Legislature(1999 - 2000)
04/23/1999 08:07 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 157
"An Act relating to power cost equalization; and
providing for an effective date."
MARY JACKSON, Staff, Senator John Torgerson, reviewed the
bill. She noted that the working group who addressed
concerns of this bill included Senator P. Kelly and Senator
Adams.
Ms. Jackson spoke to the importance of the Power Cost
Equalization (PCE) program to areas of Alaska that are
reliant upon diesel generated power. It is recognized and
that the bill is intended to extend the life of the program
by restructuring some of its components.
The bill would:
* Reduce the current 700 kWh to 350 kWh per month.
* Expand the method of establishing the base rate by
including Kenai and Palmer in the weighted average
retail residential rate which currently only
included Anchorage, Fairbanks and Juneau.
? Restructure the program so that the equalization
rate applies only to residential customers, as
opposed to the current residential and commercial
structure.
? Add new language to the program to ensure that the
rate charged by a PCE utility is not lower than a
rate charged by a non-PCE utility, so to ensure
that a customer who does not receive PCE pays a
higher rate than a customer who does receive a
PCE.
Ms. Jackson provided a sectional analysis of the bill.
Section 1 adds Kenai and Palmer into the statewide average,
which would expand the base of the statewide average.
Section 2 decreases the kilowatt-hours from 700 to 350 for
consumptive use. Section 3 adds Kenai and Palmer into the
statewide average as does Section 1. Section 4 decreases
the kWh from 700 to 350 kWh and restricts it to residential
use. Sections 5 & 6 are housekeeping references to the new
sub Section (j). Section 7 establishes the effective date
of the legislation.
Ms. Jackson referenced the April 22, 1999, Power Cost
Equalization (PCE) spread sheet contained in members
packets. The sheet provides the most recent findings of the
working group. [Copy on File].
Co-Chair Torgerson pointed out that the State has been
funding the current rate, however, the hoped for is 85%
funding. Senator Adams stated that the last supplemental
decreased that number to 78%.
Co-Chair Torgerson asked if the working group had any
recommendations which the full Committee should consider.
[Copy on File]. Ms. Jackson replied that the analysis of
that group was currently before the Committee. She
suggested that it could be approached either from the floor
(9.9 to 10.9 cents/kWh) or raising the ceiling. The working
group approached the situation from both places and the
premise was to have less of an impact on the small Bush
Communities.
Senator Kelly referenced the handout. He explained how the
floor was established including the calculations for Pelican
and Skagway. The group is waiting to determine the actual
cost to the residential consumer. The formula used to
increase the floor and the impact of combining the ceiling
from dropping down would establish the impact on the actual
consumer. He advised that new spreadsheets would be
forthcoming in the following week.
Senator Phillips asked the average residential use per month
in Alaska.
ERIC YOULD, Executive Director, Alaska Rural Electric
Cooperative Association (ARECA), Anchorage, replied that the
average in rural Alaska was 326 kWh. The average kWh usage
in the Railbelt area is 688 kWh. He accessed that rural
Alaska is roughly half of the other areas.
Senator Phillips asked the basic differences between the
rural area and the Railbelt regarding use of electricity.
Mr. Yould pointed out that the Blue Ribbon Commission
gathered profiles as to what the 326 kWh hours would
accomplish. It is very different from urban areas versus
rural Alaska, especially the refrigeration needs are higher.
Senator Wilken requested further clarification of the
spreadsheet. Senator P. Kelly pointed out that the
spreadsheet was not accurate.
Mr. Yould suggested that it would be beneficial to go to the
500 kWh; the 326 kWh is a monthly average and during the
winter months, the usage increases. He stated that there
are individual opportunities throughout the State and that
some of the other systems being investigated are very
costly. The State does have the resources; however, the
problem is an economy of scale. He added that diesel
generation exists but that there is no natural gas in rural
Alaska. Mr. Yould noted that the State is looking for
alternatives but that they are generally capital intensive.
Senator Wilken inquired about diesel efficiency and working
in conjunction with the University. Mr. Yould replied that
ARECA was not working with the University at this time. He
understood that the University was working with Department
of Education with a $2.6 million dollar grant to develop a
fuel cell using diesel power.
Senator Wilken asked if the bill would exclude schools from
PCE participation in the rural areas. Ms. Jackson
acknowledged that it would exclude schools. She noted that
Senator Torgerson had sent a letter to the Department of
Education regarding this concern.
Senator Wilken asked if Mr. Yould was aware of work being
done on fuel cells. Mr. Yould acknowledged that he was
aware of the work which in Anchorage was being funded by
Chugiach Electric. He explained that the problem with fuel
cells is that they are all natural gas and that it is
difficult to distribute natural gas in rural Alaska.
CHARLES WALLS, President & CEO, Alaska Village Electric Coop
(AVEC), Anchorage, (Testified via Teleconference), pointed
out that the statistics being referenced were three years
old. He requested that the cap cut be reconsidered. Mr.
