Legislature(1997 - 1998)

02/18/1998 01:05 PM House JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
HB 336 - ELIGIBILITY FOR POWER COST EQUALIZATION                               
                                                                               
[Three microphones were out of order during this meeting, and some             
portions are difficult to hear on the tape.]                                   
                                                                               
Number 0033                                                                    
                                                                               
CHAIRMAN GREEN announced the first item of business would be HB
336, "An Act relating to eligibility for power cost equalization."             
                                                                               
Number 0041                                                                    
                                                                               
REPRESENTATIVE GENE KUBINA, sponsor, advised members that he                   
represents District 35 and the community of Cordova.  Before coming            
to the legislature, he had served for five years on the board of               
directors for the Copper Valley Electric Cooperative.  A previous              
bill of his, passed by the legislature, had related to power line              
extensions.  He has worked with the community of Cordova on trying             
to find a way to lower their electric base.                                    
                                                                               
REPRESENTATIVE KUBINA told members that with power cost                        
equalization (PCE), the individual's rate is lowered.  However, PCE            
really does nothing for business.  For example, Cordova's many fish            
processors, that community's main industry, have very high rates               
and are therefore looking for ways to get alternative energy.                  
Representative Kubina cited a hydroelectric project that wouldn't              
be a dam but that would funnel water in-line to a turbine.  They               
have been working with U.S. Senator Stevens and have about $4                  
million appropriated from the federal government.  Although the                
cost will be $15 million, they hope to get federal and state grants            
and then propose to give up $750,000 per year in PCE.  By getting              
this going, they could lower their rates.                                      
                                                                               
Number 0221                                                                    
                                                                               
REPRESENTATIVE KUBINA referred to the individual residential rate              
and explained, "They have promised them that their rates will not              
go up with this project, but they would be able to go down to about            
where they are at the subsidized rate now."  However, he said, they            
would be able to lower the business rates, which would help                    
immensely in providing jobs for the community.  This bill sets up              
that program.  A utility receiving PCE may apply to the state for              
a grant, which for this situation would be $7.5 million, and for up            
to ten years of PCE.  Once granted that, they would build an                   
alternate energy project.  After that project is done, six months              
later they would no longer be eligible for PCE.                                
                                                                               
REPRESENTATIVE KUBINA explained that it is a trade-off, with                   
capital costs provided and ten years' worth of PCE.  But as soon as            
they get this project done, they will be off PCE.  It is an                    
incentive for communities, worded to also apply to geothermal or               
wind projects, "anything to get off this shipping out diesel fuel."            
                                                                               
Number 0337                                                                    
                                                                               
REPRESENTATIVE KUBINA concluded, "I recognize that the money part              
of this is not even in this bill, and that is something that is in             
the Finance Committee and obviously will be part of this whole mix.            
The bill that we have before us just sets up this program in                   
statute, to allow it to happen if the legislature appropriates the             
money."                                                                        
                                                                               
Number 0369                                                                    
                                                                               
REPRESENTATIVE CON BUNDE said he applauds the efforts of                       
communities to get away from PCE.  Noting the ongoing discussions              
about whether that will continue, however, he asked what would                 
happen if this bill passed, Cordova got ten years of guaranteed                
PCE, and in two years the legislature cut off the PCE program.  He             
suggested the community would actually get a little extra PCE in               
that case.                                                                     
                                                                               
REPRESENTATIVE KUBINA concurred that there is no guarantee PCE will            
be funded in any year.  However, if they'd had a program like this             
in place 10 or 15 years ago, many people would have been off of                
PCE.  He suggested it isn't fair to say they don't if it will exist            
next year or ten years from now but still not address the problem.             
                                                                               
REPRESENTATIVE KUBINA told members there has been a helter-skelter             
energy policy in Alaska for a long time.  For example, Valdez has              
a dam that some believe actually keeps rates a little higher; they             
pay a high cost but are not eligible for PCE because of it.  In                
contrast, the Railbelt has a lot of money for energy projects.                 
Representative Kubina again agreed there is no guarantee PCE will              
continue, adding, "But I still think that we should go forward as              
best we can to help economic development of the state and diversify            
our economy.  And doing the best we can to get people in the rural             
areas to have energy that comes closer to what the Railbelt energy             
is will help diversify that economy and make people more self-sufficient and se
                                                                               
