Legislature(2001 - 2002)

03/30/2001 03:20 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 175-APPROP: POWER PROJECTS                                                                                                 
Number 0035                                                                                                                     
CHAIR  MURKOWSKI announced  that the  committee would  hear HOUSE                                                               
BILL  NO. 175,  "An Act  making  an appropriation  to the  Alaska                                                               
Industrial Development  and Export Authority for  power projects;                                                               
and providing for an effective date."                                                                                           
Number 0123                                                                                                                     
REPRESENTATIVE  HALCRO  made  a  motion  to  adopt  the  proposed                                                               
committee  substitute  (CS) for  HB  175  [22-LS0705, Version  C,                                                               
Cramer, 4/5/01].  [No objection  was stated; therefore, Version C                                                               
was adopted as the work draft.]                                                                                                 
REPRESENTATIVE KEN  LANCASTER, Alaska State  Legislature, sponsor                                                               
of HB  175, apologized  for the  late proposed  CS, but  said the                                                               
Alaska  Industrial  Development  Export  Authority  (AIDEA),  the                                                               
Alaska Energy  Authority (AEA),  and the  Office of  the Attorney                                                               
General had some concerns, which were addressed in Version C.                                                                   
REPRESENTATIVE  LANCASTER  said  he  would briefly  go  over  the                                                               
projects.   The first [request]  is for  a $12 million  grant for                                                               
Cordova  Electric  to help  with  the  Power Creek  hydroelectric                                                               
project to  keep the  kilowatt cost  down, and  to get  a payback                                                               
"stream" from  power cost equalization  (PCE); he  explained that                                                               
[Cordova  Electric]  is  the  largest user  of  [PCE],  at  about                                                               
$600,000 annually.                                                                                                              
REPRESENTATIVE  LANCASTER explained  that the  second project  in                                                               
the bill is for the Copper  Valley Electric Association.  He said                                                               
$35 million in  AIDEA's account was originally  dedicated for the                                                               
Sutton-Glennallen intertie,  which never came to  fruition - that                                                               
amount is $12.5  million.  In the interim, "they"  have gone with                                                               
a co-generation formula  with "Epistar" in Valdez.   He mentioned                                                               
that some upgrades to the Copper Valley plant are needed.                                                                       
Number 0249                                                                                                                     
REPRESENTATIVE  LANCASTER stated  that another  [project] is  the                                                               
Tok  to Chistochina  [power-transmission intertie]  at a  cost of                                                               
$8.4  million.   This will  help provide  reliable and  efficient                                                               
power for the people along  the highway, and hopefully help build                                                               
a transmission grid  that will eventually tie in  with the Copper                                                               
Valley  and Glennallen  areas.   He expressed  the need  to start                                                               
building the transmission grid throughout the state.                                                                            
REPRESENTATIVE  LANCASTER,  going  down  the  list  of  projects,                                                               
stated that the  next [request] is for a grant  for the south end                                                               
of the Kenai Peninsula.  There  is an underground cable that runs                                                               
2.5  miles across  the bay  through the  spit to  Seldovia.   The                                                               
cable is well  past its useful life and is  in danger of failing.                                                               
He said  the old Fairbanks  "Morris (ph)" generators  in Seldovia                                                               
are not very reliable, and  [the community] had some severe power                                                               
outages and suffered some loss, he remarked.                                                                                    
Number 0285                                                                                                                     
REPRESENTATIVE LANCASTER  said the other [request]  is to upgrade                                                               
the  Anchorage-Fairbanks   intertie,  [allowing  for]   a  larger                                                               
capacity of power  to flow in both directions;  this project will                                                               
cost $13.2 million.                                                                                                             
REPRESENTATIVE  MEYER asked  how much  money is  in the  Railbelt                                                               
energy fund, and for what purpose was the fund set up.                                                                          
REPRESENTATIVE LANCASTER responded that  the Railbelt energy fund                                                               
was  originally   set  up  with   $2  million  for   the  Susitna                                                               
hydroelectric  project that  never  came to  fruition.   Some  of                                                               
those funds  have been  used for  the Bradley  Lake hydroelectric                                                               
power  and  the  south  end  of the  peninsula,  and  others  are                                                               
allocated  now both  to  Chugach Electric  and  to Golden  Valley                                                               
Electric Association for the northern  and southern intertie.  He                                                               
said  the balance  in the  account  today is  about $71  million,                                                               
which is  the money  that "we"  plan to use.   He  explained that                                                               
some  of  that money  was  allocated  into  the account  for  the                                                               
Sutton-Glennallen  intertie, which  came to  $35 million;  it has                                                               
accrued quite an amount of  interest, since it [started] in 1993.                                                               
Another portion  being worked on  is the  Swan Lake to  Tyee Lake                                                               
intertie project for  $20 million.  He noted that  this money has                                                               
also accrued some interest.                                                                                                     
Number 0461                                                                                                                     
REPRESENTATIVE  ROKEBERG asked  if  Representative Lancaster  had                                                               
done any research into the  political and economic history of the                                                               
Raibelt energy fund.                                                                                                            
REPRESENTATIVE  LANCASTER responded  that  he  has been  involved                                                               
with ARECA for years.                                                                                                           
REPRESENTATIVE HALCRO said funds have  been set aside for various                                                               
reasons, only to  be used for other purposes later.   He said the                                                               
biggest  project  on  the  list  is  to  upgrade  the  Anchorage-                                                               
Fairbanks power  transmission [line] for  $13.2 million.   Out of                                                               
this  $71  million  Railbelt  energy   fund,  how  much  did  the                                                               
constituents  living along  the  Railbelt actually  put into  the                                                               
fund, he  asked.  He clarified  that the Railbelt energy  fund is                                                               
to  be used  for projects  in the  Railbelt.   He said  one would                                                               
assume that  the people in the  Railbelt would have some  kind of                                                               
ownership over this fund.                                                                                                       
Number 0606                                                                                                                     
REPRESENTATIVE LANCASTER  replied that  of the $71  million being                                                               
[discussed  here], $35  million  was put  in  for the  Sutton-to-                                                               
Glennallen intertie, which never came  to fruition, and the money                                                               
has been sitting there since 1993  earning interest.  He said the                                                               
other  money  was  put   in  for  the  Swan-[Lake]-to-Tyee-[Lake]                                                               
transmission project in Ketchikan for $20 million.                                                                              
REPRESENTATIVE   ROKEBERG  said   he  thought   this  money   was                                                               
appropriated for the Susitna project.                                                                                           
REPRESENTATIVE  LANCASTER responded,  "Not  these two  particular                                                               
monies that  we are  talking about  now.   The fund  was actually                                                               
started and  originated ... with  the Susitna project -  the $200                                                               
million  was  put  in  to  study  Susitna."    He  said  the  two                                                               
allocations are for the two projects he just mentioned.                                                                         
REPRESENTATIVE  ROKEBERG asked,  "But  weren't those  allocations                                                               
made out of [the] fund and then re-appropriated back into it?"                                                                  
REPRESENTATIVE LANCASTER said he  had a chronological history [of                                                               
the Railbelt  energy fund] that  he would make available  for the                                                               
Number 0687                                                                                                                     
REPRESENTATIVE  ROKEBERG  explained  that  his  understanding  is                                                               
somewhat different:   The money  was there for  the establishment                                                               
of  the   Susitna  project,  and  then   there  were  substantial                                                               
allocations of  other monies,  for example,  for the  creation of                                                               
the Four  Dam Pool and  the establishment  of the PCE  program in                                                               
terms   of   allocation   around  the   state;   therefore,   his                                                               
constituents and neighbors claim some ownership.                                                                                
REPRESENTATIVE LANCASTER  replied that this  is why he  is trying                                                               
to fix  the Fairbanks intertie.   He said Eric Yould  could speak                                                               
more to that as well.                                                                                                           
REPRESENTATIVE  KOTT asked  Mr.  Lancaster if  Cordova or  Copper                                                               
Valley Electric is in the Railbelt.                                                                                             
Number 0757                                                                                                                     
REPRESENTATIVE  LANCASTER replied  that Copper  Valley is  in the                                                               
Railbelt and  there is some ownership.   $35 million of  this was                                                               
actually appropriated for Copper  Valley Electric for the Sutton-                                                               
to-Glennallen intertie.   He remarked that Cordova  [being in the                                                               
Railbelt] might be "stretching it."                                                                                             
REPRESENTATIVE  KOTT  directed  the committee  to  AS  37.05.520,                                                               
which reads:   "The  legislature may  appropriate money  from the                                                               
fund for programs, projects, and  other expenditures to assist in                                                               
meeting Railbelt energy  needs."  He said he is  not sure if this                                                               
isn't stretching it  to some extent.  He wanted  to bring this to                                                               
the  committee's  attention since  there  is  no other  statutory                                                               
change.   It would  be cleaner,  he said,  if there  were another                                                               
statutory   change  dealing   with  what   the  legislature   may                                                               
appropriate [the fund] for.                                                                                                     
CHAIR MURKOWSKI asked how "Railbelt" is defined.                                                                                
REPRESENTATIVE  KOTT replied  that  he  is not  sure  that it  is                                                               
Number 0829                                                                                                                     
REPRESENTATIVE  LANCASTER  stated  that going  back  through  the                                                               
Bradley  Lake project,  [these  project funds]  came  out of  the                                                               
Railbelt energy fund, although it  is not in the Railbelt either.                                                               
He stated that  he thought it had to do  with the seven utilities                                                               
that  are  in  the  Railbelt  system,  (indisc.)  down  to  Homer                                                               
CHAIR  MURKOWSKI  asked  for  clarification  that  Representative                                                               
Lancaster  is talking  about the  Railbelt [area  extending] from                                                               
Fairbanks down to Homer.                                                                                                        
REPRESENTATIVE ROKEBERG agreed because  Homer and South Kenai are                                                               
part of the  Railbelt energy grid and could  qualify because they                                                               
are interconnected.                                                                                                             
REPRESENTATIVE HALCRO asked if there  had been any proposals over                                                               
the past  five to  six years  to take money  out of  the Railbelt                                                               
energy fund to [pay for] projects in the Railbelt.                                                                              
REPRESENTATIVE LANCASTER explained that  $90 million came out [of                                                               
the  fund]  for  the  northern   and  southern  interties,  which                                                               
Commissioner Pourchot  [of the  Department of  Natural Resources]                                                               
just  [approved]  to  start  building a  valley;  the  one  being                                                               
studied is on "VIS" on the southern peninsula, he explained.                                                                    
Number 0904                                                                                                                     
CHAIR MURKOWSKI said  there are appropriations from  the fund for                                                               
such  things  as the  Bradley  Lake  hydropower project  and  the                                                               
McLaughlin Youth  Center.   She asked how  all of  these projects                                                               
came about because it looks like a "laundry list of projects."                                                                  
REPRESENTATIVE  LANCASTER   said  he   couldn't  speak   for  the                                                               
department,  but said  AIDEA received  monies  from this  funding                                                               
source for projects.                                                                                                            
Number 1010                                                                                                                     
ERIC   YOULD,   Executive   Director,   Alaska   Rural   Electric                                                               
Cooperative Association  (ARECA), the  trade association  for the                                                               
electric utility industry  in Alaska, said he  represents most of                                                               
the  utilities  throughout  the   state,  both  large  and  small                                                               
companies.  He said [ARECA] is  in favor of the bill; however, he                                                               
wanted to give  some historic perspective on  the Railbelt energy                                                               
fund.   He commented  that he  was part of  many projects  in the                                                               
1980s that [were paid] for out of the fund.                                                                                     
MR. YOULD said  back in the 1980s when the  state had more money,                                                               
it appropriated  funds for the  development of the Four  Dam Pool                                                               
for hydropower projects.  Power  cost equalization (PCE) was also                                                               
started, which has utilized $300 million.   The Four Dam Pool was                                                               
roughly  $450  million.    During this  time,  the  Railbelt  was                                                               
looking  to the  Alaska Power  Authority to  develop the  Susitna                                                               
hydropower project - a  15,000-megawatt project centrally located                                                               
between  Anchorage and  Fairbanks  that would  take  care of  the                                                               
central part of  the state.  The  idea was that it  would be used                                                               
to spread the  cost of Susitna and other  projects throughout the                                                               
state and  enhance communities  that only  had diesel  power, and                                                               
that these [communities] would get a postage-stamp rate.                                                                        
Number 1086                                                                                                                     
MR. YOULD  said in  the early  1980s the  legislature established                                                               
the  Railbelt  energy  fund;  the   language  said  annually  the                                                               
