02/04/1998 08:03 AM House CRA
| Audio | Topic |
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+ teleconferenced
= bill was previously heard/scheduled
HOUSE COMMUNITY AND REGIONAL AFFAIRS
STANDING COMMITTEE
February 4, 1998
8:03 a.m.
MEMBERS PRESENT
Representative Ivan Ivan, Chairman
Representative Fred Dyson
Representative Scott Ogan
Representative Jerry Sanders
Representative Albert Kookesh
Representative Reggie Joule
MEMBERS ABSENT
Representative Joe Ryan
COMMITTEE CALENDAR
* HOUSE BILL NO. 336
"An Act relating to eligibility for power cost equalization."
- HEARD AND HELD
* HOUSE BILL NO. 337
"An Act making a special appropriation for the Power Creek
hydroelectric facility; and providing for an effective date."
- HEARD AND HELD
* HOUSE BILL NO. 342
"An Act relating to optional exemptions for municipal property
taxes for certain residences."
- BILL HEARING CANCELLED
(* First public hearing)
PREVIOUS ACTION
BILL: HB 336
SHORT TITLE: ELIGIBILITY FOR POWER COST EQUALIZATION
SPONSOR(S): REPRESENTATIVES(S) KUBINA
Jrn-Date Jrn-Page Action
01/20/98 2090 (H) READ THE FIRST TIME - REFERRAL(S)
01/20/98 2090 (H) CRA, JUDICIARY, FINANCE
02/04/98 (H) CRA AT 8:00 AM CAPITOL 124
02/06/98 (H) CRA AT 8:00 AM CAPITOL 124
BILL: HB 337
SHORT TITLE: POWER CREEK HYDRO PROJECT IN CORDOVA
SPONSOR(S): REPRESENTATIVES(S) KUBINA
Jrn-Date Jrn-Page Action
01/20/98 2090 (H) READ THE FIRST TIME - REFERRAL(S)
01/20/98 2090 (H) CRA, FINANCE
02/04/98 (H) CRA AT 8:00 AM CAPITOL 124
WITNESS REGISTER
REPRESENTATIVE GENE KUBINA
Alaska State Legislature
Capitol Building, Room 404
Juneau, Alaska 99801
Telephone: (907) 465-4859
POSITION STATEMENT: Sponsor of HB 336 and HB 337.
TOM WRIGHT, Legislative Assistant
to Representative Ivan Ivan
Alaska State Legislature
Capitol Building, Room 418
Juneau, Alaska 99801
Telephone: (907) 465-3882
POSITION STATEMENT: Discussed fiscal notes for HB 336 and HB 337.
JIM ROBERTS, General Manager
Cordova Electric Cooperative, Incorporated
Box 20
Cordova, Alaska 99574
Telephone: (907) 424-5555
POSITION STATEMENT: Answered questions on HB 336 and HB 337.
LAMAR COTTEN, Deputy Commissioner
Office of the Commissioner
Department of Community
and Regional Affairs
P.O. Box 112100
Juneau, Alaska 99811-2100
POSITION STATEMENT: Answered questions on HB 336 and HB 337.
ERIC YOULD, Executive Director
Alaska Rural Electric Cooperative Association
703 Tudor Road
Anchorage, Alaska 99503
Telephone: (907) 561-6103
POSITION STATEMENT: Testified in support of CSHB 336 and HB 337.
PATRICIA L. JONES
P.O. Box 544
Cordova, Alaska 99574
Telephone: (907) 424-3652
POSITION STATEMENT: Testified in support of HB 337.
SCOTT JANKE, City Manager
City of Cordova
P.O. Box 1210
Cordova Alaska 99574
Telephone: (907) 424-6200
POSITION STATEMENT: Testified in support of HB 336 and HB 337.
HAP SYMMONDS, Plant Manager
Ocean Beauty Seafoods;
Vice President, Board of Directors
Cordova Electric Cooperative, Incorporated
P.O. Box Box 2646
Cordova, Alaska 99574
Telephone: (907) 424-7171
POSITION STATEMENT: Commented on HB 337.
ACTION NARRATIVE
TAPE 98-8, SIDE A
Number 0001
CHAIRMAN IVAN IVAN called the House Community and Regional Affairs
Standing Committee meeting to order at 8:03 a.m. Members present
at the call to order were Representatives Ivan, Dyson, Sanders,
Kookesh and Joule. Representative Ogan arrived at 8:10 a.m.
HB 336 - ELIGIBILITY FOR POWER COST EQUALIZATION
HB 337 - POWER CREEK HYDRO PROJECT IN CORDOVA
Number 0062
CHAIRMAN IVAN said the committee would hear HB 336, "An Act
relating to eligibility for power cost equalization," and HB 337,
"An Act making a special appropriation for the Power Creek
hydroelectric facility; and providing for an effective date." He
noted in the committee members' files there is a blank committee
substitute (CS), 0-LS1132\E, for HB 336. He said he would
entertain a motion for the adoption of the proposed CS.
Number 0094
REPRESENTATIVE JERRY SANDERS moved to adopt the proposed CS for HB
336, 0-LS1132\E. There being no objection, it was so ordered.