Number 0581                                                                    
                                                                               
REPRESENTATIVE BUNDE asked whether there has been discussion of a              
local match.                                                                   
                                                                               
REPRESENTATIVE KUBINA replied that there has been discussion on                
this project for many years.  One reason it hasn't been built yet              
is that it will not meet year-round needs; diesel generation will              
still be necessary.  Without grant money, they couldn't tell the               
people they provide energy to that their rates will be as low as               
with PCE.  People in the community haven't wanted to build a                   
project that would result in higher rates.                                     
                                                                               
Number 0687                                                                    
                                                                               
REPRESENTATIVE ERIC CROFT referred to the 75 percent and the fact              
that the project wouldn't carry the entire electrical need.  He                
asked about that and mentioned the match.                                      
                                                                               
REPRESENTATIVE KUBINA explained that at certain times of year when             
the river is flowing, the project will supply all needs.  But in               
winter, they will need diesel generation, which the utility will               
still pay for, but at a much higher rate.                                      
                                                                               
REPRESENTATIVE CROFT said there will be no PCE money to cover that.            
                                                                               
REPRESENTATIVE KUBINA concurred.  He indicated the community is                
willing to give up that $750,000.                                              
                                                                               
Number 0762                                                                    
                                                                               
REPRESENTATIVE BUNDE stated his understanding that average                     
consumers would pay about the same as they pay now; although they              
would pay more in the cold months, they could pay less in the                  
warmer months, so the total cost would be a wash.                              
                                                                               
REPRESENTATIVE KUBINA replied that the total bill they would pay is            
the same as what they pay with the PCE subsidy.  He noted that                 
Valdez has a similar situation, with a hydroelectric project that              
doesn't provide all the energy for Valdez; at times of the year, it            
doesn't work because there isn't enough water.  He told members                
that the PCE law contains a stipulation that if they put in                    
hydroelectric power, they are no longer eligible for PCE.  He                  
suggested that should have been carried forward with an offer to               
help built a hydroelectric project if that will help take that                 
community off the PCE.  That is what this bill does.                           
                                                                               
Number 0871                                                                    
                                                                               
REPRESENTATIVE NORMAN ROKEBERG asked whether there is a provision              
built into the companion bill for failure of the legislature to                
fund the PCE in the future.                                                    
                                                                               
REPRESENTATIVE KUBINA explained that the other bill that would go              
with this merely says that according to the provision, that is a               
$7.5 million appropriated for this project.  He stated, "Let's say,            
though, that there's no intention, really, of passing that bill.               
It was just a mechanism to go along with this, to discuss it, and              
if there is any money that would go for this project, we'd go                  
through the normal budget process, ... through the capital budget,             
with the stipulations, you know, that the legislature set according            
to this program."                                                              
                                                                               
Number 0909                                                                    
                                                                               
REPRESENTATIVE ROKEBERG asked, "Strategically, for the folks in                
your district and Cordova, what you would like to do is basically              
pass this particular bill, and then work on the appropriation as a             
separate item and endeavor to get a capital appropriation; is that             
correct?"                                                                      
                                                                               
REPRESENTATIVE KUBINA said that is correct.                                    
                                                                               
Number 0927                                                                    
                                                                               
REPRESENTATIVE ROKEBERG stated his understanding that there is a               
little pool of PCE money in an endowed account now or something.               
He asked, "You're not going to ask to reach into that money?"                  
                                                                               
REPRESENTATIVE KUBINA said the appropriation bill he'd introduced              
with this just says "general funds."  He doesn't want to do                    
anything that would have other small communities that depend on PCE            
think they are being attacked; some of those communities may want              
it even more than Cordova, and they might be paying 50 cents a                 
kilowatt hour without PCE.  "So, I did not specify anything like               
that," Representative Kubina concluded.                                        
                                                                               
