Legislature(2013 - 2014)BARNES 124

02/06/2013 08:00 AM ENERGY

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08:02:41 AM Start
08:03:24 AM HB39
08:42:36 AM Overview (s): Renewable Energy Projects
09:52:02 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
+ Renewable Energy Projects Overview: TELECONFERENCED
Presentation by Sara Fisher-Goad, Executive
Director, Alaska Energy Authority
                 HB 39-POWER COST EQUALIZATION                                                                              
8:03:24 AM                                                                                                                    
CO-CHAIR  ISAACSON announced  that  the first  order of  business                                                               
would be  HOUSE BILL NO. 39,  "An Act relating to  the power cost                                                               
equalization  program."   He  pointed  out  that policies  should                                                               
define  the   strategies  and  should  govern   the  approach  to                                                               
affordable  energy  throughout  Alaska.    He  opined  that  this                                                               
approach should  maximize opportunity,  "and not just  spends the                                                               
8:05:40 AM                                                                                                                    
REPRESENTATIVE BRYCE  EDGMON, Alaska State  Legislature, detailed                                                               
that the cost of energy in  outlying areas that were dependent on                                                               
diesel  had   resulted  in  lower  populations   and  a  changing                                                               
demographic in the  villages.  He explained that  his approach to                                                               
energy,  "to keep  an eye  on the  longer term,"  included a  gas                                                               
line,  large hydroelectric  projects, and  alternative, renewable                                                               
energy sources.   He stated that  it was also necessary  to focus                                                               
on the present, as villages "are  really just sort of buckling in                                                               
under  the cost  of energy."   He  opined that,  even though  the                                                               
legislature had  put hundreds  of millions  of dollars  in energy                                                               
programs  during  recent  years, including  weatherization,  home                                                               
energy  rebates,  renewable  energy grant  funds,  and  community                                                               
revenue sharing,  there was still more  to do to bridge  the gap.                                                               
He  declared  that the  natural  gas  line  would be  "the  great                                                               
equalizer for energy in Alaska."   He pointed out that this would                                                               
be supplemented  by other forms  of energy and  renewable energy.                                                               
He reported  that Power  Cost Equalization  (PCE) started  in the                                                               
early 1980s with a concern  for providing equal access to sources                                                               
of power  and, in  1984, it  became more  similar to  the current                                                               
program.   He reported that the  program peaked in 1999,  when it                                                               
provided  700 kilowatt  hours each  month  to residential  users,                                                               
with  additional provisions  for  commercial users.   Since  that                                                               
time,  the program  had scaled  back  to 500  kilowatt hours  for                                                               
residential  users  and commercial  users  were  removed, as  the                                                               
costs were exorbitant.   He pointed out that there  was now a PCE                                                               
endowment fund  of $785 million  allowing for 500  kilowatt hours                                                               
monthly  use for  each residential  user.   He reported  that the                                                               
average residential monthly usage in  many villages was about 330                                                               
kilowatt hours.  He explained  that proposed HB 39 would increase                                                               
the residential user  threshold to 600 kilowatt  hours, and would                                                               
allow commercial use for certain eligible small businesses.                                                                     
8:12:20 AM                                                                                                                    
CO-CHAIR ISAACSON asked for the  reason to increase the threshold                                                               
when the current  average monthly usage in the bush  was only 330                                                               
kilowatt hours.                                                                                                                 
8:12:30 AM                                                                                                                    
REPRESENTATIVE EDGMON replied that the  330 kilowatt hours of use                                                               
was an annual  range dispersed over all the  rural communities in                                                               
Alaska, and  had been presented in  a March, 2012, report  by the                                                               
Institute of Social and Economic Research (ISER).                                                                               
8:13:11 AM                                                                                                                    
REPRESENTATIVE FOSTER  asked if the  findings for use  were lower                                                               
on average  because people  could not afford  the cost  of energy                                                               
8:13:47 AM                                                                                                                    
REPRESENTATIVE EDGMON  expressed his  agreement, noting  that the                                                               
lower end of  costs in the PCE program was  14 cents per kilowatt                                                               
hour, which ranged up to $1 per kilowatt hour.                                                                                  
8:14:39 AM                                                                                                                    
REPRESENTATIVE FOSTER  asked if the  proposed bill was  an effort                                                               
to do what could be done within the fiscal limitations.                                                                         
8:15:07 AM                                                                                                                    
REPRESENTATIVE EDGMON, in response,  said that a previous version                                                               
of the  proposed bill had  been "tailored  in large part  to what                                                               
the program  was in  1999, although  scaling back  the commercial                                                               
side of  things."  He  reported that  the current version  of the                                                               
proposed  bill   had  been  scaled  back,   after  receiving  the                                                               
endowment  and  the  demand  forecasts.   He  pointed  out  that,                                                               
although  immediate effect  of the  program  would require  extra                                                               
money, as  the endowment grew, it  would require less money.   He                                                               
stated that proposed  HB 39 would only  provide marginal benefits                                                               
to consumers, and not the full relief of a gas line.                                                                            
8:16:20 AM                                                                                                                    
CO-CHAIR ISAACSON  reported that  60 percent of  the cost  in the                                                               
Fairbanks  region was  thermal heating,  not electricity,  and he                                                               
asked how this compared with rural communities.                                                                                 
8:16:44 AM                                                                                                                    
REPRESENTATIVE EDGMON  replied that when  fuel was flown in  to a                                                               
community,  the  cost  was  even  higher than  60  percent.    He                                                               
explained that  the proposed bill would  increase the residential                                                               
