Alaska State Legislature
News from the Joint Committee
on Electric Utility Restructuring

Wendy Lindskoog, Senate Majority Press Secretary, (907) 258-8184
Jerry Ritter, House Majority Press Secretary, (907) 258-8164
716 West 4th Avenue, Suite 510
Anchorage, AK 99501
http://www.akrepublicans.org
Actuality Line: 1-800-478-6540

Electric Utility Restructuring -- What is it?

For Immediate Release: September 11, 1998 Contact: Representative Norman Rokeberg at (907) 258-8191 or Sen. Bert Sharp at (907) 452-7885.

Anchorage -- The Legislature’s Joint Committee on Electric Utility Restructuring is considering whether Alaska should permit competition among electrical utilities, that is, a modified form of deregulation similar to the competition now permitted among telecommunication providers.

What is "electric utility restructuring"? How does it impact the Alaskan consumer? Everyone who receives an electrical bill could be largely impacted through changes in how electrical service is delivered. Currently, each Alaskan electric utility has an exclusive service area granted to them by the Alaska Public Utilities Commission ("APUC").

A wholesale competition restructuring model would permit the electric industry’s structure to change over time. A full-scale retail competition model under which customers would be offered a choice of purchasing electricity from "x" or "y" utility or from an electricity marketer (a company who purchases electricity from one place and resells it to a consumer) would be a more radical restructure. Companies owning transmission lines would have to allow all electrical suppliers to use those transmission lines for a fee. The end result, hopefully, is lower cost to the consumer and a competitive market encouraging more efficient management of utility companies. A disadvantage is the potential for "cherry-picking" which means electrical utility company "x" may offer lower rates to a big commercial consumer of electric utility company "y" to gain market share. That situation has the potential of making company "y’s" electrical rates increase to cover the lost revenue, thus negatively impacting all "y’s" remaining consumers. Full-scale restructuring could mean that an Anchorage customer could receive services from any utility or provider along the Railbelt grid.

Alaska’s Joint Committee is to make its recommendations by January 1999 and to address whether or not Alaska should implement some form of restructuring. The committee is in the process of holding hearings and two meetings were held in August where the committee heard from many interest groups and took public testimony. A number of Anchorage businesses (i.e., representatives from shopping malls, private schools, large building owners, etc.) testified in favor of deregulation and rated receiving lower electrical rates a high priority. Only a few individual consumers testified and most expressed some serious concerns about the impact of restructuring on residential electrical rates. We are concerned that the general public’s voice has not been heard on this matter. Our third meeting is scheduled for September 16^th, beginning at 10:00 a.m., at the Fairbanks Legislative Information Office. We encourage statewide participation. Teleconference hook ups will be available at the Anchorage, Kenai, Kodiak, Matanuska-Susitna, and Juneau Legislative Information Offices. Other sites may be added as interest warrants.

Alaska faces a unique and complex situation regarding restructuring. Unlike the Lower 48, we are not tied into any national transmission grid. Alaska’s interconnected transmission grid basically covers the Railbelt Area (Fairbanks to Homer). Electric utilities in Alaska are mostly consumer-owned or municipal-owned (which means that the Alaskans own most of the electric utilities in Alaska) and consideration must be given to the impact on those consumer-owned facilities, including their bonding capacity. We also face questions regarding reliability (when it’s 50 degrees below zero, Alaskan consumers want to know their electrical company can meet the demand), stranded investments (investments made to meet peak demand periods and provide for future growth), for capital credit accounts (for member-owned cooperatives), consumer education (explanations to each consumer so that an informed choice can be made), and the role of the APUC in defining a competitive electric market.

Other issues which need to be considered are: universal service (who supplies electricity to a more remote location), "power pooling and economic dispatch" (which can provide more efficient and cheaper generation), wholesale competition, preventative maintenance, rate structuring, etc. Cost shifting is also an issue – would this be a "zero-sum" game benefiting large users vs. the residential consumer?

The Legislature needs to clearly address the issue in statute. Alaskans are already receiving the benefit of the threat of electric competition as utilities recognize that some form of competition is on the horizon particularly in the form of new technology, which will allow "stand alone" generation by micro-turbines, fuel cells, solar panels, and other methods. In order to benefit the retail customers, including residential consumers, the Legislature has to give direction to APUC and has the constitutional obligation to set policy. Discussions have been held about an independent third-party study addressing Alaska’s situation. Other proposals include: a pilot program limited to a defined geographic area; or go ahead and allow full competition and address problems as they appear.

What do you think? The committee would like to hear from Alaskans concerning this matter. Written comments may be sent to the Joint Committee, c/o Rep. Norman Rokeberg, 716 West Fourth Avenue, Anchorage, AK 99501; faxed to 258-2916; or e-mailed to: Representative_Norman_Rokeberg@legis.state.ak.us

We encourage your participation in this process.

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Representative Norman Rokeberg (R-Anchorage) represents House District 11; Senator Bert Sharp (R-Fairbanks) represents Senate District P. Other committee members are: Senator Loren Leman (R-Anchorage); Senator Robin Taylor (R-Wrangell); Senator Al Adams (D-Kotzebue, Representative Alan Austerman (R-Kodiak), Representative Fred Dyson (R-Eagle River) and Representative John Davies (D-Fairbanks).