HB 307—The Legislative Process

Published February 27, 2025

By Brian Kassof

This is the second part of our overview of HB 307. It focuses on the politics of HB 307 and the formation of a Railbelt Transmission Organization. A discussion of the bill’s contents and implementation can be found in its companion article.

 The Railbelt refers to the region between the Kenai Peninsula and Fairbanks. There are five Railbelt electric utilities, four of which—Homer Electric Association (HEA), Chugach Electric Association (CEA), Matanuska Electric Association (MEA), and Golden Valley Electric Association (GVEA)—are cooperatives. The fifth is the municipal Seward Electric System.

A Complex Legislative Process:

The passage of HB 307 complicated, even by legislative standards. It combined elements of five different bills, and went through many iterations. The final version of the bill was only approved in the last hour of the legislative session. Many elements of the bill can be traced to the recommendations of the Alaska Energy Security Task Force (AESTF). This body was convened by Governor Dunleavy in 2023 to recommend steps, including legislation, to reduce the cost of energy in Alaska and enhance the state’s energy security.

The initial version of HB 307 (and its Senate counterpart, SB 217) were introduced in February at the governor’s behest. It called for the creation of an association of the Railbelt utilities to administer an (Open Access Transmission Tariff) OATT, which the Regulatory Commission of Alaska (RCA) was to develop. It also included a version of the independent power producer (IPP) tax-break included in the final bill. Most of the other elements included in the final version of HB 307 came from other bills. Many were taken from SB 257, which was introduced at the beginning of March by Senator Cathy Giessel (R-Anchorage)—this included a more robust Regional Transmission Organization (RTO), along with the new qualifications for RCA commissioners, the new criteria for the RCA to evaluate utility rates, and the changes to the Railbelt Reliability Council (RRC). The increase in funding for the RCA, recommended by the AESTF, was originally in a separate bill, HB 313. The creation of an independent Alaska Energy Authority (AEA) board started as an executive order from the governor, which was later introduced as SB 243.

For much of the session, debate over these bills took place in the Senate, and centered on SB 217 and SB 257. SB 257 was referred to the Senate Labor and Commerce Committee, which held numerous hearings on it in March and April, while the Senate Resources Committee, chaired by Giessel, held concurrent hearings on the original version of SB 217. At the same time, there were behind the scenes negotiations with numerous stakeholders about SB 257’s provisions. These included discussions of how much responsibility the RTO should be given and whether part or all of the RRC’s responsibility for drafting an Integrated Resource Plan (IRP) should be transferred to the RTO. Giessel acknowledged many of those involved in these discussions during the final Senate vote on HB 307, mentioning the Railbelt utilities, AEA, the governor’s office, IPPs, Holdmann, and consumer and environmental advocates (the Alaska Public Interest Group (AKPIRG) and the Renewable Energy Alaska Project (REAP)).

On April 19, many provisions from SB 257, revised to reflect the negotiations that had taken place, were introduced into a Senate Resources Committee substitute for SB 217. This version of SB 217 now became the primary energy bill in the Senate. An amended version of SB 257 was passed out of the Senate Labor and Commerce Committee at the end of April, but was never heard by the Senate Finance Committee. The Finance Committee instead focused on SB 217 after it was advanced by the Senate Resources Committee on April 29.

HB 307 had a much slower start in the House; the House Finance Committee held its first hearing on the bill on April 16, over two months after its introduction (the bill had bypassed the House Special Committee on Energy). In early May, HB 307 was amended to incorporate some, but not all, of the provisions that had been added to SB 217. While the Senate version included a more powerful RTO, one that managed the transmission system, the House version limited the RTO to developing and administering the OATT. The House version of HB 307 also omitted other parts of SB 217, including the heightened qualifications for RCA commissioners.

HB 307 was passed by the full House on May 13. Several floor amendments were added during the vote, including two substantive ones. An amendment proposed by Representative Kevin McCabe (R-Big Lake) instructed AEA to compile a report on using rate reduction bonds to fund the expansion of the Railbelt transmission system. These bonds are repaid through a monthly surcharge on ratepayers. Rate reduction bonds are usually used by utilities to pay for ‘stranded assets’—the closure of old, uneconomical plants. The use of such bonds had not come up during committee hearings on any of the transmission bills.

A second amendment, proposed by Representative Jesse Sumner (R-Wasilla), forbid utilities from recovering costs associated with the construction of a liquified natural gas (LNG) import facility in their rates. This had been an amendment to another bill, HB 394, which had passed the House, but died in the Senate. Originally, HB 394 had language explicitly allowing utilities to recover these costs in rates. But a committee substitute on April 29 inserted the word “not” into the text. On the House floor, Sumner argued that allowing utilities to recover these costs in their rates would give LNG an unfair advantage over local fuel sources (including, presumably, gas from Cook Inlet or the North Slope). After minimal debate, the amendment was adopted by a vote of 39-1.

