Legislature(2015 - 2016)HOUSE FINANCE 519

04/14/2015 08:30 AM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Delayed to 9:00 a.m. Today --
Moved CSHB 105(FIN) Out of Committee
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 105                                                                                                            
     "An  Act relating  to  the programs  and  bonds of  the                                                                    
     Alaska  Industrial  Development and  Export  Authority;                                                                    
     related  to  the  financing authorization  through  the                                                                    
     Alaska Industrial  Development and Export  Authority of                                                                    
     a liquefied  natural gas  production plant  and natural                                                                    
     gas  energy projects  and distribution  systems in  the                                                                    
     state;  amending  and   repealing  bond  authorizations                                                                    
     granted  to  the   Alaska  Industrial  Development  and                                                                    
     Export  Authority;  and   providing  for  an  effective                                                                    
9:06:46 AM                                                                                                                    
FRED  PARADY, DEPUTY  COMMISSIONER, DEPARTMENT  OF COMMERCE,                                                                    
COMMUNITY, AND  ECONOMIC DEVELOPMENT, placed himself  on the                                                                    
GENE  THERRIAULT, DEPUTY  DIRECTOR, STATEWIDE  ENERGY POLICY                                                                    
DEVELOPMENT,   ALASKA   ENERGY  AUTHORITY,   DEPARTMENT   OF                                                                    
COMMERCE,   COMMUNITY  AND   ECONOMIC  DEVELOPMENT,   placed                                                                    
himself on the record.                                                                                                          
Acting Commissioner  Parady provided a brief  explanation of                                                                    
the bill.  The legislation sought to  give Alaska Industrial                                                                    
Development and  Export Authority  (AIDEA) the  authority to                                                                    
consider an  alternative gas supply  to the  Interior Energy                                                                    
Project.  He  referenced  SB 23  [Short  Title:  AIDEA:  LNG                                                                    
Project;   Dividends;  Financing]   passed  in   2013  which                                                                    
provided  funding  and  specified  that a  North  Slope  gas                                                                    
supply be  used. House Bill  105 continued the  same funding                                                                    
authorities but opened the door  to consideration of propane                                                                    
or a  Cook Inlet gas  supply while retaining the  ability to                                                                    
evaluate further North Slope alternatives.                                                                                      
9:08:27 AM                                                                                                                    
Co-Chair Thompson MOVED to ADOPT Amendment 1:                                                                                   
     Page 2, line 6:                                                                                                            
          Delete "sec. 9" in both places                                                                                        
          Insert "sec. 8" in both places                                                                                        
     Page 2, lines 8 - 29:                                                                                                      
          Delete all material.                                                                                                  
     Renumber the following bill sections accordingly.                                                                          
     Page 9, line 4:                                                                                                            
          Delete "Sections 14 and 15"                                                                                           
          Insert "Sections 13 and 14"                                                                                           
Co-Chair Neuman OBJECTED for discussion.                                                                                        
Co-Chair  Thompson   announced  that  Nick   Szymoniak,  Ted                                                                    
Leonard,  and Bob  Shefchik were  online  and available  for                                                                    
Co-Chair  Neuman clarified  the  amendment  version was  29-                                                                    
GH1019\N. Co-Chair Thompson agreed.                                                                                             
9:09:00 AM                                                                                                                    
Mr. Therriault pointed out that  Amendment 1 deleted Section                                                                    
2 on page  2 which essentially left  the Fairbanks utilities                                                                    
at   the   same  status   as   other   utilities  owned   by                                                                    
municipalities  across  the  state. They  were  exempt  from                                                                    
being  regulated  by  the Regulatory  Commission  of  Alaska                                                                    
(RCA)  unless they  opted voluntarily.  The language  of the                                                                    
bill  placed them  into RCA  regulation  unless a  governing                                                                    
body of  a utility  removed them.  The feedback  he received                                                                    
from municipalities was that they desired to be non-                                                                            
regulated giving  entities more  flexibility in  the initial                                                                    
build-out  to  acclimate  rate-payers to  rate  changes.  It                                                                    
allowed costs to be spread as  demand ramped up. In terms of                                                                    
energy delivery, it was a  volume enterprise; the higher the                                                                    
demand, the lower  the per-unit cost. The initial  cost of a                                                                    
new system  would likely be  high. Therefore,  spreading out                                                                    
the  cost over  a longer  period of  time was  desirable and                                                                    
would  allow   for  an  enterprise   to  be   installed  and                                                                    
initialized. If  the section was  removed, it  [AIDEA] would                                                                    
default to  the regular statutes  as any other  utility that                                                                    
was owned by a political subdivision of the state.                                                                              
9:10:49 AM                                                                                                                    
Representative Gara  had not  followed the  controversy that                                                                    
lead  up  to  the  version   of  the  bill  in  the  finance                                                                    
committee.  He asked  about the  major  amendments added  by                                                                    
Representative Hawker in the previous committee.                                                                                
Mr. Therriault  pointed out  an addition  to the  section in                                                                    
statue that required utilities in  Interior Alaska to be RCA                                                                    
9:11:34 AM                                                                                                                    
Representative Wilson  asked about the two  utilities in the                                                                    
Interior staying  separate and  about Fairbanks  Natural Gas                                                                    
(FNG)  being regulated.  She wondered  if the  two utilities                                                                    
would be  handled differently. She  wanted to make  sure the                                                                    
committee was not making two classifications.                                                                                   
Mr.  Therriault  spoke  of the  pending  AIDEA  purchase  of                                                                    
Pentex assets; the existing FNG  system. If the purchase was                                                                    