legislature would  appropriate funds to the  Railbelt energy fund                                                               
for equity  contribution in the  Susitna project.  The  state was                                                               
looking to  put $2.5 billion into  the fund; however, due  to the                                                               
falling  price of  oil, the  Susitna project  was shelved.   This                                                               
happened  after  spending  $134  million  on  permits  and  doing                                                               
exploration for  the project.   In  the interim,  the legislature                                                               
appropriated $200 million  to the Railbelt energy fund.   At that                                                               
time,  the Railbelt  had nothing  to  show for  the early  1980s;                                                               
nevertheless, the legislature also  appropriated $124 million for                                                               
the  development of  the  Anchorage-to-Fairbanks intertie,  which                                                               
was  developed  by  the  Alaska Power  Authority.    Later,  $200                                                               
million was appropriated for the  Bradley Lake hydropower project                                                               
in  the Kenai  area to  partially fund  the project,  and another                                                               
$150  million in  revenue bonds  were  sold and  financed by  the                                                               
Number 1181                                                                                                                     
MR. YOULD  said there  was $200 million  sitting in  the Railbelt                                                               
energy  fund.   If  a  person  looks at  how  much  was spent  on                                                               
Susitna, the  intertie, and the  Bradley Lake project,  the total                                                               
was roughly $450 million for the  central part of the state where                                                               
70 percent of the population is.                                                                                                
MR. YOULD  explained that  the Railbelt  energy fund  remained in                                                               
place  throughout the  1980s, and  then in  1993 the  legislature                                                               
took the $200  million and appropriated it:  $45  million went to                                                               
the northern  transmission intertie between Healy  and Fairbanks;                                                               
$45 million went  for the intertie from Anchorage  down to Kenai;                                                               
$68 million  was appropriated  for PCE;   $35  million was  for a                                                               
low-interest loan  to Copper Valley  Electric for  a transmission                                                               
line between Sutton  and Glennallen; and another  $20 million was                                                               
appropriated for  the Southeastern intertie, a  low-interest loan                                                               
for a transmission line between Tyee and Swan Lakes.                                                                            
Number 1253                                                                                                                     
MR.  YOULD  said of  that  $200  million,  $90 million  is  going                                                               
forward  for  the  northern  and  southern  intertie  within  the                                                               
Railbelt;  with $68  million for  PCE expended,  $35 million  was                                                               
left  for  the  Sutton  to Glennallen  transmission  line,  which                                                               
didn't get  developed and probably  won't be due to  its economic                                                               
feasibility.    He said  $20  million  was  left sitting  in  the                                                               
Southeastern  intertie  fund.    There  is  $55  million  in  the                                                               
Railbelt energy fund  that has not been  expended because neither                                                               
of the two projects went forward.                                                                                               
MR. YOULD explained that in  addition to the $55 million, another                                                               
$16  million in  interest was  earned on  the fund,  bringing the                                                               
total  balance to  $71  million.   That  is  what  is before  the                                                               
committee today,  he said, a  fund of  $71 million, out  of which                                                               
this bill would appropriate $51  million for the [aforementioned]                                                               
five projects.                                                                                                                  
Number 1313                                                                                                                     
REPRESENTATIVE ROKEBERG  stated that  the Tyee and  Sutton monies                                                               
were appropriated from the fund  and have now defaulted back into                                                               
the fund.                                                                                                                       
MR. YOULD replied  that, in essence, that is correct.   Last year                                                               
when  the divestiture  legislation  took place,  the $20  million                                                               
from the Southeast  intertie was put back into the  fund, and the                                                               
$35 [million]  was still  sitting in the  fund because  it wasn't                                                               
REPRESENTATIVE  ROKEBERG asked  whether the  $68 million  for PCE                                                               
was [appropriated] last year or the year before.                                                                                
Number 1390                                                                                                                     
MR. YOULD  explained that PCE  [money] was appropriated  in 1993.                                                               
He said  it wasn't an endowment  but was appropriated to  the PCE                                                               
fund for  distribution.  He  said it  was supposed to  last until                                                               
exhausted, and  the legislature desired  to continue to  fund PCE                                                               
at  a  level consistent  with  the  formula through  2014,  which                                                               
couldn't  have been  handled  by  the $68  million  in the  first                                                               
Number 1447                                                                                                                     
REPRESENTATIVE  HALCRO  asked Mr.  Yould  about  the purpose  and                                                               
politics involved in creating the Railbelt energy fund.                                                                         
MR. YOULD  explained that  back in  the early  1980s there  was a                                                               
large amount  of money going to  what is now called  the Four Dam                                                               
Pool, which were  just four separate projects at the  time.  "We"                                                               
were looking  at developing other  projects, and  the legislature                                                               
felt that there were other  communities that were always going to                                                               
be on diesel, so that is why PCE  was started.  Back in the early                                                               
1980s,  it was  called power  cost assistance,  later changed  to                                                               
MR. YOULD  explained the politics at  the time.  He  said knowing                                                               
that Susitna  was going  to take several  years to  be developed,                                                               
there was  the feeling  that there  had to  be a  Railbelt energy                                                               
fund that  would ensure that  Susitna would get developed  and be                                                               
available.  The politics were  brutal, he remarked, and there was                                                               
the "Susitna  blackmail clause," which  said - in the  event that                                                               
$2.5  billion  is not  appropriated  for  the Susitna  hydropower                                                               
project - a prior year's appropriation  for the Four Dam Pool and                                                               
other grants  at the time  would resort to  loans.  He  said that                                                               
legislation was  later repealed because  it represented  a threat                                                               
to the  communities receiving power  from the Four Dam  Pool when                                                               
it came  time for  them to  go out and  bond for  other community                                                               
services; that represented a contingent liability.                                                                              
Number 1549                                                                                                                     
CHAIR MURKOWSKI asked  about the "laundry list"  of projects that                                                               
are  not   energy-related.    She  mentioned   the  statute  that                                                               
indicates  that monies  from  this fund  would  be allocated  for                                                               
energy-related projects within the Railbelt area.                                                                               
MR. YOULD  remarked that  he hadn't seen  the "laundry  list" but                                                               
said  money was  put  into  [the Railbelt  energy  fund] for  the                                                               
purpose of  investment, and then taken  right back out.   He said                                                               
he  didn't think  Railbelt  energy money  was  used for  anything                                                               
other than energy projects.                                                                                                     
CHAIR MURKOWSKI referred  to the top of page 2  [of a handout for                                                               
the committee  entitled "History  of the Railbelt  Energy Fund"],                                                               
where it  indicates various capital  appropriations as  grants to                                                               
municipalities   and   unincorporated  communities,   and   state                                                               
agencies.   She  asked  if  Mr. Yould  is  suggesting that  these                                                               
grants  were made,  and that  money  actually ended  up with  the                                                               
projects before the committee now.                                                                                              
MR. YOULD said he'd never seen [the  list] and it was new to him;                                                               
however, he reiterated  that he didn't believe  that the Railbelt                                                               
energy fund was used for anything other than energy projects.                                                                   
REPRESENTATIVE ROKEBERG commented  that it looked as  if the 1990                                                               
legislature was  nearing the end  of discretionary  capital funds                                                               
and had raided the energy fund.                                                                                                 
Number 1635                                                                                                                     
MR.  YOULD, when  asked about  the "[Susitna]-blackmail  clause,"                                                               
explained that  some people call it  the "Susitna-equity clause."                                                               
Upon being  asked to explain  the rationale behind  the enactment                                                               
of the clause,  he said there was  a feeling that a  lot of money                                                               
was  being appropriated  for hydropower  projects throughout  the                                                               
state;  those  appropriations  happened over  a  one-or  two-year                                                               
period of time,  and would then be  up and running.   At the same                                                               
time,  it  was realized  that  appropriations  for a  $5  billion                                                               
Susitna hydropower  project would take  place over a  much longer                                                               
period  of time;  the clause  was  to ensure  that those  getting                                                               
projects funded  over a  two-or three-year  period of  time would                                                               
continue  to support  subsequent appropriations  to the  Railbelt                                                               
energy fund for the Susitna hydropower project.                                                                                 
REPRESENTATIVE  ROKEBERG clarified  that  this was  to make  sure                                                               
that the Railbelt  area received a fair allocation.   He asked if                                                               
that was  the rationale for  the enactment:   to ensure  that the                                                               
money  wasn't   disbursed  all  over  the   state,  with  certain                                                               
populations not getting their fair share.                                                                                       
Number 1735                                                                                                                     
MR. YOULD agreed.                                                                                                               
REPRESENTATIVE  ROKEBERG  asked  Mr.   Yould,  as  the  executive                                                               
director of  ARECA representing almost all  electric utilities in                                                               
the state, whether  an increase in the  generating capacity would                                                               
enhance the  ability to attract  industry to Alaska and  help the                                                               
economy of the state.                                                                                                           
MR. YOULD responded affirmatively and said  it would have to be a                                                               
large block  of power  at low cost.   He said  he is  thinking in                                                               
terms of large  industry, and certainly that is  what happened on                                                               
the  Columbia  River  system where  several  thousand  blocks  of                                                               
megawatts  were in  place at  six mills  per kilowatt-hour.   For                                                               
example, if "we" were to  develop the Rampart hydropower project,                                                               
6,000 megawatts  of power,  the cost of  electricity out  of that                                                               
project would  be very low and  might attract industry.   He said                                                               
the Susitna  project was more suited  to the size of  the demands                                                               
of Alaska,  and he questioned  whether it would  attract industry                                                               
MR. YOULD said  none of these projects would  attract industry if                                                               
they have  to be debt-financed,  because, as with  any hydropower                                                               
project, they  are very expensive  in the beginning  as inflation                                                               
takes place,  and become  very attractive  as time  goes by.   He                                                               
said the  same is  true of hydroelectric  power, but  the project                                                               
will be in place for 200 years.                                                                                                 
REPRESENTATIVE  ROKEBERG  mentioned  the  possibility  of  having                                                               
cheap  "ANS"  [Alaska North  Slope]  natural  gas (indisc.),  for                                                               
example, or developing the  (indisc.) into substantial electrical                                                               
generation  capacity.   He  asked  if  there is  enough  low-cost                                                               
energy to entice major industry into that area.                                                                                 
Number 1786                                                                                                                     
MR. YOULD said  again the answer is yes, but  raised the question                                                               
of how one gets the cost  of that electricity down.  He explained                                                               
that if  it has  to be  totally debt-financed,  it would  be very                                                               
expensive; however,  if it were  the state's position  to attract                                                               
industry  and put  equity into  these projects,  it could  charge                                                               
whatever price it  wanted for that power; if  [the state] charges                                                               
little, it would attract industry.                                                                                              
Number 1875                                                                                                                     
MR. YOULD  stated that  there is  tremendous energy  potential in                                                               
Cook Inlet alone,  where there is the  second-highest tidal power                                                               
project in the world;  the only one that is bigger  is in the Bay                                                               
of Fundy in  Canada.  He said "we" have  looked at developing the                                                               
project on just  a straight economic basis and found  that it was                                                               
inferior even  to Susitna  hydropower.   Alaska has  one-third of                                                               
the nation's  untapped potential  hydropower, but because  of the                                                               
economics   of   developing   and  transmitting   it,   and   the                                                               
environmental  consequences, it  hasn't  happened.   He said  the                                                               
same is  true of coal;  [Alaska] probably  has 50 percent  of the                                                               
United States'  reserve of coal,  but without  the infrastructure                                                               
to bring it to market, it is not economically feasible.                                                                         
REPRESENTATIVE  ROKEBERG said  he  found it  interesting that  50                                                               
percent of  the United States'  energy production  is coal-fired.                                                               
He said [Alaska]  almost needs to have it pre-sold  to be able to                                                               
afford to develop it.                                                                                                           
MR.  YOULD  used  the  example   of  the  aluminum  industry  and                                                               
commented that  [people in the  industry] would probably  sign on                                                               
the  dotted line  if  the  money were  committed  to develop  the                                                               
Number 1933                                                                                                                     
