Legislature(2009 - 2010)HOUSE FINANCE 519
04/04/2009 10:00 AM House ENERGY
| Audio | Topic |
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| Start | |
| Roundtable Discussion on Enerby Governance in Alaska | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ENERGY
April 4, 2009
10:19 a.m.
MEMBERS PRESENT
Representative Bryce Edgmon, Co-Chair
Representative Charisse Millett, Co-Chair
Representative Nancy Dahlstrom
Representative Kyle Johansen
Representative Chris Tuck
Representative Jay Ramras (via teleconference)
MEMBERS ABSENT
Representative Pete Petersen
OTHER MEMBERS PRESENT
Representative Kurt Olson
COMMITTEE CALENDAR
Roundtable Discussion on Energy Governance in Alaska
-HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
BRYAN BUTCHER, Director
Governmental Affairs & Public Relations
Alaska Housing Finance Corporation (AHFC)
Department of Revenue (DOR)
Anchorage, Alaska
POSITION STATEMENT: Participated in the roundtable discussion.
JOHN DAVIES, Research Director
Cold Climate Housing Research Center (CCHRC)
Fairbanks, Alaska
POSITION STATEMENT: Participated in the roundtable discussion.
MEERA KOHLER, President & CEO
Alaska Village Electric Cooperative, Inc., (AVEC)
Anchorage, Alaska
POSITION STATEMENT: Participated in the roundtable discussion.
GEORGE CANNELOS, Chair
The Denali Commission
Anchorage, Alaska
POSITION STATEMENT: Participated in the roundtable discussion.
STEVE HAAGENSON, Executive Director
Alaska Energy Authority (AEA)
Alaska Industrial Development & Export Authority (AIDEA) and
Alaska Energy Authority (AEA)
Department of Commerce, Community, & Economic Development
(DCCED)
Anchorage, Alaska
POSITION STATEMENT: Participated in the roundtable discussion.
MARILYN LELAND, Executive Director
Alaska Power Association (APA)
Anchorage, Alaska
POSITION STATEMENT: Participated in the roundtable discussion.
BOB PICKETT, Chairman
Regulatory Commission of Alaska (RCA)
Department of Commerce, Community, & Economic Development
(DCCED)
Anchorage, Alaska
POSITION STATEMENT: Participated in the roundtable discussion.
CHRIS ROSE, Executive Director
Renewable Energy Alaska Project (REAP)
Anchorage, Alaska
POSITION STATEMENT: Participated in the roundtable discussion.
GWEN HOLDMANN, Organization Director
Alaska Center for Energy and Power (ACEP)
University of Alaska Fairbanks (UAF)
University of Alaska
Fairbanks, Alaska
POSITION STATEMENT: Participated in the roundtable discussion.
REPRESENTATIVE DAVID GUTTENBERG
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Participated in the roundtable discussion.
REPRESENTATIVE CRAIG JOHNSON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Participated in the roundtable discussion.
REPRESENTATIVE ROBERT "BOB" BUCH
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Participated in the roundtable discussion.
ACTION NARRATIVE
10:18:32 AM
CO-CHAIR BRYCE EDGMON called the House Special Committee on
Energy meeting to order [at 10:18 a.m.] Representatives
Dahlstrom, Tuck, Johansen, Millett, and Edgmon were present at
the call to order. Representative Ramras arrived as the meeting
was in progress, participating by teleconference.
Representatives Guttenberg, Buch, Olson, and Johnson were also
in attendance.
^ROUNDTABLE DISCUSSION ON ENERBY GOVERNANCE IN ALASKA
10:21:20 AM
CO-CHAIR EDGMON announced that the only order of business would
be roundtable discussions by representatives of many energy
groups in Alaska to have an exchange of ideas that will help the
committee pursue an energy plan for Alaska. There will also be
a discussion of the present and future energy governance
structure in Alaska. Co-Chair Edgmon noted that testimony is by
invitation only, and public testimony will be heard at a later
date. He recalled the committee has held numerous hearings in
Juneau and throughout the state on a variety of energy issues.
The purpose of this meeting is to bring various groups together
to try to set the stage for the energy committee to continue its
work on an energy plan for the state.
10:23:29 AM
CO-CHAIR MILLETT described the energy committee's work plan for
the interim. Policy summits have been scheduled to discuss the
energy plans that have already been developed for regions of the
state. In fact, the committee will travel to nine communities
during the interim to hold summits with a focus on each region.
