Legislature(2011 - 2012)BUTROVICH 205
02/16/2011 03:30 PM Senate RESOURCES
| Audio | Topic |
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| Start | |
| SB42 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 42 | TELECONFERENCED | |
SB 42-POWER PROJECT; ALASKA ENERGY AUTHORITY
3:33:17 PM
CO-CHAIR PASKVAN announced the consideration of SB 42 relating
to power projects and the Alaska Energy Authority (AEA), saying
the committee hoped to hear more from the sponsor about concerns
that have been raised. To start, the bill makes major changes to
the authority and mission of AEA. He said the legislation seeks
to thrust AEA into a more central role such that it may become
this state's de facto department of energy. The implications and
motives of this should be clearly understood.
CO-CHAIR PASKVAN said he had several basic questions for the
bill sponsor. First, does AEA seek to become the state's de
facto department of energy, and if so what is the motive and
broader vision of AEA beyond the Susitna project. Second, is it
the intent of the bill to distance the legislature from
decision-making about energy projects so as to have a more
clearly-defined process by which to proceed with a variety of
energy priorities? It appears that this legislation authorizes
AEA to create a fund to hold large sums of money and the
committee would like to know how that fund would be utilized.
CO-CHAIR PASKVAN said the committee is also interested in
knowing if the powers and duties set forth for AEA are modeled
after a parallel organization in another state. Finally, he said
Governor Parnell's January 31, 2011 Energy Report to the
legislature, which arose from passage of SB 220 last session,
offered strong support for SB 42, but there was no mention of
that report in either of the two previous hearings on the bill;
so the committee would like an explanation of why the governor's
energy report has not been referred to in the testimony as
support for this legislation. He asked if the sponsor is aware
of any other reports or studies in support of SB 42 that have
not been included in the bill packet, and that public testimony
would resume after the he has had the opportunity to address
these and other questions from the committee.
3:36:54 PM
SARA FISHER-GOAD, Executive Director, Alaska Energy Authority
(AEA), said the legislature stripped some of AEA's significant
powers and duties in 1993 including owning new projects and also
the ability to hire employees. That is when AIDEA employees,
including the executive director, became the managers of AEA
programs, which at that point were: the Four Dam Pool projects,
Larson Bay, the Alaska Intertie, and the Bradley Lake Hydro
Electric projects.
3:37:55 PM
SENATOR STEDMAN joined the committee.
MS. FISHER-GOAD said in 1993 a lot of the AEA programs were
moved under the Division of Energy in the Department of
Commerce, Community and Economic Development (DCCED). So AEA, a
distinct corporation, had a board of directors and executive
director that were the same for AIDEA, and a relatively small
group of people worked on AEA issues. In 1999 when the
legislature removed the Department of Community and Regional
Affairs, some programs went to the Department of Labor and
Workforce Development (DOLWD) and some to the DCCED. At that
time, the Division of Energy wasn't moved to the DCCED; the
Division of Energy programs were returned to the authority of
the AEA. In fact, under AS 44.83 a reference was put into AEA's
powers and duties section changing them to "carry out the powers
and duties assigned to it under AS 42. 45 [the Division of
Energy programs]."
3:40:30 PM
So, the idea that AEA seeks to become the state de facto
Department of Energy is juxtaposed with actions of the
legislature that started a path of reinstituting AEA as a
corporation with very broad powers, not just owning projects and
not creating a Department of Energy. So, the grant programs, the
Power Cost Equalization program, the loan programs, and at the
time a very small alternative energy program was moved into the
powers and duties of AEA. What they didn't change at that time
was the structure of AEA. The folks that ran those programs as
the Division of Energy then became AIDEA employees; so they kept
with the same model of AIDEA employees providing the management
of AEA programs, but they broadened the AEA programs.
Most of the seven to eight years up to about 2008, AEA programs
became concentrated on rural energy programs and the
construction of a lot of projects with Denali Commission funds.