MR. YOULD,  responding to the  question of what the  Railbelt is,                                                               
said  once  the  transmission  line   is  in  place,  "they"  are                                                               
electrically and theoretically part of the Railbelt.                                                                            
TAPE 01-43, SIDE B                                                                                                              
Number 1969                                                                                                                     
MR. YOULD stated that the submarine  cable on the southern end of                                                               
the Homer  system is a  small cable but  is part of  the Railbelt                                                               
system.   Geographically, these projects are  electrically within                                                               
the confines of the Railbelt system.                                                                                            
Number 1945                                                                                                                     
REPRESENTATIVE HALCRO  said [legislators]  need to  remember that                                                               
these  are  all  fairly  connected.    Certainly,  he  said,  the                                                               
benefits  of  affordable  power   and  adequate  energy  supplies                                                               
benefit the whole  state and not just the area  where the project                                                               
is built.                                                                                                                       
MR. YOULD agreed.  He said that  is not to say that there will be                                                               
transmission lines going through rural  Alaska, because he is not                                                               
sure that it could be done economically anyway.                                                                                 
MR. YOULD  stated that within  the Railbelt area, where  there is                                                               
the greatest concentration of population,  there is no reason why                                                               
a  transmission line  infrastructure shouldn't  be developed  and                                                               
put in place.                                                                                                                   
Number 1884                                                                                                                     
MR.  YOULD referred  to Version  C  of HB  175.   He suggested  a                                                               
change  to  the  Anchorage-to-Fairbanks transmission  line.    He                                                               
referred to  the $13.2  million cost to  upgrade the  intertie to                                                               
230  kilovolts.   This  is  partial funding,  he  said, and  full                                                               
funding   would  be   $17.2  million;   to   fully  upgrade   the                                                               
transmission  line from  Fairbanks  to Kenai  would [cost]  $24.3                                                               
million  because  of  the  need to  change  out  substations  and                                                               
Number 1840                                                                                                                     
MR. YOULD stated that "we" are  trying to build a 26-mile stretch                                                               
of transmission line  from the southern terminus  of the existing                                                               
Anchorage-to-Fairbanks  transmission line  to  hook  up with  the                                                               
Chugach transmission  line so  that there  will be  230 kilovolts                                                               
from Anchorage down  the Kenai [Peninsula].  At  the present time                                                               
there is a  26-mile bottleneck, which is  115 kilovolts, [likened                                                               
to]  a  blocked   artery.    "We"  need  to   build  around  that                                                               
transmission line  segment with  230 kilovolts  so that  there is                                                               
truly  a  first-class  transmission   system  from  Anchorage  to                                                               
Number 1809                                                                                                                     
MR.  YOULD explained  that because  the energy  authority is  the                                                               
entity that  owns the Anchorage-to-Fairbanks intertie,  "we" feel                                                               
that [it] is the appropriate  entity to be building and upgrading                                                               
this 26-mile stretch.  He recommended the following language:                                                                   
     Upgrade  the   Anchorage-Fairbanks  power  transmission                                                                    
     line, with the new language  ... [to] read, "the Alaska                                                                    
     Energy  Authority   extending  and  upgrading   to  230                                                                    
     kilovolts  the  Anchorage-Fairbanks power  transmission                                                                    
     intertie, provided that the cost  of this extension and                                                                    
     upgrade, which  are funding  by this  allocation, shall                                                                    
     not be charged to transmitting utilities."                                                                                 
MR. YOULD  explained that the  previous four  appropriations were                                                               
for  grants  to  individual   utilities,  but  the  Anchorage-to-                                                               
Fairbanks extension  and upgrade  would be  to an  existing state                                                               
authority;  therefore,  this language  is  necessary  to make  it                                                               
clear that  "they" are to  develop this  stretch and treat  it as                                                               
essentially the same grant.                                                                                                     
Number 1731                                                                                                                     
MR. YOULD explained  that the 26-mile stretch is  from Douglas to                                                               
Teeland, up in  the Wasilla area on the southern  terminus of the                                                               
existing transmission line.   He added that the  "blockage" to be                                                               
made  into  230  [kilovolts]  is   owned  by  Matanuska  Electric                                                               
Authority (MEA).                                                                                                                
REPRESENTATIVE ROKEBERG  said he  would like to  see a  bill that                                                               
establishes an  independent grid  authority in the  state because                                                               
the  organization   of  the  power   grid  is   not  appropriate.                                                               
Currently,  each  utility within  its  service  area manages  its                                                               
section  of  the  grid.    He remarked  that  if  there  were  an                                                               
independent  authority overseeing  the grid,  problems like  that                                                               
wouldn't exist.                                                                                                                 
Number 1662                                                                                                                     
REPRESENTATIVE HALCRO  asked Mr.  Yould why MEA  wouldn't upgrade                                                               
its own segment of the line.                                                                                                    
MR. YOULD replied that [MEA] has  been approached in the past and                                                               
was reluctant to  do so; however, even if [MEA]  were willing, it                                                               
would make more sense to build a parallel line.                                                                                 
REPRESENTATIVE  HALCRO asked  if there  is anyway  to recoup  the                                                               
cost if the  state finances the upgrade; does  the MEA contribute                                                               
at all, he asked.                                                                                                               
MR. YOULD said he didn't think  it would have anything to do with                                                               
MEA per  se.  He  said MEA  presently has a  "wheeling" agreement                                                               
with the  State of Alaska  whereby power  goes over its  line for                                                               
that stretch.   He said if the state chose  to charge a "wheeling                                                               
rate" in  excess of what it  took to operate the  line, it [would                                                               
be] within [the legislature's] purview to do so.                                                                                
REPRESENTATIVE HALCRO  asked if he  was correct in  assuming that                                                               
MEA "feeds" customers off this 26-mile stretch.                                                                                 
MR. YOULD explained that it is  like a highway, from one point to                                                               
the next.                                                                                                                       
Number 1556                                                                                                                     
ROBERT A.  EVANS, Lobbyist,  Golden Valley  Electric Association;                                                               
Purchasing Utilities  of the Four  Dam Pool, said he  could speak                                                               
to how some of [Railbelt] money was  spent from 1986 to 1990.  If                                                               
another legislature acts  in a subsequent year,  he explained, by                                                               
implication it has modified the  prior action of the legislature.                                                               
In  1988 there  was  an  indication that  $50  million was  being                                                               
appropriated, and at that time  there was an $850 million deficit                                                               
in the  budget.  In  order to close  the budget, $50  million was                                                               
appropriated  out of  the Railbelt  energy fund.   At  that time,                                                               
there was a  total of $289 million [appropriated]  to the general                                                               
fund; subsequently, in  1988, to close the budget  gap, there was                                                               
an appropriation of  $50 million, although it was  never drawn on                                                               
[referring  again  to  the  handout   entitled  "History  of  the                                                               
Railbelt Energy Fund"].                                                                                                         
MR. EVANS  stated that  at that  time, it was  the intent  of the                                                               
legislature  to  spend  the  $50   million  to  pay  for  general                                                               
government out of the Railbelt energy fund.                                                                                     
Number 1464                                                                                                                     
MR. EVANS  explained that any  number of other projects,  such as                                                               
the university  project and  so forth in  1990, were  funded from                                                               
the Railbelt energy fund.  The  biggest one, at the bottom of the                                                               
handout on  page 2, is $100  million for the "jobs"  bill because                                                               
the economy was in rough shape;  that being the case the governor                                                               
and the  legislature had  agreed to  appropriate $100  million to                                                               
the general fund, divvying up  $5 million per Senate district for                                                               
activity that would be happening that spring.                                                                                   
REPRESENTATIVE  MEYER  asked  Mr.  Evans how  "energy"  is  being                                                               
defined, and  could [the legislature]  use part of this  money to                                                               
help build  the gas  pipeline if  the state  wanted to  have part                                                               
MR. EVANS replied that this money  is general fund money that can                                                               
be  appropriated  by  the  legislature  for  any  purpose  deemed                                                               
appropriate.    And regarding  the  definition  for "energy,"  he                                                               
replied  that there  is  [a  definition] in  the  context of  the                                                               
statute, but  the statute hasn't been  followed for appropriation                                                               
of the fund in the past.   He concurred that the McLaughlin Youth                                                               
Center and the  Fairbanks Science Building don't have  much to do                                                               
with energy.                                                                                                                    
Number 1367                                                                                                                     
REPRESENTATIVE ROKEBERG  said the  intention was that  this money                                                               
was   reserved  for   use   by   those  geographically   specific                                                               
legislators.  Historically, there  were some very strong feelings                                                               
about that, he explained.                                                                                                       
REPRESENTATIVE MEYER  asked if using  some of this money  for the                                                               
gas pipeline  had been discussed.   He  said he'd heard  that the                                                               
state should  be part of the  pipeline, so it could  [help] speed                                                               
[the project] along.                                                                                                            
REPRESENTATIVE  ROKEBERG replied  that there  is nothing  stating                                                               
that [the legislature] can't [use  it for this purpose]; however,                                                               
he said  he didn't think  that it would  be, looking back  at the                                                               
"blood, sweat,  and tears"  that went into  trying to  retain the                                                               
money and ensure that it ends up where it belongs.                                                                              
REPRESENTATIVE   MEYER   commented   that  the   Railbelt   would                                                               
definitely benefit  if a gas  pipeline were brought  down through                                                               
the  middle of  the state,  with spurs  branching off  to various                                                               
Number 1245                                                                                                                     
REPRESENTATIVE  KOTT asked  if  any of  the  projects before  the                                                               
committee had received  any "seed" or grant money  from the state                                                               
in the past.   He said he  is trying to figure  out whether money                                                               
had  been appropriated.   In  many cases,  he said,  someone will                                                               
have  a capital  project and  will ask  for money,  [assuring the                                                               
state that his or  her entity] will [pay for the  rest].  He said                                                               
he just wants to make sure  that [the legislature] is not "doing"                                                               
the rest.                                                                                                                       
KEN GATES,  Chief Executive Officer and  General Manager, Cordova                                                               
Electric  Cooperative,  stated  that "we"  haven't  received  any                                                               
money  other than  a $1  million loan  upfront to  help with  the                                                               
licensing process, which is due to  be paid back once the project                                                               
comes "online."                                                                                                                 
REPRESENTATIVE    ROKEBERG   asked    whether   the    House   of                                                               
Representatives  made  an  appropriation  that  didn't  pass  the                                                               
Senate, because  he thought there  had been an  appropriation for                                                               
this project before.                                                                                                            
MR. GATES  responded that he wasn't  aware of [any].   On another                                                               
subject,  he said  Cordova is  in Southcentral  Alaska on  Prince                                                               
William  Sound, with  a population  of approximately  2,500.   He                                                               
urged the committee's support for  HB 175, and strongly urged the                                                               
committee to endorse Version C.                                                                                                 
MR.  GATES  explained  that  the  Parkview  (ph)  project  is  an                                                               
"around-the-river" project  for six megawatts that  will cost $24                                                               
million.   It is the  energy future  of Cordova and  will promote                                                               
lower rates if fully funded.   He stressed that it is critical to                                                               
the economic  survival of the community.   In looking at  the ten                                                               
years he had  researched, he said the growth in  Cordova has been                                                               
stagnant  and electric  utility  sales have  diminished over  the                                                               
Number 1052                                                                                                                     
MR.   GATES  explained   that   the   economy  has   deteriorated                                                               
significantly  and  this  project   will  help  promote  economic                                                               
development, and  retain and  employ the  people who  live there.                                                               
It will encourage kids to come  back, work, and raise families in                                                               
Cordova;  right now,  kids are  moving  out because  there is  no                                                               
Number 0984                                                                                                                     
MR.  GATES  stated  that  the  project is  critical.    The  fish                                                               
processing  industry  is imperative  to  the  economic health  of                                                               
[Cordova], and two  large fish processors [have  left] within the                                                               