Prior to next session, the committee will develop the framework
of a statewide energy policy leading to an energy plan.
10:29:13 AM
BRYAN BUTCHER, Director, Governmental Affairs & Public
Relations, Alaska Housing Finance Corporation (AHFC), Department
of Revenue (DOR), stated the AHFC is the energy agency for the
state that distributes U.S. Department of Energy funds to the
Alaska Energy Authority (AEA). Also, the AHFC serves as the
residential energy expert for the state and represents the
"demand side" in terms of residential energy efficiency. The
AHFC has implemented a very large energy efficiency program that
allocated $200 million for a weatherization program for Alaskans
earning less than 100 percent of median income and $160 million
for a home energy rebate program utilized by Alaskans earning
over 100 percent of median income. At this time, the
weatherization program has disbursed $30 million and about 50
percent of the Home Energy rebate funds have been obligated.
10:31:30 AM
JOHN DAVIES, Director, Research, Cold Climate Housing Research
Center (CCHRC), informed the committee the CCHRC, with support
from the AEA and AHFC, has produced a report on energy
efficiency policy recommendations for the state. The CCHRC was
established to improve the sustainability of residential housing
throughout the state; in fact, it has projects in progress from
Southeast to the North Slope and Western Alaska. He opined the
center is gathering a lot of experience and research data in
construction techniques.
10:32:29 AM
MEERA KOHLER, President & CEO, Alaska Village Electric
Cooperative, Inc., (AVEC), said AVEC is a nonprofit, member-
owned electrical utility serving fifty-three villages in rural
Alaska. The population served by AVEC is about 45 percent of
Alaska's village residents. Most of the communities have
diesel-fired power generation; however, AVEC has pioneered the
development of wind power generation in seven villages with four
more wind projects underway. Although AVEC only deals with the
electrical side of the issue, its costs at this time are
"astronomically high." Ms. Kohler expressed her keen interest
in contributing to the dialog at the meeting.
10:33:35 AM
GEORGE CANNELOS, Chair, the Denali Commission, stated the Denali
Commission has been at work for ten years upgrading the basic
community infrastructure of rural Alaska. Energy issues are a
legacy project and working with AEA and AVEC, the commission has
been replacing bulk fuel storage tanks, upgrading power plants,
and leading the way to renewable energy projects such as wind
and diesel hybrids. The commission uses training dollars to
train local residents to operate and maintain power systems. He
commended the Alaska Rural Energy Conference that took place
recently in Galena.
10:34:28 AM
STEVE HAAGENSON, Executive Director, Alaska Energy Authority
(AEA), Alaska Industrial Development & Export Authority (AIDEA)
and Alaska Energy Authority (AEA), Department of Commerce,
Community, & Economic Development (DCCED), pointed out the AEA
works closely with every organization participating in the
roundtable discussion. The AEA authored the first step of the
Alaska Energy Plan that is a high level look at energy and
energy solutions in Alaska. Furthermore, the AEA operates about
fifteen different programs such as the bulk fuel loan program,
power project funding, and the Power Cost Equalization (PCE)
program as part of its widespread organization.
10:35:30 AM
CO-CHAIR EDGMON recognized the presence of Joe Balash, Special
Staff Assistant for Energy and Natural Resource Issues, Office
of the Governor.
10:35:58 AM
MARILYN LELAND, Executive Director, Alaska Power Association
(APA), noted the APA is the trade association for electric
utilities around the state; in fact, members of APA provide
power to over 500,000 Alaskan residents.
10:36:33 AM
BOB PICKETT, Chairman, Regulatory Commission of Alaska (RCA),
Department of Commerce, Community, & Economic Development
(DCCED), stated the RCA has been given broad authority by the
legislature to regulate public utilities, telecommunications
common carriers, and pipeline carriers. Furthermore, it
oversees over 650 Certificates of Public Convenience and
Necessity (CPCNs) that are licenses for doing business in the
state. Annually, the RCA is involved in approximately $1
billion of regulated activity, all of which is deeply impacted
by the conditions of the energy market, the regulatory
framework, and changes thereof.
10:37:43 AM
CHRIS ROSE, Executive Director, Renewable Energy Alaska Project
(REAP), informed the committee REAP is a coalition of 65
organizations around the state, including utilities, consumer
groups, environmental groups, Native organizations, and
businesses that all share the goal of increasing the production
of renewable energy and promoting energy efficiency across the
state. He noted that many of the organizations participating in
the roundtable are members of REAP and opined the committee's
questions "frame the issues that we need to deal with."