REPRESENTATIVE ROKEBERG asked whether the 75 percent of the total              
electric load in HB 336 is essentially to accommodate the                      
circumstances in this particular project.  He asked whether the                
problem relates to the reservoir not being big enough.                         
                                                                               
REPRESENTATIVE KUBINA explained that some people had felt that if              
PCE was removed, a project like this should be a full 100 percent              
of what they are providing.  However, he had felt that was asking              
too much and that if they could get their rate down to what the PCE            
rate was, it was fair to give up PCE.  Representative Kubina                   
concluded that for Cordova, that number seems to work.  However, a             
different number may be better elsewhere.                                      
                                                                               
Number 1051                                                                    
                                                                               
REPRESENTATIVE ROKEBERG, requesting correction if he got the                   
nomenclature wrong, suggested that in power generation there is                
normally a need for "what is called a spinning reserve, other                  
reserves that are behind your ability to meet your demand load at              
one point in time, in case there's spikes in the load."  He posited            
that rural Alaskan communities would have generation capacity less             
than that and which could never meet an "engineered spinning                   
reserve load."  He suggested this is another argument for having               
less than 100 percent.  He asked Representative Kubina to define               
what 100 percent of load means, saying it means different things to            
different people, especially taking into account something like the            
spinning reserve.  Noting Chairman Green's background, he asked                
whether this is on the right track.                                            
                                                                               
CHAIRMAN GREEN replied, "Somewhat, yes.  I think that's a little               
different, but I understand what you're coming from."                          
                                                                               
Number 1122                                                                    
                                                                               
REPRESENTATIVE ROKEBERG pointed out that in the Nineteenth Alaska              
Legislature, he and Representative Ogan passed a bill that set up              
a leasing program for shallow gas development.  He asked, "Because             
of the proximity to Katalla and maybe some other known potential               
gas reserves in the Cordova area and Prince William Sound, is there            
any possibility that any gas could be found, explored, or it might             
create another alternative to this particular thing and may even be            
more prospective?  Do you know if they've looked into that?"                   
                                                                               
Number 1161                                                                    
                                                                               
REPRESENTATIVE KUBINA replied that a road is being designed right              
now by the Chugach Native Corporation to go into that area.                    
However, that is probably five years down the line.  He indicated              
that ARCO Alaska, Incorporated, in particular, has shown great                 
interest there.  Representative Kubina said testimony would show               
that the community already has permits for this project, and the               
engineering is done.  He pointed out that this is a renewable                  
resource that will always be there.                                            
                                                                               
Number 1210                                                                    
                                                                               
REPRESENTATIVE KUBINA referred to a previous question and advised              
members that Version H, not yet adopted, changes the language from             
"supplies more than 75 percent" to "is designed to supply more than            
75 percent."  Someone applying for this grant will do so under this            
section.  He stated, "And it's very clear that when you apply under            
this section, you are no longer going to have PCE once it's done,              
so that nobody can try to weasel out on this 75 percent level."                
                                                                               
Number 1250                                                                    
                                                                               
REPRESENTATIVE ETHAN BERKOWITZ suggested one collateral benefit of             
this program is priming the pump of the local economy by doing a               
construction project there.                                                    
                                                                               
REPRESENTATIVE KUBINA answered that the construction project itself            
is always good for any community.  The main benefit, however, is               
lower electrical costs for the fish processors, which will provide             
long-term employment.  Cordova has been a fishing town for a very              
long time but has lost processors to other places, including                   
Valdez, because of cheaper rates.  Representative Kubina stated,               
"They've worked, they've deregulated themselves so to try to give              
the best rate they can, but they have to make enough to pay for                
that diesel oil."  He added that getting this project will do much             
towards sustaining the fish processing in the community.                       
                                                                               
Number 1301                                                                    
                                                                               
REPRESENTATIVE BERKOWITZ commented that it seems there is a wider              
benefit than simply weaning a community from PCE.                              
                                                                               