last  ten  years.    "We've"  had  many  conversations  with  the                                                               
processors there  now, he  said, and "we"  are concerned  that if                                                               
the  rates [don't  go] down,  there  is a  real possibility  that                                                               
[processors] are going to move and send fish elsewhere.                                                                         
MR. GATES explained that if one  fish processor is lost, it is an                                                               
immediate  15  percent  rate  increase, and  [the  loss  of]  two                                                               
results in a  33 percent rate increase, which  would bankrupt the                                                               
utility and probably the community as "we" know it today.                                                                       
MR.  GATES said  the need  for the  full $12  million is  to help                                                               
retire the debt service because  it is currently financed through                                                               
a banking  firm.  The current  debt service is around  $800,000 a                                                               
year; should  [Cordova Electric Cooperative] receive  this money,                                                               
it will  reduce its debt-service  expense, and that money  can be                                                               
passed on to  the customer by reducing the rates.   He added that                                                               
"we"  are  all  concerned  about  the  environmental  impacts  of                                                               
burning diesel fuel,  and  "we" expect to save  a million gallons                                                               
of diesel fuel a year with this project.                                                                                        
MR. GATES stated that "we've"  anticipated that 65 percent of the                                                               
[power]  generation will  be from  hydroelectric power,  but that                                                               
could be  as high as  90 percent, depending  on the water  in the                                                               
river in  the wintertime.   This year, hydroelectric  power could                                                               
have  supplied the  community's needs  all  year if  it had  been                                                               
available.    He  emphasized  that   it  is  [paramount]  to  the                                                               
livelihood and survival of Cordova.                                                                                             
Number 0872                                                                                                                     
MR. GATES  commented that one  positive attribute of the  bill is                                                               
that "we" are willing to give up  PCE and that money can go where                                                               
it is  needed elsewhere;  however, it can't  be done  unless [the                                                               
project] is fully funded.                                                                                                       
CHAIR MURKOWSKI asked what Cordova receives in PCE.                                                                             
MR. GATES responded that "we"  are the largest recipients of PCE,                                                               
averaging  $615,000  a  year;  this year  a  much  higher  amount                                                               
[might] be received because of the high cost of diesel fuel.                                                                    
MR. GATES explained that it would  save a million gallons a year,                                                               
which equates to between roughly  $1.2 million and $1.4 million a                                                               
year in diesel.                                                                                                                 
REPRESENTATIVE HALCRO  asked if it  is currently paid for  out of                                                               
the local government operating fund.                                                                                            
Number 0769                                                                                                                     
MR. GATES  responded affirmatively.   On the cost  of electricity                                                               
and  how it  is  impacted by  diesel in  the  community, he  said                                                               
Cordova  has  the  highest electric  rates  in  the  Southcentral                                                               
coastal region, with an average  at 12.5 cents per kilowatt-hour,                                                               
not  counting  any  fuel  adjustment  charges  on  top  of  that;                                                               
currently  "we" are  charging a  fuel adjustment  pass-through of                                                               
about 5  cents a kilowatt-hour,  which makes the  overall average                                                               
24 to  25 cents.  The  residential ratepayer is paying  nearly 30                                                               
cents a kilowatt-hour, he said, which is crippling the economy.                                                                 
MR.  GATES reiterated  that sales  are down  [in the  community],                                                               
businesses  have closed,  and the  cost of  fuel has  gone up  65                                                               
percent  in  the last  year.    He  said  since [Cordova]  is  so                                                               
dependent on one segment of  the business community for survival,                                                               
the fish  processors, it  doesn't really  have the  capability to                                                               
attract new  business.  Reasonably priced  electric rates, water,                                                               
transportation,  available  workforce,  and   so  forth  are  the                                                               
criteria for economic development, he said.                                                                                     
Number 0662                                                                                                                     
MR.  GATES explained  that [Cordova  Electric Cooperative]  could                                                               
contribute  its part  to  that by  getting  electric rates  down.                                                               
"We"  work with  the city,  the  chamber of  commerce, and  other                                                               
entities  to develop  an economic  development plan,  identifying                                                               
the kind  of business that  would be  coming.  The  most critical                                                               
thing that  can be done now  is to get those  electric rates down                                                               
because it is the first  thing that [prospective businesses] look                                                               
REPRESENTATIVE KOTT asked when the Power Creek project began.                                                                   
MR. GATES responded that it was  before his time and deferred the                                                               
question  to Hap  Symmmonds,  the  president of  the  board.   He                                                               
stated  that it  was  about  eight or  nine  years  ago when  the                                                               
initial planning phase started for  the project; the construction                                                               
has  been  underway for  two  years,  and  he  expects it  to  be                                                               
"online" this summer.                                                                                                           
REPRESENTATIVE  KOTT stated  that  Mr. Gates  indicated that  the                                                               
total cost of that project would  be around $24 million, with $12                                                               
million  still needing  to be  paid off.   Where  does the  other                                                               
money  come  from,   he  asked,  and  is   it  generated  through                                                               
Number 0559                                                                                                                     
MR. GATES  replied in the negative.   He said "we"  have received                                                               
nearly $9  million in  grants through  the Department  of Energy,                                                               
the "Indian  Energy Renewable  Energies Act."   He said  "we" are                                                               
seeking another  $2.5 million, bringing  the federal share  up to                                                               
half of the  cost of the project; the other  half is being sought                                                               
from the state.                                                                                                                 
REPRESENTATIVE KOTT  asked how the  project would be paid  off if                                                               
the grant wasn't received.                                                                                                      
MR. GATES  responded that it  would be financed through  the bank                                                               
and the  debt service would  be paid, [essentially] passed  on to                                                               
the ratepayers.                                                                                                                 
REPRESENTATIVE  KOTT said  consequently  there could  be a  lower                                                               
electric  bill,  even in  spite  of  an  increase, if  the  power                                                               
project was that efficient.                                                                                                     
Number 0437                                                                                                                     
MR.  GATES said  it  wouldn't  be lower  upfront.    If the  debt                                                               
service  were paid,  the amount  of  money saved  in diesel  fuel                                                               
would  probably be  on  the negative  side a  little.   It  would                                                               
probably  stabilize rates  and [would]  require a  rate increase.                                                               
He added  that Cordova Electric  Cooperative went  through forced                                                               
reductions, literally scrutinizing  every purchase order received                                                               
to reduce  expenses, and still only  made $45,000 last year.   He                                                               
stated that  that is how  close to the margins  [Cordova Electric                                                               
Cooperative] is.                                                                                                                
REPRESENTATIVE  KOTT  asked  what other  businesses  have  closed                                                               
besides the hardware store.                                                                                                     
MR. GATES commented that there is  a retail store down in the old                                                               
Alaska Commercial Building  that is going to move  out after this                                                               
summer  because they  can't afford  it, and  "we" know  there are                                                               
others.   Many businesses  in town  are on  the brink  of closure                                                               
because  of the  effect of  the pass-through  and the  [price of]                                                               
diesel fuel.                                                                                                                    
Number 0337                                                                                                                     
REPRESENTATIVE  ROKEBERG  said  "we"  all think  about  how  much                                                               
revenue is gained  when energy costs and the price  of oil go up,                                                               
but it  has an impact  on communities, on  people transportation,                                                               
and so  forth, so  "we" have  to pay  the cost  as well  as enjoy                                                               
those benefits.   He  said he  was disturbed  that it  was having                                                               
such an economic impact on [Cordova].   He asked why Mr. Gates is                                                               
pursuing bank financing, rather than  tax-exempt bonds.  He asked                                                               
if it is because [Mr. Gates]  is looking for a potential grant to                                                               
pay it  off, and then would  not have any "covenants"  that would                                                               
restrict the early calling of those bonds.                                                                                      
MR.  GATES said  "we"  had a  line  of credit  with  the bank  to                                                               
finance  this project;  there was  a desire  to go  out and  seek                                                               
grant funding, and the possibility  was there to get this project                                                               
funded.   At the time,  "Co Bank" stepped  up and was  willing to                                                               
finance it, he said.                                                                                                            
REPRESENTATIVE ROKEBERG  stated that depending on  what rates are                                                               
paid,  a commercial  bank loan  would  be extraordinarily  higher                                                               
than  a tax-exempt  bond issue,  and the  ultimate impact  on the                                                               
[cost per] kilowatt-hour could be  lower for the customer.  After                                                               
going "online" this summer, what  will the kilowatt-per-hour cost                                                               
be for the consumer, he asked.                                                                                                  
Number 0149                                                                                                                     
MR.  GATES replied  that if  everything is  optimum, it  could be                                                               
down  in the  17-cent  range,  which would  mean  a reduction  of                                                               
roughly 20  percent.  He  clarified that "optimum"  means getting                                                               
the full $12 million grant.                                                                                                     
REPRESENTATIVE ROKEBERG  commented that  money wouldn't  be saved                                                               
right now due to the very high diesel rates.                                                                                    
MR. GATES  clarified that $1.2  million would be saved  from fuel                                                               
savings,  but the  cost of  debt service  when it  is all  in the                                                               
project is  going to be  a "push," and  could be a  difference of                                                               
$100,000 or $200,000, which is why he  said there could be a 3 to                                                               
5 percent rate increase to pick that  up.  There is really no way                                                               
that it  can be  absorbed because [Cordova  Electric Cooperative]                                                               
is  as  lean as  possible,  and  more  couldn't be  done  without                                                               
jeopardizing  the  liability  and  safety of  employees  and  the                                                               
MR.  GATES  explained that  [their]  lender  is  Co Bank  out  of                                                               
Denver.   He  said there  are several  short-term loans,  and the                                                               
rates are fixed  when the project is  done.  He said  "we" pay an                                                               
average that is just over 7.1 percent.                                                                                          
TAPE 01-44, SIDE A                                                                                                              
Number 0062                                                                                                                     
HAP SYMMONDS,  President, Board of Cordova  Electric Cooperative;                                                               
Plant Manager,  Ocean Beauty Seafoods,  stated that  Ocean Beauty                                                               
is the second-largest non-government  employer in Cordova and one                                                               
of only two  canneries left in town.  It  is vitally important to                                                               
lower the cost of electricity  to maintain the economic viability                                                               
of the processing industry.   Processors in Cordova are currently                                                               
paying  the highest  electric rates  of any  Southcentral coastal                                                               
Number 0143                                                                                                                     
MR.  SYMMONDS explained  that if  rates  don't come  down, it  is                                                               
likely  that processors  will ship  fish  to other  parts of  the                                                               
state,  which  would have  a  tremendous  negative impact  on  an                                                               
already fragile  economy.  House  Bill 175 is very  important for                                                               
financing  the Power  Creek hydroelectric  project.   The seafood                                                               
industry is the largest private  employer in Alaska.  The coastal                                                               
communities are essential to the  Railbelt and urban communities.                                                               
The  largest  number  of  limited-entry-permit  holders  live  in                                                               
Anchorage,  and nearly  all of  the transportation,  support, and                                                               
supply companies are there as well.                                                                                             
MR.  SYMMONDS asked  the committee  to support  the bill  to help                                                               
finance the project.                                                                                                            
REPRESENTATIVE HALCRO  asked if  the seafood plants  are seasonal                                                               
or operate year-round.                                                                                                          
MR. SYMMONDS  replied that  of the two  major plants  in Cordova,                                                               
one is  year-round and the other  could be.  He  added that there                                                               
are two  cold storages and neither  is operating due to  the high                                                               
cost of electricity.                                                                                                            
REPRESENTATIVE  HALCRO  stated  that  not only  is  the  seasonal                                                               
industry  aspect being  battled, but  also the  high-energy costs                                                               
associated with keeping those businesses running.                                                                               
Number 0274                                                                                                                     
MR. SYMMONDS  concurred with what Representative  Halcro had said                                                               
and added that the season  could possibly be extended by freezing                                                               
[the fish] and adding value later in the winter.                                                                                