The bill then moved to the Senate, where the Finance Committee removed the two House floor amendments and inserted a number of provisions from SB 217 that the House had not incorporated. The question of the RTO remained an open one—the members of the Senate Finance Committee continued working with a version of SB 217 that included a more powerful RTO. However, on May 15 they voted to pass a compromise version of HB 307—this was the bill’s final version. It kept some of the Senate’s additions, like new qualifications for RCA commissioners, but kept the House’s less powerful version of the RTO.

Although they agreed to the House version of the RTO, the Senate Finance Committee indicated that they did not believe this issue was settled. They added a statement of legislative intent to the bill, stating that if the Legislature appropriates future funds to pay for upgrades or expansions to the Railbelt transmission system, then the issue of ownership would need to be addressed. This leaves the door open for the Legislature to revisit the RTO’s power in the near future if such funding is provided.

The Senate Finance Committee did not approve the final version of HB 307 until 7 p.m. on May 15, the final day of the legislative session. After brief debate, it passed the full Senate at 10:20 p.m. by a margin of 18-2, with Senators Jesse Bjorkman (R-Nikiski) and Gary Stevens (R-Kodiak), both of whom represented parts of HEA’s service area, voting against. Because of the changes made by the Senate Finance Committee, the bill now had to return to the House for concurrence. The House voted to pass HB 307 at 11:14 p.m., just 45 minutes before the session needed to close. The vote was 36-4, with Representatives Ben Carpenter (R-Nikiski), David Eastman (R-Wasilla), Justin Ruffridge (R-Soldotna), and Sarah Vance (R-Homer) voting no. With the exception of Eastman, all represented areas served by HEA. The Governor signed the bill into law on July 31.

Why Legislative Intervention Was Needed to Form an RTO:

From a technical standpoint, it was not clear if legislative intervention was necessary for the creation of an RTO). The Railbelt utilities initiated talks about doing this in the fall of 2023. But many observers, including legislators, were skeptical that these efforts would succeed. Despite some recent successes, the Railbelt utilities have historically had a difficult time collaborating on projects. It was believed that legislative intervention would be necessary if real progress were going to be made. The subsequent utility positions on HB 307 confirmed this—without direct legislative intervention, it is unlikely the Railbelt utilities would have formed an RTO in the next few years.

Serious discussions about the creation of an organization to operate the Railbelt transmission system go back over a decade. In 2014, the Legislature commissioned the RCA to prepare a report on reforming the Railbelt electric system. The RCA made its recommendations in June 2015. Among them was the creation of an independent transmission company to operate the Railbelt system. The RCA recommended allowing the utilities an opportunity to create this company on their own; if they failed, then legislative intervention would be required.

Although the RCA said the utilities should be given an opportunity to create a transmission organization on their own, it expressed considerable skepticism that they would succeed. Its report described them as “fragmented, balkanized, and often contentious.” At that time, the Railbelt utilities were embroiled in a multi-year court case over transmission-related issues. There were several attempts at creating an independent transmission company over the next four years, but they all fell apart. In 2019, the Railbelt utilities did sign a memorandum of agreement to form an electric reliability organization (ERO), leading to the creation of the RRC, which was certified as the Railbelt ERO in 2022). But this only took place after legislation mandating the creation of such an entity (SB 123) had been introduced (SB 123 was passed in 2020--REAP has compiled a useful timeline of these efforts).

In the past four years, the Railbelt utilities have successfully collaborated on a number of initiatives relating to the Bradley Lake hydroelectric project (which they jointly operate). This includes the issuance of bonds to upgrade transmission lines and development of the Dixon Diversion project that would add to Bradley Lake’s capacity. Through Bradley Lake they also collaborated on grant applications for federal funds to upgrade the Railbelt transmission system, receiving one for $206.5 million as part of the Grid Resilience and Innovation Program (GRIP—the Trump administration has frozen these grants, leaving their future uncertain).

In 2023, the governor convened the AESTF. As its work progressed, it became clear it would recommend that all Railbelt transmission assets be unified under AEA or a new non-profit entity. This may have factored into the informal agreement made in October 2023 by the Railbelt utilities’ CEOs to explore the creation of a transmission organization and development of a unified transmission tariff.

According to testimony given to the Senate Resources Committee in April 2024 by HEA’s Chief Strategy Officer, Keriann Baker, this agreement was sketched out on the back of a napkin during a trip to Iceland. This trip, sponsored by the Alaska Center for Energy and Power (ACEP) at the University of Alaska, Fairbanks, was to study how Iceland had created a unified transmission grid in the 1990s. Upon their return to Alaska, the Railbelt CEOs formed two working groups under the Bradley Project Management Committee (BPMC, which runs Bradley Lake), one to consider how to structure a transmission organization and the other to develop an OATT. They even hired outside consultants to assist each group. (For more on the activities of these groups, which later became the RTO Organizing Committee, see this AETP piece on the BPMC).