finalized and  AIDEA became the  new owner, it would  not be                                                                    
regulated.  Fairbanks  Natural  Gas indicated  that  it  had                                                                    
applied with the RCA for a  rate regulation in case the sale                                                                    
did not materialize.                                                                                                            
9:12:28 AM                                                                                                                    
Representative  Wilson  was  trying to  understand  the  two                                                                    
different  utilities.  If  the utilities  remained  separate                                                                    
would there be less regulation  for the Interior Gas Utility                                                                    
(IGU) as a municipally owned utility or for another reason.                                                                     
Mr.  Therriault  pointed  out that  the  existing  statutory                                                                    
exemption  from  RCA  regulation   for  utilities  owned  by                                                                    
political subdivisions would  not be available to  FNG if it                                                                    
remained separate  under private  ownership. It  was AIDEA's                                                                    
intent  to eventually  blend the  two systems  together into                                                                    
one.  If  the AIDEA  purchase  moved  forward the  amendment                                                                    
would be helpful.                                                                                                               
Representative Wilson  remarked that she did  not understand                                                                    
but suggested the committee move on.                                                                                            
9:13:37 AM                                                                                                                    
Representative Pruitt  wanted to  understand why  the people                                                                    
of  Fairbanks   would  want  a  non-regulated   utility.  He                                                                    
understood the  burden of regulation. However,  he wanted to                                                                    
ensure  that the  people  of Fairbanks  were  not harmed  by                                                                    
another government  agency. He did  not want to see  a large                                                                    
burden fall on  the user because of  initial build-up costs.                                                                    
He wondered  about the costs  following build-up.  He opined                                                                    
that he  would not  want his  rates as a  consumer set  by a                                                                    
government bureaucracy.  He believed that the  RCA worked to                                                                    
do the right thing for the  public. He wondered if there was                                                                    
a way of  making RCA the regulatory entity  over the project                                                                    
following the build-up period.                                                                                                  
Mr.  Therriault reported  that  a municipally-owned  utility                                                                    
could choose to fall under  RCA regulations at any time. The                                                                    
attempt   would  be   to  initially   have  the   additional                                                                    
flexibility as  AIDEA was  trying to  get the  enterprise up                                                                    
and running. The Interior Gas  Utility had a locally elected                                                                    
board.  The  reason  why  a utility  owned  by  a  political                                                                    
subdivision had  the option  of being  exempt by  statue was                                                                    
because   an  elected   board   could   interact  with   its                                                                    
constituency at  a local level  to determine fair  rates. In                                                                    
the  case of  the Pentex  purchase and  the FNG  system, the                                                                    
AIDEA board  would be making  the decisions, at least  for a                                                                    
period of  time, until  the utility could  be spun  off from                                                                    
the AIDEA  board to another  utility operation such  as IGU.                                                                    
He did  not have any reason  to suspect the AIDEA  board was                                                                    
going to  somehow savage the constituency  of Fairbanks with                                                                    
unfair rates.                                                                                                                   
9:16:45 AM                                                                                                                    
Co-Chair  Thompson noted  that Speaker  Chenault had  joined                                                                    
the audience.                                                                                                                   
Representative  Guttenberg asked  about Section  2 which  he                                                                    
suggested  separated  the  IGU   from  all  other  municipal                                                                    
utilities.  He wanted  to clarify  that  no other  municipal                                                                    
utility had the obligation to operate under the RCA.                                                                            
Mr. Therriault responded affirmatively.  He added that other                                                                    
utilities owned  by political subdivisions of  the state had                                                                    
the  ability to  be  non-RCA regulated  by statute  assuming                                                                    
they had locally  elected boards. In other  words, a utility                                                                    
had another body that governed the rates to consumers.                                                                          
Representative  Guttenberg  asked   about  the  benefits  of                                                                    
including  Section 2.  He wondered  if  they outweighed  not                                                                    
including the section.                                                                                                          
Mr. Therriault suggested that  the limitation on flexibility                                                                    
outweighed the benefit of having RCA regulation in place.                                                                       
Co-Chair  Neuman  WITHDREW  his OBJECTION.  There  being  NO                                                                    
OBJECTION, Amendment 1 was adopted.                                                                                             
9:18:31 AM                                                                                                                    
Co-Chair Thompson MOVED to ADOPT Amendment 2:                                                                                   
     Page 7, line 15, following "the":                                                                                          
          Insert "members of the"                                                                                               
     Page 7, line 16:                                                                                                           
          Delete "approves"                                                                                                     
          Insert "approve by resolution"                                                                                        
Vice-Chair Saddler OBJECTED for discussion.                                                                                     
Mr.  Therriault   relayed  that  AIDEA  had   suggested  the                                                                    
amendment. There was  a desire to have  more certainty about                                                                    
moving the IEP forward. He pointed  to Section 11 on page 7,                                                                    
lines 14-21  of the bill.  He explained that, in  an attempt                                                                    
to  meet  some of  the  concerns  that  were brought  up  in                                                                    
earlier committees,  AIDEA needed to  act on an  initial set                                                                    
of  criteria  prior  to utilizing  any  remaining  financing                                                                    
tools. Amendment 2 clarified who  approved the project plan.                                                                    