Number 0121
CHAIRMAN IVAN said there also is a proposed CS for HB 337, 0-
LS1133\B. He said he would entertain a motion for the adoption of
the proposed CS.
Number 0168
REPRESENTATIVE REGGIE JOULE moved to adopt the proposed CS for HB
337, 0-LS1133\B. There being no objection, it was so ordered.
Number 0185
REPRESENTATIVE GENE KUBINA, sponsor of HB 336 and HB 337, came
before the committee. He informed the committee that before he
became a legislator, he served five years on the board of directors
for Copper Valley Electric. Representative Kubina noted the first
piece of legislation that became law which he had introduced
related to the Power Line Extension Grant Program that helped hook
up a lot of people to electricity. He explained that over the last
couple of years, that program hasn't been funded so it doesn't do
much good.
REPRESENTATIVE KUBINA informed the committee that a lot of
communities throughout the state receive power cost equalization
(PCE). He said he has always believed that the PCE Program is very
helpful to communities, but it is not always efficient. If we
could take some of the cooperatives and electric utilities that are
in the program and give them the resources to get some kind of
alternate energy, they'd be able to come off the program.
Representative Kubina pointed out the PCE only works for a certain
amount of kilowatt hours. He noted he doesn't remember the top
rate, but it isn't very much. It is good for the residential
people, but doesn't really help businesses at all.
REPRESENTATIVE KUBINA indicated that if a community applies for
and receives a grant to put in a hydroelectric facility, they would
go off the PCE once the facility was running. Representative
Kubina said, "In essence, it takes the state of Alaska to say,
'Alright, I'm going to put up some up-front money.' In this case,
Cordova would be ten years worth of PCE. They get $750,000 a year.
They're one of the biggest actually users of PCE because they're
one of the biggest communities that receive it. So it would take
ten years worth of that or $7.5 million, use that to match money
that they have been getting from the federal government. And Ted
Stevens has been helping them work on this program. For a total
they would get $15 million. They would build a hydro project for
it with that money, and then once that hydro project gets up and
running, they would no longer get PCE. So in essence, it would be
a program that whereby the state of Alaska would give them their
PCE up-front for ten years in exchange for not having PCE
afterwards."
REPRESENTATIVE KUBINA said this project would be beneficial to the
business community where just receiving PCE is not beneficial to
the business community. He informed the committee members that he
changed the bill because the way the bill was originally written
some of the smaller utilities who were receiving such a small
amount of PCE might be hurt by the way it was originally worded.
The last thing he wants to do is put any utilities in jeopardy of
their PCE.
Number 0481
REPRESENTATIVE FRED DYSON asked what would happen if PCE was phased
out over the next few years.
Number 0503
REPRESENTATIVE KUBINA stated he isn't sure. He said if we didn't
have PCE, there would be incentive for the legislature to fund any
other utilities like this one. He pointed out that there are a lot
of arguments to keep PCE for the small communities. Representative
Kubina said he believes that any Administration and legislature
would really fight to find ways to keep PCE because there is no
alternative for a lot of the places.
Number 0579
REPRESENTATIVE DYSON asked if there is a specific reason that the
bill only applies to hydroelectric as opposed to other new
technology.
REPRESENTATIVE KUBINA pointed out his original language specified
only hydroelectric. He said he can see that there may be a
geothermal plant. He noted that up by Shishmaref there are hot
springs. Representative Kubina explained that during rewrite of
the bill, he wanted it to be written so that it wouldn't hurt any
of the small utilities. Representative Kubina said, "Let me tell
you that this rewrite of the bill happened actually yesterday -
late last night. I've been trying to get it so that it wasn't
going to hurt any of the small utilities and we're very much open
to a way to make it any other thing like that. I think anything we
can do as a state to help them -- give them the capital costs to
bring them their electric rate so they don't need to subsidize.
That's the goal."
Number 0650
REPRESENTATIVE DYSON said he would add the more we can get away
from the dependence on hydrocarbons, particularly diesel, it would
be worthy.
Number 0667
REPRESENTATIVE SCOTT OGAN informed the committee that his concern
with the legislation is that it kind of puts Cordova in a position
of getting up-front money when the future of PCE is debatable. He
noted there are a lot of arguments for it, but there is not a lot
of money. He said if he understands the bill correctly, it gives
Cordova ten years of PCE up-front. Representative Ogan said it
seems to him that it would be unfair if PCE isn't funded.
Number 0728
REPRESENTATIVE KUBINA responded, "(Indisc.) nothing that we can do
is going to determine for sure what we're going to fund next year
or the year after that or the year after that, but this debate
about PCE has been here a long time. There has been a whole lot
money spent in railbelt communities. Of course the rural areas
that depend on PCE think that this is just their fair share. If
you add up how much money has been spent on Susitna hydro projects,
interties, et cetera, et cetera, there is hundreds of millions of
dollars in there and PCE's costs is nowhere near -- come close to
making up for what's already been put in those areas. But I agree
with you, Representative Ogan, that you know there is no guarantee
it's going to be here next year, but I don't think that that means
we close our eyes on not trying to find ways to make -- to bring
these people into self-sufficiency. And just as Anchorage and
Fairbanks couldn't fund interties in between themselves themself --
they may have been able to, but when the state would have had the
ability to help, that's what they did. We should do our best to
help these people become self-sufficiency. You know the economy of
smaller towns -- if they were all very healthy, why it certainly
would make our railbelt area just as healthy or even healthier."