monthly benefit for kilowatt hours from  500 to 600, and it would                                                               
reinstate a subsidy  of 600 kilowatt hours of use  to those small                                                               
businesses which used  less than 2400 kilowatt  hours each month.                                                               
He declared that it was  the small businesses which would benefit                                                               
from the proposed bill.                                                                                                         
8:18:54 AM                                                                                                                    
CO-CHAIR ISAACSON  noted that,  prior to  2000, the  Alaska State                                                               
Legislature supported  both commercial  and residential  use with                                                               
PCE.   He  reported  that  since then,  commercial  use had  been                                                               
excluded  and there  had  been "a  huge  out-migration" from  the                                                               
rural  communities because  employers  could not  keep the  doors                                                               
8:19:55 AM                                                                                                                    
CO-CHAIR MILLETT  reminded the  committee that,  as the  price of                                                               
oil dropped in 1999, oil  revenues declined, and the state budget                                                               
was  forced  to make  this  change.    She  stated that,  as  oil                                                               
revenues were  again going to  be declining, it was  necessary to                                                               
be cognizant of the budget.   She expressed her pleasure with the                                                               
foresight of  the legislature to  fund an endowment,  which would                                                               
continue to produce opportunities for energy subsidies.                                                                         
8:21:33 AM                                                                                                                    
REPRESENTATIVE EDGMON  stated that  rural legislators  had always                                                               
pointed  to   the  symbiotic   economic,  cultural,   and  social                                                               
relationship between  hub communities and outlying  villages.  He                                                               
acknowledged  that  this  proposed  bill would  most  likely  not                                                               
precede the cruise ship bill to  the desk of the governor, but he                                                               
expressed  his  hope  for  more debate  and  the  opportunity  to                                                               
highlight the  perilous situation  existing in  many communities.                                                               
He  opined  that the  challenge  for  affordable energy  was  now                                                               
8:22:45 AM                                                                                                                    
REPRESENTATIVE FOSTER  asked what the average  kilowatt usage was                                                               
during the winter months.                                                                                                       
8:23:55 AM                                                                                                                    
TIM  CLARK,  Staff,  Representative Bryce  Edgmon,  Alaska  State                                                               
Legislature,  offering his  belief that  the average  rural usage                                                               
was an annual calculation, declared  that any small increment was                                                               
a significant help to the residents.                                                                                            
8:24:33 AM                                                                                                                    
REPRESENTATIVE  HUGHES  asked  how  many  Alaska  residents  were                                                               
eligible, were they  all in the "rural off the  road system," and                                                               
were  Fairbanks  residents eligible.    She  asked for  a  sample                                                               
utility  bill  after  the  inclusion  of  PCE.    She  asked  for                                                               
clarification for the logistics of payment with PCE.                                                                            
8:25:45 AM                                                                                                                    
REPRESENTATIVE EDGMON suggested that  the Alaska Energy Authority                                                               
(AEA) would better  explain the mechanics of the  program and its                                                               
impact.   He  shared  that his  summer usage  did  not reach  500                                                               
kilowatt  hours, but,  during  the higher  usage  in winter,  PCE                                                               
supplemented a benefit for about 33 percent of his bill.                                                                        
8:26:45 AM                                                                                                                    
REPRESENTATIVE  HUGHES asked  about  the cost  for  the other  67                                                               
percent of the bill.                                                                                                            
8:26:52 AM                                                                                                                    
REPRESENTATIVE EDGMON  replied that, in Dillingham  as there were                                                               
more efficient  generators and a  more modern utility,  the power                                                               
rate  of  about 40  cents  per  kilowatt  hour, without  the  PCE                                                               
benefit,  was lower  than many  of the  smaller communities.   He                                                               
declared that the  norm for many communities was in  excess of 50                                                               
cents per kilowatt  hour.  In response  to Representative Hughes,                                                               
he said  that his electric bill  was more than $300  per month in                                                               
the winter.                                                                                                                     
8:28:05 AM                                                                                                                    
REPRESENTATIVE HUGHES asked  again if PCE only  extended to those                                                               
communities off the road system.                                                                                                
8:28:21 AM                                                                                                                    
REPRESENTATIVE  EDGMON  opined that  PCE  extended  to about  185                                                               
communities, but Fairbanks was not awarded PCE.                                                                                 
8:28:40 AM                                                                                                                    
CO-CHAIR ISAACSON clarified that  the average costs in Fairbanks,                                                               
Anchorage, and Juneau were used to calculate the PCE formula.                                                                   
8:29:03 AM                                                                                                                    
CO-CHAIR MILLETT suggested  a review to the history of  PCE as it                                                               
was a complicated formula.   She declared that the endowment fund                                                               
had  changed the  dynamics of  the  program from  a general  fund                                                               
expenditure to  a percentage of  market value from a  fund, which                                                               
avoided crisis management of the program.                                                                                       
8:30:45 AM                                                                                                                    
CO-CHAIR ISAACSON  agreed to schedule  the discussion of  PCE and                                                               
asked the committee to focus on the proposed bill.                                                                              
8:31:02 AM                                                                                                                    
REPRESENTATIVE EDGMON  directed attention to the  attached fiscal                                                               
note  [Included   in  members'   packets].    He   reported  that                                                               
additional accounting personnel would  be necessary, and that the                                                               