Despite this collaboration, many observers remained skeptical that the Railbelt utilities would be able to reach a final agreement on these plans without outside intervention. Gwen Holdmann, Senior Researcher at ACEP, gave one explanation why collaboration was so challenging to the Senate Resources Committee in March 2024. Railbelt consumers overall would benefit from greater integration of the electric system, but the immediate impact on different utilities would vary. The leaders of the cooperatives see defending the interests of their members as their primary responsibility, so they would block attempts at integration that did not benefit them in the near term, even if they might benefit in the longer term.

Others put matters in blunter terms. John Burns, GVEA’s CEO and President, told the House Finance Committee in April 2024 that the utilities needed the Legislature to force them “into the sandbox” to work together. In May 2024, MEA’s CEO Tony Izzo told the Senate Finance Committee that without the Legislature forcing change, Railbelt utilities would continue to make what he characterized as “myopic, sometimes xenophobic decisions.” When Representative Alyse Glavin (I-Anchorage) asked Andrew Jensen, the governor’s advisor on energy, if the RTO could be formed without legislation, Jensen replied that if that were possible, it would have happened decades ago.

It became evident during the hearings for HB 307 and related bills that the Railbelt utilities were not, in fact, on the same page about when a Railbelt transmission organization should be created and what authority it should have. Two utilities—GVEA and MEA—favored the immediate creation of a strong RTO that would manage the transmission system. For much of the session, CEA supported the original version of HB 307, which had the RCA, not an RTO, developing an OATT. Only in early May did it finally come out in support of a version of the bill with the RTO drawing up the transmission tariff. But CEA remained adamantly opposed to an RTO that would manage or own the transmission system. Given that CEA is by far the largest of the four Railbelt cooperatives and that it owns and operates key sections of the transmission network, its opposition on these issues likely carried significant weight with legislators.

The fourth Railbelt cooperative, HEA, was staunchly opposed to the creation of any RTO at this time. HEA’s representatives, including its CEO, Brad Janorschke, told House and Senate committees that HEA supported the creation of an independent system operator for the Railbelt grid, but only once the necessary upgrades were made to eliminate all interregional transmission constraints. Creating an RTO and developing an OATT before that time, one HEA representative argued, “merely socializes existing costs and shifts those costs to others.”

HEA’s representatives argued that they would see little or no benefit from the creation of an RTO because of the current constraints on transmission in and out of their service area. Only one transmission line connects the western Kenai Peninsula to the rest of the Railbelt, and some of its capacity is dedicated to bringing power from Bradley Lake to other utilities. On-going work to upgrade this segment of the transmission system means that for the next five years, HEA will be cut off from the rest of the grid entirely for 2-4 months a year. For this reason, HEA wanted, at the very least, to delay the creation of an RTO until the completion of a second transmission line linking it to the rest of the Railbelt. This is the project the GRIP grant is supposed to fund—an undersea transmission line running to CEA’s Beluga power plant. The target date for this project’s completion is 2031. While HEA was not able to prevent the passage of HB 307, a provision was added requiring the OATT to take into account periods when a utility is cut off from the rest of the grid (islanded) for more than 24 hours.

Acronyms used in this article:

ACEP—Alaska Center for Energy and Power at the University of Alaska, Fairbanks

AEA—Alaska Energy Authority

AESTF—Alaska Energy Security Task Force

AKPIRG—Alaska Public Interest Resarch Group

BPMC—Bradley Project Management Committee

CEA—Chugach Electric Association

ERO—Electric Reliability Organization

GVEA—Golden Valley Electric Association

HEA—Homer Electric Association

IPP—Independent Power Producer

IRP—Integrated Resource Plan

LNG—Liquified Natural Gas

MEA—Matanuska Electric Association

OATT—Open Access Transmission Tariff

RCA—Regulatory Commission of Alaska

REAP—Renewable Energy Alaska Project

RRC—Railbelt Reliability Council

RTO—Railbelt Transmission Organization

Legislation Mentioned:
HB 307—Energy bill passed in 2024

SB 217—Senate companion to HB 307, introduced in 2024

SB 257—Senate energy bill introduced in 2024; some provisions were integrated into the final version of HB 307

SB 243—Bill creating independent board for AEA, introduced in 2024. Merged into HB 307

HB 313—Bill to raise the limit of the RCA’s regulatory surcharge, introduced in 2024. Merged with HB 307.

SB 123—Bill introduced in 2019 and passed in 2020 requiring the creation of a Railbelt ERO