REPRESENTATIVE BUNDE suggested that enough opposition had existed              
there to stop logging.  He asked what level of support there is in             
Cordova for expanding economic development.  He further asked how              
big an impact this fish processor has, as a guaranteed purchaser of            
potential electrical energy, in a time of worldwide instability of             
fish prices.                                                                   
                                                                               
Number 1402                                                                    
                                                                               
REPRESENTATIVE KUBINA said that both Native corporations have had              
logging operations going on for some time.  While it has caused                
some debates and disagreements in the communities, he doesn't                  
believe those corporations stopped because of that.  As for the                
road planned towards the Katalla area, the first project out there             
will be a logging operation that the community is well aware of.               
Representative Kubina maintained, however, that Cordova's long-term            
base is fishing.  While the price of fish doesn't help, he said                
that everything we can do to lower electric costs, so they can                 
better compete with Chilean fish, is to our advantage as a state.              
                                                                               
Number 1461                                                                    
                                                                               
REPRESENTATIVE BUNDE responded that he doesn't disagree, but the               
question is what happens to this plan if that processor goes away.             
                                                                               
REPRESENTATIVE KUBINA explained that there are at least four                   
processors, three of which are major processors that employ a lot              
of people during the season.  He said they have offered them the               
best rate they can to keep open in the winter, to process pollock,             
for example, or to attract cod fisheries to come onshore; they are             
trying to expand beyond salmon, to operate year-round.  He                     
suggested that testifiers from the community could speak to that.              
                                                                               
Number 1521                                                                    
                                                                               
CHAIRMAN GREEN said that is a good point.  He noted that the major             
resources of timber, fish and hydrocarbons are all subject to                  
fluctuations, although the state has often weathered those.  He                
asked if there were further questions of the sponsor, then called              
upon testifiers from Cordova who were present.                                 
                                                                               
Number 1569                                                                    
                                                                               
JIM ROBERTS, General Manager, Cordova Electric Cooperative,                    
Incorporated (CEC), told members that CEC's debt service is one of             
the highest in the state.  They had become a cooperative in 1978,              
prior to which they were a municipally-owned utility.                          
Consequently, they could not qualify for federal funding at the                
lower interest rate and had had to borrow money.  Their average                
cost of power in 1997 was more than 20 cents per kilowatt hour;                
with grant financing, the projected cost would be lowered to an                
average of 15.8 cents per kilowatt hour, quite a savings.                      
Canneries, for example, would then be on a par with Seward and                 
other communities that have access to the Railbelt energy, which he            
indicated is their objective.                                                  
                                                                               
MR. ROBERTS referred to the project status, indicating they had                
received the Federal Energy Regulatory Commission (FERC) license on            
December 24.  They had been going through the licensing process and            
working on this since 1992.  He indicated they've said all along               
that if they could get 50 percent funding from the state, they                 
would be willing to give up PCE.  Mr. Roberts commented that in                
addition to logging, Cordova will have cruise ships this year for              
the first time, which will provide a new industry.  He said the CEC            
has received $4 million in grants from the federal government and              
is lined up for an additional $3.5 million this year; they are                 
basically trying to finance the whole project with grant funds.                
                                                                               
Number 1718                                                                    
                                                                               
REPRESENTATIVE BRIAN PORTER asked whether the estimated $7.5                   
million in state contributions is on top of the additional $3.5                
they are trying to get from the federal government.                            
                                                                               
MR. ROBERTS said yes.  The total project cost is $15 million.  They            
are looking at $7.5 million from the state.  They've already                   
received $4 million from the federal government and are in for an              
additional $3.5 million.  They have already set up a line of credit            
with their supplemental lenders because they are basically set to              
start this spring.                                                             
                                                                               
Number 1774                                                                    
                                                                               
REPRESENTATIVE ROKEBERG stated his understanding that the CEC would            
have no capital costs in this.  He asked about the transmission                
lines, for example.                                                            
                                                                               
CHAIRMAN GREEN said they are existing.                                         
                                                                               
[Mr. Roberts' reply was indiscernible.]                                        
                                                                               
