2015-01-30                     House Journal                      Page 0107
HB 86                                                                                                                         
HOUSE BILL NO. 86 by the House Rules Committee by request of                                                                    
the Governor, entitled:                                                                                                         
                                                                                                                                
    "An Act relating to investment of the power cost equalization                                                               
    endowment fund; and providing for an effective date."                                                                       
                                                                                                                                
was read the first time and referred to the Labor & Commerce and                                                                
Finance Committees.                                                                                                             
                                                                                                                                
The following fiscal note(s) apply:                                                                                             
                                                                                                                                
1.  Zero, Dept. of Revenue                                                                                                      
                                                                                                                                
The Governor's transmittal letter dated January 28, 2015, follows:                                                              
                                                                                                                                

2015-01-30                     House Journal                      Page 0108
"Dear Speaker Chenault:                                                                                                         
                                                                                                                                
Under the authority of Article III, Section 18 of the Alaska                                                                    
Constitution, I am transmitting a bill relating to the investment of the                                                        
power cost equalization (PCE) endowment fund (AS 42.45.070).                                                                    
                                                                                                                                
The PCE endowment fund provides annual funding for the PCE and                                                                  
rural electric capitalization fund (AS 42.45.100).  The primary purpose                                                         
of the PCE and rural electric capitalization fund is to annually fund the                                                       
PCE program, which reduces the cost of energy in areas of the state                                                             
that experience high electric energy costs.                                                                                     
                                                                                                                                
The bill would amend the powers of the Commissioner of Revenue to                                                               
invest amounts in the PCE endowment fund.  Existing law obligates                                                               
the Commissioner of Revenue to invest the endowment fund "in a                                                                  
manner likely to achieve at least a seven percent nominal return over                                                           
time."  This investment mandate requires the Commissioner of                                                                    
Revenue to invest with excessive or undue risk in a low-rate                                                                    
environment.  The investment strategy also does not enable the                                                                  
Commissioner of Revenue to match the endowment fund's investment                                                                
policy to the needs of the PCE program.  The bill would eliminate the                                                           
riskier investment mandate and enable the Commissioner of Revenue                                                               
to establish a more appropriate investment policy by considering the                                                            
amounts of anticipated draws from the endowment fund that would be                                                              
necessary to meet the financial needs of the power cost equalization                                                            
program.                                                                                                                        
                                                                                                                                
I urge your prompt and favorable action on this measure.                                                                        
                                                                                                                                
Sincerely,                                                                                                                      
/s/                                                                                                                             
Bill Walker                                                                                                                     
Governor"