10:39:14 AM
GWEN HOLDMANN, Organization Director, Alaska Center for Energy
and Power (ACEP), University of Alaska Fairbanks, University of
Alaska, said the ACEP is an applied research program at the
University of Alaska (UA) that coordinates energy research
throughout the UA system. This is a new program that also
includes applied research in product testing at the UA Fairbanks
campus. Additionally, the center explores hydrokinetics,
wind/diesel, geothermal, and biomass technologies together with
energy storage, battery systems, transmission, and distribution
control.
10:40:10 AM
CO-CHAIR EDGMON presented question one: Describe your views on
whether Alaska needs an energy plan and if so, the components
involved in such a plan.
10:40:57 AM
MR. DAVIES answered that Alaska desperately needs an energy plan
and its present oil and gas wealth should be used to create a
sustainable Alaska that is not dependent upon fossil fuels or
the importation of labor, manufactured goods, and food supplies.
Furthermore, the following four fundamental strategies are
needed within that plan: conservation, efficiency, and the
reduction of the demand for energy; a focus on developing both
local and regional renewable energy resources; a focus on
combined heat and power and the co-location of greenhouses to
prevent energy waste; and a focus on local manufacturing and
agriculture, not just in urban areas, but to reach
sustainability in all of Alaska's communities.
10:45:00 AM
MR. BUTCHER opined the legislature and the governor have taken a
first step to address Alaska's demand for energy with the two
aforementioned programs. Alaska Housing Finance Corporation
estimates that by the time it disperses all of its available
funds, energy efficiency will have been improved in 10-20
percent of the homes in Alaska by an average of 20-30 percent
per home. He stressed energy savings in residential
construction is a good place to start; however, there are
schools, public buildings, and commercial buildings that need to
be weatherized as well. Mr. Butcher related the Obama
Administration has asked for information on AHFC's programs in
order to use them to serve as an example for the rest of the
nation.
10:48:02 AM
MS. KOHLER prefaced her comments by saying that AVEC's
involvement is with the rural electricity side of the energy
framework. She stressed that Alaska's vast geography and small
population generally preclude an energy plan like those for
other states. In the Lower 48, there are regional, statewide,
and national grids to move power between communities and this is
a fundamental difference from the situation in Alaska. She
offered her energy vision for Alaska: To provide every Alaskan
with reliable, safe, and affordable electricity that, to the
greatest extent possible, is environmentally benign. Ms. Kohler
opined the flaw in the current approach is searching for local
solutions that may not exist due to Alaska's isolated
populations; therefore, for the best solutions Alaska must build
projects that produce the maximum benefit for population
centers, and then share those benefits with rural areas by
another mechanism.
10:49:58 AM
MR. CANNELOS stated his agreement with the other speakers, and
added two additional points. Firstly, the energy plan must
include a mechanism "for making hard choices ... and at the
other end of this there will be some decisions and outcomes."
Secondly, there must be a serious discussion about connecting
communities by interties. This decision should be made not by
looking at power lines only from a cost-benefit analysis, but a
process of incremental connections that would reap benefits and
opportunities in 10-30 years, as has happened in the Pacific
Northwest.
10:51:45 AM
MR. HAAGENSON stressed the importance of a successful plan that
engages Alaskans in the solution. This includes educating
residents on efficiency, electricity, heat, transportation, and
how each region can participate. At some point the state must
look at integrated resource plans that could fund large projects
in each region such as the Railbelt, Southeast, and rural
Alaska. Innovative systems that connect regions together make
sense in the long-term and can be developed with creative
thinking specific to the needs of Alaskans. Furthermore, Mr.
Haagenson pointed out that energy costs are part of the economic
development picture.
10:55:50 AM
MS. LELAND agreed that everyone in the state would say Alaska
should have an energy plan. In fact, APA requested the governor
create an energy department at the cabinet level. In addition,
APA members feel private business organizations do not have the
resources or expertise to develop all phases of an energy plan,
but can contribute expertise in their fields. She further
agreed that the energy plan needs to include all sectors brought
together and looking at the state as a whole. Speaking from
personal experience, Ms. Leland stressed the importance of
consumer education as she was very surprised at how much energy
is saved by replacing appliances that are not "Energy Star"
rated.
