HCRA-260518-0800

House Community and Regional Affairs Committee meeting to order. Today is Monday, May 18th, and the time is 8:17 a.m. Members present are everyone: Representative Kai Holland, Representative Mike Prox, Representative Carolyn Hall, Representative Steve Sinclair, Representative Garrett Nelson, Co-chair Rebecca Himschoot, and myself, Co-chair Donna Mears. We have a quorum to conduct business. Just a reminder for everyone, first thing in the Good morning. Silence your cell phones.

If you need to pass a note to committee members, please get the attention of my aide, Talia Ames. Thank you, Talia. And also thanks to the co-chair, Himschutz Committee aide, Thatcher Brower. Before we get started, I'd like to thank our recording secretary, Sophia Tenney, and helping us out today from the Juneau LIO is Jude Augustine. We have one bill on our agenda this morning.

We will have a bill introduction, invited in public testimony, and consider amendments for SB 250, Data Centers Utilities, sponsored by Senator Tobin. We'll get as far as we can in the next few minutes, and then we'll see see what the day brings us. We will then look to the will of the committee for this legislation. This bill was referred from over from the Senate, and this is the first hearing in the House. SB 250, Senator Tobin and staff.

Mr. Louie Flora, please welcome to the committee. Please approach the table, put yourself on the record, and begin your presentation on SB 250. Good morning, Madam Chairwoman and members of the committee. My name is Lukey Gale Tobin, and I represent Senate District I. I'm Louis Flores, staff to Senator Lukey Tobin.

Thank you. Well, thank you again for, uh, allowing us to have this hearing so early in the morning. I really appreciate the time that you were giving us to talk about, uh, SB 250, which is at its heart is a consumer protection bill. We have all heard about the data centers that are being, uh, put forth in communities across the United States and the significant upheaval and disruption that they are causing. And of course, the community backlash, we know that that community backlash has been severe.

And there has been billions of dollars of canceled projects, because there has been no consistency in how those communities are able to vet and thoroughly negotiate whether they'd like a particular facility built in their community. One of the things we know is that data centers have caused significant impacts to the natural environments in those communities, oftentimes disrupting land use, water use, electricity rates for ratepayers who are residential. Uh, what SB 250 attempts to do is really provide, uh, guardrails to ensure that communities and those data center facilities are able to negotiate fairly and with one another, uh, to ensure that there is no hampering of potential, potential in development, and there is no change in the perception of the community's will, that there is no backlash that ends up having those projects canceled. Now, we've been working with stakeholders to really ensure that this bill is focused on consumer protection, that it doesn't step outside of just creating that guard— those guardrails, that expectation that everybody needs to sit and work together. Uh, one of the things we do want to note is this piece of legislation really takes a cue from President Trump.

Earlier this year, President Trump proposed a new rule to require data centers to pay for their transmission lines. This rule is currently under consideration by our federal government, but essentially it says that we should not have ratepayers foot the bill for this infrastructure that is being built. So with that, and as we know, your time is limited. We do have a few folks who are online that can provide some additional testimony, and of course, we are happy to walk through a sectional analysis. Thank you.

Let's go to invited testimony. We have— Ms. McKittrick is online. So Ms. McKittrick, please put yourself on the record and share with us.

Hello, through the chair, this is Erin McKittrick. I am an independent in Philadelphia. I also sit on the board of Palmer Electric Association, but I am not speaking for them and do not represent them. Speaking on my own behalf here. Um, time is limited, but I wanted to make the most important point, I think, which is that The way that electricity rates are designed is based on a history of incremental load growth, where load grows slowly across lots of different sectors, and you have this cost-payor mechanism that means when it does, actually, everybody comes out ahead and saves money.

The issue across the country today is that data centers are so big that they break that model. And their load growth, instead of making everything cheaper for everybody, can end up making it more expensive. And so that's why data centers need new forms of consumer protection to ensure that they're actually helping the rest of our grid rather than hurting it. And I'd be happy to answer questions on the actual— details of how that works. Thank you.