Walls recommended that the Committee carefully scrutinize
Section 7, the new section being added. That section could
result in a village utility in not receiving the Power Cost
Equalization (PCE) which would establish a new floor for all
others. At the present time, the average revenue per
kilowatt-hour for a non-PCE utility is regulated by the
Alaska Public Utility Commission (APUC). He urged that the
bill be reconsidered.
Co-Chair Torgerson asked Mr. Walls to verify that used in
the bill were dated from 1996. Mr. Walls replied that the
handout referred to was the last published statistics
available and was complied in 1996.
Co-Chair Torgerson requested that Mr. Walls fax pertinent
information to the Committee dealing with the proposed bill.
BRUCE KOVARIK, Executive Director, Association of Alaska
Housing Authority (AAHA), Anchorage, (Testified via
Teleconference), testified that the Association supports the
PCE program for residential and community customers. The
State's regional housing authority has developed and
operated home ownership of housing programs for over 7,000
families. He emphasized that the worse case scenario would
be the loss of that program.
TAPE SFC-99 #109 Side A
Mr. Kovarik continued his testimony.
Co-Chair John Torgerson commented that it would take time to
consolidate the State's commitment and that of AAHA. Mr.
Kovarik noted that a certain amount of funding could be
taken from the Native Self-Determination Act and placed into
a PCE fund. That fund would be invested and the interest
generated from the fund would go to PCE.
Co-Chair John Torgerson questioned how to get all parties to
agree. Mr. Kovarik reiterated that the participation in the
plan would have to be voluntary and flexible. The Housing
Authority has investment strategies and cash flow
considerations based upon work to be developed. It would
need to be a plan which allows for the investment of funds.
There are federal requirements and regulations. The hope is
for assistance from the Department of Community and Regional
Affairs.
Co-Chair John Torgerson stressed his intention to move the
bill through the Legislature this session. He commented
that if the Housing Authority was to be used as a potential
funding source, it is important to finalize that commitment.
He was not sure about the possibility of using Alaska
Industrial Development Export Authority (AIDEA) funds.
Senator Randy Phillips questioned if there had been
consideration by the Office of the Governor to use AIDEA
funding. Mr. Kovarik replied that the only comments he had
heard were at press conference regarding the consolidation
of the Department of Commerce and Economic Development and
the Department of Community and Regional Affairs.
DICK ENERMAN, Planner, Division of Energy, Anchorage,
(Testified via Teleconference) offered to answer any
technical questions of the Committee.
Senator Pete Kelly noted that Mr. Enerman would be preparing
a spreadsheet for the Committee's review for the following
week and recommended any suggestions be given to him. Mr.
Enerman detailed the information he had been requested to
present on the spreadsheet. The spreadsheet would indicate
for each of the PCE utilities, an impact of various changes
to the PCE would affect the financial impact.
Co-Chair John Torgerson asked if the average use by month
would be included. Mr. Enerman responded that information
was not available and would not be included. The total
residential kWh under PCE and for each utility and the
number residential customers would be included. The
calculated average annual use per customer could be made
with that information, otherwise, only estimates can be
made.
Co-Chair John Torgerson asked about the data. Mr. Enerman
replied he would be using data from FY96. Data from FY97
and FY98 had not been compiled and examined at present time,
however, if possible, he would use more current information.
Co-Chair Torgerson asked if the data would be more current
than 1986. Mr. Enerman did not believe that it would be
because at this time, that is all which has been published.
Senator Adams asked Mr. Enerman's spreadsheet could indicate
the effect of changing the floor from 9.9 to 10.9. Mr.
Enerman acknowledged that was his intent.
BRAD REEVE, General Manager, Kotzebue Electric Association
(KEA), Kotzebue, (Testified via Teleconference), testified
that having power is an important aspect of the future. He
stated that a flat 350 kWh per month rate would not
adequately recognize the actual use patterns in Alaska.
Mr. Reeve added that KEA has raised two other utility grade
wind turpins in Kotzebue. He suggested that would be the
technology that will benefit rural Alaska. The goal is to
reduce annual diesel consumption by about 300 thousand
gallons annually. The program allowed communities to
maintain power plants while they investigated alternate
power sources that were less expensive. Mr. Reeve
anticipated that diesel would continue to play a large part
of power for communities in the future.
WALTER SAMPSON, NANA Corporation, Kotzebue, (Testified via
Teleconference), voiced his appreciation of the Committee's
effort to address the rural power situation. He restated
the high cost of fuel in rural Alaska and the difficulty in
getting it those remote areas. He pointed out that there
are fears in many communities that power systems will be
shut down. Mr. Sampson urged the Committee to give
communities an opportunity to look at alternative fuel
sources.
Co-Chair John Torgerson noted that the bill would be held in
Committee.
SB 157 was HEARD and HELD in Committee for further
consideration.
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