Legislation introduced to level the playing field on utility tariffs
JUNEAU — Alaska’s independent power producers and Railbelt utilities are now battling it out in the Regulatory Commission and the Legislature.
House Bill 78, the Alaska Competitive Energy Act, would level the playing field between small, private power producers and utilities across the state, according to Rep. Tammie Wilson, R-North Pole, who sponsored the bill.
Wilson testified before the House Energy Committee March 3.
The state has put $212 million into power generation infrastructure over the last three years and a shift toward attracting private money for power projects needs to occur, according to Wilson.
“What this is really about is using private dollars to bring us lower cost (power),” Wilson said, referring to the financing mechanisms independent power producers often use.
The legislation would make the state “open for business” to power producers who currently are unable to negotiate fair power purchase agreements, or PPAs, she said, because of antiquated regulations.
Alaska has outgrown the regulatory framework that supports a monopolized utility system and needs to open access to its transmission network, Wilson said.
“We talk about access and fair a lot in this bill,” she said to the committee.
The extensive bill tackles many of the issues the Alaska’s independent power producers have raised over the years while struggling to integrate into the state’s electrical grids.
Independent power producers in the state have said some Alaska utilities are more concerned with controlling their own generation than buying the cheapest power. That mindset, combined with a regulatory structure that allows them to demand unreasonably low prices from independent power sources has stifled otherwise willing private investment, the producers claim.
If it becomes law, it would clarify regulatory statutes and give the authority and directive to the Regulatory Commission of Alaska to make sure state requirements for electric transmission access are in line with federal law, according to the bill’s analysis.
Further, HB 78 requires the RCA set “fair and nondiscriminatory” transmission tariffs, attorney for the Alaska Independent Power Producers Association, Teresa Clemmer said.
Ownership of Alaska’s electric transmission infrastructure is broken up amongst the state’s utilities. This has led to what is known as “rate pancaking,” where tariffs, or wheeling fees, are added on top of each other as power is sent through the grid, particularly in the Railbelt, where six utilities own some portion of the intertie.
It is one issue all parties agree needs to be resolved one way or another.
Because the Railbelt grid was built primarily with state funds, Clemmer said the tariffs should be set at a flat rate.
“These are public infrastructure systems similar to highways that everybody should have access to,” she said during her testimony to the committee.
It is this such rate pancaking that prevented Cook Inlet Region Inc. from selling wind power from its Fire Island Wind farm in Anchorage to Fairbanks’ Golden Valley Electric Association, according to CIRI representatives.
When CIRI couldn’t find a buyer for its power earlier last year the company missed a federal energy tax credit deadline and suspended its construction plan. CIRI had planned to spend $50 million to double what is now an 11-turbine wind farm.
A section of HB 78 would limit utilities to charging tariffs that cover their maintenance cost on transmission lines and private equity return if they have made their own investments in the infrastructure.
While the bill attempts to make sure the RCA has ample jurisdiction on most related matters, it limits the commission from ruling on bulk power sales outside of a utility service area.
Clemmer said there is no need for consumer protection when power is sold to a mine or other large industrial customer.
Overall, Clemmer believes HB 78 lays the groundwork for a Railbelt transmission company, or TRANSCO, which would lead investment in the rickety regional grid.
Multiple studies over the past couple years have concluded that in excess of $900 million is needed to improve the reliability and performance of the Fairbanks to Homer intertie that in some places is connected through a single line.
Large Midwest utilities American Transmission Co. and Xcel Energy Inc. have pitched ideas to legislators this session on ways they could lead a TRANSCO. Such a group would provide private investment in the Railbelt grid and encourage local utilities to invest rather than seeking state funding in a time when there is none to be had.
The local utilities argue that the Railbelt grid itself is the problem, not the regulatory structure.
Alaska Railbelt Cooperative Transmission and Electric Co. CEO David Gillespie testified that the Legislature needs to focus its efforts legislation that would lead to the formation of a unified system operator that would unilaterally govern the Railbelt.
ARCTEC is a consortium of four utilities: Golden Valley Electric Association, Matanuska Electric Association, Chugach Electric Association and Seward Electrical System.
Bringing Alaska law in line with the federal Public Utility Regulatory Policies Act, or PURPA, is unnecessary and the RCA is already working to resolve many of the issues HB 78 addresses, he said.
On Feb. 27, the RCA opened a docket to address whether or not the Railbelt needs a system operator. The commission currently has two years to finalize a docket matter; HB 78 would cut that timeline to one year.
“If our objective is to be more like PURPA, we don’t need a new law, we need to enforce the existing one,” Gillespie said.
Chugach Electric CEO Brad Evans wrote in prepared testimony to the Energy Committee that duplicative legislation and regulations increase the potential for inconsistent policy decisions. He expects the RCA proceedings “will result in the same playing field under PURPA as found in other states and likely eliminate any concerns HB 78 might be intended to address,” Evans wrote.
The detailed nature of HB 78 goes beyond what legislation should address; the finer points of regulation should be left to the RCA, according to Gillespie.
He said ARCTEC believes that independent power producers can adapt to the market in ways larger utilities cannot and that it is in everyone’s interest to create a fair and open system — just that HB 78 is not the best way to get there.
“We believe legislation should focus on what we are trying to accomplish and leave how we get there to regulators,” Gillespie said.
Elwood Brehmer can be reached at [email protected].