Legislature(2005 - 2006)HOUSE FINANCE 519
01/26/2006 01:30 PM House FINANCE
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| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 326 | TELECONFERENCED | |
HOUSE FINANCE COMMITTEE
January 26, 2006
1:39 p.m.
CALL TO ORDER
Co-Chair Meyer called the House Finance Committee meeting to
order at 1:39:03 PM.
MEMBERS PRESENT
Representative Kevin Meyer, Co-Chair
Representative Bill Stoltze, Vice-Chair
Representative Richard Foster
Representative Mike Hawker
Representative Jim Holm
Representative Reggie Joule
Representative Mike Kelly
Representative Carl Moses
Representative Bruce Weyhrauch
MEMBERS ABSENT
Representative Mike Chenault, Co-Chair
Representative Beth Kerttula
ALSO PRESENT
Jim Dalman, Division of Public Assistance, Department of
Health and Social Services; Mary Riggen-ver, Division of
Public Assistance, Department of Health and Social Services;
Laura Baker, Budget Chief, Division of Administrative
Services, Department of Health and Social Services; Mike
Harper, Deputy Director of Rural Energy, Alaska Energy
Association; Terri Harper, Program Manager, Power Cost
Equalization, Alaska Energy Authority; Sara Fisher Goad,
Financial Analyst, Alaska Energy Authority; Kate Giard,
Chair, Regulatory Commission of Alaska; Felix Meendez, CPA,
Utility Financial Analyst; Meera Kohler, President and CEO,
Alaska Village Electric Cooperative; Representative Mary
Kapsner; Representative Gabrielle LeDoux; Representative
Bill Thomas; Representative Berta Gardner; Representative
Woodie Salmon
PRESENT VIA TELECONFERENCE
None
GENERAL SUBJECT(S):
^
OVERVIEW - POWER COST EQUALIZATION/LOW-INCOME HOME ENERGY
ASSISTANCE PROGRAM
The following overview was taken in log note format. Tapes
and handouts will be on file with the House Finance
Committee through the 24th Legislative Session, contact 465-
6814. After the 24th Legislative Session they will be
available through the Legislative Library at 465-3808.
LOW INCOME HOME ENERGY ASSISTANCE PROGRAMS
TIME SPEAKER DISCUSSION
1:39:08 PM Co-Chair Meyer Introduced visiting legislators.
1:40:59 PM JIM DALMAN, Explained the purpose of the Low Income
DIVISION OF Home Energy Assistance Program (LIHEAP)
PUBLIC run under the Department of Health and
ASSISTANCE, Social Services as the Heating
DEPARTMENT OF Assistance Program (HAP). It is
HEALTH AND federally funded by a single block
SOCIAL grant of close to $12 million. A
SERVICES portion of that grant also funds eight
Alaska Native organizations that run
similar programs.
1:42:50 PM Mr. Dalman Reported that the program provides a
single annual benefit to qualifying
households beginning on November 1.
Forty percent of these households are
working people who are not receiving
other forms of public assistance. The
grants are typically paid to the home
energy vendor and vary according to the
size of household, area where it
resides, income, and the fuel type.
The grants vary from $200 to over
$1,000 with the average at around $800.
Roughly 10,500 households will be
served this year. The benefit is not
intended to see a family through a
whole year, but to offset energy costs.
1:45:56 PM Mr. Dalman Shared the problems related to an
increase in home heating costs this
year. One of the conditions of the
block grant is that it can be
transferred to AHFC to augment
weatherization expenses. Nearly 1/3 of
the grant gets distributed to Native
organizations.
1:48:22 PM Mr. Dalman Expressed pride as to how well the
program is working. The HAP is well
run and serves a good purpose.
1:49:26 PM Representative Asked about the range of price per
Joule gallon of home heating fuel. Mr.
Dalman said it ranges dramatically, but
is distributed proportionally.
1:50:32 PM REPRESENTATIVE Pointed out that the federal government
MARY KAPSNER is advocating $100 million more funding
for LIHEAP nationwide. She inquired if
the benefit to consumers would be about
21 gallons per household. Mr. Dalman
replied that it sounds about right. He
explained how the emergency contingency
fund money is released and distributed.
1:51:44 PM MARY RIGGEN-Added that the state receives about
VER, DIVISION two-thirds, and the tribes one-third.
OF PUBLIC She pointed out that even with the
ASSISTANT, additional funding, the amount is not
DEPARTMENT OF equal to last year's funding.
HEALTH AND
SOCIAL
SERVICES
1:52:34 PM Representative Requested to know the amount that the
Kapsner governor is proposing as a state match
of funds.