Number 0855
REPRESENTATIVE OGAN asked if there is a fiscal note available.
Number 0860
REPRESENTATIVE KUBINA explained the fiscal note would be the HB
337.
Number 0872
TOM WRIGHT, Legislative Assistant to Representative Ivan Ivan,
Alaska State Legislature, informed the committee members that
fiscal notes have been requested from the Administration. He
indicated he has not received a fiscal note for HB 336. A fiscal
note is required for that particular bill. Mr. Wright referred to
HB 337 and stated a fiscal note is not required as it is an
appropriation bill.
Number 0893
REPRESENTATIVE ALBERT KOOKESH stated he believes the legislation is
a step in the right direction. He said, "I really think, like
everybody else, I don't know what the future of PCE is going to be,
but one of the things that we have to do as legislators, and people
who are considered at least by some of us, leaders in the state as
far as policy for the state goes, is that we need to start looking
at some way to end PCE ourselves. And maybe one of the ways to end
it is to make sure everybody else has some self sufficiency down
the road, whether it be hydroelectric or anything else. So I
really think that we have to take the first step and maybe this is
the first step." Representative Kookesh informed the committee he
would really appreciate continued consideration of similar bills so
there are options on the table for everyone to consider.
Number 0953
REPRESENTATIVE JOULE indicated he is relieved to see the proposed
CS for HB 336. He referred to the original version and said, "I
had concerns that if something were to happen or just normal wear
and tear to regular power units in some of the smaller communities,
if a purchase of a generator and replacement of some of those
equipment, I was going to ask the question of whether or not that
would end that kind of capital investment would end power cost
assistance to those communities if that were to occur when it
wasn't really an effort to find alternative power other than to
just replace the aging systems. And then the other part of this
is, you know, there is a task force out there looking at power cost
equalization to try and find potentially I guess some revenue
streams and also I imagine some alternatives for development. And
I wonder whether or not something like this would be able to fall
within that purview."
Number 1039
REPRESENTATIVE OGAN said HB 337 is the funding mechanism and it is
basically a general fund grant. He asked if it would be a general
fund grant and it wouldn't come out of power cost equalization.
REPRESENTATIVE KUBINA indicated that is correct. Representative
Kubina stated that he knows to request $7.5 million is a hard
question to ask. He urged that the legislation move to the House
Finance Committee so they can consider it within the budget.
Number 1101
CHAIRMAN IVAN said he also had reservations regarding the original
versions of the legislation. He said he appreciates the
Representative Kubina's interest in the preservation of power cost
equalization to the state as a whole. Chairman Ivan said, "If we
could look back and maybe have encouraged other forms to be looked
at - hydro projects, natural gas, (indisc.), we wouldn't have to
continue to (indisc.) and fund. Probably some of our communities
would have been off PCE and make that -- I encourage that - getting
off. And I see the bill doing this. I understand it will not harm
the rest of the rural communities power projects that are so
dependent on PCE at this time." Chairman Ivan said some of the
communities he represents are trying to find ways to get off of PCE
if at all possible. They are in situations where they need help to
get off PCE. He indicated Representative Kubina's legislation is
a beginning.
Number 1210
REPRESENTATIVE OGAN referred to a resolution in his committee file
from Cordova Electric Cooperative, Incorporated, and said the
letter says that they are constructing the Power Creek
hydroelectric facility. He asked if it is safe to assume that the
facility is currently being funded.
REPRESENTATIVE KUBINA said he understands that they have received
$5 million from federal appropriations over the last couple of
years. He noted this happened with the help of Senator Stevens.
Representative Kubina pointed out that Senator Stevens has
encouraged Cordova Electric Cooperative, Incorporated, to also
continue to ask the state for help in funding. Senator Stevens
believes it should be a joint state/federal program.
Representative Kubina said if the small communities had to pay for
the whole thing, they'd still be on PCE and the rates probably
wouldn't decrease. He asked how does the smaller communities get
the capital costs to get something going so they can become self-
sustaining.
Number 1288
REPRESENTATIVE OGAN asked what the total cost is of the project.
REPRESENTATIVE KUBINA responded that it is $15 million
REPRESENTATIVE OGAN asked if there was a state match for the $5
million.
REPRESENTATIVE KUBINA indicated there wasn't.
REPRESENTATIVE OGAN asked if it was an outright grant from the
federal government.
REPRESENTATIVE KUBINA answered in the affirmative.
REPRESENTATIVE OGAN asked if there would be any additional federal
funds available if the state kicked in a smaller amount.
