Legislature(1993 - 1994)
04/14/1993 09:15 AM Senate FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 126
An Act making special appropriations for design and
construction of power transmission interties between
Anchorage and the Kenai Peninsula, between Healy and
Fairbanks, and between the Swan Lake and Tyee Lake
hydroelectric projects; and providing for an effective
date.
Co-chair Pearce directed that SB 106 and 126 be
simultaneously brought on for discussion. Referencing SB
106, she noted that at the March 3, 1993, meeting, the
committee adopted a draft committee substitute dated 3/2/93.
She then suggested that that action be rescinded in order to
adopt an updated draft. Senator Sharp MOVED to rescind
adoption of the 3/2/93 version. No objection having been
raised, prior committee action was RESCINDED. Senator Sharp
then directed attention to an updated draft committee
substitute (8-LS0594\C, 4/13/93, Cramer) and MOVED for
adoption. Senator Kerttula initially objected but
subsequently removed his objection, and CSSB 106 (Fin) was
ADOPTED. Senator Sharp further advised of proposed
Amendment No. 1.
At the request of Co-chair Pearce, Senator Sharp provided a
sectional review of the updated draft. (Copies of the
sectional analysis are on file in the original bill file at
the Legislative Finance Division.)
Sec. 1 sets forth reasons for enacting the legislation
and expresses legislative intent as to how the program is to
be managed. It states that power cost equalization is to be
funded for 20 years at $17 million, annually. Demands on
the general fund for this program are to decrease to zero by
the year 2000, or sooner, since it is anticipated that
revenues from the fund established by the legislation will
generate sufficient revenue to reduce general fund demands.
Sec. 2 authorizes the Alaska Energy Authority to
contract with utilities to design and construct transmission
lines. The utilities assume the risk of completion costs,
overruns, and all operation and maintenance costs.
Sec. 3 amends the definition of program receipts to
include earnings of the energy authority revolving loan
fund.
Sec. 4 provides for Dept. of Revenue investment of the
balance of the energy authority revolving fund.
Secs. 5 and 6 contain conforming amendments making
changes in references to various accounts.
Sec. 7 creates the energy authority revolving fund. It
is to become the consolidated fund for all income and assets
of the authority except for the electrical services
extension fund and the power cost equalization fund.
Secs. 8 through 30 contain transfers of existing
accounts, conforming amendments, changes in account names,
and reference changes from funds to accounts.
Sec. 31 authorizes design and construction of a
transmission intertie between Anchorage and the Kenai
Peninsula.
Sec. 32 authorizes design and construction of a
transmission intertie between Healy and Fairbanks.
Sec. 33 conditions authorization provided in Secs. 31
and 32 upon utility company agreement to pay all completion
costs above $90 million as well as operating and maintenance
costs.
Sec. 34 authorizes design and construction of a
transmission intertie between Swan Lake and Tyee Lake
hydroelectric projects upon utility company agreement to pay
completion costs above $35 million and all costs of
operation and maintenance.
Sec. 35 authorizes design and construction of a
transmission intertie between Sutton and Glennallen with
utility company agreement to pay costs above $27.5 million
and all operation and maintenance. This project is further
conditioned on Office of Management and Budget approval of
the feasibility study submitted by the energy authority.
Sec. 36 provides that AEA contract with utilities to
design and construct transmission interties unless the
utilities decline that opportunity.
Sec. 37 provides for an effective date.
Senator Kelly questioned language within Sec. 36 that would
allow AEA to design and construct a facility even if the
participating utility declines. Senator Sharp explained
that the language was intended to cover situations wherein
the utility did not wish to participate in design and
construction but wanted the project and agreed to pay cost
overruns and debt service. AEA cannot build facilities that
utilities have not agreed to operate and maintain. Senator
Kelly suggested the language requires greater definition.
Senator Kerttula said he had no problem with the intertie
connections or where or how they are funded. He stressed,
however, that debt service on an electrical project is owed
to the general fund. The proposed legislation would make
those revenues the property of AEA (similar to AIDEA
capitalization). He raised public policy concerns regarding
that approach.
Senator Kerttula further noted that the proposed bill
guarantees nothing for the power cost equalization program
since provisions for funding at $17 million for 20 years are
stated in intent language only. He questioned whether a set
amount would cover population increases in rural Alaska over
that time period.
Senator Sharp acknowledged that all future expenditures from
the revolving fund would have to be authorized by future
legislatures, including power cost equalization. He
directed attention to a spread sheet tracking bill proposals
from 1993 through 2003 and explained that provision of rural
technology assistance funding is intended to allow present
PCE recipients to modify facilities "to get off of PCE over
the same period of time."
In response to a question from Senator Rieger concerning
funding for intertie construction, Senator Sharp advised
that Amendment No. 1 would change troublesome wording.
Senator Rieger voiced his understanding that the legislation
specifies the total cost as well as the amount to be
provided by utilities.
Further discussion of interest rates for various projects
followed between Senator Rieger and Senator Sharp.
Senator Rieger directed attention to Page 7, Lines 2 and 3,
and questioned authority ability to "enter into agreements,
with respect to the revolving fund, that it considers
necessary to secure its bonds." Senator Sharp voiced his
understanding that the forgoing represents standard
procedures.
Senator Sharp MOVED for adoption of Amendment No. 1. Co-
chair Pearce voiced OBJECTION to both Amendment No. 1 and
No. 2. She then called for a show of hands on the motion.
Amendment No. 1 was ADOPTED on a vote of 5 to 1. (Co-chair
Pearce opposed the motion, and Co-chair Frank was not
present during the vote.)
Senator Sharp MOVED for adoption of Amendment No. 2. Co-
chair Pearce OBJECTED and again called for a show of hands.
Amendment No. 2 was ADOPTED on a vote of 5 to 1. (Co-chair
Pearce was opposed, and Co-chair Frank was absent from the
meeting.)
Co-chair Pearce announced her intent to HOLD the bill in
committee for further discussion but suggested that public
comment begin at this time.
CLAYTON HURLESS, General Manager, Copper Valley Electric,
came before committee. He explained that CVE serves a large
geographic area in Southcentral Alaska (Glennallen to
Valdez). Members pay the highest unsubsidized rates in the
state. (Residential consumers in Glennallen pay
approximately 21 cents per kilowatt hour.) CVE has
attempted, for a number of years, to find a solution to high
costs. Connection to the railbelt electrical system would
provide much lower cost power from "a tremendous surplus."
Mr. Hurless noted railbelt support for CVE's endeavors.
CVE is at a critical point in that the productive capability
of the Solomon Gulch hydroelectric plant, owned by the state
and operated by CVE, will be completely "used up in 1993."
Additional needs beyond that load will have to be served
from supplemental resources--two aged diesel plants.
Considerable capital expenditure will have to be made if
these plants are to meet power needs. The intertie would
avoid that major expenditure as well as the obvious rate
impact.
Mr. Hurless said he was familiar with changes within the
legislation and said that of all proposals before the
legislature, the present approach serves Copper Valley best.
He urged passage of CSSB 106 as amended by committee.
MIKE KELLY, General Manager, Golden Valley Electric,
Fairbanks, next came before committee in support of the
railbelt interties. He noted that the railbelt energy fund
has dwindled from approximately $200 million to $120
million. Utilities in the railbelt have gone from potential
100% grant funding to the present agreement whereby utility
members would pay 50% of the cost of the interties plus any
cost overruns.
Mr. Kelly voiced support for CSSB 106 as amended and urged
that it be passed to the Senate for a floor vote.
ADJOURNMENT
The meeting was adjourned at approximately 10:10 a.m.
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