Alaska  Industrial Development  and Export  Authority wanted                                                                    
approval defined by  an official action of the  board in the                                                                    
form  of a  resolution rather  than a  letter signed  by the                                                                    
chairman or a couple of committee members.                                                                                      
9:20:32 AM                                                                                                                    
Representative Pruitt  commented that  the word  "Board" was                                                                    
not included in the language of  the bill. He wondered if it                                                                    
should say "Members of the Board."                                                                                              
Mr.  Therriault  stated  that in  the  statute  establishing                                                                    
AIEDA  the  term  "board"  was   not  included.  Instead  it                                                                    
mentioned  "members".   The  word   "resolution"  inherently                                                                    
encompassed the  members who acted  together as a  board. By                                                                    
using  the word  "resolution"  it assured  that  it was  the                                                                    
board  entity   taking  an  action  rather   than  just  the                                                                    
9:21:11 AM                                                                                                                    
Vice-Chair Saddler  asked about the threshold  for passing a                                                                    
resolution.  He  wondered  if it  was  a  simple  two-thirds                                                                    
TED  LEONARD, DIRECTOR,  ALASKA  INDUSTRIAL DEVELOPMENT  AND                                                                    
EXPORT  AUTHORITY  (AIDEA) (via  teleconference),  explained                                                                    
that  AIDEA had  a seven  member board  and in  order for  a                                                                    
resolution to pass  a majority vote was needed.  Four out of                                                                    
seven  board  members had  to  vote  in  favor in  order  to                                                                    
approve a resolution.                                                                                                           
9:22:13 AM                                                                                                                    
Vice-Chair Saddler  clarified that  the majority  meant four                                                                    
members not just the majority of the members present.                                                                           
Mr. Leonard believed  that it had to be the  majority of the                                                                    
quorum but would verify the information.                                                                                        
Vice-Chair  Saddler  stated  that he  would  appreciate  the                                                                    
9:22:38 AM                                                                                                                    
Representative  Gara  reported he  had  just  sent a  public                                                                    
information request to Mr. Leonard.                                                                                             
Mr. Leonard reported that four  members had to vote in favor                                                                    
of a  resolution in order  for it  to be approved  no matter                                                                    
the quorum.                                                                                                                     
Mr. Therriault added that the  membership of the AIDEA board                                                                    
was predominantly public members.                                                                                               
Vice-Chair Saddler  WITHDREW his  OBJECTION. There  being NO                                                                    
OBJECTION, Amendment 2 was adopted.                                                                                             
9:23:31 AM                                                                                                                    
Co-Chair Thompson MOVED to ADOPT Amendment 3:                                                                                   
     Page 9, following line 4:                                                                                                  
          Insert a new bill section to read:                                                                                    
          "* Sec. 18. Section 16 of this Act is repealed                                                                        
          June 30, 2020."                                                                                                       
     Renumber the following bill section accordingly.                                                                           
Vice-Chair Saddler OBJECTED for discussion.                                                                                     
Mr.  Therriault encouraged  committee  members  to refer  to                                                                    
Section 16  on page 8  of the work  draft which added  a new                                                                    
section  establishing  a  report given  quarterly  and  also                                                                    
required  AIDEA to  be prepared  to give  a briefing  at the                                                                    
request  of  the  Legislative Budget  and  Audit  Committee.                                                                    
Amendment  3 placed  a repealer  on the  section. Without  a                                                                    
repealer  AIDEA would  be giving  quarterly  reports to  the                                                                    
legislature  long  after   financing  was  completed.  AIDEA                                                                    
understood that  the legislature wanted more  information in                                                                    
the  early years  of financing  being utilized.  However, he                                                                    
argued  that  after   a  certain  period  of   time  it  the                                                                    
obligation would be unnecessary.                                                                                                
Vice-Chair Saddler  WITHDREW his  OBJECTION. There  being NO                                                                    
OBJECTION, it was so ordered.                                                                                                   
9:25:48 AM                                                                                                                    
Co-Chair Thompson MOVED to ADOPT Amendment 4:                                                                                   
     Page 3, line 23:                                                                                                           
          Delete "law"                                                                                                          
          Insert "the legislature [LAW]"                                                                                        
Vice-Chair Saddler OBJECTED for discussion.                                                                                     
Mr.  Therriault referred  to Section  4 on  page 3,  line 22                                                                    
explaining that "the legislature"  was substituted for "law"                                                                    
currently  in  existing  statute. The  substitution  was  an                                                                    
amendment suggested in the other  body. It had been retained                                                                    
in the  House version of the  bill. In Section 4  on page 3,                                                                    
line 23  there was another  reference to "law."  Amendment 4                                                                    
made the  two lines read  the same, changing the  word "law"                                                                    
to "the legislature."                                                                                                           
Vice-Chair Saddler  WITHDREW his  OBJECTION. There  being NO                                                                    
OBJECTION, it was so ordered.                                                                                                   
Co-Chair Thompson WITHDREW Amendment 5.                                                                                         
9:27:16 AM                                                                                                                    
Co-Chair Thompson MOVED to ADOPT Amendment 6:                                                                                   
     Page 7, following line 31:                                                                                                 
          Insert a new bill section to read:                                                                                    