REPRESENTATIVE KUBINA responded that Cordova Electric Cooperative,
Incorporated, is going to do everything they can to get funding for
as much of this project as possible. He said what they're trying
to do is if they can fund half of the project from the state and
half from the federal government so the capital costs will be paid
for. They would give up $750,000 a year. That is a savings to the
state. They would then be able to charge enough to pay all the
operating costs. Representative Kubina added that they would not
be able to generate all their electricity with this project as it's
not big enough. They would still have diesel generation, but the
blended part of it between diesel and hydroelectric would bring
their costs down low enough that they could give up the PCE.
Number 1317
REPRESENTATIVE JOULE referred to his earlier comment about the task
force and said maybe the timing of this couldn't be "more better."
He said as technology is changing how we do things. He suggested
that the task force might want to work closely to monitor the
plant, as it is being built, to see whether other things can be
tied into it. Representative Joule said it could be used as a
model as we look towards self-sufficiency.
REPRESENTATIVE KUBINA explained that the task force has reviewed
the original piece of legislation. He said the task force will be
reviewing the new version of the legislation. Representative
Kubina informed the committee that the task force is looking at how
they can help communities be self-sustaining.
Number 1466
JIM ROBERTS, General Manager, Cordova Electric Cooperative,
Incorporated, came before the committee to give a brief history of
his organization. He informed the committee that the cooperative
did not become a cooperative until 1978. Consequently, they could
not take advantage of the low interest rates from the federal
government through the Rural Utility Service (RUS) Program. He
said they have the highest blended interest rate for capital of any
cooperative utility in the state of Alaska and that's one of their
big problems.
MR. ROBERTS informed the committee that the cooperative's average
cost of power as of 1997 was over 20 cents per kilowatt-hour. He
said what is being proposed regarding the Power Creek project is if
they can get the funding that they want to build the project, it
will drop their costs over 5 cents a kilowatt-hour. That will help
not only residential, but the industry. He said the PCE does help
residential, but it doesn't help their industry. The basic
industry is fish processing. He noted the fish processing industry
can't really compete with other communities. Cordova has lost a
couple of fish processors over the past five or six years. It
hurts the economy.
MR. ROBERTS explained their thrust has been that they are willing
to give up PCE if they can get the funding they need. Considering
that Cordova is basically the largest single community in the state
that receives funding from PCE, the project would allow more money
to be put back into the pot for other small communities. Mr.
Roberts said he believes the project makes sense and the PCE task
force is going to look at that and maybe use it as a model for
other communities throughout the state.
MR. ROBERTS informed the committee that they received the Federal
Regulatory Energy Commission (FREC) license on December 24, 1997.
They have some grant funding from the federal government and they
are back in for another $3.5 million to try and get the 50 percent
on each side. He said he belives they have a good chance of
receiving the money as Senators Stevens and Murkowski and
Representative Young are in a good position to help get the rest of
the funding for the project.
Number 1621
MR. ROBERTS explained they are looking at construction to begin in
the spring depending on the funding. He said he does have bridge
interim financing set up, but it is contingent on what happens with
the state as to whether or not they can proceed with the project.
The Alaska Energy Authority (AEA) did a feasibility study in 1992
on the project. Mr. Roberts said, "We went out looking to see if
there was something else out there RFP - internationally, we had
like 70 different outfits from all over the world, not just the
United States. And this was a single project that people came up
with that was the most benefit to a community." He indicated the
Power Creek project is something that the community very badly
needs and, in the long term, it will lower the cost the state on
PCE. It will help the smaller communities. Mr. Roberts stated
$750,000 a year is a big bite out of the PCE.
Number 1686
REPRESENTATIVE DYSON questioned how many killowats the project will
generate.
MR. ROBERTS responded that it is a six megawat project.
Number 1686
REPERESENTATIVE DYSON asked if there are low-flow problems during
different times of the year that would be a problem.
MR. ROBERTS answered in the affirmative and said that is why it'll
be suppmented with diesel. He said they have a small 1 1/4 meg
hydro project that went on-line in 1991. Depending on the year and
the run of the river, that provides about 10 percent to 15 percent.
He noted that is during the summer when they get a lot of melt-off
and rain. Power Creek is the same way. In the summer, Power Creek
would provide 100 percent of what is needed. During the winter
when the flow is down, they would have to supplement with deisel.
Number 1731
REPRESENTATIVE DYSON referred to the winter during the low-flow
conditions and asked what percentage of the power will the plant
provide.
MR. ROBERTS stated it depends on the winter. He pointed out the
current winter is very mild and they're still getting a lot of
water. It would probably 40 percent to 50 percent of what is
needed.
Number 1749
REPRESENTATIVE DYSON asked what the distance is from the project to
where the consumers are.
MR. ROBERTS informed the committee that there is a road going right
to the project. It is seven miles from one of the generation
plants.
REPRESENTATIVE DYSON questioned what the transmission voltage will
be.
MR. ROBERTS responded, "12-4-70 distribution voltage. The
engineers are looking at maybe stepping up to 25 KB for
transmission, but everything else we have is 12-4-70 even out to
the airport. That's 13 miles away and we don't have any voltage
problems."