REPRESENTATIVE ROKEBERG noted that the lowered per-kilowatt-hour               
cost would be 15.82 cents.  He said testimony he'd heard that                  
morning was that the statewide average cost is slightly more than              
10.4 cents per kilowatt hour.  He asked whether that is right.                 
                                                                               
MR. ROBERTS replied that he believes that what they receive through            
PCE is lower.                                                                  
                                                                               
REPRESENTATIVE ROKEBERG stated his understanding that the 15.8                 
cents excludes any PCE.                                                        
                                                                               
Number 1833                                                                    
                                                                               
MR. ROBERTS concurred.                                                         
                                                                               
REPRESENTATIVE ROKEBERG commented that he'd be a little                        
disappointed if it wasn't lower than that, particularly if there               
was no capital cost.  He then asked the reason for the requested               
six-month delay in the cessation of PCE in the bill.                           
                                                                               
MR. ROBERTS pointed out that peak production from the river is in              
the summertime, the CEC's highest load period.  If the project                 
comes on-line in fall or winter, they won't have 100 percent of                
what they need out of it, because the water isn't there.                       
Therefore, this is a transition period.                                        
                                                                               
REPRESENTATIVE BUNDE stated his understanding, with round numbers,             
that there is a $15 million package, with $7 million from PCE.  The            
grants from various governments would be a local contribution.                 
                                                                               
MR. ROBERTS said that is basically correct.  Right now, they have              
a $1 million loan through the state Division of Energy, used for               
permitting.                                                                    
                                                                               
REPRESENTATIVE BUNDE suggested that $1 million loan is a local                 
contribution, and the rest would come from grants.                             
                                                                               
MR. ROBERTS noted that to date, they have spent approximately                  
$350,000 that is not reimbursable under the grants.                            
                                                                               
Number 1912                                                                    
                                                                               
CHAIRMAN GREEN asked whether essentially 25 percent would be                   
generated with diesel year-round, with a big increase in both                  
hydroelectric power and in the load during the summer.                         
                                                                               
MR. ROBERTS said no.  They got a small hydroelectric wheel in 1991;            
depending on rainfall, that provides 10 to 15 percent of their                 
needs right now.  This additional hydroelectric power will cover               
all community needs during the summertime.  However, during the                
winter, that will drop off and must be supplemented with diesel.               
                                                                               
Number 1956                                                                    
                                                                               
REPRESENTATIVE ROKEBERG noted that he had been to Cordova this past            
summer for the Alaska Rural Electric Cooperative Association                   
(ARECA) convention.  He had seen a huge, expensive machine digging             
an underground electrical service wire over some five or six miles,            
with two houses at the end of this road.  He asked who financed                
that and what the purpose is.                                                  
                                                                               
MR. ROBERTS answered that they had borrowed money through the                  
federal Rural Utility Service (RUS) for a line extension and                   
upgrade, putting lines underground.  He indicated there are more               
than two houses out there, and there is a new subdivision.                     
                                                                               
REPRESENTATIVE ROKEBERG suggested that loan is in their rate base.             
                                                                               
MR. ROBERTS concurred.                                                         
                                                                               
REPRESENTATIVE ROKEBERG asked who had financed the small                       
hydroelectric project mentioned earlier.                                       
                                                                               
MR. ROBERTS replied that there was a $1.5 million debt from a                  
supplemental lender, and he believes there were state grants also.             
                                                                               
Number 2048                                                                    
                                                                               
HAP SYMMONDS, Plant Manager, Ocean Beauty Seafoods; Vice President,            
Board of Directors, Cordova Electric Cooperative, Incorporated,                
came forward to testify, indicating his company is the largest                 
private employer in Cordova.  He characterized HB 336 as a vehicle             
that provides a win/win situation.  It allows communities to seek              
alternatives to diesel generation, and it allows the state to wean             
Bush and rural communities from PCE.                                           
                                                                               