additional  funding necessary  for the  program was  listed under                                                               
Grants & Benefits.   He pointed to the Fund  Source and explained                                                               
that both the  general fund and the PCE endowment  would fund the                                                               
expanded program.  He directed attention  to page 2 of the fiscal                                                               
note,  paragraph   1  of  "Costs   Breakdown",  and   noted  that                                                               
residential use  accounted for 33  percent of the  additional $20                                                               
million  annual cost.    Moving  on to  the  second paragraph  of                                                               
"Costs Breakdown," he  reported that the remaining  67 percent of                                                               
the  $20  million annual  cost  would  be allocated  to  eligible                                                               
commercial customers.                                                                                                           
8:32:29 AM                                                                                                                    
REPRESENTATIVE  EDGMON pointed  to  page 3  of  the fiscal  note,                                                               
which portrayed the endowment projection through FY 19.                                                                         
REPRESENTATIVE  JOSEPHSON asked  to clarify  that a  larger store                                                               
would not get any subsidy.                                                                                                      
8:35:04 AM                                                                                                                    
REPRESENTATIVE EDGMON expressed his agreement.                                                                                  
8:35:21 AM                                                                                                                    
REPRESENTATIVE  HUGHES asked  whether the  endowment alone  could                                                               
fund the  program in the  future, should the kilowatt  hour usage                                                               
not be increased.                                                                                                               
8:35:36 AM                                                                                                                    
MR. CLARK, in response, said  that the endowment fund projections                                                               
and the cost estimates for  increased residential usage indicated                                                               
that the endowment  fund could cover the additional  cost for the                                                               
commercial subsidy.                                                                                                             
8:36:22 AM                                                                                                                    
REPRESENTATIVE EDGMON suggested that  the Alaska Energy Authority                                                               
(AEA)  could  better clarify  whether  the  endowment fund  could                                                               
fully support the PCE program without proposed HB 39.                                                                           
8:36:55 AM                                                                                                                    
REPRESENTATIVE  NAGEAK  asked  if  the  endowment  generated  any                                                               
8:37:16 AM                                                                                                                    
REPRESENTATIVE  EDGMON replied  that the  $785 million  endowment                                                               
fund   had  been   started  in   2001  with   money  from   major                                                               
appropriations, which included  the constitutional budget reserve                                                               
and the railroad energy reserve.   He reported that the endowment                                                               
fund benefit amount was annually  determined from a rolling three                                                               
year average, and  that the endowment was required  by statute to                                                               
earn 7 percent annually.                                                                                                        
8:38:13 AM                                                                                                                    
CO-CHAIR  MILLETT  pointed  out  that  the  legislature  was  not                                                               
prohibited from funding the endowment,  and that the average cost                                                               
for  PCE  could  increase  considerably,  dependent  on  Railbelt                                                               
8:39:08 AM                                                                                                                    
CO-CHAIR  ISAACSON  expressed  his   agreement  that  times  were                                                               
changing in Alaska, costs were  increasing, and the effectiveness                                                               
of the  program could be diminished  because of the high  cost of                                                               
energy in the larger communities.                                                                                               
8:40:28 AM                                                                                                                    
REPRESENTATIVE JOSEPHSON  asked what the cost,  or the percentage                                                               
of  usage, was  for  Toyo and  Monitor stove  use,  as they  were                                                               
thermal heat related.                                                                                                           
8:41:12 AM                                                                                                                    
REPRESENTATIVE  EDGMON replied  that  he was  not  aware of  this                                                               
information,  as the  household  information had  not been  found                                                               
during their research.                                                                                                          
8:41:41 AM                                                                                                                    
REPRESENTATIVE  FOSTER  asked   to  clarify  that  Representative                                                               
Josephson was asking for the  fuel consumption by Monitor or Toyo                                                               
stoves.   He  shared  that  he owned  a  four-plex with  electric                                                               
heating and he offered to split the bill for an estimate.                                                                       
[HB 39 was heard and held.]                                                                                                     
            OVERVIEW (S):  RENEWABLE ENERGY PROJECTS                                                                        
                 [Contains discussion of HB 39]                                                                                 
8:42:36 AM                                                                                                                    
CO-CHAIR  ISAACSON  announced that  the  next  order of  business                                                               
would  be an  overview  of Renewable  Energy  Projects and  would                                                               
continue the discussion of proposed HB 39.                                                                                      
8:43:16 AM                                                                                                                    
SARA  FISHER-GOAD, Executive  Director,  Alaska Energy  Authority                                                               
(AEA), informed  the committee  that the  endowment fund  was the                                                               
most  significant  funding  source   for  the  PCE  program,  and                                                               
reminded  the  committee  that the  program  funding  included  a                                                               
combination of  general fund and  endowment fund.   She explained                                                               
that  the  annual distribution  from  the  original $400  million                                                               
investment to the  endowment fund was determined by  a formula of                                                               
three  years for  monthly  average market  value.   She  directed                                                               
attention to  page 3 of  the Fiscal note  for HB 39  [Included in                                                               
members' packets].  She noted  that, with a statutory requirement                                                               
for a  7 percent annual return,  the estimated value of  the fund                                                               