Number 1779
REPRESENTATIVE OGAN referred to the bridge interim financing and
asked what form of financing is it.
MR. ROBERTS explained cooperatives have access to funding through
cooperative banks. Co Bank is one of the lenders that they use.
He said it went to their loan committee for approval. He noted the
approval is contingent on the rest of the financing.
REPRESENTATIVE OGAN asked if the rest of the financing is the $7.5
million.
MR. ROBERTS responded in the affirmative.
REPRESENTATIVE OGAN said if they don't get $7.5 million, they don't
have a project.
MR. ROBERTS said they could do it, but whether or not they can
afford to do it is a different question. It really isn't really
worthwhile to build the project if they can't keep the same cost or
lower the cost.
Number 1824
REPRESENTATIVE OGAN said if the recalls correctly, the project cost
is $15 million.
MR. ROBERTS indicated that is correct.
Number 1837
REPRESENTATIVE OGAN asked if they didn't get the funding, what
would their payments be. He also asked if the loan would be a low
interest loan.
MR. ROBERTS informed the committee it is not a low interest loan.
The rate would be the market rate through the cooperative bank. He
noted their rate is slightly lower than the normal market rate.
REPRESENTATIVE OGAN asked if they issue municipal bonds.
MR. ROBERTS said there has been discussion with the city and there
is a possiblity of doing it. He informed the committee that they
haven't really explored the possibility because if push came to
shove, they'd probably be better off to try and go through RUS for
funding. Mr. Roberts said they probably could qualify for a
hardship loan of 5 percent. The funding would be quite a bit down
the line as there is a lot of demand for that money.
Number 1878
REPRESENTATIVE DYSON questioned when the project would pay for
itself if they don't receive a grant.
MR. ROBERTS said if they had to go out and borrow the rest of the
money they need, he would say the break even point would be in the
range of 10 to 15 years.
Number 1918
LAMAR COTTEN, Deputy Commissioner, Office of the Commissioner,
Department of Community and Regional Affairs, came before the
committee. He pointed out that the department, through the Power
Project Fund Program, has loaned this project $1 million at a zero
interest rate. It is contingent upon the financing. He informed
the committee that the Power Project Fund Program has loaned money
to a number of energy related projects throughout the state. Mr.
Cotten said it has been mentioned that there is a "Blue Ribbon
Panel," which is currently composed of ten people including two
legislators. He said the program has been looking at PCE since PCE
runs out in the summer of 1999. He said the Administration belives
that the panel approach is to look at the issue in a very
comprehensive way. Mr. Cotten said, "It plans to report back to
the legislature in 1999. It's going to look at about five broad
areas, that is looking at funding and endowment or somehow finding
capital. Looking at the impact if you did in fact terminate PCE,
not only in rural Alaska, but in turn the effects you would have on
urban Alaska. Looking at the history of the -- where the money has
gone for energy projects, both urban and rural Alaska. Looking at
long-term options to reduce rural electric utility costs. And then
lastly, to look at the program -- the formula that's in place now
to look whether there should be changes."
MR. COTTEN said even though the department has supported the Power
Creek project in the past, at this point they would certainly
perfer to look at the Blue Ribbon Panel appropriate approach as
probably the more appropriate approach. He said the department
believes that is a better approach because it is not "piecemeal."
He said, "It certainly doesn't stop the panel from looking at some
of the proposals that are included in these two bills. In fact, if
anything, we want to look at them very carefully. And it would not
suggest that the Administration doesn't support this project. In
fact, if it does come down to where Cordova Electric has to look at
other loans, I know that we are in a position perhaps to help,
again, if it's the right combination of grants and loans."
Number 2026
REPRESENTATIVE KOOKESH said PCE, as it currently stands, whether or
not it has a future, is a state benefit. He asked how the decision
is made in Cordova to take it away for a different alternative.
Representative Kookesh pointed out his community receives PCE and
if somebody tried to take it away for a different alternative,
whether or not that alternative was good or bad, that it is a state
benefit. He asked how the people in Cordova makes that decision or
do they.
Number 2055
MR. COTTEN indicated he doesn't know the answer.
REPRESENTATIVE KOOKESH informed Mr. Cotten that he doesn't really
expect an answer. He said somebody ought to look at that because
if somebody in Cordova says, "Wait a minute, I want PCE and I don't
want you guys to do these other things," how would they get around
the question.
CHAIRMAN IVAN said he would leave that decision up to the
community.
Number 2075
REPRESENTATIVE KOOKESH said currently, the community is not making
that decision and the cooperative is.
Number 2095
MR. ROBERTS came back before the committee. He referred to
Representative Kookesh's question and said it is a decision of the
cooperative, but the reason there is the backing of the community
is that the only way this can be done is if the cost of power goes
down and it will not impact residential growth.
REPRESENTATIVE KOOKESH pointed out that he wasn't speaking so much
to the Cordova question, but was speaking to the statewide question
of whether PCE has a future or not, it is a state benefit.
Number 2127
REPRESENTATIVE JERRY SANDERS said when Mr. Roberts referred to the
break even point being somewhere between 10 and 15 years, was he
talking about current prices or anticipated savings prices.