She explained that in 2008 there was need and increasing
pressure to focus on AEA as the energy authority; the question
also came up about it being run by the bankers through AIDEA
(AIDEA is known as a financing agency with a strong tie to
banking). So, at the time the legislature created the ability
for AEA to hire a separate executive director from the AIDEA
executive director.
3:43:17 PM
MS. FISHER-GOAD said AEA is not the state de facto Division of
Energy. When the issue came up about whether the state needed
one came up last year, most of the energy programs were in the
AEA. Instead of creating a Division of Energy, the
administration decided to require an analysis of what makes
sense for the powers and duties of AEA and the relationship with
AIDEA. The governor's report mentions the introduction of HB 103
and SB 42, and of course the Susitna project is a very large
project that everyone is interested in, and AEA has for years
been looking at reports that were prepared in the 1980s and
forward on it. The analysis found that some of AEA's powers
should be restored, and SB 42 reflects the analysis of the
governor on what AEA should look like moving forward. The
legislature has recognized that AEA has expertise in their
programs, and has given them more responsibility through the
years with the Renewable Energy Fund Program and most recently
the Emerging Energy Technology Fund, in addition to some
significant capital appropriations to fulfill the projects that
they want them to be involved in. In addition, they have also
been financed to do some significant regional planning. So, AEA
has a statewide presence and has had one from 1990 when the
Division of Energy was incorporated back into it.
3:47:11 PM
So, the motive for AEA to have employees and the ability to own,
operate, and construct new projects, in her opinion, is more of
a natural progression of AEA having a bit more focus on energy
and truly operating as a state corporation.
MS. FISHER-GOAD said deliberating on whether the legislature
should be distanced from decision-making about energy projects
is appropriate and leads to determining how the legislature
wants to interact with this process. She said the legislature
has chosen for AEA programs to be treated differently depending
on the program. The Renewable Energy Fund has tremendous strings
attached with the legislature approving projects after AEA has
evaluated them, and becomes a grant recommendation program in
the capital budget. The Emerging Energy Technology Fund is a
capitalized fund that after they are done evaluating the
projects and determining which projects should be funded, they
can issue grants without further legislative appropriation.
MS. FISHER-GOAD explained that the funds in AEA need to be
capitalized and that's where it's appropriate to consider
legislative approval for any project they fund out of it or
establishing regulations to determine which project makes the
most sense.
She did not think the intent of the bill is to distance the
legislature from decision making about energy projects, but she
thought they needed to discuss where the legislature wanted
control - at establishment of the fund, of the money coming out
of the fund, or should there be no fund and it should just be
based on a year-to-year capital project basis, which has been
used.
3:51:01 PM
On the issue of powers and duties of AEA being modeled after a
successful parallel organization in another state, she offered
to follow up after she had done some research. She mentioned
they had a specific hearing on the Sustainable Energy Act report
before the legislation was heard in the committee. If it hasn't
been mentioned enough, she apologized. The Susitna project has
caused a lot of focus on the legislation, but it has a broader
scope and purpose. The discussions today are about what AEA
should look like in the future to address the energy needs of
the state.
3:53:39 PM
Of the over 70 positions in AIDEA the 42 that deal with AEA
programs identify themselves as AEA staff, she explained. There
wouldn't be much difference for them. This is more of a truth in
budgeting measure, because now about $5 million of AEA
appropriations are transferred to AIDEA to pay for staff. This
is shown on the [AIDEA] side as an interagency receipt fund, but
on the AEA side it is shown as an expense. This is a way to be
more accurate that a significant amount of AEA funds pay for
staff.
MS. FISHER-GOAD thanked the committee for the questions and said
she looks forward to having continued conversations with them.
