Legislature(2001 - 2002)
04/20/2001 01:46 PM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE BILL NO. 175 "An Act making an appropriation to the Alaska Industrial Development and Export Authority for power projects; and providing for an effective date." STEVE HAAGENSON, ACTING PRESIDENT & CEO FOR GOLDEN VALLEY ELECTRIC ASSOCIATION, FAIRBANKS testified in support of the legislation. The upgrade of the Anchorage to Fairbanks power transmission intertie, to 230 kilowatts is a very important project for Interior Alaska. This project, at a minimum, should, involve the construction of a second transmission line between Douglas Substation located near Willow and Teeland Substation located in Wasilla. The new transmission line would ho constructed to operate at 230 thousand volts, and would provide the source, for converting the remainder of the Anchorage to Fairbanks intertie to 230 thousand volts operation. The existing line from Douglas to Teeland is a bottleneck for delivery of power from Anchorage to Fairbanks. The electrical capacity to Healy would increase from 70 megawatts to approximately 130 megawatts, after project completion. The increase in transfer capacity would provide access to both now and existing gas-fired cogeneration in Anchorage. Power can flow either direction Oil these transmission lines. After the natural-gas pipeline is constructed the transmission capacity increase could allow for delivery of 130 megawatts of North-Slope gas fired power to the Anchorage bowl. The increased capacity will also provide a method to share spinning reserves, which are not always available to Fairbanks. The existing line from Douglas to Teeland has had numerous faults due to insulator flashovers and other causes. Every time this line tripsa significant portion, if not all, of the power in Fairbanks goes off. The addition of a second circuit will improve reliability between Teeland and Douglas by providing an alternative path during faults. The addition of a second transmission line will reduce electrical transmission losses between Teeland and Douglas, as will the voltage conversion from 138 kilovolts to 230 kilovolts will, for the entire Anchorage in Fairbanks transmission line. Representative Davies clarified that the estimated amount needed to build the 26 miles between Teeland and Douglas and convert other substations to 230 kilovolts is $24 million dollars. ROBERT WILKINSON, CEO, COPPER VALLEY ELECTRIC ASSOCIATION (CVEA), GLENNALLEN testified via teleconference in support of the legislation: In 1993, the 18th Alaska Legislature appropriated a $35 million, 50-year, zero-interest loan for an intertie project. The purpose of the loan was to benefit the region by lowering electrical rates. After much effort and expense the intertie project ground to a halt in 1996. Instead CVEA constructed a state of the art combustion turbine cogeneration project. That project has numerous benefits. It is high tech, it is green, and it turns Alaska crude into kilowatt-hours. It also adds five megawatts of generating capacity to Copper Valley's system. Having said that, the project does nothing to lower the high cost of electricity for the region. Copper Valley's request accomplishes a number of things. It reduces the fixed costs of the Cogeneration project. It replaces 30-year old diesel fired units, thereby improving system reliability and air quality. It also reduces fuel and maintenance expenses. In addition, a project, which recovers heat from the Glennallen diesel plant to reduce heating expense for the Copper River School District Glennallen schools. Finally, it reimburses Copper Valley for the DCRA intertie feasibility study required by the Legislature. NORM STORY, HOMER ELECTRIC ASSOCIATION testified via teleconference in support of the legislation. He noted that Homer Electric's appropriation request would replace an underwater cable that spans 3.8 miles across Kachemak Bay from Homer to the Southside of the bay [McKeon Flats]. It would also replace four backup diesel generators that are approximately 50 years old, which are used during power outages. Mr. Story maintained that it is critical that the 700 consumers in villages south of Kachemak Bay continue to have access to reliable and affordable electric power. The underwater cable is the only access to the electrical grid. The people in these communities are doing their part now to keep electric costs down. The average consumer in this area uses only 440-kilowatt hours per month per consumer compared to almost 700-kilowatt hours per consumer north of the bay. He noted that the general membership of Homer Electric Association has always subsidized the cost of providing service to these communities. In the absence of this subsidy the villages would probably receive Power Cost Equalization bonds or some other assistance. The