was difficult to project for  fiscal note purposes.  She referred                                                               
to the document, "PCE Endowment  Fund Real and Projected Balances                                                               
and  Appropriations,"   [Included  in  members'   packets]  which                                                               
detailed assumptions  for the fund  earnings based on the  use of                                                               
five percent or  seven percent for the program.   She pointed out                                                               
that a 5 percent usage with  a 7 percent return for the endowment                                                               
fund would closely match the  targeted annual cost of $40 million                                                               
for the  existing program.   She  clarified that  this assumption                                                               
did not include any changes from proposed HB 39.                                                                                
8:46:30 AM                                                                                                                    
REPRESENTATIVE HUGHES asked if the  addition of general funds was                                                               
for payment to  the increase in kilowatt usage  or for investment                                                               
into the endowment fund.                                                                                                        
8:46:58 AM                                                                                                                    
MS.  FISHER-GOAD, in  response, said  that the  additional monies                                                               
necessary to fund  the proposed program were  $20.6 million, with                                                               
$14.3 million  projected for the  commercial customers,  and $6.3                                                               
million for residential customers.                                                                                              
CO-CHAIR  ISAACSON said  that this  would conclude  discussion on                                                               
PCE,  and  discussion on  the  Renewable  Energy Fund  would  now                                                               
8:48:35 AM                                                                                                                    
MS.  FISHER-GOAD presented  a  PowerPoint  titled "Alaska  Energy                                                               
Authority   Overview   and   Renewable   Energy   Fund   Update."                                                               
Introducing  slide   2,  "Reducing  the  Cost   of  Energy,"  she                                                               
explained that the  Alaska Energy Authority (AEA)  mission was to                                                               
reduce the  cost of energy  by providing technical  and community                                                               
assistance, investing in  energy infrastructure, and diversifying                                                               
Alaska's energy  portfolio to meet  the State of Alaska  goal for                                                               
50  percent of  electricity use  from renewable  energy by  2025.                                                               
She moved  on to slide  3, "Electricity Generation by  Region," a                                                               
chart of regional electricity generation  in Alaska, and slide 4,                                                               
"Energy  Costs Vary,"  which showed  the variance  of energy  and                                                               
heating costs  throughout the state.   She pointed out  that most                                                               
of the high cost regions were lower populated areas.                                                                            
8:51:21 AM                                                                                                                    
MS.  FISHER-GOAD directed  attention to  slide 5,  "Energy Policy                                                               
Development  and   Coordination,"  and   said  that   the  Deputy                                                               
Director, Gene  Therriault, had taken  the lead  for coordination                                                               
of energy policy and planning.   She listed transmission planning                                                               
and  the  liquid  natural  gas (LNG)  trucking  proposal  as  two                                                               
important upcoming issues.  She  declared that AEA was working on                                                               
regional energy  planning, slide 6, utilizing  the energy pathway                                                               
report,  which was  a  significant inventory  of  the variety  of                                                               
resources available  to communities.   She shared  that utilizing                                                               
regional  energy solutions  had developed  this into  a statewide                                                               
planning  process.   She  acknowledged that  a  solution for  one                                                               
region was not necessarily a statewide solution.                                                                                
8:53:19 AM                                                                                                                    
CO-CHAIR MILLETT  asked if the  committee could be  provided with                                                               
the  inventory  of  energy  sources  and  costs  for  communities                                                               
throughout the state.                                                                                                           
8:53:55 AM                                                                                                                    
MS. FISHER-GOAD  agreed to provide  the report.  She  reported on                                                               
slide  7, "Infrastructure  and Large  Projects,"  and listed  the                                                               
Bradley Lake Hydro-electric project  which supplied 10 percent of                                                               
the  Railbelt   electricity,  and  the  Alaska   Intertie,  which                                                               
connected Willow  and Healy.   She declared that AEA  was working                                                               
on the  licensing for the Susitna-Watana  hydro-electric project,                                                               
and  explained that  a significant  milestone had  been met  with                                                               
completion of  the 44 studies  for the Federal  Energy Regulatory                                                               
Commission (FERC).   She pointed to slide 8,  "Rural Energy," and                                                               
stated  that the  rural  energy program  was  making progress  on                                                               
rural  power  system  upgrades that  helped  improve  the  energy                                                               
infrastructure in rural Alaska.  She  said that for the past five                                                               
years the State  of Alaska has provided AEA  with capital dollars                                                               
to continue these upgrades.                                                                                                     
8:56:15 AM                                                                                                                    
REPRESENTATIVE  NAGEAK  asked  if   there  was  a  memorandum  of                                                               
agreement (MOA) with the Railbelt utilities and AEA.                                                                            
8:56:36 AM                                                                                                                    
MS.  FISHER-GOAD  said  that  there  was  an  intertie  operating                                                               
agreement with those utilities that benefited.                                                                                  
8:56:50 AM                                                                                                                    
REPRESENTATIVE   NAGEAK  asked   if  there   was  any   financial                                                               
8:56:59 AM                                                                                                                    
MS. FISHER-GOAD,  in response, said  that, although there  was no                                                               
debt  or profit  motive  with AEA,  the  Railbelt utilities  were                                                               
responsible  for the  operation and  maintenance of  the intertie                                                               
8:57:20 AM                                                                                                                    
CO-CHAIR MILLETT pointed to the  significant reduction in federal                                                               
funding  for  the  Denali  Commission,  and  its  effect  on  the                                                               
program.  She noted that there  was now the question for how that                                                               