3:56:51 PM
SENATOR WIELECHOWSKI thanked the co-chairs for the committee
substitute (CS) as he had a lot of concerns about the original
bill. He thought the bill's original purpose was to help a
Susitna Hydro project get started, but it has become more far-
reaching than anticipated. Some of the changes might be worth
discussing, but he wasn't sure SB 42 was the proper vehicle for
that. His goal is to get started on the Susitna Hydro project,
and he had expressed concerns about the procurement issues,
which small contractors came to him with. He noted that the
audit 2.5 years ago said that the AEA procurement policies and
procedures not only did not comply with federal and state
procurement procedures, but they were not consistent with good
procurement practices. He didn't think exempting AEA from state
law was prudent at this point based on those findings.
Another concern he had was taking away legislative oversight
over billions of dollars and essentially all power projects in
the Railbelt and allowing AEA to hire and fire based on purely
political reasons if they chose making all their employees
exempt, particularly in looking at past history. His other
concern was the seeking of removal from regulatory oversight.
3:59:14 PM
CO-CHAIR PASKVAN corrected that the committee didn't have a CS
but rather a rough draft of concepts, and he believed the
concept of the Susitna/Watana with a transmission line was
something they are interested in making sure got started in
terms of making the appropriate applications to FERC.
SENATOR FRENCH said language on page 3, lines 4-6, gives the AEA
the power to make grants for power projects and electric
transmission lines, but what happens if Mt. Spurr asks the
Authority for an electric transmission line and a road? Suddenly
a bill he thought would authorize Watana is directed to an
electrical transmission line to Mt. Spurr. Is that possible
under this bill?
MS. FISHER-GOAD answered no; it's about creation of the fund but
it wouldn't be capitalized.
4:02:19 PM
SENATOR FRENCH said he wanted to know what oversight the
legislature would have over the appropriations mentioned on page
3, lines 4-6. Could AEA spend a million dollars before coming
back to the legislature?
MS. FISHER-GOAD replied that the Southeast Energy Fund was
created in AEA statutes, and a proposed appropriation puts $10
million into that fund. AEA doesn't need any further legislative
authority to issue grants under it. However, they go through a
public process for the Renewable Energy Fund and they have draft
regulations for the Emerging Energy Technology Fund. For a grant
program they would go through some type of competitive process
unless a grant recipient is mentioned as a line item in the
capital budget. For the federal Denali Commission funds, AEA
established a deficiency list for both bulk fuel and RPSU
projects.
4:05:37 PM
SENATOR MCGUIRE asked her to describe what led up to the bill,
and to talk about the broader goals and how it morphed from the
Susitna Hydro bill into a broader focus. She added that this
committee might be most comfortable backing a project-specific
bill. She has heard that the capital projects aren't being
prioritized through a central process.
4:08:27 PM
MS. FISHER-GOAD responded that the bill is simpler than being a
broad policy change. For many years there has been discussion
about whether AEA has the ability to own and construct new
projects and if there is a need for it to have its own staff. As
a fully functioning authority and since they feel this project
is important, it seemed the appropriate time to pursue a general
authority for AEA to construct and own new projects. The biggest
limiting factor is that AIDEA has a profit perspective that AEA
doesn't have. AEA owns and manages projects and manages programs
for the benefit of the residents of the State of Alaska and its
mission is to reduce the cost of energy. These are extremely
different missions.
With respect to addressing the needs for the Railbelt and other
regions of the state, through legislative appropriations and
direction from the legislature she said they have undertaken
studies to determine what makes the most sense in an integrated
plan. Some think SB 42 has broad sweeping changes, she didn't
agree. A change in statute will allow AEA to move forward on a
significant project, but other issues have been percolating for
a while with respect to whether it makes sense for them to have
employees and to own and operate new projects. Without
appropriations AEA can't pursue anything further. The bill is a
next step for AEA to be more independent of AIDEA; it's a tool
for AEA to use to address energy needs for the state.
4:13:14 PM
SENATOR MCGUIRE said this bill was developed because a lot of
departments are doing different things related to energy, and
allocating money to a fund that the legislature would have no
authority over would be a departure from what is done now.