REPRESENTATIVE  CRAWFORD  asked  for   the  number  of  employees                                                               
[employed] in the two processing plants.                                                                                        
MR. SYMMONDS  stated that  seasonally there  are between  400 and                                                               
500 employees between the two large processing plants.                                                                          
REPRESENTATIVE  KOTT asked  how  long those  plants or  canneries                                                               
have been in operation in Cordova.                                                                                              
MR. SYMMONDS  responded that [Ocean  Beauty Seafoods']  plant was                                                               
built in  1978, and  the North  Pacific plant  was prior  to that                                                               
time.   He said there  have been  canneries in Cordova  since the                                                               
turn of  the century.  Responding  to an earlier question  to Mr.                                                               
Gates, he said  the request for proposals (RFPs)  for the Cordova                                                               
hydroelectric project went out in 1994.                                                                                         
Number 0374                                                                                                                     
REPRESENTATIVE ROKEBERG  asked about  the financing package.   He                                                               
asked  if there  has  been  a commercial  bank  or  if the  board                                                               
desired to use grant money, and why  the choice was made to go to                                                               
a commercial bank rather than to the bond market.                                                                               
MR.  SYMMONDS replied  that the  legislature was  approached when                                                               
the project first started.   Originally, it was planned to grant-                                                               
finance 100 percent of the project,  half with the state and half                                                               
with the federal  government.  "We" looked into  bonding and were                                                               
told that the  fees associated with that and  the bonding package                                                               
were  too small,  and that  a  commercial bank  [would serve  the                                                               
purpose just as well].                                                                                                          
Number 0374                                                                                                                     
REPRESENTATIVE ROKEBERG  asked if  AIDEA was [consulted]  about a                                                               
package or municipal bond bank.                                                                                                 
MR.  SYMMONDS  answered affirmatively.    He  believed that  this                                                               
conversation took place in 1997 or 1998.                                                                                        
REPRESENTATIVE ROKEBERG  stated that  our municipal bond  bank is                                                               
not working because it is  supposed to consolidate those types of                                                               
things.   He said he thought  the House of Representatives  did a                                                               
$3 million appropriation that failed in the Alaska Senate.                                                                      
MR. SYMMONDS  replied in the negative.   He said it  was [former]                                                               
Representative Kubina's  bill, and  "we" were looking  at walking                                                               
away with PCE.   It went through two committees,  failed, and was                                                               
never reintroduced.                                                                                                             
Number 0568                                                                                                                     
ROBERT   WILKINSON,  Chief   Executive  Officer,   Copper  Valley                                                               
Electric Association (CVEA),  stated that he is in  support of HB                                                               
175  and  more specifically  [Copper  Valley's]  portion of  that                                                               
request.   He provided some  written testimony for  the committee                                                               
and  said he'd  spoken to  many committee  members over  the past                                                               
couple of months.                                                                                                               
MR.  WILKINSON explained  that  [CVEA]  provides central  station                                                               
electric service  to the Copper  River Basin and Valdez,  an area                                                               
covering 156  miles of the  Richardson Highway  and approximately                                                               
80 miles of the Glenn Highway.   "We" go off the Edgerton Highway                                                               
halfway to Chitna  17 miles and up the Tok  road to the (indisc.)                                                               
at  mile  12.   He  said  in  1993  the 18th  Alaska  Legislature                                                               
appropriated a  $35-million, 50-year, zero-interest loan  for the                                                               
transmission line between Sutton and Glennallen.                                                                                
Number 0666                                                                                                                     
MR. WILKINSON stated  that after more than a  million dollars was                                                               
spent  trying  to advance  that  project,  it was  high-centered,                                                               
fraught  with economic,  political,  and environmental  problems.                                                               
The board  of directors, on  his advice,  set the project  on the                                                               
back  burner.   At that  time, [CVEA]  had pressing  power supply                                                               
needs, and in favor of the intertie, [CVEA] built a combustion-                                                                 
turbine  cogeneration project  with Petro  Star Inc.  - a  Valdez                                                               
refinery, and [CVEA's] largest customer.                                                                                        
MR.  WILKINSON stated  that  it is  high-tech,  "green," has  net                                                               
environmental  and omission  benefits, and  turns crude  oil into                                                               
kilowatt-hours.  And it adds  five valuable megawatts of capacity                                                               
to the  CVEA system.   He said  the project was  financed through                                                               
the industry cooperative  bank, which does nothing  to reduce the                                                               
high  cost of  electricity  and  is one  of  the major  "drivers"                                                               
behind the 1993 intertie appropriation.                                                                                         
MR.  WILKINSON explained  that  the  Copper Valley's  residential                                                               
rates in the  Copper Basin last year were 19.5  cents a kilowatt-                                                               
hour, and  16.5 cents in  Valdez.  Those rates  are approximately                                                               
seven  cents  higher  per  kilowatt-hour  than  for  other  small                                                               
communities on the road system  including Delta Junction, Nenana,                                                               
Healy, Moose  Pass, Cooper Landing,  and others that  are similar                                                               
in nature to the communities served by CVEA.                                                                                    
Number 0758                                                                                                                     
MR.  WILKINSON  stated  that  [CVEA's] request  is  for  a  $12.5                                                               
million  grant  for  four  energy projects:  The  largest  is  to                                                               
capitalize the  [cogeneration project] of $7.5  million, allowing                                                               
[CVEA]  to bring  down  the  price of  electricity  in a  region;                                                               
[CVEA's] prime  generation in Glennallen is  approaching 30 years                                                               
of age, and  [CVEA] would like to replace those  units with units                                                               
that are more fuel-efficient and less  costly to maintain.  It is                                                               
very difficult  to find parts  for 30-year-old  enterprise units,                                                               
although they are relied upon for prime power.                                                                                  
MR.  WILKINSON stated  that  there is  also a  project  to run  a                                                               
waste-heat loop from  the Glennallen plant to the  high school to                                                               
circulate "jacket  water" off the  diesel unit and plumb  it into                                                               
the  school  district's  heating  system,  thereby  reducing  the                                                               
number of  gallons that the school  must burn to fire  its boiler                                                               
for space-heating  purposes, which  reduces consumption  by about                                                               
50,000 gallons a year.                                                                                                          
Number 0846                                                                                                                     
MR. WILKINSON explained that there  is also a $500,000 request to                                                               
repay  [CVEA] for  the  intertie-feasibility  study conducted  in                                                               
1993 and  1994.  In 1993,  the Alaska Energy Authority  (AEA) had                                                               
$500,000  in its  budget to  fund  a feasibility  study for  this                                                               
intertie  project.    The legislation  deleted  [it]  from  AEA's                                                               
budget, and  [CVEA] was instructed to  take the money out  of the                                                               
$35 million loan fund.                                                                                                          
MR. WILKINSON added that Copper  Valley spent $1.3 million trying                                                               
to advance  the project.   The $500,000 was specifically  for the                                                               
intertie study required  by the legislation.   Commenting on some                                                               
previous  statements from  Representative Rokeberg,  he said  his                                                               
understanding was that  the $35 million in  1993 was appropriated                                                               
for the  project and  that the money  went to  the power-project-                                                               
loan fund  as part  of HB  447.   That appropriation  lapsed back                                                               
into the Railbelt energy fund  without interest.  With respect to                                                               
Representative Kott's  comments, he  said none of  these projects                                                               
have received any  state funding.  In the early  1990s, the State                                                               
of  Alaska  had  a  line-extension fund  for  small  distribution                                                               
projects,  and that  was  the last  time  Copper Valley  received                                                               
state financial assistance.                                                                                                     
REPRESENTATIVE  KOTT asked  Mr.  Wilkinson to  indicate what  the                                                               
$12.5 million  would be applied  to.  He  asked if there  are new                                                               
projects  or  if this  is  just  the  retirement of  the  capital                                                               
construction debt.   He said if  it is a new  project, then there                                                               
isn't a  debt to retire,  so he  wondered if the  [bill] language                                                               
was appropriate based on what Mr. Wilkinson had said.                                                                           
MR.  WILKINSON  replied  that  there are  four  projects  in  the                                                               
request:   the $7.5 million would  be to retire existing  debt on                                                               
the [cogeneration] project;  the $4 million would  be for yet-to-                                                               
be  constructed generation  in the  Glennallen  diesel plant,  so                                                               
there is  no debt  to be  retired there;  the waste-heat  loop is                                                               
also   a  yet-to-be   constructed  project;   and  the   intertie                                                               
feasibility study would be a reimbursement of costs expended.                                                                   
REPRESENTATIVE KOTT  stated that  $7.5 million  is to  retire the                                                               
MR. WILKINSON responded affirmatively.                                                                                          
REPRESENTATIVE  ROKEBERG asked  what  the  interest or  financing                                                               
mechanism is on the $7.5 million.                                                                                               
MR.  WILKINSON stated  that [CVEA]  is a  member of  the National                                                               
Rural Utility  Cooperative Finance  Corporation and  had borrowed                                                               
100 percent.   "We" refinanced our "RUS" debt in  1998, went with                                                               
"CFC," and are currently paying  an interest rate of 7.3 percent.                                                               
Responding to a question about why  the interest rate is so high,                                                               
he stated that it is tied to the  cost of money and is a variable                                                               
rate.  He  said "we" didn't move quickly enough  and are watching                                                               
the rates every day.                                                                                                            
Number 1049                                                                                                                     
REPRESENTATIVE KOTT  asked if Solomon  Gulch is part of  the Four                                                               
Dam Pool, and how much power it generates for the grid.                                                                         
MR. WILKINSON stated that it is part  of the Four Dam Pool and is                                                               
a 12-megawatt  facility.   Thirteen megawatts  [of power]  can be                                                               
generated  out of  the project  in the  summer when  the lake  is                                                               
full; this  happens to be  Copper Valley's system load,  he said.                                                               
It  produces  reliable  energy  at  a fixed  cost  but  has  some                                                               
problems, the  biggest [one] being  that the reservoir  will only                                                               
hold 50  million kilowatt-hours [worth  of water], no  matter how                                                               
much  it rains  and snows  in Valdez.   Solomon  carries [CVEA's]                                                               
entire system load  in the months of June through  October.  When                                                               
things  turn  cold and  start  to  freeze,  the lake  drops,  and                                                               
historically  [CVEA] has  supplemented that  with the  Valdez and                                                               
Glennallen  diesel  plants.   Now,  he  said, the  supplement  to                                                               
Solomon is primarily the [cogeneration project].                                                                                
MR. WILKINSON  explained that Solomon  produces about  60 percent                                                               
of the  annual requirement,  the [cogeneration  project] produces                                                               
about 30  percent, and  the remaining 10  percent comes  from the                                                               
Glennallen plant.                                                                                                               
MR.  WILKINSON, upon  being asked  what the  Valdez kilowatt-hour                                                               
was,  stated   that  it  was  16.5   [cents  per  kilowatt-hour].                                                               
Responding to  a question about  what "CEA" Anchorage  is paying,                                                               
surmised that it was 10 to 11 [cents].                                                                                          
[There was an indication from the  audience that it was more like                                                               
9 to  10 [cents],  but that  a rate  increase had  recently taken                                                               
MR.  WILKINSON stated  that of  the 16.5  cents, approximately  8                                                               
cents was  for the fuel  and purchase-power components.   He said                                                               
the blended fuel and the  purchase power from hydroelectric was 8                                                               
of the 16.5 cents.                                                                                                              
REPRESENTATIVE KOTT asked  if there are other  communities in Mr.                                                               
Wilkinson's service area on PCE.                                                                                                
MR. WILKINSON  responded that  there aren't,  but said  there are                                                               
adjacent communities such as Chitna  and Chistochina, and that he                                                               
understood that  [the rail  system] is coming  to Valdez  at some                                                               
point in time.                                                                                                                  
Number 1233                                                                                                                     
REPRESENTATIVE KOTT said Cordova had  indicated that it would get                                                               
off PCE if [the legislature] gave them the grant.                                                                               
REPRESENTATIVE ROKEBERG  commented that  if [the  legislature] is                                                               
going to "raid" this fund,  [the legislature is] not getting much                                                               
of a  payback offer from  these folks,  and getting off  PCE just                                                               
doesn't happen.  He said, "Maybe  we ought to be able [to] reload                                                               
into the back end of their energy fund."                                                                                        
Number 1312                                                                                                                     
SANDRA GHORMLEY,  Manager, Marketing and Member  Relations, Homer                                                               
Electric  Association, spoke  in support  of  HB 175.   She  said                                                               