1:52:46 PM LAURA BAKER, Responded that the governor has
BUDGET CHIEF, proposed $8.8 million in state general
DIVISION OF funds to supplement the LIHEAP program.
ADMINISTRATIVE A portion of that money would go to
SERVICES, Native tribal programs.
DEPARTMENT OF
HEALTH AND
SOCIAL
SERVICES
1:53:05 PM Mr. Dalman In answer to a question from
Representative Kapsner about how much
of the additional $100 million would go
to the state, replied that the amount
of the contingency funding was about
$300,000. The state LIHEAP block grant
for the year was $11.9 million.
1:53:34 PM REPRESENTATIVE Asked about the timing of heating
BERTA GARDNER assistance applicants and availability
of funds at the end of the application
period. Mr. Dalman replied that
everyone who has applied in the past
has been served. It there were more
applicants than funding available, then
the regulations would require a halt in
services.
1:55:00 PM Ms. Riggen-ver Agreed and added that it is "first
come, first served".
1:55:16 PM Representative Asked if the agency provides incentives
Weyhrauch for fuel cost savings, such as
alternative sources of energy. Mr.
Dalman replied that indirectly it does.
There is a provision for the transfer
of some grant funds for weatherization
of low-income homes. There are no
funds for alternative energy sources.
1:56:55 PM Representative Asked how the payment is made. Mr.
Weyhrauch Dalman replied that the grant is set up
as a credit on the customer's home
energy bill, and as cash for renters.
Representative Weyrauch asked if it is
a problem keeping track of whether the
cash is used for home heating
assistance. Mr. Dalman explained the
process when cash is used for direct
payments to the provider. Ms. Riggen-
ver further explained that the program
would pay for up to a year's electric
credit before issuing cash.
1:58:48 PM Mr. Dalman Added that often special funding is
received later in the year and can
provide supplemental funding to a
supplier.
1:59:30 PM Representative Asked why the money is not given to the
Stoltze landlord. Mr. Dalman replied that
heating expenses are built into rent
increases and the program serves
renters.
2:00:46 PM Representative Suggested that the renter would have
Kapsner the lower income and qualify, not the
landlord. Ms. Riggne-ver agreed.
2:01:20 PM Representative Asked if there is any tracking of money
Joule spent on weatherization. Ms. Riggen-
ver replied that Alaska Housing Finance
Corporation (AHFC) has some of the
figures, but they are difficult to
track.
POWER COST EQUALIZATION PROGRAM
2:03:11 PM KATE GIARD, Introduced the presenters and described
CHAIR, how the Price Cost Equalization (PCE)
REGULATORY program is delivered. The PCE program
COMMISSION OF is administered jointly by the Alaska
ALASKA Energy Authority (AEA) and the
Regulatory Commission of Alaska (RCA).
AEA administers the overall program and
the funding, and RCA administers the
calculations of the reimbursements.
She referred to a handout published by
the Regulatory Commission of Alaska
(RCA) entitled "Certificated Utilities
by Legislative District" (copy on
file.)
2:06:16 PM Ms. Giard Referred to a handout "Power Cost
Equalization Costs and Rates" (copy on
file.)
2:07:15 PM FELIX MEENDEZ, Explained how PCE is administered. He
CPA, UTILITY referred to a set of slides "PCE
FINANCIAL Program Overview for the House Finance
ANALYST Committee" (copy on file.) He
described the process that RCA uses to
review reports to verify compliance
with efficiency standards to find
eligible costs.
2:12:11 PM Mr. Meendez Related how PCE rates are determined.
2:13:00 PM Mr. Meendez Shared rate statistics. He provided
statistics regarding the mean of the
cost per kWh in Anchorage, Fairbanks,
and Juneau (copy on file.)
2:15:10 PM REPRESENTATIVE Asked if the rate is based on the urban
WOODIE SALMON area average. Mr. Meendez replied that
is one of the considerations in the way
the rate is determined. The purpose
of the program is to close the gap
between urban and rural expenses, and
the program doesn't kick in until 12
cents per kWh is exceeded.
2:16:01 PM Mr. Meendez Explained the average split of power
cost per kWh.
2:17:25 PM Ms. Riggen-ver Called attention to the spreadsheet,
which clarified the impact of
hydroelectric power or other alternate
types of fuel on the average fuel cost
of utilities.
2:18:06 PM Mr. Meendez Explained the average cost trend of
fuel in the last five years.
2:18:51 PM Representative Asked if the cost included cleanup from
Stoltze spills. Mr. Meendez clarified that
costs included fuel delivery, and the
costs for spills may be covered, but
only if there is no negligence
involved.
2:20:26 PM Mr. Meendez Shared the graph on power cost per kWh,
the average of which is 42 cents per
kWh. There are many utilities that do
not fall within the eligibility rate of
38 cents or more per kWh.