MR. SYMMONDS discussed the importance of non-Railbelt communities              
having access to competitively priced electrical services,                     
suggesting that Cordova's Power Creek hydroelectric project will               
save the state more than $700,000 per year in PCE, as well as save             
over one million gallons of diesel fuel.  The reduction in the cost            
of electricity will help Cordova processors be more competitive                
with other processors in Alaska.  Mr. Symmonds concluded, "The                 
amount of PCE received by industry is insignificant, and it is the             
lower power cost of the hydro project which is of the greatest                 
importance."                                                                   
                                                                               
Number 2113                                                                    
                                                                               
REPRESENTATIVE BUNDE asked Mr. Symmonds if he is aware of any other            
area that has a project which would take advantage of this bill, or            
if this is basically a Cordova bill at this point.                             
                                                                               
MR. SYMMONDS said although it is a Cordova bill now, it is a                   
vehicle that could fund wind generation, hydroelectric generation              
or other alternate energy projects that would fit into the rural               
communities' needs.                                                            
                                                                               
Number 2143                                                                    
                                                                               
REPRESENTATIVE CROFT stated his understanding that this is the                 
general bill, which could apply to any plant, anywhere, for any                
type of electrical generation.                                                 
                                                                               
MR. SYMMONDS agreed, adding that HB 337 would set out funding for              
the Power Creek project.                                                       
                                                                               
Number 2174                                                                    
                                                                               
REPRESENTATIVE ROKEBERG asked how many jobs per year they can                  
provide.  He also inquired about the fishing season.                           
                                                                               
MR. SYMMONDS stated his belief that the fishing season will be as              
good as or better than the previous year.  He indicated his company            
provides more than 250 jobs in the community, noting that they have            
a one-million-pound cold storage in town that hasn't operated since            
1992 because of the cost of electricity.  He told members that as              
a company, they would like to do much more value-added production              
in Cordova.  He pointed out that their electrical costs in Cordova             
are approximately 20 percent of the entire overhead of the plant               
annually, a very significant number.                                           
                                                                               
Number 2215                                                                    
                                                                               
REPRESENTATIVE BUNDE asked for confirmation that the $750,000                  
annual savings to the state, mentioned earlier, wouldn't be                    
realized for ten years, because there would be ten years of PCE.               
                                                                               
MR. SYMMONDS replied, "I don't know if I'm the one to speak to                 
this, but ... I feel that the legislature's going to have to do                
something for the rural communities.  We can all sit here and say              
that PCE is going to run out.  Many of the rural communities are               
not going to be able to afford essential services without some sort            
of help from the state government, be it called PCE or whatever.               
... In some form, this program is going to continue.  We're just               
saying that given a grant to the City of Cordova, we, as your                  
largest customer, will go away.  That money will be available for              
other rural communities.  Hopefully, with Representative Kubina's              
bill, other communities will take a look at the same type of thing.            
... I'm quite sure that they don't want to be hung on this type of             
financing on an annual basis.  If they could set up some sort of a             
project that would get them off PCE, I'm sure that there are a                 
number of communities that ... would do that.  And HB 336 sets that            
mechanism into place."                                                         
                                                                               
Number 2323                                                                    
                                                                               
REPRESENTATIVE BUNDE said he doesn't disagree but is trying to get             
a handle on the amount of money the state would save.  Giving it               
with one hand instead of the other is still providing money.  He               
agreed that after ten years the state would realize some savings,              
but not until then.                                                            
                                                                               
Number 2339                                                                    
                                                                               
CHAIRMAN GREEN asked what percentage Mr. Symmonds' company or the              
fishing industry uses of the total electricity sold.                           
                                                                               
MR. SYMMONDS said Cordova has two major processors and a minor one,            
which use more than 20 percent of Cordova's total.                             
                                                                               
Number 2363                                                                    
                                                                               
CHAIRMAN GREEN asked whether they pay a discounted amount now for              
electricity.                                                                   
                                                                               
MR. SYMMONDS said their rate is lower than the residential rate.               
                                                                               
CHAIRMAN GREEN asked whether it is significantly lower.                        
                                                                               
MR. SYMMONDS indicated Jim Roberts would know that.                            
                                                                               
