Vol. 26, No.15 Week of April 11, 2021
Providing coverage of Alaska and northern Canada's oil and gas industry

Concerns are raised over ERO regs for oversight of electric grid

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Alan Bailey

for Petroleum News

While work continues in the Regulatory Commission of Alaska, developing regulations for RCA oversight of electric reliability organizations in Alaska, controversy is also continuing to emerge over how prescriptive the regulations should be, and over whether or not an ERO should be regulated as a public utility. Electric utilities are questioning whether the regulations can realistically be developed by a July 1 statutory deadline.

Some recent RCA filings relating to the regulation development have focused on these issues. But during an April 7 RCA public meeting the commission decided to continue its regulatory development process, as planned.

Implementing SB 123

The RCA is developing the regulations in order to be able to implement Senate Bill 123, a bill passed during last year’s legislative session to enable the commission to regulate EROs. The primary purpose is to enable the implementation of an ERO for the Alaska Railbelt electrical system, to provide a more unified and efficient approach to the overall management of the system. The Railbelt electric utilities are in the process of forming the Railbelt Reliability Council, or RRC, as an ERO for the Railbelt. The RRC will require RCA approval before it goes into operation. And that approval will depend on an implemented set of ERO regulations.

SB 123 set a deadline of July 1 for completion of the regulations. However, some components of the regulations are clearly taking significantly longer than the commission had hoped. Normally the commission has two years, rather than one year, in which to develop new regulations.

Statement from utilities

On March 29 the five Railbelt utilities filed a statement with the RCA, expressing concern that the ERO regulations that the commission is developing for ERO certification and governance, and for oversight of integrated resource planning, are “ambiguous, internally inconsistent, overly complex, and exceed the commission’s statutory authority.” The utilities recommended that the commission request the Legislature to approve a 12-month extension to the time allowed for regulation development.

“The truncated timeline is frustrating the required public process and limiting effective, meaningful interaction with the full commission, creating concern that improperly vetted and rushed regulations, unsupported by a robust, meaningful public record, will be adopted,” the utilities wrote.

Importance of governance

Governance of an ERO is an especially important issue. ERO decisions need to represent some appropriate balance of the interests of the various stakeholders in the system, including electricity consumers; the utilities that generate, transmit and distribute the power; and independent power producers. Interest in expanding the use of renewable sources of electricity such as wind power also factors into the governance issues.

A key question arises over how prescriptive the commission should be in spelling out governance parameters such as the structure of the ERO board of directors. A more flexible approach would involve more general regulatory statements about expectations for the board and ERO governance, with the commission evaluating an ERO proposal when a potential ERO applies for certification. Under SB 123 the commission also has regulatory oversight of integrated resource planning and the development of major new electricity facilities - similar issues arise around how prescriptive these regulations should be.

And so, while the RCA is anxious to ensure that an approved ERO will oversee an electrical system in a fair and balanced manner, a prospective ERO, while needing regulatory clarity, will likely want as much leeway as possible for creativity in determining its governance structure and the manner in which it operates.

The utilities argued, in their filing, that the intent of the SB 123 legislation was to have a regulatory process that specifies what the commission wants an ERO to do, but not how an ERO does it.

In an April 1 filing with the commission, Cook Inlet Region Inc. responded to the filing by the utilities, with CIRI saying it is satisfied with the manner in which the commission is developing the ERO regulations and that it does not agree with or understand the utilities’ concerns. CIRI, as operator of a wind farm on Fire Island, offshore Anchorage, is an independent power producer in the Railbelt.

“The requested delay will not be helpful to mitigate concerns outlined in the (utilities’) letter, but rather will cost consumers more money and further delay the benefits of an ERO,” wrote Suzanne Settle, CIRI vice president, energy land and resources.

A public utility?

Another legal issue has arisen over whether an ERO should be regulated as a public utility, or whether it is some other form of business. While the RCA, in developing its regulations, has been taking a view that an ERO is not a traditional utility, the state Office of the Attorney General, Regulatory Affairs and Public Advocacy Section, has expressed a view that an ERO is a public utility. The utilities, in their filing, argue that there would be questions over the RCA’s statutory authority to regulate an ERO, if the ERO is not a public utility, and that the RCA needs to ask the attorney general’s office to issue a formal opinion on the matter.

In an April 2 filing Matanuska Electric Association argued that the commission should view an ERO as a public utility but also recommended that the commission should resolve the issue by obtaining an official legal opinion.

Different perspectives

During the April 7 public meeting electric utility executives expressed their support for the intent of SB 123 and the regulatory process that is needed to implement it. But the executives also reiterated their concerns about the need for well crafted regulations and the amount of time needed to draft these regulations.

On the other hand, Chris Rose, executive director of Renewable Energy Alaska Project, asked why the question of an extended deadline has just come up now, given that everyone has known the July 1 deadline since the SB 123 legislation was debated and passed.

“At this point we’ve got legislation, we’ve got a lot of progress on these regulations, we’ve got a lot of progress with the RRC, and we should be moving on,” Rose said.

Rose also commented that, in his view, an ERO is clearly not a public utility.

Too late for deadline change request

Extending the deadline for regulation change would require the state Legislature to pass a bill containing language making an appropriate change to the statutory language of SB123. In the course of discussions during the April 7 meeting, it became evident that the commission would have to request this statutory change through the governor’s office, and that the commission had already missed a statutory deadline for making a request of this type during the current legislative session. And, so, it is not currently feasible for the commission to request to have the deadline extended.

In terms of the question of whether an ERO is a public utility, Commissioner Antony Scott, who is leading the commission’s work to develop the ERO regulations, said that, regardless of whether the state attorney general publishes a formal opinion on the matter, the question would remain open to legal challenge through the courts. And Stuart Goering, assistant attorney general with the RCA, told the commission that nowadays the attorney general only issues written advice rather than formal opinions, the only question being whether that advice is published publicly. Moreover, especially given the need for the attorney general’s office to support the current legislative session, there is considerable uncertainty over how quickly the office could respond to even an urgent request.

The upshot was that a majority of commissioners voted against a motion to issue an urgent request for a formal attorney general opinion on whether an ERO is a public utility. And the commission is continuing to work on the development of draft ERO regulations, under a July 1 deadline for completion.


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