2:22:25 PM Representative Asked if the rate included tax. Mr.
Kapsner Meendez replied that property tax and
income tax are included in the
utilities' revenue. Representative
Kapsner expressed that Napakiak is
paying more than 68 cents per kWh due
to sales tax costs. Ms. Riggen-ver
clarified that if a utility pays a tax,
then that is included in the cost base.
She said Representative Kapsner is
correct in her assumption.
2:24:20 PM Mr. Meendez Referred to the spreadsheet "Power Cost
Equalization Costs and Rates" (copy on
file), which shows the wide range of
what utilities are charging.
2:24:55 PM Representative Asked how communities with wind
Joule generation would be reflected on this
chart. Mr. Meendez replied that Wales,
Kotzebue, and Sand Point have wind
generators and are included on the
chart.
2:25:53 PM Ms. Riggen-ver Referred Representative Joule to the
second page of the spreadsheet. She
explained that those villages have less
than half of their fuel costs covered
because they do have alternative power
sources.
2:27:12 PM Mr. Meendez Discussed the graph on out of pocket
expenses for a 500 kWh bill.
Representative Joule asked how much
usage 500 kWh equals. Ms. Riggen-ver
gave examples of two households that
use 500 kWh.
2:28:56 PM Representative Asked if facility charges are included.
Stoltze Mr. Meendez explained utility bill
charges.
2:30:34 PM Mr. Meendez In response to a question from
Representative Salmon, related that the
utilities that are eligible for federal
monies use diesel fuel and are not
connected to a central power. Ms.
Riggen-ver explained that there are
rural electric utilities that are
excluded from the program for not
filing.
2:32:49 PM Mr. Meendez Related how rates are calculated for
Andreanof Electric Corporation as shown
on the spreadsheet.
2:34:48 PM Ms. Riggen-ver Explained that the last column shows
the amount of the customer bill for 500
kWh.
2:35:38 PM Representative Inquired why the current PCE rate is
Holm greater than the cost per kWh in many
instances. Ms. Riggen-ver explained
the process.
2:37:30 PM At-Ease
ALASKA ENERGY AUTHORITY
2:38:47 PM Reconvene
2:38:56 PM MIKE HARPER, Introduced himself and his staff, Sara
DEPUTY DIRECTOR Fisher Goad and Terri Harper.
OF RURAL
ENERGY, ALASKA
ENERGY
AUTHORITY
2:40:21 PM Mr. Harper Provided an overview of PCE in rural
Alaska, which affects 86 utilities,
spread over 183 communities, and over
20,000 customers. He stated that there
are over 400 million kWh sold by
utilities in the bush, with about 1/3
eligible for PCE.
2:41:17 PM Mr. Harper Noted that Governor Murkowski is in
support of the program. He thanked the
legislature for funding last year's
costs. Full cost coverage has been
requested in the FY06 supplemental
budget of $5.7 million. The request
for FY07 is for $25 million to approach
full funding.
2:41:58 PM SARAH FISHER-Spoke to the endowment, which was
GOAD, ALASKA created in FY01. The fund is managed
INDUSTRIAL by the Department of Revenue and it
DEVELOPMENT AND managed to earn 7 percent over time. 7
EXPORT percent of the 3-year monthly market
AUTHORITY value is available for the program.
The earnings rate in FY05 was 8.78
percent above the 7 percent statutory
requirement.
2:43:25 PM Ms. Goad Commented that for FY07, $11.67 million
dollars is available for the program.
2:43:49 PM Representative Asked for further clarification about
Kapsner the endowment.
2:44:16 PM Ms. Goad Replied that the endowment is set up as
a percent of market value fund. She
explained how it works and the current
earnings rate.
2:45:08 PM Ms. Goad Related that the current endowment fund
balance is over $179 million dollars.
The fund is doing very well.
2:45:30 PM Representative Inquired if it is still growing at 1.78
Kapsner percent each year. Ms. Goad explained
the average earnings and the statutory
requirement. She summarized that the
fund is earning as anticipated.
2:46:35 PM Representative Recalled that when the endowment was
Kapsner created in FY01 it was capitalized at
$180 million. She asked if the $250
million is now needed in order to
sustain the fund over time.
2:46:58 PM Ms. Goad Replied that $300 million would provide
7% over time. It depends on the
investment level.
2:47:26 PM Representative Asked if it should be at $300 million.
Kapsner
2:47:41 PM Ms. Goad Replied that full funding of the
program is $25 million right now.
There are variables at play.
2:48:16 PM Representative Asked what the number should be. She
Kapsner noted past confusion by members. She
asked, for the record if it is fully
endowed.