federal funding would be replaced.                                                                                              
8:58:15 AM                                                                                                                    
MS.  FISHER-GOAD   offered  to  provide   additional  information                                                               
regarding  the  Denali Commission.    She  noted the  partnership                                                               
between  AEA   and  the  Denali  Commission   for  other  ongoing                                                               
8:59:00 AM                                                                                                                    
REPRESENTATIVE NAGEAK  asked if  the units  pictured in  slide 8,                                                               
"Rural  Energy,"  were  barged  up completely  assembled  to  the                                                               
8:59:53 AM                                                                                                                    
MS.   FISHER-GOAD  explained   that   much   of  the   powerhouse                                                               
construction  was  completed  at  the  AEA  Anchorage  warehouse,                                                               
before they  were shipped  to a rural  community.   She mentioned                                                               
the AEA Power Project low interest loan program.                                                                                
9:00:27 AM                                                                                                                    
SEAN  SKALING,  Deputy  Director,  Alternative  Energy  &  Energy                                                               
Efficiency,  Alaska Energy  Authority, jumped  to slide  11, "AEA                                                               
Programs,"  and  explained that  AEA  had  energy efficiency  and                                                               
alternative energy  loan programs.  Directing  attention to slide                                                               
12,  "Energy Efficiency  and Conservation,"  he stated  that this                                                               
first  step  was the  most  important,  prior to  building  large                                                               
systems  to provide  energy to  structures that  were not  energy                                                               
efficient.    He  noted  the  two  main  AEA  programs:    Alaska                                                               
Commercial   Energy  Audit   Program  and   the  Village   Energy                                                               
Efficiency program, slide 13.  He  pointed out that the AEA focus                                                               
was  for  commercial,  small industrial,  and  public  buildings,                                                               
while the  Alaska Housing Finance Corporation  (AHFC) coordinated                                                               
residential  buildings.   He  said  the  commercial energy  audit                                                               
program  had   a  lot  of   potential  with  for   lowering  fuel                                                               
consumption.  He pointed to  the Alaska Energy Partnership, slide                                                               
11, as the  center of the outreach efforts to  align messages and                                                               
plan together  for a significant impact  at low cost.   He stated                                                               
that the partnership's objective was  to attain the state goal of                                                               
15 percent energy efficiency improvement by 2020.                                                                               
9:03:25 AM                                                                                                                    
CO-CHAIR ISAACSON directed  attention to slide 11,  and asked for                                                               
more explanation to the coordination between State agencies.                                                                    
9:03:31 AM                                                                                                                    
MR.  SKALING,  reflecting on  the  coordination  between AEA  and                                                               
AHFC, said this was about energy  efficiency.  He said that there                                                               
was not  as much end  use energy efficiency work  with Department                                                               
of  Natural  Resources  (DNR).   He  pointed  to  the  difference                                                               
between the  equipment and the  system providing it.   He offered                                                               
an  example  of  the  rural  powerhouse  program  which  provided                                                               
supply-side  energy  efficiency.    He said  that  the  Renewable                                                               
Energy  Fund did  coordinate  with DNR  for  an extensive  review                                                               
process  of  each  applicant.    He noted  that  there  were  122                                                               
communities  which received  American  Recovery and  Reinvestment                                                               
Act of 2009  (ARRA) funding.  He stated  that efficiency programs                                                               
had  immediate savings,  and that  the loan  programs were  often                                                               
paid through these savings.                                                                                                     
9:05:53 AM                                                                                                                    
CO-CHAIR  ISAACSON commented  that these  loans only  worked when                                                               
there were sufficient funds to pay  the original debt.  He stated                                                               
that "in a real world" many people did not qualify for loans.                                                                   
9:06:25 AM                                                                                                                    
MR. SKALING  expressed his agreement  that this was a  hurdle for                                                               
commercial  and small  commercial buildings.   He  concluded that                                                               
energy  efficiency had  the most  effective return  within energy                                                               
programs, as the dollar savings  went "straight to the end user."                                                               
Directing attention to  slide 13, he explained  that this "whole-                                                               
village retrofit"  to reduce the  cost of energy  included energy                                                               
audits on many  public buildings.  He moved on  to slide 14, "AEA                                                               
Programs,"   and  spoke   briefly  about   the  Emerging   Energy                                                               
Technology Fund, which was relatively  new and was now funding 16                                                               
competitively   bid  projects.     Addressing   slide  15,   "AEA                                                               
Programs," he said  that the Emerging Energy  Technology Fund was                                                               
a stepping stone  to the Renewable Energy Fund,  which focused on                                                               
generating  cost  effective  energy.     He  reported  that  this                                                               
included renewable  energy, energy efficiency  technology, energy                                                               
storage, and energy transmission.                                                                                               
9:10:00 AM                                                                                                                    
MR. SKALING,  in response to Representative  Hughes, replied that                                                               
the balloon wind  turbine was a project which had  been funded in                                                               
Alaska, though the exact location was still being researched.                                                                   
9:10:21 AM                                                                                                                    
MR.  SKALING reported  that the  Emerging Energy  Technology Fund                                                               
was a  valuable program  which was just  beginning.   He declared                                                               
that  the Renewable  Energy Fund  projects  were competitive  and                                                               
were   lowering  costs.      He  explained   that   this  was   a                                                               
recommendation program, with a long  vetting process, and that it                                                               
was currently in Round 6.                                                                                                       