calculated rate [without subsidy] would be .20 cents a kilowatt-hour as opposed to the current cost of .11 cents. The costs associated with replacement of the cable and the diesel generators would have a catastrophic impact on the electrical rates in these villages. Recovering costs in these small communities endangers their already fragile economy. They cannot afford the additional .5 cents a kilowatt-hour. A zero percent interest loan repaid over 25 years would greatly assist in lessening the impacts to villages south of the bay. JOE COOK, VICE PRESIDENT, CORDOVA ELECTRIC COOPERATIVE INC., CORDOVA testified via teleconference in support of HB 175. The Power Creek Hydroelectric project has been a community priority for the past four years and will be the salvation of Cordova. Funding is critical, as it will have positive long-term effects on Cordova's economy, due to reductions in electrical power rates, which would lower the cost-of-living and the cost-of-doing business in Cordova. Lower power costs would improve operating conditions in the community's economic sectors and increase job opportunities. SYLVIA LANGE, CORDOVA testified via teleconference in support of HB 175. She noted that as an owner of a fish processor facility, that the single greatest impediment to economic diversity and survival is the exorbitant cost of electricity. Electric rates including fuel surcharges and taxes were over .30 cents a kilowatt-hour as compared to .04 cents an hour in Seattle. She maintained that they are forced to send their product elsewhere for "value added" processing. Representative Ken Lancaster, Sponsor testified in support of HB 175. He clarified that the Anchorage/Fairbanks Transmission Line Bottleneck project is a state project. The Power Creek Hydropower project in Cordova would provide a payback of approximately $600 thousand dollars. He observed that he will have a technical amendment to add back language that was inadvertently deleted. The Railbelt Energy Fund was the initial fund source. The legislation was changed in the House Labor and Commerce Committee to fund the project from the Constitutional Budget Reserve. In response to a question by Representative Hudson, Representative Lancaster clarified that there would be sufficient funding in the Railbelt Energy Fund to fund the projects. He noted that $71 million dollars of interest has accrued since 1973. However, it was felt that the money should remain in the fund to be used as leverage or seed money when the gas pipeline comes to fruition. Representative Croft clarified that there is approximately $80 million dollars in the Fund. The appropriations [in the legislation] total $62 million dollars. In response to a question by Representative Davies, Representative Lancaster clarified that the appropriations would be no interest loans. He noted that the $25 million dollars for the Anchorage/Fairbanks intertie would be a state project and the costs would be recovered. DONALD MAHON, REGIONAL VICE PRESIDENT, ALASKA POWER AND TELEPHONE testified via teleconference in support of the legislation. He noted that two of the communities they serve are on stand-alone high cost diesel generation. The Tok/Chistochina Transmission Intertie would reduce the energy cost for these communities by .15 cents a kilowatt- hour and provide central station power for an additional 100 customers along the highway. He maintained that it makes good sense to tie these communities to the Tok power plant. ERIC YOULD, EXECUTIVE DIRECTOR, ALASKA RURAL ELECTRIC COOPERATIVE ASSOCIATION, ANCHORAGE testified via teleconference in support of HB 175. He observed that the Board expressed strong support for HB 175. He added that Chugach Electrical Association and the Anchorage Municipal Light and Power Association also support the project. He asked why the appropriation fund source was changed. Representative Hudson asked the affect of the legislation on Power Cost Equalization. Mr. Yould responded that the Cordova project would be a grant in exchange for relinquishing their annual $600 thousand dollar PCE grant. The original project structure would have reduce the Chistochina Mine's PCE amount. Under the long-term, low interest loan, power costs for Cordova would be lower but they would continue to receive PCE adjustments. Representative John Davies asked what use the Railbelt Energy Fund would be put to in regards to the gas pipeline. KATELYN MARKLEY, ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY (AIDEA) testified via teleconference in support of the legislation. She noted that HB 238 would address the concerns of AIDEA. The Alaska Industrial Development and Export Authority (AIDEA) felt that funding should go through the Alaska Energy Authority. She stated that all the projects have merit. HB 175 was heard and HELD in Committee for further consideration.