11:00:27 AM
MR. PICKETT strongly stated his and the RCA's support for the
development of an energy plan. His experience with federal and
state planning processes is that some processes are, in essence,
academic exercises that gather information but do not result in
any changes. Planning processes with a mandate tied to funding
can be good; in fact, plans need to have a mechanism to identify
what is important and how funding will be applied. For example,
grant awards have evaluation criteria to establish the basis on
which decisions are made and mechanisms for feedback,
performance measures, and annual reporting. He agreed with Mr.
Haagenson that success takes people, organizations, and adequate
resources. Furthermore, organizational capacity in Alaska is
very uneven leaving some communities and regions without as many
opportunities as others.
11:04:36 AM
MR. ROSE opined that Alaska's energy plan needs to be a 50-year
vision that can be revisited as the world demand for energy
changes. As much of the world is still dependent on fossil
fuels, the price of oil and gas will keep going up. In order to
attract future investment and residents, Alaska needs to have
"flat-priced power". He agreed with the need for regional plans
because each region is disparate and unconnected, and that the
bottom line must be efficiency in order to get the best
investment in the long run. Alaska is rich with renewable
resources such as geothermal and wind; however, the resources
are often "stranded" by distance. Mr. Rose then turned to the
subject of agriculture and advised that 98 percent of Alaska's
food comes from out-of-state, averaging a shipping distance of
5,000 miles. He pointed out that food is energy for humans, and
as part of the energy chain, the supply can be cut off.
Furthermore, Mr. Rose recommended that energy efficiency
policies and a regulatory structure, in addition to plans and
visions, are required to incentivize renewable energy and energy
efficiency. Finally, the inclusion of components such as
workforce development, technical assistance, demonstration
projects, and research and development are necessary to develop
a plan unique to Alaska.
11:09:28 AM
MS. HOLDMANN expressed her belief in the need for a state energy
plan. However, much of the discussion is focused only on
reducing the cost of energy; however, her view is that energy is
a tool that can be used to create wealth for the state and its
residents. A long term goal should include Alaska's future role
in the world when it may not be the remote outpost it is today,
but a strategic shipping location for the exportation of value-
added products. She would like to address the following issues:
the disparity between rural and urban energy costs; encouraging
private sector investment with long-term planning; and
incentivizing preferred technology. Ms. Holdmann added that the
development of large scale regional projects around the state
requires a state energy plan.
11:13:35 AM
CO-CHAIR EDGMON opened the discussion to include committee
members.
11:14:05 AM
CO-CHAIR MILLETT noted that the role of energy conservation was
part of almost every speaker's comments. She asked for further
information about AHFC's weatherization programs.
11:14:45 AM
MR. BUTCHER informed the committee that there was concern that
funding for both of these programs would be "sucked up by the
urban areas." To prevent this, allocations were established for
different areas of the state in order to reserve funds for the
later applications expected from rural areas. In addition,
allocations were judged not only on population, but also on
heating degree days and the price of fuel. Funds for the
weatherization program initially allowed for improvements to
about 600 homes. This year 1,800 homes were weatherized, and
during the 2009 construction season 3,000 homes will be
improved. The Energy Rebate Program has received 8,500
applications with the pre-rating by a home energy rater
completed. After the recommended work is done, if the energy
rating of the home is improved by one step, the home qualifies
for a one-time rebate from AHFC of $4,000. Additional
improvements can qualify a home for a rebate up to $10,000.
Anchorage and Fairbanks currently have an excess of raters, and
AHFC established a "roving rater" position to complete ratings
in rural areas, in addition to the rural rater training
programs. Mr. Butcher noted that the drop in oil prices has
slowed the rate of applications, but AHFC will continue to
encourage residents to have an energy rating and make their
homes more energy efficient regardless of the price of oil.
11:20:23 AM
CO-CHAIR EDGMON asked whether conservation is playing a role in
energy planning in Alaska at this time.
11:21:37 AM
MR. DAVIES stated his belief that through the AHFC programs,
conservation is playing an active role as the energy savings
rate in Alaska is between 20-30 percent and the national average
for weatherization programs is 22 percent. However, he
expressed his concern that Alaska needs to think more about how
to use those resources more effectively and raise the goal to 50
percent savings. In addition, it is time to establish energy
standards for public and commercial buildings.