9:12:13 AM                                                                                                                    
REPRESENTATIVE  HIGGINS  asked if  applicants  had  to show  that                                                               
energy could be added to the grid.                                                                                              
9:12:45 AM                                                                                                                    
MR. SKALING explained that the  applicant was required to own the                                                               
energy  and  have  a  power  sales agreement,  if  they  were  an                                                               
independent power producer.  He  reported on slide 16, "Renewable                                                               
Energy Fund: Evaluation Process," and  said that this process had                                                               
an  intensive four  stage review,  which  included Department  of                                                               
Natural Resources,  AEA, independent economic  evaluations, ISER,                                                               
and subject matter experts.                                                                                                     
9:13:55 AM                                                                                                                    
CO-CHAIR  ISAACSON   asked  for   clarification  on   the  global                                                               
application with regard  to other projects of  Stage 4, "Regional                                                               
9:14:35 AM                                                                                                                    
MR. SKALING explained that the  recommendations were presented to                                                               
the  legislature  in its  report.    He  said  that the  Stage  2                                                               
technical score criteria reflected  the economic feasibility, and                                                               
Stage 3 reported the scoring  utilizing the statutory guidelines,                                                               
with  the  cost  of  the  energy as  the  most  heavily  weighted                                                               
guideline   factor.      He  described   that   the   recommended                                                               
applications  were geographically  spread  by  formula, Stage  4,                                                               
which reviewed  the underrepresented energy regions  of the state                                                               
in the fund.                                                                                                                    
9:16:33 AM                                                                                                                    
REPRESENTATIVE  HUGHES  asked  for   clarification  of  the  ISER                                                               
9:16:59 AM                                                                                                                    
MR. SKALING  explained that  AEA hired  economic firms  to review                                                               
and analyze  the projects,  and then  ISER reviewed  and verified                                                               
these findings.                                                                                                                 
9:17:54 AM                                                                                                                    
CO-CHAIR  MILLETT   reported  that  she  would   provide  to  the                                                               
committee  the  Legislative  Audit  Division  recommendations  on                                                               
House  Bill 152  and  House Bill  306,  which offered  background                                                               
information to  the expectations and evolution  for the renewable                                                               
energy fund.                                                                                                                    
9:18:45 AM                                                                                                                    
REPRESENTATIVE JOSEPHSON  asked if  the spreadsheet  was included                                                               
in the January report.                                                                                                          
9:19:13 AM                                                                                                                    
MR. SKALING,  in response to Representative  Josephson, said that                                                               
it was included in that report.   He concluded by explaining that                                                               
the  projects were  forwarded, after  Stage 4,  to the  Renewable                                                               
Energy  Fund Advisory  Committee and  then those  recommendations                                                               
were provided  to the Alaska  State Legislature by the  tenth day                                                               
of the legislative session.  He  moved on to slide 17, "Renewable                                                               
Energy Fund Projects," a map  showing the diverse regional spread                                                               
of  the  projects  in  Rounds  1-5.   He  pointed  to  slide  18,                                                               
"Construction Projects," which  depicted construction projects in                                                               
Alaska, either underway or completed.                                                                                           
9:20:20 AM                                                                                                                    
REPRESENTATIVE  JOSEPHSON  asked if  the  projects  were only  on                                                               
state land.                                                                                                                     
9:20:30 AM                                                                                                                    
MR.  SKALING  replied  that  the  projects  could  be  on  state,                                                               
federal, or  private land, as  long as  there were rights  to the                                                               
9:20:40 AM                                                                                                                    
REPRESENTATIVE  JOSEPHSON  asked  about the  process  on  federal                                                               
MR. SKALING stated that there was a lot of federal scrutiny.                                                                    
9:20:49 AM                                                                                                                    
MS. FISHER-GOAD clarified slide 18,  explaining that there was an                                                               
analysis  for recommendation  and,  then the  follow  up was  the                                                               
grant process.   She pointed  out that the  construction projects                                                               
required site control by the applicant.                                                                                         
9:21:27 AM                                                                                                                    
MR. SKALING pointed  out that the process  compared projects side                                                               
by side.                                                                                                                        
9:22:26 AM                                                                                                                    
REPRESENTATIVE HUGHES  returned attention to slide  18, and asked                                                               
if the  majority of interest  and applications had been  for wind                                                               
9:22:38 AM                                                                                                                    
MR.  SKALING  explained  that  the wind  projects  tended  to  be                                                               
quicker to  construct.   He pointed out  that the  hydro projects                                                               
were more expensive and  took "a long time to go  step by step to                                                               
get to construction."                                                                                                           
9:23:12 AM                                                                                                                    
CO-CHAIR  ISAACSON asked  if hydro  projects  were being  removed                                                               
from federal funding opportunities.                                                                                             
9:23:31 AM                                                                                                                    
MS.  FISHER-GOAD observed  that  more preliminary  work had  been                                                               
done  with federal  funds for  "shovel ready"  wind projects,  as                                                               
there  was often  less of  a  permitting process  than for  hydro                                                               