MR. ROBERTS said they are looking at the savings price. He said
what they are looking at for a rate, depending on the financing, it
would change them quite a bit one way or another.
REPRESENTATIVE SANDERS questioned whether the price would decrease
when the electric comes on or will the price remain the same for 10
or 15 years.
MR. ROBERTS said the cooperative would look at having to try to
lower the cost. He said he doesn't see how they can, in good
faith, build the project by giving up PCE if they don't get the
needed funding. Mr. Roberts explained they can't ask the people to
pay what they are currently paying without the PCE offset of the
cost. He referred to the residental people who are receiving a
credit from the state on their monthly bill and said the promise
the cooperative has made to them is that the cooperative will not
increase what they are currently paying out of their pocket by
building the project. Mr. Roberts stated that if they can't get
the funding, then they won't build the project.
Number 2218
ERIC YOULD, Executive Director, Alaska Rural Electric Cooperative
Association (ARECA), testified via teleconference from Anchorage.
He said ARECA represents virtually all of the electric utilities of
the state. He said he would like to go on record, on behalf of the
association, in favor of HB 336, as amendmend, and also HB 337. He
said the amended version is much more in consonance with what the
electric utility industry could support. He said he believes that
using renewable resource projects as a solution for electrical
needs throughout the state is the way to go. Mr. Yould said he
believes some of the original problems associated with communities
that have no choice but to remain on diesel power would have been
hurt by the earlier version of the legislation. The Power Creek
project is an excellent project. He noted that back in the 1940s,
the federal government looked at developing the project. Later,
the state of Alaska also looked at developing the project, but it
got caught in a time warp because other projects were also being
looked at and the Power Creek project didn't go forward. Mr. Yould
commended Cordova Electric Cooperative for their efforts to bring
it forward.
MR. YOULD said he is also a member of the Blue Ribbon Committee
task force. He pointed out they have just began to meet and he is
very impressed with the integrity of the members and the
seriousness with what they're deliberating on this very difficult
issue. Mr. Yould said, "Obviously, power cost equalization is a
program that is somewhat the underpinning of a sound economic
structure in rural Alaska and it's certainly not our place to
establish policy for where the state should go in terms of rural
Alaska, but it is our position that if you are going to have a
sound economy in rural Alaska that power cost equalization is a
very important element of that overall mix. As a matter of fact
it's virtually the keystone of whether or not we'll have some form
of business in rural Alaska."
MR. YOULD said in speaking for himself, he believes that the
committee will find that the Blue Ribbon Committee task force would
view the legislation in consonance with the overall policy that
they will probably be reporting out roughly a year from now. Mr.
Yould said, "We do strongly support, that is the electric utility
industry, these two bills and the second one as amended."
MR. YOULD referred to Representative Kookesh's question of how does
a community decide whether or not they want to forego their power
cost equalization and said, "At least in the case of Cordova, and
as a matter of fact this is the case in most of the -- or many of
the rural communities, Cordova Electric Co-op is in fact a co-op
and that means that it is owned by everybody in that community.
They all have a voice in what that co-op does because they all own
shares in that co-op. So I guess I'd have to say that by virtue of
its governing body adopting a resolution in support of this
particular position, you've pretty well heard from the community
itself that they agree that this approach to weaning themselves off
power cost equalization in favor of a long-term solution is what
they'd like to do." Mr. Yould said he would answer any questions
the committee may have.
Number 2396
REPRESENTATIVE OGAN said, "You are on the power cost equalization
task force. I'm always (indisc.) that all the task forces are
'blue ribbon,' but anyway -- and I'm sure that people on there are
of the highest caliber, but I'd just like to see a white ribbon
panel some time. But anyway, what is the -- do you think this is
a little bit of the cart before the horse. I mean we have this
question where this funding goes away in 1999. You know we're
being offered a deal that they'll back out of power cost
equalization if we fund this out of our capital budget. But it
seems to me that we need to determine the future of power cost
equalization both as a -- your task force that you serve on as well
as the legislature before we make any major decisions on deals on
something that might not be around. Do you care to comment on
that?"
MR. YOULD said, "Unfortunately, this is project that its time has
come. Whether PCE is out there or not, it's a project that very
much should go forward based on its own economic merits.
Unfortunately, with a capital intensive project like this one, even
through it's economically feasible it's very difficult for small
communities to be able to absorb the high front-end cost associated
with a project until it's ten years out, then all of a sudden the
line crosses below the cost of diesel power. Mr. Yould pointed out
that it is kind of like buying a capital intensive house or renting
forever. Over the long haul, the house that you're renting is
going to cost you more money than if you were to buy it outright.
However, in the early years that rent is relative low. He said
that is kind of what Cordova is dealing with. In this particular
instance, we're really talking about single project...."
TAPE 98-8, SIDE B
Number 0001
MR. YOULD continued "...he'll be given a permit from the Federal
Energy Regulatory Commission that will give him a specific window
in which to construct his project. If he doesn't construct in a
timely fashion, he could have his permit revoked. All be it, I
think that that is improbable. I think you could go back to the
Federal Energy Regulatory Commission and get them to extend that.