Basically, energy-related capital items are assembled at the
Finance table and a budget is put together. People need to
understand the broader conversation as the state moves forward
into the building of infrastructure in Alaska.
SENATOR STEDMAN said he got a little concerned when he saw money
going into the Southeast Energy Fund, but the legislature losing
control over the resulting outcome. He was even more concerned
about migrating some legislative power over to the executive
branch where a rogue department head with oversight over these
appropriations could have "acquisitions and mergers and all
kinds of stuff going on" that would be out of control of the
legislature. They need to make sure that the end result is to
move forward on the Susitna project and not create other
problems.
4:17:16 PM
JOE GRIFFITH, President, Alaska Railbelt Cooperative Electric
Transmission Company (ARCTEC), said ARCTEC supports SB 42 as
written. It came from "the mistake of 1993" that eliminated AEA
and left the state without an energy policy or an energy agency
that was doing the work needed for energy infrastructure. AEA
must be able to construct and own - the major change in the
bill. The people are doing the work today, but it is under the
guise of AIDEA rather than under AEA.
He related that prior to 1993, AEA was the state's energy policy
and they have some substantial successes: Bradley Lake, the
intertie from Willow to Healy, and to some extent the Golden
Valley intertie from Healy to Fairbanks (that was built from
Railbelt energy funds). But since 1993 nothing has been done
except having "spats" with each other over trying to "dip into
the pot and get a few dollars for infrastructure." Too many
issues face the state to continue that way. Further he said
"This electricity that we provide is the grease that makes our
economy work." The electric utilities could do this eventually
but they are a bunch of little co-ops and don't have the
financial strength.
MR. GRIFFITH noted he has a list of the ARCTEC capital budgets.
He advised starting AEA with small projects and by the time they
get to Susitna, people would have the expertise to handle it.
Susitna could be done by AIDEA, but it's a bank and "you don't
want your bank running your projects." He assured them that the
utilities would cooperate with AEA.
He related that the Project Management Committee started when
Bradley Lake was built and still manages that project. The model
works and projects need to be done irrespective of how they get
there; they have tremendous transmission shortfalls. Bradley
Lake didn't need RCA regulation and it has worked well for 25
years. The RCA doesn't do projects; they look at everyone's rate
for every power sales agreement and every rate filing that goes
before them. That is where their control is.
4:24:09 PM
SENATOR STEDMAN pointed out that Susitna is a 400 megawatt power
plant, but most of the other needed projects are substantially
smaller, about 5-20 megawatts.
SENATOR WIELECHOWSKI asked if the state has a certain amount of
money to spend (and they are about to authorize AEA to bond for
$5 billion), is it better off putting that money towards a gas
line. He mentioned the people in Fairbanks are paying $1000-
2000/mo for gas and $100-300 for their electric bills. Susitna
Hydro won't help them with their heating issues and it keeps
their electrical rates pretty much where they are. The same in
Southcentral. Whereas if a gas pipeline is built, maybe both
those problems will be solved.
MR. GRIFFITH replied that was a good question that they should
all ask themselves. Planning for future projects is taking that
very issue into consideration. The problem is a little gas line
isn't economic. The big gas line is needed in addition to
Susitna; a tap can always be put off of the big line. Gas will
always be needed to back up the turbines on the lake. You just
don't operate systems with only one source of power that is 125
miles north. "Yes, do them both."
CO-CHAIR PASKVAN asked what the utilities think about the
operation of Watana.
MR. GRIFFITH replied he imagined it would operate similar to
Bradley Lake, probably through something like ARCTEC that
manages the intertie and Bradley Lake "and it has been
swimmingly effective in both cases."
CO-CHAIR PASKVAN asked what would need to be constructed in
terms of an intertie from the Watana project.