          "* Sec. 14. Section 2(a), ch. 27, SLA 1993, as                                                                        
          amended by sec. 19, ch. 111, SLA 1996, and sec.                                                                       
          10 of this Act is repealed June 30, 2019."                                                                            
     Renumber the following bill sections accordingly.                                                                          
     Page 9, line 4:                                                                                                            
          Delete "Sections 14 and 15"                                                                                           
          Insert "Sections 15 and 16"                                                                                           
Vice-Chair Saddler OBJECTED for discussion.                                                                                     
Mr.  Therriault explained  that  in  the proposed  committee                                                                    
substitute   (CS)  a   project  from   an  old   AIDEA  bond                                                                    
authorization   for  a   bulk  commodity   loading  facility                                                                    
somewhere  in  Cook  Inlet was  removed  from  the  repealer                                                                    
section of the bill,  refreshed, and reinserted into Section                                                                    
10 at the  top of page 7. He explained  that after a certain                                                                    
number  of  years if  the  refreshed  authorization was  not                                                                    
utilized, it  would automatically be repealed.  In the past,                                                                    
AIDEA's  bonding  authorizations   or  possible  loans  were                                                                    
passed without  a repealer.  If they  were never  used, they                                                                    
were still seen by  rating agencies as potential obligations                                                                    
on AIDEA's  books. As a  result, AIDEA's  rating evaluations                                                                    
were affected. If bonding authorizations  were not used by a                                                                    
certain time,  AIDEA needed to  clean them off of  its books                                                                    
by incorporating  automatic repealers. For any  new projects                                                                    
in  which  authorizations  were  granted  AIDEA  was  asking                                                                    
proposers  to include  an automatic  repealer  to avoid  any                                                                    
accumulation  of old,  unused authorizations.  The amendment                                                                    
established   a   new   sunset    for   a   refreshed   bond                                                                    
Representative  Pruitt  asked  about all  of  the  repealers                                                                    
included  in the  bill. He  noted  a repealer  for the  bulk                                                                    
commodity loading ship terminal  in Point MacKenzie, one for                                                                    
the  Sweetheart Lake  [Hydroelectric Project],  and one  for                                                                    
the Waterfall  Creek Hydroelectric Project in  King Cove. He                                                                    
wondered if  there were  things that  were not  specified in                                                                    
the bill that would be repealed.                                                                                                
Mr.  Therriault  was  looking for  the  Governor's  original                                                                    
transmittal letter  which explained  the meaning of  each of                                                                    
the  repeals. There  were  a number  of  projects that,  for                                                                    
various  reasons, never  went forward.  He  referred to  the                                                                    
sectional  analysis that  explained that  there was  one for                                                                    
the  processing  facility  for seafood,  the  Kodiak  launch                                                                    
complex  facilities,  the  Red   Dog  port,  the  Nome  port                                                                    
facility,  the development  at Hatcher  Pass,  and the  port                                                                    
facilities in  Lynn Canal. Some  of the projects  dated back                                                                    
to 1993, 1995,  1998, 2004, and 2006. The  projects were old                                                                    
enough   that  AIDEA   would  not   be  using   the  bonding                                                                    
9:31:24 AM                                                                                                                    
Representative Pruitt wondered if  the authorization for the                                                                    
Red Dog Mine had been utilized in part or at all.                                                                               
Mr. Therriault replied  that it was in  the repealer because                                                                    
it had  not been utilized at  all. If it had  been partially                                                                    
utilized  it  would  have  appeared   in  the  bill  with  a                                                                    
different structure to remove the unused portion.                                                                               
Representative  Pruitt  wondered  if there  was  a  repealer                                                                    
associated with the current IEP  project. If so, he inquired                                                                    
about the dates.                                                                                                                
Mr. Therriault invited Mr.  Leonard to answer Representative                                                                    
Pruitt's question.                                                                                                              
9:32:15 AM                                                                                                                    
Mr.  Leonard responded  that  under SB  23  he believed  and                                                                    
would  confirm that  there was  a five-year  sunset on  bond                                                                    
authorizations. He  would get the  information and  bring it                                                                    
back to the committee.                                                                                                          
Representative Wilson  asked if the five  years started upon                                                                    
the passing  of the current  bill or prior. She  wondered if                                                                    
other  projects were  included in  the bill  aside from  the                                                                    
Mr. Therriault  believed there  would be  a repealer  on all                                                                    
new authorizations contained in the bill.                                                                                       
Co-Chair Thompson  asked Mrs.  Leonard if  he had  found the                                                                    
information requested by Representative Pruitt.                                                                                 
Mr. Leonard was looking for it in SB 23 and would find it.                                                                      
Representative Pruitt did  not want to hold  up the meeting,                                                                    
but the information would be helpful.                                                                                           
Vice-Chair Saddler  WITHDREW his  OBJECTION. There  being NO                                                                    
OBJECTION, Amendment 6 was adopted.                                                                                             
9:34:12 AM                                                                                                                    
Vice-Chair Saddler MOVED to ADOPT Amendment 7:                                                                                  
     Page 1, line 11, following "project;":                                                                                     
          Insert   "authorizing    the   Alaska   Industrial                                                                    
          Development  and Export  Authority to  issue bonds                                                                    
          to  finance  the infrastructure  and  construction                                                                    
          costs of rebuilding  transmission between the Hope                                                                    
          substation  and  Portage, rebuilding  transmission                                                                    