We certainly had to do that when we were building the hydropower
projects in the earlier part of the 1980s from time to time. But
I appreciate your concern. I don't think that this particular
project is precedence setting. I don't think that it necessarily
puts the cart before the horse."
Number 0032
PATRICIA L. JONES testified via teleconference from Cordova. Ms.
Jones informed the committee she has been a resident of Cordova for
over 40 years. She said she has voted in every state election
since statehood. Ms. Jones said she represents many people in
Cordova who believes that the cost of electricity in their area is
much too high, running over 20 cents per kilowatt-hour. She said,
"With the grant fund financing, we would be able to lower the
average cost of power about 5 cents per kilowatt-hour. This is a
top priority for all Cordovans. The state of Alaska and the
legislature have given $300 million in grants to the Four Dam Pool
hydro project and $15 million in grants to Seward for an intertie
to the railbelt power grid. The Federal Energy Regulatory
Commission or FERC issued the license for the Power Creek
hydroelectric project on December 24th of 1997, just last year. So
all of the environmental studies have been done. Cordova has
received $4 million in grants from the federal government and we
are in line to receive $3.5 million this year thanks to Senator
Stevens and to the congressional delegation. We are urging this
committee and the Twentith Legislature to vote to match this amount
of money from the federal government for the special appropriation
under House Bill number 337 for $7.5 million for the Power Creek
hydroelectric facility. Please help us on this hydroelectric
project. Thank you."
Number 0116
SCOTT JANKE, City Manager, City of Cordova, was next to testify via
teleconference from Cordova. He explained the City of Cordova has
been a major supporter of this project. During the last four
years, the city council has made it one of their top priorities and
has authorized him to help the Cordova Electric Cooperative board
of directors and Jim Roberts in fundraising efforts and lobbying
the legislature. Mr. Janke said he believes that Mr. Roberts and
other speakers have done a good job of discussion on the economies
that are prevelant in Cordova and how they will be affected by
either having the project go forward or not allowed to go forward
by not granting these monies. Mr. Janke said a member of the
committee asked the question of whether or not the community could
do a bond for this project. He explained that is extremely
unlikely. On March 3, 1998, Cordova voters are going to be voting
on $4.3 million in bonds for a water system improvement and a land
fill improvement. These are projects that are becoming necessary
due to federal and state regulatory requirements. That, by itself,
is over $1,400 per capita of debt. They simply can't afford to pay
for a hydroelectric project and they need state assistance. Mr.
Janke said, "Our fish processing industry is teetering on the edge
because of the high cost of energy and obviously to keep that
industry healthy, which is one of the most important industries in
Alaska, they need a better energy cost equation so they can compete
in the world marketplace. But again, the city council has made
this a top priority for at least four years that I've been here -
possibly longer. And I would ask and urge you to support this --
Mr. Kubina's bill to allow funding for this extremely important
project for Cordovans."
Number 0217
HAP SYMMONDS, Plant Manager, Ocean Beauty Seafoods; Vice President,
Board of Directors, Cordova Electric Cooperative, Incorporated, was
next to testify via teleconference from Cordova. He said he would
like to make some points in reference to HB 337. Mr. Symmonds
said, "We seem to be hung up partially on the giving up of PCE as
a tradeoff for funding. In the business world, the $54 of PCE
credit is meaningless. The nickel a kilowatt-hour lowering of the
electric rate is what the business community in this town is
looking at. And as Scott Janke (indisc.) said the seafood
processing industry, as a whole, and especially in Cordova, is on
the brink of going under so anything that can be done to lower the
cost overall and especially major factors such as electricity is
something that is very much needed. Of course, we all look at - as
Pat said - the funding that has gone into the Four Dam Pool and the
intertie and I think we tend to seat up against them. And I have
spoken at other gatherings and I think that the committee needs to
remember that, you know, urban and rural Alaska are all still one
state of Alaska, and just because something benefits one group and
maybe doesn't have a direct benefit with the other group is
something that we need to look at as Alaskans. Thank you."
Number 0318
REPRESENTATIVE DYSON confessed that he had not done his homework on
the issue and he isn't prepared to vote the legislation out of
committee. He said that he would appreciate not moving the
legislation out until the next meeting so he can do his homework.
Number 0339
CHAIRMAN IVAN said that he feels the legislation is so important
that the committee needs to do a good job with the information that
is coming to the members. He asked Representative Dyson if he
would have enough time to review the legislation if he holds the
bill until Friday.
REPRESENTATIVE DYSON indicated Friday would be fine.
CHAIRMAN IVAN stated that he would like to take some action on the
CS. He referred to page 1 of the proposed CS for HB 336, lines 9
and 10, "An electric utility loses its eligibility under AS
42.45.100 - 42.45.150 if, on or after January 1, 1998, it
constructs a hydroelectric generation facility..." He referred to
"hydroelectric generation facility" and said he would like to
expand the language to include other projects that may be available
for renewable resources. It would include other projects that may
be available besides hydroelectric generation projects. Chairman
Ivan said he would entertain a motion for the adoption of the
language change.