11:23:16 AM
MS. LELAND agreed with the aforementioned goal. However, she
said, "but I think on the electric usage, I think that we still
have a long ways to go." In Anchorage, Chugach Electric and
Anchorage Municipal Light & Power (AML&P) are promoting the use
of compact fluorescent light (CFL) bulbs by teaching consumers
how to use them to save electricity. She stressed the need for
more consumer education on electric usage.
11:24:57 AM
MS. KOHLER stated that conservation in the household is already
very evident in the communities served by AVEC. In fact, in the
last few years, the average residential monthly usage of
electricity has been reduced from 397 kilowatt hours per month
(kWh/m) to 390 kWh/m. The consumers are squeezing everything
out of their electrical energy dollars and their heating fuel
dollars also, although she questioned what the cost
effectiveness of that investment is going to be. Even when
energy use is reduced, the cost per unit is still extremely
expensive. Regarding consumer education, she described an
information booklet that will be distributed to AVEC's members.
Furthermore, AVEC is installing new meters that will allow
consumers to see their energy consumption. Ms. Kohler
encouraged the use of state money to support programs such as
metering improvements and consumer education.
11:27:56 AM
MR. DAVIES agreed that improved metering systems are "one of the
most cost-effective things you can do."
11:28:17 AM
MR. CANNELOS strongly encouraged the adoption of basic design
standards for public facilities, such as schools.
11:28:50 AM
MS. KOHLER pointed out the electrical bills for the two or three
new schools built in the AVEC service area "throws their entire
[school] budget out of kilter. I do wonder who designs these
facilities and who is estimating what the energy load is going
to be?"
11:29:40 AM
MR. HAAGENSON agreed with Ms. Kohler and suggested the use of
"life cycle cost analysis (and) throw operating cost in the mix,
and not just ignore (operating cost). Once a building is built
the community must absorb the cost, and designers do not
recognize the burden that is placed on the community. He
encouraged "more thinking like Cold Climate (Housing Research
Center) is doing for Alaska today."
11:31:49 AM
MR. ROSE pointed out that transportation consumes a huge amount
of energy statewide in the form of diesel and gasoline. He
stressed the value of public transportation and the use of
electric vehicles in areas such as Sitka and Juneau.
11:33:03 AM
MS. HOLDMANN stated that there is also room for improvement in
energy efficiency on the production side by improvements to
generators and generating systems, and by capturing waste heat
to use for beneficial purposes.
11:33:34 AM
REPRESENTATIVE JOHANSEN observed that the funds appropriated to
AHFC got the weatherization program underway within one year;
however, weatherization programs to conserve every kilowatt of
electricity and gallon of fuel should also be part of the long
term, big picture plan. He then asked when the energy aspect of
AHFC's policies was implemented as energy efficiency is not
found in the findings and purpose statutes or the general powers
and limitations of the corporation except for the energy
conservation added with the integration of the State Housing
Authority in 1992.
11:36:31 AM
MR. BUTCHER explained that in the late 1980s and early 1990s
there was an economic downturn and AHFC foreclosed on thousands
of abandoned homes. Many of these houses were poorly
constructed and could not be resold without improvements. This
resulted in the passage of the bill for building energy
efficiency standards (BEES) and any house constructed afterward
must be 4-Energy Star rated or above in order for AHFC to buy
the mortgage. He opined this legislation played a significant
role in improving energy efficiency for new construction
throughout the state.
11:38:41 AM
REPRESENTATIVE JOHANSEN surmised that AHFC's involvement with
energy efficiency began through its home loan program.
MR. BUTCHER agreed. Furthermore, in terms of being "the energy
agency, that's just been something that was decided, probably in
the governor's office years ago ... for whatever reason it was
decided to be AHFC and ... the [U.S. Department of Energy] money
just gets passed through us."
11:39:29 AM
CO-CHAIR MILLETT asked whether Alaska should make changes to its
energy government structure. She noted that Alaska's federal
energy stimulus money was distributed through AFHC, which is a
housing authority, and then to AEA.
11:40:16 AM
MR. BUTCHER observed that much of the stimulus money belongs
with AHFC for the weatherization program. However, there
definitely needs to be a focus on a plan. Although AHFC is
familiar with the residential energy code, AEA has the expertise
with commercial and public buildings.
11:41:34 AM
MR. HAAGENSON explained that AEA and AIDEA are now separate
entities. In response to Co-Chair Millett, he said AEA and
AIDEA are governed by separate boards made up of the same
people.