projects.  She  expressed agreement that it was  a longer process                                                               
to  permit and  develop  a  hydro project  in  Alaska, hence  the                                                               
significant development of  wind projects.  She  pointed out that                                                               
a wind project  could be financially scaled up  or down depending                                                               
on the  number of turbines,  but a  hydro project was  subject to                                                               
the spending caps on the AEA projects.                                                                                          
9:25:43 AM                                                                                                                    
CO-CHAIR  ISAACSON opined  that strategies  were created  just to                                                               
complete projects,  when in fact  the goal and the  policy should                                                               
direct the strategies of the projects.   He suggested that a goal                                                               
of renewable, sustainable, long term,  and low cost energy should                                                               
be  headed by  hydro  projects wherever  possible,  even if  wind                                                               
projects were  easier and faster  to facilitate.  He  stated that                                                               
wind  projects  always required  diesel  to  ensure there  was  a                                                               
reliable source of energy.                                                                                                      
9:26:47 AM                                                                                                                    
MS.  FISHER-GOAD, in  response  to  Co-Chair Isaacson,  explained                                                               
that the  Renewable Energy Fund  development of projects  was one                                                               
strategy which  the State  of Alaska had  funded AEA  to address.                                                               
It was  designed for  local projects and  was only  one strategy.                                                               
She agreed that another strategy  through AEA was the development                                                               
of hydro  projects.   She shared  that the  primary goal  of AEA,                                                               
when established  in 1976,  was to  develop energy  projects, but                                                               
that the Renewable  Energy Fund was only one  strategy for energy                                                               
projects, and it was for development using local resources.                                                                     
9:28:52 AM                                                                                                                    
CO-CHAIR MILLETT said that not  every community would have access                                                               
to hydro  power.  She declared  that the idea of  the program was                                                               
to  find renewable  resource projects  that would  work for  each                                                               
specific community.  She pointed  to the recognition that, as not                                                               
every area would  have the same type of renewable  energy, it was                                                               
necessary to find  what was best for each community.   She stated                                                               
that the  realistic goal  was to replace  diesel with  a reliable                                                               
source of energy.                                                                                                               
9:31:02 AM                                                                                                                    
CO-CHAIR ISAACSON  expressed his  agreement that  community goals                                                               
should have  integration with the  region, and that the  goal for                                                               
lower  cost energy  projects should  be strategic,  not reactive.                                                               
He reiterated  that "the policy  should inform our  projects, not                                                               
our projects our strategies."                                                                                                   
9:31:41 AM                                                                                                                    
REPRESENTATIVE  HUGHES  asked what  the  goal  was for  renewable                                                               
energy for the state, and  whether hydro projects were considered                                                               
as renewable projects.                                                                                                          
9:32:08 AM                                                                                                                    
MS.  FISHER-GOAD  replied  that  the  goal  was  for  50  percent                                                               
renewable energy use  by 2025.  She said that  there were aspects                                                               
of federal funding  for renewable projects which  did not include                                                               
hydro as a renewable resource.                                                                                                  
9:33:12 AM                                                                                                                    
REPRESENTATIVE HUGHES  asked to  clarify that the  definition had                                                               
not been changed, but that there was not the funding.                                                                           
9:33:15 AM                                                                                                                    
MS. FISHER-GOAD  replied that, although  it was dependent  on the                                                               
program, federal programs did not  recognize large hydro projects                                                               
as  a renewable  energy  resource.   She  noted  that there  were                                                               
subtleties for the requirements of  certain loan programs and the                                                               
State  of Alaska  did urge  the federal  government to  recognize                                                               
hydro as a renewable resource.                                                                                                  
9:34:10 AM                                                                                                                    
REPRESENTATIVE HUGHES asked which  form of renewable resource had                                                               
"the most value, as far as bang for the buck."                                                                                  
9:34:31 AM                                                                                                                    
MS.   FISHER-GOAD,   in   response  to   Representative   Hughes,                                                               
referenced  Kodiak  as the  poster  community  for the  Renewable                                                               
Energy Fund.   She noted  that Kodiak had  successfully developed                                                               
wind and hydro  projects.  She said that  different regions could                                                               
take appropriate advantage of the surrounding resources.                                                                        
9:35:57 AM                                                                                                                    
REPRESENTATIVE  NAGEAK  suggested a  discussion  for  the use  of                                                               
methane gas for power.                                                                                                          
9:36:59 AM                                                                                                                    
CO-CHAIR  ISAACSON   recommended  that  committee   members  read                                                               
"Pathways," an AEA energy book.                                                                                                 
9:37:22 AM                                                                                                                    
CO-CHAIR MILLETT  declared the  importance for  committee members                                                               
to  familiarize themselves  with both  House Bill  306 and  House                                                               
Bill 152, as it was necessary to have an historical perspective.                                                                
9:37:56 AM                                                                                                                    
REPRESENTATIVE JOSEPHSON asked for  an explanation to the federal                                                               
government not recognizing hydro as a renewable resource.                                                                       
9:38:31 AM                                                                                                                    