Homer  Electric Association  is an  electric cooperative  utility                                                               
serving  about   26,000  meter  locations  in   the  Lower  Kenai                                                               
Peninsula.     She  said  although   she  is  speaking   for  the                                                               
Seldovia/Port   Graham/Nanwalek  regional   power  project,   and                                                               
although   [Homer   Electric   Association's]  portion   of   the                                                               
appropriation request is  the smallest of the five,  all of these                                                               
energy projects are  important, not only to  the communities that                                                               
are directly impacted, but to all Alaskans.                                                                                     
Number 1410                                                                                                                     
MS. GHORMLEY stated  that these funds would be used  to improve a                                                               
section of the  existing infrastructure on the  southern most end                                                               
of  the Railbelt.    In spite  of the  fact  that Homer  Electric                                                               
Association is often thought of  as an urban utility, it provides                                                               
service to several remote areas south  of Kachemak Bay.  For over                                                               
25  years, it  has  served these  communities  via an  underwater                                                               
cable that  spans 3.8 miles across  Kachemak Bay and 60  miles of                                                               
power line.   It has been the key instrument  in getting electric                                                               
service  to  Nanwalek,  Port Graham,  Halibut  Cove,  Tutka  Bay,                                                               
Peterson Bay,  and all of  the communities in between,  about 700                                                               
MS.  GHORMLEY pointed  out that  she had  provided the  committee                                                               
with a map showing where the  submarine cable crosses the bay and                                                               
the distance of  the lines that serve those  communities.  Access                                                               
to these  areas is  limited to  air or  boat [travel],  she said,                                                               
which  is dependent  on the  weather.   Without  connection to  a                                                               
central  source of  power, these  villages and  communities would                                                               
lose  their access  to affordable  electric  service and  [might]                                                               
require  some  sort of  supplement  to  survive, perhaps  PCE  or                                                               
something, she said.                                                                                                            
Number 1506                                                                                                                     
MS.  GHORMLEY  said  economies in  these  rural  communities  are                                                               
fragile, and a  rate increase would have a  significant impact on                                                               
the  balance.   The  3.8 miles  of  cable across  the  bay is  in                                                               
disrepair, according  to a recent engineer's  survey, and failure                                                               
is eminent.   [Homer Electric Association]  has four, 52-year-old                                                               
diesel generators  located in  Seldovia that  serve as  a back-up                                                               
source  of  power  during  outages.    It  is  known  that  those                                                               
generators couldn't sustain the load  for very long if there were                                                               
a  cable  failure.    Homer  Electric  Association  is  seriously                                                               
committed  to serving  these communities  at a  level of  service                                                               
equal to that for the communities on the north side of the bay.                                                                 
MS. GHORMLEY explained  that this summer 25 spans  of power lines                                                               
would  be built  and upgraded,  and poles  damaged during  winter                                                               
storms  would  be replaced  this  year;  this will  cost  roughly                                                               
$300,000.  [Homer Electric Association]  also has determined that                                                               
another $2.8 million  is going to be needed to  clear the spruce-                                                               
bark-beetle  killed trees  from power  corridors from  China Poot                                                               
[Bay]  to  Tutka  Bay,  and  that  is  just  the  beginning,  she                                                               
MS. GHORMLEY stated that with the  passage of this bill the state                                                               
is paying  for needed infrastructure, specifically  an underwater                                                               
cable  and four  diesel generators  that are  the sole  supply of                                                               
electric service to these communities.                                                                                          
Number 1605                                                                                                                     
MS. GHORMLEY concluded  by saying that there  has been widespread                                                               
support for this  project and bill.  The  Kenai Peninsula Borough                                                               
and the  City of Seldovia  have offered a resolution  of support.                                                               
On  behalf   of  the  Homer   Electric  Association's   board  of                                                               
management, she  urged the committee  to pass the bill,  and also                                                               
to  walk  it  through  the  legislative  process  to  ensure  the                                                               
continuation of  affordable, reliable  electric service  south of                                                               
Kachemak Bay.                                                                                                                   
MS.  GHORMLEY  mentioned  that  the  Homer  Electric  Association                                                               
supports the appropriation  to upgrade the Anchorage-to-Fairbanks                                                               
transmission  intertie to  230  [kilovolts] in  the  bill.   This                                                               
section of line  is essential in moving electricity  off Kenai to                                                               
Fairbanks, she  said.   Also, it  is essential  to the  future of                                                               
this state; as  the natural gas pipeline becomes  a reality, this                                                               
upgrade is going  to become very important  to moving electricity                                                               
Number 1670                                                                                                                     
REPRESENTATIVE  ROKEBERG asked  if  the South  Kachemak Bay  area                                                               
receives any PCE.                                                                                                               
MS. GHORMLEY  stated that it  doesn't.  Responding to  a question                                                               
about whether all  of these customers are  integrated into [Homer                                                               
Electric  Association's] system,  she replied  affirmatively, and                                                               
said there is a slight difference  in the rate today, but that it                                                               
isn't significant.  Responding to  whether the replacement of the                                                               
cable  or   transmission  facilities  is  being   amortized,  Ms.                                                               
Ghormley  replied that  this particular  project is  viewed as  a                                                               
regional power project, part of  the infrastructure, which is why                                                               
"we've"  gone  ahead  and  looked  to  the  state;  "we"  believe                                                               
supporting  infrastructure is  a good  use of  public funds,  she                                                               
REPRESENTATIVE  ROKEBERG   said  historically   the  transmission                                                               
capability  of the  state has  been  paid for  by capital  money;                                                               
therefore, it  isn't amortized  and integrated  into part  of the                                                               
rate base.  There  is a failed line and there  is no sinking fund                                                               
to  pay  for  it.    Wasn't  it amortized,  he  asked,  or  at  a                                                               
depreciated cost?                                                                                                               
MS.  GHORMLEY  stated  that  25  to 30  years  ago  the  Seldovia                                                               
community was  the same size  as the  Homer community, and  had a                                                               
thriving  fishing industry;  there is  a very  different economic                                                               
situation [now  compared] to 25  years ago.   At that  time, "we"                                                               
incurred  debt and  it  was repaid  through  electric rates,  but                                                               
today that isn't an option for these communities.                                                                               
REPRESENTATIVE ROKEBERG  said Ms.  Ghormley's testimony  was that                                                               
the members financed the installation  of the submarine cable and                                                               
the transmission  area before, put it  in the base, and  paid for                                                               
it that  way.  He  said now that  there are some  difficulties in                                                               
the  economic situation  as well  as other  contributing factors,                                                               
[Homer Electric Association] can't afford  to replace it and make                                                               
an adjustment in the tariff.  He asked whether that is correct.                                                                 
MS.  GHOMLEY explained  that  "we"  are trying  to  avoid a  rate                                                               
increase for those communities.                                                                                                 
REPRESENTATIVE ROKEBERG asked what  Halibut Cove's kilowatts per-                                                               
hour [rate] is.                                                                                                                 
MS. GHORMLEY  responded that [residents]  are paying 9  cents for                                                               
their energy charge, which doesn't  include the wholesale cost of                                                               
power pass-through.  She said  the pass-through for the fuel part                                                               
is about  1 cent.  Responding  to a statement that  the rates are                                                               
almost   comparable   to   the  Anchorage   area,   she   replied                                                               
Number 1847                                                                                                                     
REPRESENTATIVE  ROKEBERG  asked  if   this  was  like  Kenai  and                                                               
Soldotna too.                                                                                                                   
[The question  was answered from  the audience.   An unidentified                                                               
speaker responded  that it  would be  about 2  cents more  on the                                                               
south side of the bay.]                                                                                                         
Number 1883                                                                                                                     
STEVE HAAGENSON,  Acting President  and Chief  Executive Officer,                                                               
Golden  Valley Electric  Association (GVEA),  via teleconference,                                                               
stated that [GVEA]  is currently working on  quantifying the hard                                                               
(indisc.) in  the following areas by  increasing the transmission                                                               
capacity, which  will double the  amount of hours that  will come                                                               
to Fairbanks  from Anchorage,  and the power  can flow  in either                                                               
direction  on the  transmission line.   Perhaps  by the  time the                                                               
natural gas  pipeline is  constructed, the  transmission capacity                                                               
increase will allow for delivery  of 130 megawatts of North Slope                                                               
gas-fired power to the Anchorage bowl.                                                                                          
MR.   HAAGENSON  said   reducing  transmission   line  loss   and                                                               
[increasing] reliability  are other  benefits; the addition  of a                                                               
second  circuit [line]  will  improve  the [reliability]  between                                                               
Teeland  and Douglas,  which  currently has  one  of the  highest                                                               
outage  rates  in Alaska.    There  will also  be  reconstruction                                                               
benefits; the  second line will  allow for continued  delivery of                                                               
power to Fairbanks  during construction on these lines.   He said                                                               
[GVEA} also supports the grant  for the Power Creek hydroelectric                                                               
project; it  would reduce the  amount of state  participation and                                                               
PCE by approximately $200,000 to $600,000.                                                                                      
Number 1973                                                                                                                     
REPRESENTATIVE ROKEBERG  said he was  a little disturbed  to hear                                                               
about  the  amazing   amount  of  power  that  is   going  to  be                                                               
forthcoming out of Fairbanks, because  the flow has been from the                                                               
other direction.                                                                                                                
MR. HAAGENSON responded that today  it is in the other direction.                                                               
In anticipation of  the gas being delivered  to Fairbanks through                                                               
some  of the  "Prudhoe" with  the gas  lines, "we"  expect it  to                                                               
switch  directions and  supply any  deficiencies  in natural  gas                                                               
down to the Anchorage bowl.                                                                                                     
Number 2007                                                                                                                     
DONALD MAHON,  Alaska Power  Company, via  teleconference, stated                                                               
that "we" serve all communities  in the Tok region with telephone                                                               
and  power  [service],  with  most  of  those  communities  being                                                               
remote.   He emphasized that  he has been  in Tok for  ten years,                                                               
and that  the residents  along the highway  and those  from Slana                                                               
have  requested  funding continually  for  central  power.   This                                                               
request started  back in  1978, and  in the  last ten  years "we"                                                               
have  been working  with "them";  "we" submitted  the request  in                                                               
1994 and are  now submitting another request to  get those people                                                               
on central power.                                                                                                               
MR. MAHON stated that not only  will it provide central power for                                                               
the  residents along  the highway,  reducing  costs for  Mentasta                                                               
[Lake] and  Chistochina that are  now on stand-alone  diesel, but                                                               
it  will  also  put  the residential,  small  commercial  [areas]                                                               
within that  90-mile [stretch]  along the  highway on  Tok power,                                                               
which is at a reduced cost.                                                                                                     
Number 2101                                                                                                                     
MR. MAHON pointed  out that another important aspect  of this tie                                                               
line is that this project is  the beginning of an energy tie-line                                                               
system for  eastern Interior  Alaska.  In  the future,  this line                                                               
could connect to the Railbelt  grid, either through Glennallen or                                                               
by the  construction of  a tie-line from  Delta Junction  to Tok.                                                               
Looking  to   the  future,  there   continues  to   be  extensive                                                               
exploration in eastern Interior Alaska.   Just recently there was                                                               
a promising  precious-metal discovery  at North  (indisc.), which                                                               
is along  the Alaska  Highway.  He  said two  infrastructures are                                                               
needed for  mining to  be economical;  one is  the transportation                                                               
system,  and  the  other  is  economical  energy.    The  eastern                                                               
Interior  intertie project  would provide  economical energy,  he                                                               
MR.  MAHON  mentioned letters  of  support  received from  Ahtna,                                                               
Incorporated;  Copper   River  School  District;   Copper  Valley                                                               
Telephone,  Chistochina  Tribal   Council,  Mentasta  Traditional                                                               
Council,  and   the  Department  of  Transportation   and  Public                                                               
Facilities because  of the expansion.   He said people  are being                                                               
turned  away from  Denali National  Park and  Preserve, and  some                                                               
people say  that Wrangell-Saint Elias National  Park and Preserve                                                               
will be the next Denali.   Looking into the future, this tie line                                                               
is  the  start  of  economic  development  for  eastern  Interior                                                               
Alaska, (indisc.) requires approximately 30 megawatts of energy.                                                                
