45 PM CHAIR OLSON announced that the first order of business would be HOUSE BILL NO. 169, "An Act directing the Regulatory Commission of Alaska to provide a report to the legislature relating to electrical transmission in certain areas of the state; and providing for an effective date." 3:20:20 PM KONRAD JACKSON, Staff, House Labor & Commerce, Representative Kurt Olson, Chair, stated that HB 169 would direct the Regulatory Commission of Alaska (RCA) to review and make recommendations regarding a process whereby an Independent Railbelt Transmission Operator would be created. The Railbelt energy system consists of an interconnected electrical transmission system in Southcentral Alaska which encompasses the Bradley Lake hydroelectric plant on Kachemak Bay near Homer north to Fairbanks. The interconnection of the communities by these transmission lines helps keep a significant number of people of Alaskans safe and secure. With long distances between utility companies and their generation facilities, the interconnected system is of great importance. The interconnect system helps bring reliable electricity to a large percentage of Alaskans should not to be taken lightly, he said. MR. JACKSON said the transmission authority proposed to be evaluated by the RCA would act as more of a "craigslist" type of authority. Instead of mandating utilities pledge their assets to one controlling entity, this concept would allow continued local control of assets while at the same time maximizing the value and reliability of the interconnected system. Using this approach, excess power could be posted as available and be purchased as needed by any utility. This would promote usage of the most economical power along the interconnected system at all times. Without local control of assets, some utilities stand to be losers while others stand to gain from these losses. Consumer pricing and reliability across the Railbelt is critical for any transmission company to work in the long-term. 3:22:35 PM MR. JACKSON said that willing participation and continued local control of assets should also be considered critical as Alaska continues to look towards an ISO [Independent System Operator] concept along the Railbelt. Last year the RCA was tasked with the job of reporting to the legislature whether creating an independent system operator was the best option to provide for effective and efficient electrical transmission. The RCA is nearing completion on its work and the intent of HB 169 is not to interrupt the foregoing work, but to allow the legislature to consider any further direction to the RCA. He characterized HB 169 as a first step in that regard. In response to Representative Kito, he stated that House Bill 340 was considered by the legislature in 2014 and directed the RCA to look at a similar concept with an independent system operator (ISO) and report back to the legislature. This bill refers to a slightly different ISO and the reporting date falls one year later, he said. 3:25:00 PM REPRESENTATIVE KITO, referring to the fiscal note, suggested some cost should be associated with it, but the fiscal note was identified as indeterminate through 2021. He questioned why the report would still be ongoing in 2021 and also said he was a little confused why the fiscal note was indeterminate. He further asked for clarification on the source of funding for the report. MR. JACKSON offered his belief that last year House Bill 340 had a fiscal note. He deferred to Mr. Patch, RCA to speak to the fiscal note. He surmised that some of the funds might be available for this report, but Mr. Patch could better answer questions on the fiscal note. 3:26:25 PM BRAD JANORSCHKE, General Manager, Homer Electric Association (HEA), stated that the RCA has been directing a study which was funded during the last legislative session to consider whether creating an ISO or similar structure for the Railbelt transmission system is the best option for effective and efficient use of the transmission system. Although the RCA's efforts were appreciated, he offered his belief that HB 169 would provide additional direction and clarity on the RCA's analysis. This bill would direct the RCA to evaluate the creation of an independent entity to manage the transmission system and the entity, regulated by the RCA, and must meet criteria the Homer Electric Association (HEA) has identified as important. The entity would be required to attain a Certificate of Public Convenience and Necessity from the RCA and operate under a tariff. Secondly, participation in such an entity would be voluntary, he said, which is a critical attribute for HEA. While each utility's participation is important, each utility should voluntarily enter into the arrangement since a voluntary model encourages cooperation and reduces the magnitude of winners and losers. He said he recently talked to Alaska Municipal Light & Power's (AML&P) chair, Jim Trent, who couldn't participate today since he was attending an RCA hearing. However, Mr. Trent advised him that he also felt very strongly that any entity created should be voluntary in order to better allow for consensus on a common set of principles and standards and to mitigate any losers in the process. Lastly, the entity envisioned in HB 169 will allow for continued local control of assets, while at the same time it will maximize the value and reliability of an interconnected system, he said. 3:29:20 PM MR. JANORSCHKE said that the entity envisioned in HB 169 will manage and create a voluntary and transparent wholesale energy market without adding significant administrative overhead, which will be the most economical distribution of wholesale power on the Railbelt. He said that HEA has worked with other utilities, without a middle man, to ask for bids on short term spot market energy needs, which has been fairly successful. The Railbelt has been going through some increases and ratepayers and members have had to shoulder most of those rising costs. Thus the HEA has tried to mitigate circumstances that will add to the costs. Last September, all the Railbelt utilities signed a [MOU] Memorandum of Understanding adopting guiding principles of a Railbelt "transco" [or transmission company]. This bill appears to be entirely consistent with those principles, he said. The entity envisioned by HB 169 would be transparent and nondiscriminatory and adhere to established planning and reliability standards. He stated that these standards and protocols would be based on established objective transmission, operating, maintenance, planning, and design principles to promote safety, reliability, and economic efficiencies across the Railbelt grid. 3:31:16 PM T.W. PATCH, Commissioner, Chair, Regulatory Commission of Alaska (RCA), Department of Commerce, Community & Economic Development (DCCED), stated he is a commissioner and Chair of the Regulatory Commission of Alaska. 3:31:58 PM The committee took an at-ease from 3:31 p.m. to 3:34 p.m. 3:34:33 PM MR. PATCH stated that the RCA recently got a new state phone system. [Mr. Patch was unable to testify due to technical difficulties with the audio.] 3:35:46 PM The committee took an at-ease from 3:35 p.m. to 3:36 p.m. due to technical difficulties. 3:36:54 PM CORY BORGESON, President & CEO, Golden Valley Electric Association (GVEA), stated that the GVEA has 34,000 members and provides electric service as an electric cooperative owned by its members in Interior Alaska. He spoke in support HB 169. The GVEA has faith in the RCA, he said, noting that Mr. Patch has done a phenomenal job. Most Railbelt utilities generally support changes in how the Railbelt interties are operated. He related his understanding that how the Railbelt dispatches its energy needs to be reevaluated, which is exactly what HB 169 is intended to do. As Mr. Janorschke mentioned, the composition of the Railbelt utilities has changed in the past few years and will continue to evolve as Matanuska Electric Association (MEA) becomes a self-generating utility. He reported that the Railbelt consists of five utilities that produce third generation and there needs to be additional rules and regulations as the Railbelt becomes "a bigger club." Historically, three utilities primarily produced all of the energy, but as the Railbelt has grown and matured some additional rules, organizations, and structures will be necessary. The Railbelt utilities have been discussing the need for change over the past few years. MR. BORGESON acknowledged that some information that has come to the legislature has been from independent power producers, who have had some issues with their ability to connect to the intertie for their own projects. As utilities have become more complex, they realize that an evolution is necessary in the Railbelt. He stated that Golden Valley Electric Association (GVEA) supports the study that is contemplated in HB 169. All six utilities have signed the "guiding principles," which indicates the cooperative spirit that has evolved in the Railbelt towards this issue. The guiding principles have been filed with the RCA so they are also available for committee members to review. One concept in the bill is for a voluntary organization. As Homer Electric Association stated, that aspect is important to them. The GVEA believes that the markets will prevail and as the new system is developed, the Railbelt will have a better economic dispatch of energy that will save Alaskans on electric costs. He appreciated this bill coming into play. He anticipated that discussions will continue over the summer. 3:41:01 PM CHAIR OLSON hoped the committee could work on HB 169 over the legislative interim. 3:42:33 PM CHAIR OLSON left public testimony open. [HB 169 was held over.] The committee took an at-ease from 3:42 p.m. to 3:44 p.m.