MR. GRIFFITH replied that was another good question because it's
a big ticket item. You would come north out of the reservoir up
to the Denali Highway area and then down the road to the
existing intertie. If the assets and the resources could be
found to do it, they would continue on to Healy with a parallel
intertie and on down to Willow. Two loops are needed for that he
said. If you had two, then you'd have more faith in your ability
to keep the lights on. You do not want to let the lights go out
because with that big of a unit on the line the Railbelt would
go off if it dropped off for any reason.
CO-CHAIR PASKVAN asked about any comprehensive numbers as far as
any component of the interties would cost.
MR. GRIFFITH guessed it would cost another $200-300 million to
build to Healy and come all the way to Willow, and it would be
done in stages. The power would come from the plant to the
existing intertie. This was the plan with Bradley Lake 25 years
ago, but in 1993 just after they got it "schooled up" AEA died,
and nothing happened after that other than Golden Valley
building the interties from Healy up to Fairbanks.
4:30:12 PM
SENATOR WIELECHOWSKI said he gets asked fairly regularly why the
state doesn't build a huge electrical generation plant on the
North Slope and then run a big intertie down to Fairbanks and
Southcentral. Is that doable?
MR. GRIFFITH replied it could be done but it would cost a great
deal (400 miles of intertie would cost $2 billion) and would
still be one power source. But it would be wonderful to have it.
SENATOR WIELECHOWSKI asked how many megawatts could be shipped
down on a DC line.
MR. GRIFFITH replied those lines are huge - 750 megawatts.
4:31:43 PM
MARILYN LELAND, Executive Director, Alaska Power Association
(APA), said the members of the association are the electric
utilities from all around the state, both urban and rural. Her
members provide power to roughly a half million Alaskans. Much
discussion is centered on the idea of large-scale hydro power
for the Railbelt, but here members believe that is not the only
answer to their problem. It is really a rural and a Railbelt
issue. She said her members believe it's going to take a very
strong partnership between the electric utilities and the state
in order to solve these problems. This morning the association
had a board meeting at which they unanimously approved a
resolution in support of expanding the statutory powers of AEA.
4:34:35 PM
CO-CHAIR PASKVAN said copies of the resolution would be
distributed to the members.
4:35:06 PM
WILLARD DUNHAM, Mayor, City of Seward, testified in support of
SB 42. He noted that the City Council passed a resolution
unanimously in support of it. He said as the state moves forward
on its quest in the usage of renewables, both on state and
federal levels, the community of Seward feels that additional
AEA uses would be very helpful in the overall implementation of
the energy programs that are vital to the whole state,
especially for them to be able to do feasibility studies and
design.
MR. DUNHAM said he was surprised the ARCTEC was able to come
together the way it did and Seward is a very active participant
in it. Melding of the utilities couldn't have been done without
AEA. You can tweak the bill but don't destroy the intent, he
concluded.
4:40:15 PM
At ease from 4:40 p.m. to 4:41 p.m.
4:41:18 PM
CO-CHAIR PASKVAN reconvened the meeting and closed public
testimony on SB 42, but said it may be opened in the future. He
asked Ms. Fisher-Goad if she had any final comments.
4:41:59 PM
MS. FISHER-GOAD thanked the committee and the people who
testified in support of the bill, and summarized that what they
are saying is that AEA has a statewide perspective in solving
energy issues of the state, and they have a lot of programs and
folks that are dedicated to doing that.
CO-CHAIR PASKVAN held SB 42 in committee.
CO-CHAIR WAGONER announced that last year Senator McGuire and he
worked on the Cook Inlet Stampede. He read a release from
Buccaneer Energy that said it would spend up to $30 million to
bring a jack up a rig to Cook Inlet. AIDEA would have to commit
$30 million. Buccaneer would drill up to four wells and then the
rig would be available to other projects. This is good news for
Southcentral and the state.
4:46:39 PM
There being no further business to come before the committee,
Co-Chair Paskvan adjourned the meeting at 4:46 p.m.
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