CHAIRMAN GREEN asked whether it is 20 percent of the use or 20                 
percent of the total dollars.                                                  
                                                                               
MR. SYMMONDS replied, "Revenue."                                               
                                                                               
Number 2390                                                                    
                                                                               
CHAIRMAN GREEN said, "What I'm getting at is if there were to be a             
reduction because of the position that Representative Bunde                    
mentioned earlier, there would be a 20 percent decrease in the                 
revenue to the system but a significantly greater amount of reduced            
power demand."                                                                 
                                                                               
MR. SYMMONDS responded, "But there would be no reduction of PCE."              
                                                                               
CHAIRMAN GREEN asked whether the total dollars would decrease but              
the rate would stay the same.                                                  
                                                                               
MR. SYMMONDS replied, "No, because the PCE line on my electric                 
bill, which can be $50,000-plus a month, is a constant $54.86.  I              
mean, that's what I get out of PCE."                                           
                                                                               
CHAIRMAN GREEN asked whether that is true for everyone on the                  
system.                                                                        
                                                                               
MR. SYMMONDS explained, "It's based on 700 kilowatt hours.  You get            
PCE on your first 700 kilowatts, and that's it."                               
                                                                               
Number 2423                                                                    
                                                                               
CHAIRMAN GREEN asked, "If you reduce the total consumption from the            
system, is it the same?  Would it be prorated directly on the                  
number of reduced kilowatt hours that you'd have to generate?"  He             
suggested perhaps he should have asked Mr. Roberts, then stated,               
"So, let's just say you cut it in half, the amount of power that               
you're actually using.  You're only paying 20 percent, but maybe               
you're using 50 percent.  If all of that went away, the PCE total              
dollar value should decrease, that the state pays."                            
                                                                               
MR. SYMMONDS replied that of the two major processors that                     
contribute 20 percent of the revenue to CEC, the state would save              
$108 in PCE if those went away, because it is only on the first 700            
kilowatt hours which those two canneries use that they get PCE.                
                                                                               
TAPE 98-19, SIDE B                                                             
Number 0006                                                                    
                                                                               
REPRESENTATIVE CROFT asked, "And is that why you said that the PCE             
that goes to industry is negligible when you started out?"                     
                                                                               
MR. SYMMONDS said that is correct.                                             
                                                                               
Number 0014                                                                    
                                                                               
REPRESENTATIVE BERKOWITZ suggested it may make sense, now that                 
money is relatively cheap and interest rates are low, to let them              
have the money, rather than paying PCE in perpetuity.                          
                                                                               
Number 0055                                                                    
                                                                               
ERIC YOULD, Executive Director, Alaska Rural Electric Cooperative              
Association (ARECA), informed members he represents most of the                
utilities in the state, both large and small.  He is also on the               
Governor's PCE task force, which has a twofold charge:  to identify            
potential sources of revenue that could be considered in the long-term solution
to identify constructive changes to the program that would perhaps             
be an incentive for the utilities to get off of PCE.                           
                                                                               
MR. YOULD told members ARECA has always been a strong component of             
the PCE program, because it provides cheaper electricity, primarily            
in rural Alaska "where we have a very weak underpinning to the                 
economic base in the first place."  Consequently, they have                    
supported PCE strongly in the past.  They feel that this particular            
bill is very good, and they support it.  They feel it is a good                
incentive and a good way to put in place capital-intensive projects            
and to provide long-term solutions.                                            
                                                                               
MR. YOULD pointed out that they are talking about a hydropower                 
project that will very possibly be in place for 50 or 100 years.               
The hydropower project in Ketchikan has been in place for almost a             
hundred years now, and there is no reason to believe most                      
hydropower projects such as this won't be in place for a long time.            
Mr. Yould said they are talking about giving up ten years of PCE,              
with a capital appropriation, that essentially will help ensure                
that a long-term solution is put in place.  He likened it to buying            
a house, which is expensive up-front, versus renting.  He concluded            
by saying a capital-intensive project like hydropower is basically             
an inflation-fighter, and it is there for the long term.                       
                                                                               
