Legislature(2001 - 2002)

04/20/2001 01:46 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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                                                                   
     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                                                                   
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                                                                   
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                                                                   
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"                                                                   
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                                                                   
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                                                                   

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