Number 2199                                                                                                                     
REPRESENTATIVE  ROKEBERG  referred  to  the  information  in  the                                                               
committee's packet  that indicates that  the average price  is 20                                                               
cents a  kilowatt-hour in  the Tok  area, whereas  the standalone                                                               
generation  in Mentasta  and  Chistochina is  about  35 cents  an                                                               
hour;  he  asked if  that  is  because [Alaska  Power  Company's]                                                               
generators  are  larger and  more  efficient;  he also  asked  if                                                               
"they" are dependent on diesel fuel.                                                                                            
MR.   MAHON  replied   affirmatively   and  said   the  Tok   and                                                               
Chistochina-Mataska  operations are  diesel.   He  said  it is  a                                                               
matter of economics, and "we"  are running about 1.5 megawatts in                                                               
Tok compared  to an average of  70 kilowatts for an  average load                                                               
in Chistochina  and Mentasta.   He pointed  out that the  cost of                                                               
fuel is higher for smaller operations.                                                                                          
REPRESENTATIVE ROKEBERG  asked if  there is a  small distribution                                                               
system  in  those areas,  and  whether  individuals in  Mentasta,                                                               
Chistochina,  and  Slana  have  their own  generators  or  use  a                                                               
community distribution system.                                                                                                  
MR. MAHON said  in Mentasta and Chistochina there  is a community                                                               
distribution  system,   but  between   those  two   locations  is                                                               
residential generation.                                                                                                         
Number 2267                                                                                                                     
THELMA SCHRANK,  via teleconference,  said "we" have  been trying                                                               
for a long time to get central  power at a reasonable cost.  Most                                                               
of the  people in the area  have generating plants; many  rely on                                                               
2,500  kilowatts gasoline  generator  and run  "basic stuff"  off                                                               
that two to three hours a day.                                                                                                  
MS.  SCHRANK  stated that  "we"  might  get an  assisted-[living]                                                               
facility  in the  area,  and  it would  be  advantageous to  have                                                               
commercial power  to cut the cost  of taking care of  some of the                                                               
elderly  folks in  the Chistochina,  Slana,  and Mentasta  areas.                                                               
She said  she had  worked with  Mr. Mahon from  the onset  of the                                                               
project, and [she offered her assistance].                                                                                      
Number 2357                                                                                                                     
ALAN  LeMASTER, via  teleconference,  said this  is an  important                                                               
issue across the  Copper Valley.  He said  oftentimes people talk                                                               
about the Copper Valley Electric  Association and think of Valdez                                                               
and Glennallen, but  12 to 14 other communities  are also served.                                                               
He said [Copper  Valley Electric Association] also  "serve ... as                                                               
12  or  15  agencies  of  the federal  government  and  about  20                                                               
agencies of  the state," and  all those agencies  and communities                                                               
are paying one of the highest rates of electricity in Alaska.                                                                   
MR. LeMASTER  stated that the  electric association came  up with                                                               
cost efficiencies  and its rates declined  slightly; however, due                                                               
to the increase in fuel in the  last couple of years, the rate is                                                               
now back at about 19.5 cents  per kilowatt-hour.  The prospect of                                                               
that  is very  bleak, and  "we" are  going to  see a  substantial                                                               
increase in fuel costs again this summer, he remarked.                                                                          
MR. LeMASTER  explained that anything  "we" can do to  retire the                                                               
debt  or bring  our  existing  equipment up  to  speed with  more                                                               
efficient  energy  generation  is  going   to  be  good  for  the                                                               
community.  One  of the biggest problems "we"  have in developing                                                               
industry in  [the Copper  Valley] is that  energy and  fuel costs                                                               
are so high.                                                                                                                    
Number 2437                                                                                                                     
MR. LeMASTER stated that construction  would resume at the end of                                                               
next month at the Princess Hotel.   And the National Park Service                                                               
is building a  new visitor's center in Copper Center.   Those two                                                               
new projects are going to bring  focus to the valley as marketing                                                               
goes out.  This will bring  a tremendous burden on the people who                                                               
work there.   He  said he  had to close  his business  all winter                                                               
long because he couldn't afford the cost of fuel.                                                                               
TAPE 01-44, SIDE B                                                                                                              
MR. LeMASTER  said "our" debt  service is holding us  up, because                                                               
the only  way to  pay high  debt service  is through  high energy                                                               
MR.  LeMASTER said  as a  result,  "our" board  of directors  and                                                               
general manager are moving one  step forward and trying to reduce                                                               
energy costs to  try to [bring] business into  the community, and                                                               
to keep the ones that are here open.   He said he hopes that what                                                               
is happening  in Cordova isn't  going to  happen here.   He asked                                                               
the committee to [move] the bill to the House floor.                                                                            
Number 2401                                                                                                                     
DWIGHT  NISSEN,  President,  Alaska  Rural  Electric  Cooperative                                                               
Association  (ARECA);   Board  Member,  Golden   Valley  Electric                                                               
Association, via teleconference, stated that  ARECA is made up of                                                               
20  electric cooperatives  in six  cities in  Alaska.   More than                                                               
556,000 Alaskans  get their  electricity from  these cooperatives                                                               
and municipalities,  he said.   "Our" managers and  board members                                                               
have  testified in  support  of HB  175, and  he  hopes that  the                                                               
committee will support  it and help with the  electric problem in                                                               
Number 2346                                                                                                                     
MARGY  JOHNSON,  Mayor,  City  of  Cordova,  via  teleconference,                                                               
stated  that Cordova  is the  historic and  original home  of the                                                               
Railbelt, the  original Copper  River and  Northwestern railroad.                                                               
She said  the City of  [Cordova] supports HB 175;  she encouraged                                                               
the committee to  look at it as an investment.   The economies of                                                               
rural  Alaska, and  Cordova in  general, are  stumbling.   Before                                                               
"we" fall into that abyss and  apply for state aid for unemployed                                                               
families, "we"  urge [the  committee] to  support this  and lower                                                               
the cost of energy [in Cordova].                                                                                                
MS.  JOHNSON  explained  that  the   fish  processors  there  are                                                               
exceedingly important.   If they  leave Cordova, many  won't stay                                                               
in  Alaska,  and  Canada  is  courting them  [right  now].    She                                                               
encouraged the committee to support HB 175.                                                                                     
Number 2305                                                                                                                     
SYLVIA LANGE,  RatePayer, via teleconference,  said she  was born                                                               
and raised in Cordova and is  raising three children; she and her                                                               
husband  are small  business owners.   They  own a  property that                                                               
includes  several  small  mom-and-pop  businesses,  and  lease  a                                                               
portion of  their property to  a fish  processor.  There  also is                                                               
have a one-million-pound cold storage  facility that hasn't truly                                                               
operated since  the herring season  closed two years  ago because                                                               
the electric rates are not affordable.                                                                                          
MS. LANGE stressed  the importance of reducing  electric rates in                                                               
the community  as a whole, and  to her family in  particular.  It                                                               
will  make the  difference between  her being  able to  raise her                                                               
family here,  and her  children being  able to  return back  to a                                                               
community  that can  support them.   She  asked the  committee to                                                               
pass  the  legislation and  said  if  "we"  can keep  this  fully                                                               
funded, "we" might be able to  stay on a level playing field with                                                               
the economy in the rest of Alaska.                                                                                              
Number 2233                                                                                                                     
DENNIS  LEWIS,  Electrical  Superintendent, City  of  Petersburg;                                                               
Chairman,  Four Dam  Pool; Board  Member,  Alaska Rural  Electric                                                               
Cooperative Association (ARECA),  via teleconference, stated that                                                               
all of  the projects in  HB 175 are  fully supported by  the Four                                                               
Dam  Pool and  the City  of Petersburg,  and that  he hoped  [the                                                               
committee] would pass HB 175.                                                                                                   
PAUL  ANDERSON,  President,  Thomas Bay  Power  Authority;  Board                                                               
Member,  Alaska Rural  Electric  Cooperative Association  (ARECA)                                                               
Board of Directors; Council Member,  Petersburg City Council, via                                                               
teleconference,   stated   that   Thomas  Bay   Power   Authority                                                               
unanimously supports  HB 175.   This bill  provides the  means to                                                               
give  citizens affordable,  reliable  electrical power.   In  the                                                               
early 1990s, under  previous legislation, the Four  Dam Pool debt                                                               
retirement of approximately  $10 million a year was  subject to a                                                               
40-40-20  split:    40  percent to  the  Southeast  intertie,  40                                                               
percent to PCE,  and 20 percent to state  energy projects through                                                               
AIDEA and AEA.                                                                                                                  
MR. ANDERSON stated that $4.5 million  of that was PCE money.  He                                                               
said Copper  Valley, Kodiak, Petersburg, Wrangell,  and Ketchikan                                                               
were all  [receiving] PCE.   The ratepayers down here  have given                                                               
the state money  through the rates, and by spending  money out of                                                               
the Railbelt  energy fund, there  is the opportunity to  save the                                                               
state  money in  PCE  costs; "we"  support HB  175  and hope  for                                                               
Number 2122                                                                                                                     
BOB POE,  Executive Director,  Alaska Industrial  Development and                                                               
Export Authority  (AIDEA) and the Alaska  Energy Authority (AEA),                                                               
via  teleconference, spoke  in  support of  the  proposed CS  and                                                               
thanked the committee for hearing the bill.                                                                                     
Number 2095                                                                                                                     
JOE RILEY,  via teleconference,  offered some comments  about the                                                               
bill.   A few people want  to keep those outside  of the Railbelt                                                               
literally "in the dark."  He asked:   If the fund were the Alaska                                                               
Energy Fund, would there be  the same questions about allocation?                                                               
He  said  the  $8.4  million   for  the  Tok-to-Chistochina  line                                                               
includes a line for the South  Slana settlement area that has the                                                               
largest concentration  of population in  the Slana area.   If the                                                               
Tok-to-Chistochina   line   is   built   through   Mentasta   and                                                               
Chistochina, are PCE funds lost,  he asked, and/or does the Slana                                                               
area become eligible for those funds?                                                                                           
Number 2007                                                                                                                     
MR.  RILEY said  it is  his understanding  that these  funds have                                                               
collected  interest,  as  much  as  $17 million.    He  said  the                                                               
interest  alone  could  twice  fund   the  cost  of  the  Tok-to-                                                               
Chistochina  [project]; he  said  it was  his understanding  that                                                               
there are federal funds available  for local power generation and                                                               
that this  is an  area that  would benefit  from wind  power type                                                               
generation.  He asked why the research hadn't been done.                                                                        
MR.  RILEY said  this is  one of  the few  systems in  the entire                                                               
United  States on  a major  road  system that  has no  commercial                                                               
power.  He said this bill should be passed as soon as possible.                                                                 
Number 1943                                                                                                                     
JAMES KVASNIKOFF (ph), via teleconference,  stated that he wanted                                                               
to  speak  about  the  importance   of  the  energy  provided  in                                                               
Nanwalek,  the  Lower  Cook  Inlet  area.    The  Homer  Electric                                                               
Association is putting  in a proposal for a  $4.8 million project                                                               
so power  can be supplied to  the Lower Cook Inlet.   Without it,                                                               
the  village would  be  in  a lot  of  trouble  trying to  afford                                                               
electricity.  Right now the rates  are at an affordable level for                                                               
the  areas that  have high  unemployment rates.   [On  behalf of]                                                               
Nanwalek, he said, "we" support HB 175.                                                                                         
Number 1943                                                                                                                     
REPRESENTATIVE HALCRO commented that it is  a good bill.  He said                                                               
there are obviously some proprietary  concerns as far as the fund                                                               
being established, but every legislature  has the ability to fund                                                               
programs  and use  the  general  fund dollars  as  they see  fit.                                                               
There are few [people] left  in this legislature that were around                                                               
when the Railbelt  energy fund was created;  the largest proposal                                                               
on the  project list goes  to the Railbelt [area],  and regarding                                                               
some  of the  others,  it could  be argued  that  there is  great                                                               
benefit to  those that live in  the Railbelt.  He  said precedent                                                               
is  set every  year when  funds that  are dedicated  for specific                                                               
purposes are  used for other  things, such as the  Alaska Housing                                                               
Finance  Corporation  (AHFC)  dividend, AIDEA  dividend,  tobacco                                                               