So I wanted to put a little perspective to folks on data centers because our office has been working on this as well. So the total demand for the rail belt is about 3/4 of a gigawatt, give or take. There's news just this week that there's a 1-gigawatt facility being contemplated for the North Slope, which is more than the entire load that we've got now. Of course, that'd be isolated from our rail belt grid, but it shows the potential for these, these impacts. I see the— I see the opportunity in data centers.

It's been mentioned in the gas line discussion that having more in-state demand is beneficial. I— for that project, I see that in-state demand from data centers, mining, military, helping with renewable projects that need that critical mass to be helpful. And that, yes, that backlash from the public on, on, on projects is substantial. Terra Energy had a proposal for their facility out in Mat-Su, and the public pushback just at the concept has been pretty significant. So people are looking for consumer protection and environmental protection.

And there are tools that utilities have, but They are in a negotiation process. They're not set out ahead of time. So one of the things that I'm looking for from this legislation, which I believe you are as well, Senator Tobin, is that those guidelines are clear. So when projects are looking to come to Alaska, they know what their parameters are. The communities know what their parameters are.

The public knows what those parameters are. And these are things that are being negotiated. Now, and it brings all those parameters into focus early on. So yes, I was about to turn to community discussion and questions. Representative Nelson.

Yes, thank you.

I just to jump— thank you, Madam Co-Chair— just to jump right into it, you know, you brought up the Matsu example. And there was significant pushback, and there is a process for that which they are going through right now. And so I think to just paint it as— now, I am frankly kind of ambiguous, but just to paint it as a, you know, that like there is just resistance, I don't think is quite accurate. And as we are going to jump into discussion now, I see this legislation as incredibly prescriptive for local municipalities and co-ops and utility companies that do already have this process in place. So that's kind of my initial comment.

I know that we're trying to move fast, which this is not something we should move fast on, but I just want to say that those processes are largely already in place. And, uh, I think this would preempt or that this would, this would eliminate individual associations and cooperations from making agreements with data centers or any kind of power generation that the people that are in those individual areas think is best for them. It's my initial comment. Madam Chair, Lukey Tobin for the record, Senate District I, through the chair. Representative G. Nelson, thank you for that.

And I do want to just note here in the legislation, if you look on page 2 and again on page 3, we recognize that not all communities have the same capacity. Matsu Borough is quite mature and advanced. There are many communities across the state that don't necessarily have all the resources that Matsu has to have those deliberations and discussions. So within this legislation, what we do request is from the data centers that are making those contracts with utilities to ensure that there is clear information for the public to be able to adequately vet and assess whether this is the right project for their community. This is always about local control.

We want to ensure that the local community gets to choose what happens in their boundaries. So again, if you're looking at page 2 starting on line 27, we say that that contract that the data center is engaged with, with the local utility, must include specific information. Again, that is to ensure consumer protection. If we move to page 3 starting on line 24, subsection I, we talk about community benefit agreements. In that we don't say that your community benefit agreement has to look a certain way or has to say this is what's right for you.

But we do say you need to address certain issues, particularly in the Matsu community. They are very well equipped to defend their community members, ensure that they're getting the right deal for their neighbors. However, we know that there's many places across Alaska that don't have those resources, and we want to ensure that these data centers have a good framework and understanding as they're coming to Alaska and asking to build their facilities in our communities. We also want to ensure that all consumers are protected across the state. So we recognize that for some it may look prescriptive, but really it is all about local control.

You get to decide what happens within your community. So I'm just going to make a note that we're going to have to recess here to the call of a chair very shortly. So if there's a couple of thoughts to get out and that we may or may not have time to get back to later today. I'm going to go to Representative St. Clair then since—. Can I follow up?

Quickly so that I want our other members that are in the question to get them out. Sure, yeah, I understand. And I appreciate those points, Senator, very much. So I think that— so my district is like on the edge of the Matsu and goes all the way to Valdez. So in the spirit of the discussion of local control, I think as we consider these things, as we do consider a, a statewide prescription, even though like we, we want to say that it's not prescriptive, but we are going to be making laws that will apply to everybody.