          between Powerline Pass to  Indian, and the Eklutna                                                                    
          hydroelectric    transmission    system    upgrade                                                                    
     Page 2, line 6:                                                                                                            
          Delete "sec. 9" in both places                                                                                        
          Insert "sec. 11" in both places                                                                                       
     Page 8, following line 11:                                                                                                 
          Insert a new bill section to read:                                                                                    
           "* Sec.  15. The uncodified  law of the  State of                                                                    
          Alaska  is  amended by  adding  a  new section  to                                                                    
          LEGISLATIVE APPROVAL;  ALASKA RAILBELT COOPERATIVE                                                                    
          TRANSMISSION AND ELECTRIC  COMPANY. (a) The Alaska                                                                    
          Industrial  Development and  Export Authority  may                                                                    
          issue  bonds  to  finance the  infrastructure  and                                                                    
          construction costs for                                                                                                
               (1) rebuilding transmission  between the Hope                                                                    
               substation   and   Portage  by   the   Alaska                                                                    
               Railbelt    Cooperative   Transmission    and                                                                    
               Electric Company;                                                                                                
               (2)    rebuilding     transmission    between                                                                    
               Powerline  Pass  to   Indian  by  the  Alaska                                                                    
               Railbelt    Cooperative   Transmission    and                                                                    
               Electric Company; and                                                                                            
               (3)  the  Eklutna hydroelectric  transmission                                                                    
               system   upgrade   project  by   the   Alaska                                                                    
               Railbelt    Cooperative   Transmission    and                                                                    
               Electric Company.                                                                                                
          (b)  The projects  listed in  (a) of  this section                                                                    
          shall be  owned and  operated by the  authority or                                                                    
          financed under AS 44.88.172.                                                                                          
          (c) The principal amount of  the bonds provided by                                                                    
          the authority  for the projects in  (a)(1) and (2)                                                                    
          of this  section may not  exceed a  combined total                                                                    
          of  $107,100,000, and  may  include  the costs  of                                                                    
          issuing    bonds    considered   reasonable    and                                                                    
          appropriate by  the Alaska  Industrial Development                                                                    
          and Export Authority.                                                                                                 
          (d) The principal amount of  the bonds provided by                                                                    
          the authority  for the project  in (a)(3)  of this                                                                    
          section  may   not  exceed  $20,400,000   and  may                                                                    
          include  the  costs  of issuing  bonds  considered                                                                    
          reasonable   and   appropriate   by   the   Alaska                                                                    
          Industrial Development and Export Authority.                                                                          
          (e) This section  constitutes legislative approval                                                                    
          required by AS 44.88.095(g)."                                                                                         
     Renumber the following bill sections accordingly.                                                                          
     Page 9, line 4:                                                                                                            
          Delete "Sections 14 and 15"                                                                                           
          Insert "Sections 14 - 16"                                                                                             
Co-Chair Thompson OBJECTED for discussion.                                                                                      
Vice-Chair  Saddler  explained  his  amendment  which  would                                                                    
authorize  AIDEA to  issue up  to $127  million in  bonds to                                                                    
finance   some   additional    critical   state   electrical                                                                    
transmission  upgrades. He  relayed  that  the Bradley  lake                                                                    
power transmission  system in the Kenai  area provided power                                                                    
for the entire Homer to  Fairbanks Railbelt. However, it was                                                                    
constrained  by   inadequate  old  lines   and  transmission                                                                    
towers.   These    inhibited   the   development    of   big                                                                    
hydroelectric  projects   in  the  Railbelt  and   made  the                                                                    
transmission  of power  less  reliable  and less  efficient.                                                                    
There was an  Alaska Energy Authority (AEA)  study two years                                                                    
previously  that showed  the  state  was potentially  losing                                                                    
more  than $100  million  worth of  energy  efficiency as  a                                                                    
result of  inadequate transmission  lines. The  $127 million                                                                    
in projects would be bonded  through the amendment and would                                                                    
take  care of  much  of  the Anchorage-to-Kenai  limitations                                                                    
although  not the  entire  problem. He  spoke  of two  major                                                                    
elements  that the  authorization  would  fund including  an                                                                    
upgrade  of the  Quartz  Creek to  the  Anchorage and  Kenai                                                                    
transmission lines at a cost  of about $107 million. The two                                                                    
segments were from  the Hope substation to  Portage and from                                                                    
Power Line  Pass to  Indian that  would replace  50-year old                                                                    
transmission lines. Also, towers  with higher capacity lines                                                                    
would be upgraded  from 115 kilovolts to  230 kilovolts. The                                                                    
study from AEA indicated that  there would be a cost-benefit                                                                    
ratio of 1 to 4.6, meaning  that for every dollar in capital                                                                    
expenditures  the  state   contributed  the  state  received                                                                    
nearly $5 in  benefits to consumers along  the Railbelt from                                                                    
Anchorage to Homer  and Fairbanks to Kenai in  terms of more                                                                    
economical  and  reliable  power. The  second  portion  that                                                                    
would  be  funded  was  a $20  million  project  called  the                                                                    
Eklutna   Hydroelectric  Transmission   System  that   would                                                                    
improve  the  connections  between  the  existing  Municipal                                                                    