settlement money, and so forth.                                                                                                 
REPRESENTATIVE HALCRO stated that  these projects help the people                                                               
of  Alaska and  regardless of  the political  history behind  the                                                               
fund, these  projects are  good for Alaska  and will  benefit the                                                               
entire state, which is really what the money should be for.                                                                     
Number 1788                                                                                                                     
CHAIR  MURKOWSKI  pointed out  that  there  had been  a  proposed                                                               
amendment   suggested   by   Mr.   Yould   to   "bump"   up   the                                                               
[appropriation]  amount  for the  26-mile  Anchorage-to-Fairbanks                                                               
REPRESENTATIVE  ROKEBERG said  [an  appropriation for]  something                                                               
else would  have to be  [lowered] if [the legislature]  wanted to                                                               
do  that.   He  said  he is  glad  that Representative  Lancaster                                                               
brought this  bill forward because  it exposes some of  the needs                                                               
in the  state.  He  stated that  he takes particular  interest in                                                               
the Cordova  project; the people  of Cordova have been  coming to                                                               
this building for  years looking for assistance, and  it has been                                                               
very limited.   The legislature  needs to do something  there, he                                                               
REPRESENTATIVE ROKEBERG  said he is particularly  concerned about                                                               
paying  back Copper  Valley for  [sinking money]  into a  project                                                               
that  their money  determined might  not even  be feasible.   The                                                               
concept of  a circular grid  from Nanwalek up  through Fairbanks,                                                               
down  through Delta  to Tok,  and down  to Glennallen  and Valdez                                                               
could be extremely important for  the whole state someday because                                                               
it  is technically  feasible and  will eventually  supply cheaper                                                               
power to a lot of areas of the state that don't receive it now.                                                                 
REPRESENTATIVE ROKEBERG  said all of  these things make a  lot of                                                               
good  sense,  but  nevertheless [the  legislature]  needs  to  be                                                               
extremely  careful  about  the  spending of  this  money  in  its                                                               
historic perspective.                                                                                                           
REPRESENTATIVE  ROKEBERG  said  he thought  Representative  Meyer                                                               
made a good  point in terms of the great  potential that could be                                                               
derived, particularly revolving around  the potential North Slope                                                               
natural gas [line];  he mentioned providing at least  a spur line                                                               
to  the  Cook  Inlet  tidewater,  which  he  said  was  extremely                                                               
important for  the energy needs of  the people in the  Cook Inlet                                                               
REPRESENTATIVE  ROKEBERG remarked  that he  is reluctant  to take                                                               
money  set  aside for  the  Railbelt  and expend  it  immediately                                                               
without having  a long-term  plan.  Every  one of  these projects                                                               
has merit and should be funded  or at least assisted with funding                                                               
from the state.   He noted that  he would have a  great deal more                                                               
comfort if he  knew that some of these communities  would be able                                                               
to get off PCE,  and might also be able to  pay [the state] back.                                                               
He said there  have been several formulas  historically, and even                                                               
the current  PCE endowment fund  makes assumptions  about payback                                                               
of the Four  Dam Pool into the fund to  help offset those ongoing                                                               
costs.  He said he is very  concerned if $71 million is taken and                                                               
expended, but there is no return.                                                                                               
REPRESENTATIVE ROKEBERG  commented that  it is "seed  money" that                                                               
can be utilized and  leveraged, so it needs to be  look at from a                                                               
broader perspective.                                                                                                            
Number 1530                                                                                                                     
REPRESENTATIVE  ROKEBERG pointed  out that  during discussion  of                                                               
the  1990 "jobs  bill" when  there was  a mild  recession in  the                                                               
United  States  and  [the  state]   was  coming  off  the  little                                                               
[economic]  burst from  the unfortunate  Exxon Valdez  spill, the                                                               
legislature decided to try to  make some macroeconomic and fiscal                                                               
policies  in that  dire  situation.   He said  he  would be  very                                                               
reluctant right  now to  expend these monies  without at  least a                                                               
long-range plan, and  it would be a grave mistake  for the people                                                               
of Alaska.                                                                                                                      
Number 1509                                                                                                                     
REPRESENTATIVE  MEYER pointed  out  that Representative  Rokeberg                                                               
had  commented  that  the  amendment  couldn't  be  made  without                                                               
reducing [spending]  elsewhere.   He asked if  there is  just $50                                                               
million [to spend].                                                                                                             
CHAIR MURKOWSKI  said [the legislature]  only used up $51  of the                                                               
$71 [million]; there is [roughly] $20 million left.                                                                             
REPRESENTATIVE MEYER said there was no reference in the title.                                                                  
REPRESENTATIVE HALCRO pointed  out that in 1993,  $55 million was                                                               
appropriated  out of  this fund  for two  specific projects  that                                                               
didn't come to  fruition, so that money  was re-appropriated back                                                               
into  the  fund.    He   asked  why,  eight  years  later,  there                                                               
[shouldn't] be  the ability to  take a  look at the  energy needs                                                               
and projects out  there that would benefit the  people of Alaska.                                                               
For all intents  and purposes, that $55 million  should have been                                                               
spent, but it lapsed back into  the fund, picked up an additional                                                               
$16 million in interest for a  total of $71 million, and [now the                                                               
legislature is] only going to  spend $51 million.  These projects                                                               
make sense and will help economic development.                                                                                  
REPRESENTATIVE HALCRO said it is  [time] for [the legislature] to                                                               
look at the  list of needs in the state,  whether in the Railbelt                                                               
or close to  the Railbelt, and make those decisions.   There will                                                               
still  be $20  million left  in the  fund, which  could go  to do                                                               
feasibility studies  or to design  projects.  He  reiterated that                                                               
the money was anticipated to be spent.                                                                                          
Number 1309                                                                                                                     
CHAIR MURKOWSKI  said the testimony  heard was  overwhelmingly in                                                               
support of these projects.                                                                                                      
REPRESENTATIVE ROKEBERG said it is  a question of how to allocate                                                               
the fund,  but even  further, this  legislature started  with the                                                               
scrutinization  of  the  tobacco   settlement  agreement.    [The                                                               
legislature] determined that some of  this money can be leveraged                                                               
using creative  financing techniques.  [The  legislature] is able                                                               
to have money upfront for a  future income stream at a relatively                                                               
modest price.  He  said he believes there would be  a way to take                                                               
the corpus of the money and look at how it can be used.                                                                         
Number 1210                                                                                                                     
REPRESENTATIVE ROKEBERG  said this  looks like  an old-fashioned,                                                               
"I want the money, and hand me  the cash" bill, and at this stage                                                               
he isn't  comfortable with that.   He said it would  be a mistake                                                               
for  the committee  to  hand  out money  without  looking at  the                                                               
REPRESENTATIVE  ROKEBERG  stated  that  he would  be  working  on                                                               
legislation to set  up a grid authority for the  state that would                                                               
be  independent of  the utilities,  to ensure  that the  Railbelt                                                               
grid  is working;  he doesn't  think  it is  represented in  this                                                               
REPRESENTATIVE LANCASTER commented  that HJR 1 passed  out of the                                                               
House   Rules  Committee;   [that   legislation  authorized   the                                                               
formation] of  a task force  to look at  the energy needs  of the                                                               
state.    The  Alaska   Rural  Electric  Cooperative  Association                                                               
[realizes] that a plan is  needed.  He agreed with Representative                                                               
Halcro that  the money has  been around for  a long time  and has                                                               
earned good interest.  What  is [the legislature] waiting for, he                                                               
asked; is  this state ever  going to  be "grown" and  money saved                                                               
for these people?   "We" do have a small  payback from Cordova at                                                               
$600,000 plus a year on PCE,  which they could use to payback the                                                               
loan,  and roll  it  back into  PCE  again.   He  said maybe  the                                                               
"tweaking"  [of  the bill]  could  happen  in the  House  Finance                                                               
Number 1057                                                                                                                     
REPRESENTATIVE   ROKEBERG   mentioned   that  the   21st   Alaska                                                               
Legislature had established  an alleged endowment for  PCE with a                                                               
$4-million-a-year  short[fall].    That is  something  that  [the                                                               
legislature] needs to  look at because it becomes  a problem when                                                               
the  issue  has  to  be  revisited  each  year  to  make  up  the                                                               
[deficit].   At $71  million, [the  legislature] would  more than                                                               
endow the  balance of that, to  bring it up to  full funding; the                                                               
corpus of  this money  would be  more than  enough to  cover that                                                               
REPRESENTATIVE LANCASTER,  referring to  PCE, said he  is working                                                               
with AIDEA, AEA,  and the Denali Commission  on some legislation.                                                               
He said "we"  used about 30 million gallons a  year to fund those                                                               
PCE generators, schools,  and so forth.  He said  he thinks there                                                               
is a way to  deliver that fuel better and to  buy it cheaper, and                                                               
the  money saved  would  roll  back into  [the  fund], and  would                                                               
hopefully be enough to fully endow that PCE.                                                                                    
REPRESENTATIVE HALCRO  said "we" have  the benefit of  the Denali                                                               
Commission, which is looking at  energy problems around the state                                                               
and  alternatives, and  certainly  [the commission]  is going  to                                                               
look at rural  Alaska.  These programs, in  conjunction with what                                                               
the Denali Commission is doing,  will hopefully lift the state up                                                               
so [everyone] will be able to enjoy affordable energy.                                                                          
Number 0870                                                                                                                     
REPRESENTATIVE  MEYER asked  Representative Lancaster  whether he                                                               
supports the amendment proposed [by Mr. Yould]?                                                                                 
REPRESENTATIVE LANCASTER  responded affirmatively and said  it is                                                               
a  technical  change.    Responding  to  Representative  Halcro's                                                               
comments he  said he  agrees and  that it is  a shame  that [U.S.                                                               
Senator Stevens] has to bail the  state out of its own industry -                                                               
to have  the Denali Commission come  up and "clean up"  around us                                                               
and send more  funds so [Alaska] can be better  administered.  He                                                               
said he  doesn't know  what the  money would be  saved for.   The                                                               
Alaska  Industrial Development  Export Authority  (AIDEA) has  an                                                               
energy plan in rough draft; one  was done for the Railbelt, which                                                               
wasn't  well  received,  and  one for  rural  Alaska,  which  was                                                               
somewhat  better received.   It  is  a starting  place, he  said,                                                               
along with the  assessments the Denali Commission  and AIDEA have                                                               
done with all  of the rural utilities.  He  urged [the committee]                                                               
to support the  bill because he said the money  couldn't be saved                                                               
REPRESENTATIVE KOTT  asked Representative Lancaster if  AIDEA and                                                               
AEA [had helped identify] these projects.                                                                                       
REPRESENTATIVE LANCASTER explained that he  had spoken to Mr. Poe                                                               
and to  ARECA.  He  said [the projects] are  somewhat prioritized                                                               
and  have  some positive  effects  on  the other  utilities  that                                                               
aren't immediately  or directly touched  by them - there  will be                                                               
some savings  that will help build  the grid.  He  added that Mr.                                                               
Poe is fully in support of these projects.                                                                                      
Number 0681                                                                                                                     
CHAIR MURKOWSKI  said one way  or another,  it is still  going to                                                               
get down  to a situation in  which these [issues] are  weighed in                                                               
the House Finance  Committee.  She said she isn't  sure she wants                                                               
to determine  the merits  [of the  projects] versus  other energy                                                               
needs out  there.  [The  committee] had some good  testimony, she                                                               
said, which ought to carry members through.                                                                                     
REPRESENTATIVE  KOTT  asked that  if  [the  bill is]  brought  up                                                               
again, the  proposed CS be  prepared with the amendment  that Mr.                                                               
Yould  provided.   He said  he  would support  the $24.3  million                                                               
level, increasing it from the $13.2  [million].  He said he would                                                               
like  to  get testimony  from  Mr.  Wilkinson and  identify  more                                                               
specifically the projects in his  line-item [list].  He said "we"                                                               
are  not retiring  a capital  debt; there  are new  projects here                                                               
that need to be identified.                                                                                                     
REPRESENTATIVE KOTT said the other  areas of the bill where money                                                               
has been  appropriated or grants identified  are pretty specific;                                                               
however, the  $12.5 million is  a little misleading and  needs to                                                               
be cleared up.                                                                                                                  
[HB 175 was held over]                                                                                                          

Document Name Date/Time Subjects