Number 0171                                                                    
                                                                               
PERCY FRISBY, Director, Division of Energy (DOE), Department of                
Community and Regional Affairs, came forward to testify.  [Some of             
Mr. Frisby's testimony is particularly difficult to hear.]  He                 
informed members he had been working with Cordova for the last                 
three years developing and trying to put a financial package                   
together.  In addition, the DOE loaned Cordova $1 million to kick              
the whole effort off.  He referred to the Governor's PCE task force            
and indicated that while the worst-case scenario would be                      
eliminating that program, they are looking at alternative programs             
including shallow gas, small coal developments and a (indisc.)                 
project in Kotzebue.                                                           
                                                                               
MR. FRISBY said that for these new technologies, they are trying to            
determine whether they may be applied in areas of rural Alaska.  He            
said the problem they are dealing with in rural Alaska now is that             
there are systems using generators with an output as small as 60               
kilowatt hours.  A hydroelectric or wind project is hard to apply              
to such a system, and Mr. Frisby suggested they may need more time             
to do that.  He complimented Cordova for coming up with an                     
innovative way to put their financial package together.  He said               
the power cost equalization (indisc.) committee is going to address            
a lot of these issues.                                                         
                                                                               
Number 0314                                                                    
                                                                               
REPRESENTATIVE KUBINA said he could have several other people                  
speak, but he believed the committee had the gist of it.  He                   
offered to answer questions.                                                   
                                                                               
Number 0325                                                                    
                                                                               
REPRESENTATIVE PORTER commented that this is the easy part of the              
equation, as this bill is enabling but not funding, which will be              
the challenge.  He also congratulated Cordova for coming up with a             
plan that he believes is "very appropriate to be considered for                
state government to make an expenditure for infrastructure that                
gets away from the continual state allotment."  He said it is not              
only the right thing to do but is timely, considering the current              
revenue projections.                                                           
                                                                               
Number 0367                                                                    
                                                                               
REPRESENTATIVE ROKEBERG asked about the fiscal note and alleged                
savings.  He said the fiscal note makes a lot of assumptions, then             
suggested it could be argued either way.  He stated that he doesn't            
necessarily agree with what it says.  "I don't think that damages              
your cause or anything," he added.                                             
                                                                               
REPRESENTATIVE KUBINA expressed confidence that it would be a good             
debate in the House Finance Standing Committee as to whether it is             
appropriate.                                                                   
                                                                               
Number 0397                                                                    
                                                                               
REPRESENTATIVE CROFT made a motion to adopt Version H [0-LS1132\H,             
Cramer, 2/18/98] as a work draft.  There being no objection, it was            
so ordered.                                                                    
                                                                               
Number 0450                                                                    
                                                                               
REPRESENTATIVE CROFT made a motion to move the proposed committee              
substitute for HB 336 [Version H] from committee with individual               
recommendations and attached fiscal note.                                      
                                                                               
CHAIRMAN GREEN asked whether there was any objection.                          
                                                                               
REPRESENTATIVE BUNDE objected for discussion purposes.  He said                
this is innovative, although it sounds like somewhat creative                  
financing.  He suggested its stature would be enhanced by requiring            
legitimate or actual local contribution, as he doesn't look at                 
federal grants or state grants as a local contribution.                        
                                                                               
Number 0483                                                                    
                                                                               
REPRESENTATIVE ROKEBERG concurred, then congratulated the sponsor,             
indicating this is the type of mechanism needed in rural areas,                
particularly for alternate energy sources such as shallow gas, coal            
and so forth.  He suggested it is even perhaps a good use of                   
capital monies.  Representative Rokeberg said he would be voting               
for this bill and wished the sponsor good luck in the House Finance            
Standing Committee.  He added that vote for this bill should not be            
viewed as an endorsement of the PCE program.                                   
                                                                               
REPRESENTATIVE BUNDE removed his objection.                                    
                                                                               
Number 0565                                                                    
                                                                               
CHAIRMAN GREEN announced that there being no further objection,                
CSHB 336(JUD) was moved from the House Judiciary Standing                      
Committee.                                                                     

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