Light and Power (MLP) plants  in Muldoon with the Matanuska-                                                                    
Susitna Electric Association's  (MEA) new Eklutna generation                                                                    
station. The project  would have a cost benefit  ratio of $1                                                                    
to $23.  He suggested that with  a little bit of  input from                                                                    
bonding  there would  be tremendous  benefits  of an  entire                                                                    
state  transmission   system;  improved  reliability   of  a                                                                    
transmission  system and  improved use  of the  Bradley Lake                                                                    
Hydroelectric System that Railbelt  rate payers were already                                                                    
paying for.  He remarked that  the project fell  squarely in                                                                    
the  tradition  of  some  of the  other  state  projects  to                                                                    
generate   hydroelectric   and  improve   transmission.   He                                                                    
encouraged members to support the amendment.                                                                                    
Co-Chair Thompson informed the  committee that Joe Griffith,                                                                    
the  general manager  of Matanuska  Electric  was online  to                                                                    
answer any questions.                                                                                                           
9:36:48 AM                                                                                                                    
Representative  Wilson was  not  aware of  the project.  She                                                                    
wanted  to know  if the  bonds  were going  directly to  the                                                                    
utility  and  whether  the  utility   would  be  the  entity                                                                    
requesting  the  bond.  She  was  assuming  AIDEA  would  be                                                                    
providing due diligence.                                                                                                        
Mr.  Therriault deferred  to Mr.  Leonard  who could  better                                                                    
speak to the AIDEA process.                                                                                                     
Mr. Leonard stated that the bonds  allowed under SB 23 had a                                                                    
sunset date of June 30, 2018.                                                                                                   
Mr. Therriault interjected that  Mr. Leonard's answer was in                                                                    
response to Representative Pruitt's question.                                                                                   
He  responded   to  Representative  Wilson's   question.  He                                                                    
explained  that before  AIDEA issued  bonds  for a  project,                                                                    
such  as the  one being  discussed, full  due diligence  was                                                                    
required  in   order  to  issue  bonds.   Alaska  Industrial                                                                    
Development  and Export  Authority's  process  would be  the                                                                    
same  in issuing  any other  bond  authorizations that  came                                                                    
before the committee.                                                                                                           
9:38:27 AM                                                                                                                    
Representative  Wilson  asked  about due  diligence  and  if                                                                    
there  was discussion  about the  use of  transmission lines                                                                    
for other projects.                                                                                                             
Mr. Leonard specified  that for a project owned  by AIDEA or                                                                    
financed  through AS  44.88.172 there  was usually  language                                                                    
that  dealt with  how the  process  could incorporate  other                                                                    
entities using the lines as long  as the lines were owned or                                                                    
the project was financed by AIDEA.                                                                                              
Representative  Wilson asked  where the  funds where  coming                                                                    
from and whether they came from other hydro power funds.                                                                        
Mr. Leonard clarified that all  the bond authorization would                                                                    
allow AIDEA  to utilize bonding  as a tool when  examining a                                                                    
project  for financing  or owning  the  project and  issuing                                                                    
bonds. In the due diligence  process of evaluating a project                                                                    
AIDEA  would be  looking at  its  capacity and  the type  of                                                                    
bonds that would  best serve the project  like revenue bonds                                                                    
or general  obligation bonds.  The evaluation  process would                                                                    
determine whether AIDEA would  finance the project, and what                                                                    
type of bonds would be utilized for financing.                                                                                  
9:41:22 AM                                                                                                                    
Representative Wilson asked why  it [the bond authorization]                                                                    
was in  the bill and  whether the  amount was a  factor. She                                                                    
suggested that  in the case  of a lesser  amount legislation                                                                    
was not needed.                                                                                                                 
Mr.  Leonard  concurred.  He  stated  that  based  on  state                                                                    
statutes,  a project  financed  through  AS 44.88.172  AIDEA                                                                    
currently  had to  have an  authorization  for bonds  issued                                                                    
over $10 million.                                                                                                               
9:41:59 AM                                                                                                                    
Vice-Chair Saddler wanted to clarify  that the Eklutna Hydro                                                                    
facility  was  an  existing  and   very  old  facility.  His                                                                    
amendment   proposed   AIDEA   issuing  bonds   to   finance                                                                    
transmission  lines  which  would connect  the  old  Eklutna                                                                    
facility with  the new power generation  facility at Muldoon                                                                    
and to  the new Eklutna generation  station, MEA's gas-fired                                                                    
plant being  constructed. He  pointed out it  was not  a new                                                                    
hydro facility.                                                                                                                 
Representative Wilson  mentioned that  she was  just talking                                                                    
about  transmission lines.  As the  state installed  more of                                                                    
them she suggested they could  be shared with other entities                                                                    
to reduce costs.                                                                                                                
9:42:43 AM                                                                                                                    
Representative  Pruitt responded  that  the amendment  would                                                                    
benefit  more  than  just  one  or  two  of  the  utilities.                                                                    
Currently,  there was  a bottleneck  for energy  produced at                                                                    
Bradley  Lake  Hydroelectric  Plant.  The  lines  could  not                                                                    
accommodate  additional power.  If there  were any  problems                                                                    