Number 0434
REPRESENTATIVE JOULE questioned where the change would be made.
CHAIRMAN IVAN responded the change would be on page 1, line 10,
after "hydroelectric generation facility." The amendment would
include "other projects using renewable resources."
Number 0455
REPRESENTATIVE SANDERS asked if it would have the same effect by
deleting "hydro" and say "electric generation facilities."
Number 0466
REPRESENTATIVE DYSON stated that he would encourage Chairman Ivan
not use the limiting word "renewable." He noted he is thinking
particularly of legislation by Representative Ogan which was passed
about a year ago that had to do with shallow gas wells.
Representative Dyson said he believes the interest is with
nondiesel fired. He said we're looking for alternatives to
expensive diesel generators on the bush. Representative Dyson
said, "I would encourage us to not limit it."
CHAIRMAN IVAN said that he is trying to make other options and
opportunities available.
Number 0510
REPRESENTATIVE OGAN indicated that he understands the Chairman
Ivan's point. He informed the committee he concurs with
Representative Dyson's analysis. He said he knows, for a fact,
that in Naknek they're looking at developing shallow gas resources
that generate electricity. He suggested making the language broad
enough to include that. Representative Ogan said he isn't sure how
to do that. If the bill isn't going to move, he would suggest the
committee consider the appropriate language change and maybe adopt
it at the next committee meeting.
CHAIRMAN IVAN said Representative Ogan's point is well taken and he
would consider the suggestion before the next committee meeting the
following Friday.
Number 0559
REPRESENTATIVE DYSON said, "If you have the votes to move it out of
committee, my feelings won't be hurt, you know, if you go ahead and
move it. So you can do what you choose and I won't be upset. Just
for my sake, I probably can't vote for it to move as of yet. If
you have the votes, go for it."
CHAIRMAN IVAN indicated it would be up to the committee members as
to whether the bill moves. He noted there is not a fiscal note for
HB 336. Following past procedures, the bill will have a zero
fiscal note to accompany the bill. Chairman Ivan again stated he
would like to make other options available.
Number 0604
REPRESENTATIVE OGAN said, "I would (indisc.) move a conceptual
amendment or at least an amendment that we delete the word
'hydroelectric' and put 'logical generation facility that is
financed in whole or part.' I think that would probably [be] broad
enough that it would include generation facility, financial gas or
otherwise."
Number 0624
REPRESENTATIVE KUBINA said he agrees with the Chairman's intent.
He said his fear is that if it is not limited somewhat, it would be
the same as his original version of the legislation. The small
utilities that may need help if they had a new diesel generator,
would still have the high cost. Since they received help they
would have jeopardized their PCE. He suggested using the term
"alternative nondiesel generators."
Number 0664
CHAIRMAN IVAN said he would introduce a conceptual amendment to the
CS before the committee.
Number 0669
REPRESENTATIVE OGAN said he would withdraw his motion for the
amendment.
CHAIRMAN IVAN asked Representative Kubina to repeat his suggested
wording.
REPRESENTATIVE KUBINA said, "alternative nondiesel generation."
CHAIRMAN IVAN said if there is no objection, the language would be
included.
Number 0696
REPRESENTATIVE JOULE made a motion to move HB 336 out of committee
with individual recommendations, a zero fiscal note and with the
conceptual amendment.
REPRESENTATIVE DYSON objected to the motion.
Number 0713
A roll call vote was taken. Representatives Kookesh, Joule and
Ivan voted in favor of the motion. Representatives Dyson, Sanders
and Ogan voted against the motion. So HB 336, as amended, failed
to move out of the House Community and Regional Affairs Standing
Committee.
CHAIRMAN IVAN announced the legislation would be considered again
at the meeting on Friday.
Number 0774
REPRESENTATIVE OGAN said, "A point of procedural order here. I'm
not sure that we amended the bill. Representative Joule had a
motion to move the bill with a conceptual amendment. I don't think
we ever had it -- I withdrew my motion for my amendment. I don't
think we ever had a motion to amend the language - a proper motion.
So maybe we could bring that up at the next meeting. We might want
to check the record to make sure..."
CHAIRMAN IVAN said if he isn't mistaken, he did introduce that
amendment as presented by Representative Kubina.
REPRESENTATIVE OGAN said, "That's correct, Sir. With all due
respect, I don't believe there was a motion or we voted on the
amendment though so we might have missed a procedural thing there.
I think you moved the motion, but there was never a vote on the
motion or the amendment."
REPRESENTATIVE DYSON said he gave a thumbs up.
CHAIRMAN IVAN said he didn't hear an objection to the motion.
REPRESENTATIVE OGAN said, "Okay, alright, I stand corrected."
CHAIRMAN IVAN indicated HB 336 and HB 337 would be addressed again
at the meeting on Friday.
ADJOURNMENT
Number 0843
CHAIRMAN IVAN adjourned the House Community and Regional Affairs
Standing Committee meeting at 9:15 a.m.
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