Legislature(1995 - 1996)
04/10/1996 03:52 PM Senate RES
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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
SB 284 FOUR DAM POOL: RELATED FUNDS & BONDS
SENATOR LEMAN announced SB 284 to be up for consideration. He said
there were two proposed committee substitutes.
SENATOR LINCOLN said she wanted some clarification on how the PCE
would be reduced and more information on the rural capitalization
fund.
RANDY SIMMONS, Alaska Energy Authority, responded that the Four Dam
Pool Utilities make approximately $11 million per year in payments
to the State for debt service for construction of the Four Dam Pool
projects. Right now that money is appropriated 40 percent to PCE,
40 percent to the Southeast Intertie, and 20 percent to DCRA's
power project fund for small grants.
He explained with the long term power sales agreement the State has
with the utilities the State is responsible for certain repairs and
improvements to those projects. In this case the repairs are for
the Tyee and Terror Lake Projects. Those repairs are around $20 -
$23 million. AEA has no funding to make those repairs, he
explained. Their option is to come to the legislature and try to
get a general fund appropriation or to try to do bonds or allow the
utilities to use their self help right. Under their self help
right they can withhold any or all of the monies that are paid in
on the debt service. If there is self help, therefore, there would
be a reduction of the amount of money that will go into PCE.
This bill would issue bonds and they would like to defer payments
for one year to try to get a long term solution to the Four Dam
Pool issues and PCE's. So there wouldn't be any effect for that
one year period. If they cannot float the bonds, the utilities
will exercise their self help right and no monies would be coming
into the State for the next two years.
SENATOR LEMAN asked him which committee substitute he preferred.
He answered the G version because, although it doesn't give them
the flexibility they wanted of 10 years, they thought they could
live with eight years. Under F they like the way the bonds are set
up better, but there are a number of provisions that concern them
if the State and the utilities do not reach agreement by June 30,
1997. Then there would be a new way the monies are allocated.
They are allocated first to the bond payments which is good. But
secondly they could go to the utilities for repairs, improvements,
or new capital projects that are related to the projects; and the
way the new capital projects are written now the State would have
no veto right at all. They also have other legal concerns, he
added.
SENATOR LEMAN said he would prefer that these mature within 10
years.
SENATOR TAYLOR clarified that the legislation that created his
entity specified the creation of the Southeast Intertie Fund, the
amount of money that would flow to it, and how those monies would
be returned. The legislature was never intended to have a veto
over the funds. They didn't have a veto over them right now.
MR. SIMMONS said he was not trying to specify that the
Administration is opposed to the Southeast Intertie. He was trying
to give an example of a project that the utilities could decide to
build. They could all use a different one. They could decide to
hook a new intertie up to the projects that no one has even
contemplated. AEA would have no say so as to whether they went
forward with that project.
SENATOR TAYLOR said the question is whether this administration is
going to meaningfully enter into discussions on divestiture. He
said he wanted to make sure there was good faith bargaining and
finality here.
Number 281
SENATOR TAYLOR moved to adopt CSSB 284(RES), version F. SENATOR
LEMAN objected for the reasons stated by the witnesses. SENATORS
LINCOLN, PEARCE, LEMAN, and FRANK voted "Nay"; SENATOR TAYLOR voted
"Yes"; and so, the motion failed.
SENATOR LEMAN asked if the committee wanted to consider the G
version.
SENATOR TAYLOR said he had a question on page 3, line 7 where it
talks about the 50 years mature date for the bonds.
MR. KEITH LAUFER, Assistant Attorney General, explained that was a
provision included in AEA's general bonding statutes. It pertains
to bonds that AEA otherwise issued.
SENATOR FRANK asked what kind of incentive the State has to settle
the divestiture issue. MR. SIMMONS replied that in 1993 the State
made it clear they wanted AEA to divest of all of its projects.
SENATOR FRANK asked for clarification about what money would come
back to the State. MR. SIMMONS replied that if they were to sell
the projects they would be getting a sales price and they would be
selling them that debt.
SENATOR FRANK asked if they were discounting that stream of cash.
MR. SIMMONS replied that they discount the stream of cash depending
on the interest rate at the time and then they would reduce that
discount by what they call the risk of the ownership of those
projects, such as known repairs for those projects that they don't
have funding for.
SENATOR FRANK asked what their value was. MR. SIMMONS replied
their value was somewhere between $87 - $108 million depending on
who does the repairs.
SENATOR FRANK asked if they did the repairs what it would cost.
MR. SIMMONS answered $108 million and roughly $25 million less if
someone else does the repairs.
Number 78
SENATOR PEARCE moved to CSSB 284(RES), version G. SENATOR TAYLOR
objected. SENATORS LINCOLN, LEMAN, PEARCE, FRANK, and HALFORD
voted "Yea"; SENATOR TAYLOR voted "Nay"; and so, the motion passed.
SENATOR TAYLOR commented that from talks with the utilities he
found they would rather pay the debt off earlier rather than later.
MR. LAUFER said he recommended putting a certain date in the bill
to make the statute easier to read.
SENATOR FRANK moved on page 3, lines 4 and 5 to delete the words
"the effective date of this bill" section and insert "May 1, 1996."
There were no objections and it was so ordered.
SENATOR LINCOLN moved to amend line 7 to delete "eight years" and
insert "10 years." SENATOR HALFORD objected. SENATORS LINCOLN and
LEMAN voted "Yea"; SENATORS PEARCE, FRANK, HALFORD, and TAYLOR
voted "Nay"; and so, the motion failed.
SENATOR FRANK moved to pass CSSB 284(RES), as amended, from
committee with individual recommendations. There were no
objections and it was so ordered.
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