2:48:47 PM Ms. Goad Responded that the original fund was a
$15.7 million appropriation. The
endowment was set up and the 7 percent
was assumed to provide approximately
$13 million for the program. On a
historical level the endowment is
producing as anticipated.
2:49:50 PM Representative Asked if it could be inflation proofed.
Joule
2:50:01 PM Ms. Goad Replied that no additional funds go
into the endowment. It is not
inflation proofed.
2:50:19 PM TERRI HARPER, Offered to answer questions.
PROGRAM
MANAGER, POWER
COST
EQUALIZATION,
ALASKA ENERGY
AUTHORITY
ALASKA VILLAGE ELECTRIC COOPERATIVE
2:51:05 PM MEERA KOHLER, Provided members with a handout "Power
PRESIDENT & Cost Equalization - Myths and
CEO, ALASKA Realities" (Copy on File). She
VILLAGE provided an overview on PCE.
ELECTRIC
COOPERATIVE
2:52:15 PM Ms. Kohler Shared the history of PCE. In 1977
there was almost no transmission of
oil, diesel fuel was the prime source
of fuel, and there was very little
hydropower.
2:53:27 PM Ms. Kohler Once the oil started flowing down the
pipeline, the state began to spend its
newfound wealth. A transmission line
to Fairbanks was started.
2:54:32 PM Ms. Kohler The first assistance program began in
1979 as oil prices peaked and diesel-
fueled utilities were hit hard. The
legislature established the Power
Production Cost Assistance Program.
2:55:38 PM Ms. Kohler In 1984, consultants admitted defeat
and the legislature established Power
Cost Equalization. The limit was based
on 700 kWh for each member of the
community.
2:57:54 PM Ms. Kohler Pointed out that the guideline from
1984 that 75 percent of a community's
energy had to come from diesel fuel is
still in place today.
2:58:30 PM Ms. Kohler Shared the current situation in 2006:
the floor has been raised to 12 cents,
eligible electricity has been reduced
to 500 kWh, only one meter per resident
is allowed, 6,000 commercial customers
are ineligible, there is chronic under-
funding, annual fuel cost has doubled
in 15 years, non-fuel costs are up 50
percent, current funding ($18.7
million) is at the 78 percent level,
and more utilities are crossing through
the 52.5 cent ceiling.
3:00:05 PM Ms. Kohler Spoke about Alaska Village Electric
Cooperative (AVEC), which consists of
52 villages, a population of 22,000,
with 94 percent Alaska Native.
3:00:52 PM Ms. Kohler Pointed out the location of the
villages on the slide. Most are not
accessible in the winter.
3:01:22 PM Ms. Kohler Spoke to AVEC's system statistics: 48
power plants, 160+ diesel generators,
500+ fuel tanks, and 5 million gallons
of fuel burned.
3:01:49 PM Ms. Kohler Provided the 2004 overview with 7,122
residential and commercial services and
with $24.7 million in revenues. PCE
equals 26% of revenue, which is modest
usage.
3:02:56 PM Ms. Kohler The biggest creditor is the AEA.
3:03:28 PM Ms. Kohler Referenced the slide indicating the
1973-2004 fuel prices.
3:04:23 PM Ms. Kohler Highlighted the graph of historical
costs. With the exception of 1995, a
year in which costs dropped, the
profits are modest. In the most recent
three years, the gross has risen to $28
million dollars because of the raise in
fuel costs.
3:05:24 PM Ms. Kohler Provided information on the loss of
usage. The gross revenue has increased
since 2004. Projected margins for 2006
are $0.
3:06:02 PM Ms. Kohler Identified some of the challenges faced
by the plant in Gambell.
3:06:53 PM Ms. Kohler Clarified Myth # 1 - PCE reduces rural
power cost to urban levels.
3:07:33 PM Ms. Kohler Showed the cost of 700 residential kWh
for various communities. She dispelled
Myth # 2 - PCE discourages conservation
and innovation.
3:09:49 PM Ms. Kohler Highlighted AVEC costs from the 2004
report. Dispelled Myth # 3, that PCE
villages have no plant investment, and
Myth #4, that PCE is abused.
3:12:30 PM Ms. Kohler Explained Myth #5 - PCE money would be
better spent on alternative energy is
incorrect.
3:14:18 PM Ms. Kohler Showed an aerial view of the new power
plant, tank farm, and wind turbines in
Selawik.
3:15:10 PM Representative Spoke about the addition of Teller.
Stoltze Ms. Kohler provided the history of
Teller.
3:17:07 PM Representative Praised Ms. Kohler's work with the
Kelly Alaska Village Electric Cooperative.
ADJOURNMENT
The meeting
was
adjourned
at 3:19 PM
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