with the lines  the gas-fired generation plants  such as the                                                                    
one in  Beluga would  be turned on.  He understood  that all                                                                    
six  of the  utilities on  the Railbelt  benefited from  the                                                                    
energy  at Bradley  Lake.  However, if  the  line could  not                                                                    
transmit the  affordable energy then no  one benefitted. The                                                                    
utilities in the valley, Fairbanks,  and Anchorage would all                                                                    
benefit  greatly  from  the expansion  of  the  transmission                                                                    
lines in  the critical  connecting sector between  the Kenai                                                                    
area  and Anchorage.  He  believed  Fairbanks would  benefit                                                                    
from   low-cost  power   by  improving   the  Bradley   Lake                                                                    
transmission system.                                                                                                            
Co-Chair Thompson  suggested that  the rate-payers  would be                                                                    
the beneficiaries.                                                                                                              
9:44:10 AM                                                                                                                    
Representative Guttenberg  asked for more  information about                                                                    
the   Alaska  Railbelt   Cooperative  Transmission   Company                                                                    
(ARCTEC).  He   was  not  familiar   with  the   entity.  He                                                                    
understood  about the  transmission bottleneck  but wondered                                                                    
about  who would  be  paying for  the  improvements and  who                                                                    
would benefit. He wanted to assure parity across all users.                                                                     
Mr. Therriault answered  that ARCTEC was a  creation of four                                                                    
Railbelt utilities. It was an  entity created by the parties                                                                    
to work  together, particularly  on transmission.  In answer                                                                    
to Representative Wilson's question,  as part of AIDEA's due                                                                    
diligence board members  would look at what  kind of traffic                                                                    
would be  expected if  a line was  created. They  would also                                                                    
consider whether it  would be operated under  an open access                                                                    
tariff. More business would be  anticipated with a line with                                                                    
commonly understood  reliability standards.  He acknowledged                                                                    
the  legislature's  interest  in making  sure  a  governance                                                                    
structure  was   in  place  for  the   entire  Railbelt.  He                                                                    
commented  on  the  savings numbers  Representative  Saddler                                                                    
noted explaining  that the  numbers came  from an  AEA study                                                                    
done on the entire  Railbelt system. Alaska Energy Authority                                                                    
and its  consultant suggested there  would be  a substantial                                                                    
savings from  de-bottlenecking the system. He  reported that                                                                    
his  staff compared  the suggested  project  to the  project                                                                    
list  from  AEA's  study  and   found  all  components  were                                                                    
recommended for upgrades.                                                                                                       
9:46:33 AM                                                                                                                    
Representative  Guttenberg restated  his question  regarding                                                                    
equitability across the project.                                                                                                
Mr.  Therriault suggested  that as  the lines  were improved                                                                    
and debt  was accumulated there  would be a cost  built into                                                                    
the  tariff.  Therefore,  anyone  shipping  power  across  a                                                                    
particular portion of the system would pay an equal tariff.                                                                     
9:47:14 AM                                                                                                                    
Vice-Chair  Saddler  thought  Mr.  Therriault's  answer  was                                                                    
"yes." He asked  Mr. Therriault to explain  the Bradley Lake                                                                    
funding  model  including  how  different  utilities  shared                                                                    
expenses   and  how   that   example   might  parallel   the                                                                    
transmission line work.                                                                                                         
Mr. Therriault  was uncertain of the  comparison to Bradley.                                                                    
He  explained that,  in  terms of  Bradley  Lake, the  state                                                                    
provided  a portion  of the  funding.  The utilities  bonded                                                                    
through  the state  for the  remaining funds.  As power  was                                                                    
produced  there  was a  cost  associated  with repaying  the                                                                    
bonds. Once  the bonds  were paid back,  the charge  for the                                                                    
power continued until the  state recuperated its investment;                                                                    
anywhere from 25 to 30 years.                                                                                                   
Vice-Chair Saddler  suggested that Joe Griffith  with ARCTEC                                                                    
was   on   the   line  and   could   answer   Representative                                                                    
Guttenberg's  questions  about   the  organization  and  the                                                                    
potential benefits of the upgrades.                                                                                             
9:48:30 AM                                                                                                                    
JOE   GRIFFITH,   GENERAL    MANAGER,   MATANUSKA   ELECTRIC                                                                    
ASSOCIATION (via teleconference),  explained that ARCTEC was                                                                    
created  in  2010  or  2011 to  principally  deal  with  the                                                                    
generation and  transmission [G&T]  issues in  the Railbelt.                                                                    
The company's thrust  over the previous five  years had been                                                                    
on  transmission that  would de-constrain  the Bradley  Lake                                                                    
delivery method. It was a huge benefit for the Railbelt.                                                                        
9:49:49 AM                                                                                                                    
Representative Gara stated  that obviously the legislature's                                                                    
job was  to support the  entire state. He indicated  that he                                                                    
was  concerned about  the  resistance  from other  Anchorage                                                                    
legislators earlier  in the  session. He  wanted to  know if                                                                    
Alaska  Energy  Authority had  future  plans  to expand  the                                                                    
production at Bradley Lake. It  was clean and cost-efficient                                                                    
power.  He  thought the  energy  would  go  all the  way  to                                                                    
Fairbanks. He was wondering about a plan for Bradley Lake.                                                                      
Mr. Therriault  relayed that the utilities  had been working                                                                    