MS. FISHER-GOAD,  in response  to Representative  Josephson, said                                                               
that she  did not  want to speculate  for reasons  behind federal                                                               
decisions  although,   she  pointed   out,  there   were  federal                                                               
financial resources  available for  hydro projects.   She offered                                                               
her  belief that  there was  a federal  preference for  solar and                                                               
wind  projects over  hydro  projects.   She  said  that the  FERC                                                               
process  for  Susitna-Watana  Hydroelectric  project  required  a                                                               
great deal of work.                                                                                                             
9:39:59 AM                                                                                                                    
CO-CHAIR MILLETT  explained that  the federal government  did not                                                               
recognize hydroelectric  as a renewable  resource because  of the                                                               
effect  of dams  on  land and  fishing.   She  alluded that  poor                                                               
project  management when  planning for  environmental impacts  in                                                               
the  Lower 48  had led  to the  removal of  hydro as  a renewable                                                               
resource.   She  said  that the  high lake  dams  in Alaska  were                                                               
different than  the damming of rivers  in the Lower 48,  and that                                                               
in Alaska  there was an  insignificant impact to  the environment                                                               
and  the fishing  industry.   She acknowledged  that the  federal                                                               
government  recognized   that  "Alaska  is  different"   and  was                                                               
receptive  to  funding hydro  projects  and  expediting the  FERC                                                               
process  in Alaska.    She  stated that  Alaska  was not  damming                                                               
9:41:57 AM                                                                                                                    
REPRESENTATIVE  JOSEPHSON  clarified  that  Alaska  was  not  yet                                                               
damming rivers.                                                                                                                 
CO-CHAIR MILLETT  replied that  this was not  a fair  comment, as                                                               
Alaska  was  "pretty  cognizant  of not,  we're  pretty  good  at                                                               
determining  that we  won't sacrifice  one  resource for  another                                                               
9:42:04 AM                                                                                                                    
MR.  SKALING  continued  with   slide  20,  "Independent  Program                                                               
Review," and  said that AEA  had sought  a third party  review on                                                               
the Rural Energy  Fund (REF) during the past year,  and those two                                                               
reports had  been published.   He pointed to slide  21, "Economic                                                               
Benefits,"  which reflected  the net  present value  costs versus                                                               
the net present  value benefits for the first 62  projects of the                                                               
program that  made it to  the construction  phase.  He  noted the                                                               
high profit.   He said  that diesel equivalent fuel  savings were                                                               
at  or above  projection and  would continue  to rise,  slide 22,                                                               
"Avoided Fuel."  He projected  slide 23, "PCE Communities," which                                                               
reflected the impact of the  REF on Power Cost Equalization (PCE)                                                               
in  communities.   He  stated  that  the  largest impact  of  REF                                                               
benefit  had  been  for  commercial  buildings,  which  were  PCE                                                               
ineligible, and that  the State of Alaska was  also a beneficiary                                                               
of the  program.   Speaking to  slide 24,  "Lowering the  Cost of                                                               
Energy,"  he compared  the total  cost of  Diesel Generation  for                                                               
twenty years  versus a wind project.   The wind project  cost was                                                               
reflected  with  Renewable  Energy  Fund (REF)  and  without  REF                                                               
capital costs.   The  REF support for  wind projects  had lowered                                                               
and  stabilized  the  costs  compared   to  diesel.    Slide  25,                                                               
"Community  Highlight: JBER,"  listed the  landfill-gas-to-energy                                                               
project which allowed the methane  to be regulated and not escape                                                               
into the environment.  The  project now had the methane collected                                                               
and directed through gas fired  units to produce about 26 percent                                                               
of the JBER  energy needs.  Slide 26,  "Delta Junction," depicted                                                               
the Delta  Junction School biomass  project for heat,  which used                                                               
the wood chips from a local  saw mill, saving $153,000 and 53,000                                                               
gallons in  heating for the school  during the first winter.   He                                                               
pointed out  that the system  was low maintenance, and  was being                                                               
considered for expansion  into the elementary school.   Slide 27,                                                               
"Atka,"  portrayed  a small  hydro  project  that was  generating                                                               
energy to provide 100 percent of the community energy needs.                                                                    
9:48:39 AM                                                                                                                    
MR.   SKALING  directed   attention   to  slide   28,  "Round   6                                                               
Recommendations," which listed hydro projects  as high value.  He                                                               
clarified   that  ideas   went  through   a  feasibility   study,                                                               
reconnaissance,   and    final   design   before    moving   into                                                               
9:50:16 AM                                                                                                                    
MS. FISHER-GOAD  pointed to slide  29, "Active  Energy Projects,"                                                               
which  listed the  renewable energy  programs and  other projects                                                               
that were active,  alongside the funding which  had been provided                                                               
beyond the  Renewable Energy Fund.   She concluded with  Slide 31                                                               
"Projects  Under Construction,"  a  map of  Alaska depicting  the                                                               
projects  under  construction  during the  previous  summer,  and                                                               
slide 31,  "By the Numbers," which  showed the FY 14  summary and                                                               
budget request.                                                                                                                 

Document Name Date/Time Subjects
Energy Committee Agenda.pdf HENE 2/6/2013 8:00:00 AM
HB 39 Sponsor Statement 2013.23.1.pdf HENE 2/6/2013 8:00:00 AM
HB 39
HB 39.pdf HENE 2/6/2013 8:00:00 AM
HB 39
HB 39 Leg Research 00.022 PCE 1981 to 1999.pdf HENE 2/6/2013 8:00:00 AM
HB 39
HB 39 Leg Research 06.016 PCE 2005.pdf HENE 2/6/2013 8:00:00 AM
HB 39
HB 39 PCE Blue Ribbon Report 1999.pdf HENE 2/6/2013 8:00:00 AM
HB 39
HB 39 PCE Program Guide 2009.pdf HENE 2/6/2013 8:00:00 AM
HB 39
HB 39 PCE Endowment Fund Appropriations Estimates.pdf HENE 2/6/2013 8:00:00 AM
HB 39
HB039-DCCED-AEA-02-01-13.pdf HENE 2/6/2013 8:00:00 AM
HB 39
HB 39 PCE Endowment Current Statutes.pdf HENE 2/6/2013 8:00:00 AM
HB 39
HB39--PCE Bill--Support from Kokhanok Resident.txt HENE 2/6/2013 8:00:00 AM
HB 39
AEA Overview House Energy 02 06 13.pdf HENE 2/6/2013 8:00:00 AM
Energy Cheat Sheet diagram.pdf HENE 2/6/2013 8:00:00 AM