I think that it would be appropriate to have the— at least I'm only speaking for myself— I want the utilities and the co-ops that are in my district that would be directly affected by this, that are elected by the individual members living in those communities. I would like their testimony beyond just written testimony. Appreciated. Representative Sinclair. Thank you, Madam Chair.

Um, I'm thinking along the same lines as my, uh, counterpart here to the right. Esteemed colleague. Um, to my right, this is very prescriptive, and as the sponsor stated, the MATSU is very mature, and a lot of this would not apply to it. When it comes to data centers, there's a lot of misinformation out there, and I think that we need to get truthful, legitimate information out on the public outcry with data centers in the lower 48. Texas, they have to use a lot of water because it's hot.

North Slope, they're not going to have to use as much because it's cold. This is, this is, is again, I think, too prescriptive and narrows the, the path so much that it would actually discourage data centers from coming up here because they look at it, say, well, we got to do this, that, the other way. You look at it, a cost-benefit, you know, return on investment, and if the money's not there and it's too prescriptive they're not going to come. And as to the Terra Energy one, I would like to see— our grid can't handle a large data center, even in the Mat-Su Anchorage. We can't do it.

So if we had— if we built a, a power plant of some sort and then had the data center as an anchor tenant, they're basically paying for the majority of that. And that could— well, I don't think they can kick the electricity over to our grid system now because I think it would be way incompatibility. But potentially that could be, uh, energy, uh, to our grid or to help rebuild or strengthen our infrastructure so that we can continue. It would lower ratepayers' costs. I mean, we can't do it flat out.

We cannot do a data center with the infrastructure we have right now. We need something like Terra Energy having the— building a power plant with a data center as the anchor tenant. I mean, you do a contract for 20, 30 years, you know that you are going to get return on your investment for the power plant and for the data center. That is just my thoughts on it. I don't think we are quite there yet.

Thank you. Representative, something you want to get out on the record? Yes.

We don't really have time to evaluate what this is all about. We are focused on data centers because they make the news today, but the same thing applies to any significant— well, no, any commercial or industrial load that gets put on. They negotiate it. When we did the electric electrification project for Alyeska, we had to get in touch with Golden Valley and work it back and forth. When Kinross— well, it was way before Kinross, but the Fort Knox mine, same deal.

They had to build a transmission line out there. That was done, that was negotiated. We tried to build a subdivision. The owner-developer of the subdivision has to make an agreement with the utility that handles the load, etc. If you want to put in a solar farm or a wind farm, that's— well, they're running into that right now with Golden Valley, is that it doesn't fit into the power system.

So we shouldn't be just focusing on data centers. And we shouldn't be doing this at the last minute because it really is quite complicated.

And we shouldn't prescribe how that works. Does anybody else have anything briefly to get back out on the record? Because I have one more thing to say before we recess to the call of the chair. Madam Chair, I just want to say a few things just so I can bring some attention to the bill language. Again, Lukey Tobin for record, Senate District I.

Through the chair to Representative St. Clair, I just want to note Section 1 of the legislation. One of the things we don't want to do is have data centers need additional amenities such as transmission lines being built out or additional connectivity and having that being passed on to ratepayers. So again, as this is a consumer— consumer-focused, a consumer protection bill, we are— we are very prescriptive in that regard, is that you cannot pass those additional amenities that are required only for connection of the data center onto residential ratepayers. And to your concerns, Representative Prox, again, through the Chair, Lukey Tobin, for the record, I do want to note that in your bill packet you should have a several documents. One of those documents is a, uh, a piece that says $64 billion of data center projects have been blocked or delayed amid local opposition.

And one of the things we're trying to do here is encourage innovation and inspire, uh, these facilities to come to Alaska, cuz we do have some unique amenities that do, uh, provide us as a really unique place to build these things. What we don't wanna do is have local communities push back so significantly that we end up seeing canceled projects. And those projects uh, tell their friends and their friends choose not to come to Alaska. So what we're trying to do is create a set of guardrails, expectations that are fair and equitable for everyone, and also empower communities to make the right choices for themselves. So I've got one last thing.

I would like everybody to have conversations with your constituents about what their thoughts are on consumer protection for data centers. We'll recess to a call of the chair. All right.