closely  with  AEA on  a  project  called the  Battle  Creek                                                                    
Diversion  which would  put more  water behind  Bradley Lake                                                                    
damn  to generate  more  power.  The de-bottlenecking  would                                                                    
ensure that the  power could get to the  utilities along the                                                                    
Railbelt  at the  optimum time  of  the day  to achieve  the                                                                    
largest  benefit for  the consumer  as  far as  the cost  of                                                                    
power.  It was  his  understanding that  an application  had                                                                    
been  filed with  the Federal  Energy Regulatory  Commission                                                                    
(FERC) for Bradley  Lake to add the  Battle Creek diversion.                                                                    
He stressed that AEA was  working closely with the utilities                                                                    
to get more power out of the existing infrastructure.                                                                           
9:52:06 AM                                                                                                                    
Representative Gara  stated that it was  important and would                                                                    
also reduce reliance on natural gas in Cook Inlet.                                                                              
Co-Chair  Thompson WITHDREW  his OBJECTION.  There being  NO                                                                    
OBJECTION, Amendment 7 was adopted.                                                                                             
Co-Chair Thompson MOVED to ADOPT Amendment 8:                                                                                   
     Page 2, line 6:                                                                                                            
          Delete "sec. 9" in both places                                                                                        
          Insert "sec. 11" in both places                                                                                       
Vice-Chair Saddler OBJECTED for discussion.                                                                                     
Mr.   Therriault  indicated   that  the   amendment  was   a                                                                    
conforming amendment.  In the bill  there was  language that                                                                    
clarified   that  the   IEP  and   the  Sustainable   Energy                                                                    
Transmission and Supply Development  Funds (SETS) were to be                                                                    
used  only  for  the  IEP.   He  stated  that  the  drafters                                                                    
identified a change needed on  page 2, line 6 to incorporate                                                                    
the addition rolled into the CS.                                                                                                
Vice-Chair Saddler  WITHDREW his  OBJECTION. There  being NO                                                                    
OBJECTION, it was so ordered.                                                                                                   
9:53:56 AM                                                                                                                    
Co-Chair  Thompson  commented  that  members  of  the  House                                                                    
expressed concerned with AIDEA  getting too stretched in its                                                                    
ability to bond. He asked for Mr. Leonard's remarks.                                                                            
Mr.  Leonard  reported  that the  authorizations  were  just                                                                    
endorsements  that allowed  AIDEA to  utilize the  tools. If                                                                    
AIDEA's  capacity was  ever pushed  to a  point where  board                                                                    
members  did  not  feel  AIDEA   had  the  bonding  capacity                                                                    
available,  then the  authorizations would  not be  used. He                                                                    
added that  as AIDEA  went forward  in examining  several of                                                                    
the larger energy projects it  would be looking at more than                                                                    
just the general  obligations but also at  revenue bonds. In                                                                    
using   revenue  bonds   based  on   the  revenues   from  a                                                                    
transmission  line,  for  example,   they  would  not  count                                                                    
against  AIDEA's bonding  capacity  because  revenue from  a                                                                    
project  would be  used to  back the  bonds. Several  of the                                                                    
projects  would likely  use revenue  bonds  which would  not                                                                    
affect   AIDEA's   capacity.    He   reiterated   that   the                                                                    
authorizations  allowed   AIDEA  to   utilize  bonds   as  a                                                                    
financing tool.                                                                                                                 
Co-Chair  Thompson discussed  that SB  23 contained  certain                                                                    
restrictions. The  original legislation removed  four words,                                                                    
"On the  North Slope".  He stated that  the AIDEA  board was                                                                    
initiated by  the legislature  to take  the politics  out of                                                                    
the equation. However,  he felt that HB 105  had turned into                                                                    
a political football. He pointed  out that projects of which                                                                    
the  AIDEA  board  had  performed  its  due  diligence  were                                                                    
profitable and  successful. He added that  the only projects                                                                    
that had  failed were those that  the legislature interfered                                                                    
with by  directing AIDEA.  He reiterated  his disappointment                                                                    
in the  politicizing of the  current legislation  before the                                                                    
9:57:23 AM                                                                                                                    
Vice-Chair Saddler  MOVED to  REPORT CSHB  105 (FIN)  out of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal  note. There being NO  OBJECTION, it was                                                                    
so ordered.                                                                                                                     
CSHB  105(FIN) was  REPORTED  out of  committee  with a  "do                                                                    
pass" recommendation and with  one previously published zero                                                                    
fiscal note: FN1 (CED).                                                                                                         
9:57:57 AM                                                                                                                    
AT EASE                                                                                                                         
10:00:49 AM                                                                                                                   
Co-Chair  Thompson reviewed  the list  of testifiers  online                                                                    
and invited Representative Gattis,  the sponsor of the bill,                                                                    
to make her presentation.                                                                                                       

Document Name Date/Time Subjects
HB80 Supporting Documents - Becoming an SAT test center is easy.pdf HFIN 4/14/2015 8:30:00 AM
HB 80
HB80_SupportDocuments_Matsu.pdf HFIN 4/14/2015 8:30:00 AM
HB 80
HB80_SupportDocuments_Dr. Paramo.pdf HFIN 4/14/2015 8:30:00 AM
HB 80
HB80 Supporting Documents - Letter Sara Moore.pdf HFIN 4/14/2015 8:30:00 AM
HB 80
HB80 Supporting Documents - Letter Griffin.pdf HFIN 4/14/2015 8:30:00 AM
HB 80
HB 105 PP slides.pdf HFIN 4/14/2015 8:30:00 AM
HB 105
HB 105 Amendment N 4.pdf HFIN 4/14/2015 8:30:00 AM
HB 105
HB 105 Amendment N 3.pdf HFIN 4/14/2015 8:30:00 AM
HB 105
HB80 Supporting Documents -ASA Resolution Opposing Unfunded Mandates 3-8-2015.pdf HFIN 4/14/2015 8:30:00 AM
HB 80
HB 105 Amendment N 5.pdf HFIN 4/14/2015 8:30:00 AM
HB 105
Hb 105 Amendment N 10.pdf HFIN 4/14/2015 8:30:00 AM
HB 105
HB 105 AMENDMENT N.9.pdf HFIN 4/14/2015 8:30:00 AM
HB 105
HB 105 Amendment N 8.pdf HFIN 4/14/2015 8:30:00 AM
HB 105
HB 105 Amendment N 7.pdf HFIN 4/14/2015 8:30:00 AM
HB 105
HB 105 Amendment N 6.pdf HFIN 4/14/2015 8:30:00 AM
HB 105
HB 105 Amendment N 4.pdf HFIN 4/14/2015 8:30:00 AM
HB 105