11:42:46 AM
CO-CHAIR MILLETT clarified that AEA and AIDEA share the same
board that serves two missions.
11:43:17 AM
MR. PICKETT recalled that he was responsible for the management
of 7,000 foreclosures outside of Anchorage and noted that the
quality of construction of residential housing in Alaska has
substantially improved. Regarding the responsibilities of AHFC,
he recalled that the legislature "weighed in" when AHFC was
merged with housing programs within the former Department of
Community and Regional Affairs, and with the former Alaska State
Housing Authority.
11:45:14 AM
REPRESENTATIVE TUCK described his experience with a six-year
long-term plan while serving on a school board. He suggested
that the state energy plan may set goals for 25 or 50 years with
reviews scheduled every 3 or 6 years to allow for any needed
modifications.
11:47:08 AM
REPRESENTATIVE BUCH asked Mr. Rose for details on flat priced
power.
11:47:39 AM
MR. ROSE explained that flat priced power means that because
there are no fuel costs associated with renewable energy, the
up-front costs of the capital are known, and the operating and
maintenance costs are predictable, so the cost of the power can
be predicted and will not rise with increases in fuel cost.
11:48:06 AM
REPRESENTATIVE GUTTENBERG described the difficulty in developing
a plan that turns into policy and is then implemented with each
of the components such as, in-state gas use, building the
Susitna dam, renewable energy, or transportation costs. He
expressed his belief that the public is waiting for the
government to act and questioned how to implement what the
legislature and governor need to do to join the components and
"get something done." Representative Guttenberg agreed with Ms.
Holdmann that "energy is the tool to create wealth."
11:49:56 AM
REPRESENTATIVE JOHANSEN directed attention to a handout from
Percy Frisby, Tribal Energy Director, Tlingit & Haida Central
Council in Juneau. He noted that the handout is the perspective
of the Tlingit & Haida Central Council and not the energy plan
for Southeast Alaska developed by Southeast Conference.
11:52:40 AM
The committee took an at-ease from 11:53 a.m. to 12:04 p.m.
12:04:24 PM
CO-CHAIR EDGMON presented question two: Discuss the state of
energy governance in Alaska and ways you would suggest to
improve it.
12:05:28 PM
MR. PICKETT observed that energy governance in Alaska is very
disjointed at the state level. For example, when basic resource
questions are involved, several state agencies with "rather
narrow [eyeglasses]" look at the issue. Energy governance
processes also draw in more public sector participants than
private sector participants, and he encouraged more
participation from the private sector viewpoint.
12:07:02 PM
MS. LELAND agreed with Mr. Pickett that energy governance is
disjointed at the state level. On the governance level of the
over 100 individual electric utilities, she stated that the
majority of consumers in Alaska buy their power from members of
the APA and APA provides a forum to work together and share
information. However, there needs to be more coordination
between utilities.
12:08:18 PM
MR. HAAGENSON described his experience with cooperative
utilities. He observed that local control must be balanced with
the "bigger picture". In the Lower 48, utilities include
generation and transmission for economy of scale and better
financing; however, in Alaska, utilities remain single, silo-
type utilities in order to maintain local control.
12:10:01 PM
MR. CANNELOS urged the adoption of an overarching policy that
acknowledges that much of Alaska lives with third world
conditions and that will end disparities through energy,
workforce development, and improvements to transportation. He
said he was encouraged by the recent government forum bringing
the state commissioners and most federal agencies together twice
per year to discuss mutual issues.
12:11:17 PM
MS. LELAND interjected that utilities in Alaska are 91.9 percent
public power, thereby giving consumers an opportunity to be part
of the governance process. She said she was pleased to announce
that the first joint meeting of the Railbelt utilities is
scheduled for April, 2009.
12:12:07 PM
MS. KOHLER pointed out that Alaska has about 150 utilities
serving a population of 680,000 residents. Five large utilities
serve 75 percent of the total population, leaving an average of
1,200 residents owning and operating a generation plant at each
of the remaining utilities. She expressed her belief that the
state is doing its citizens a great disservice by failing to
ensure that reliable electricity is available to each citizen at
a reasonable cost. No community of a few hundred people should
be required to maintain its own generation plant. Ms. Kohler
said:
The G&T should absorb all of the utility generating
assets in Alaska. The electricity should then be sold
back to the utilities which would then become
distributing utilities like they are in the Lower 48.
And then they would sell it to their customers. All
utilities should be able to buy the generated power at
the same cost ... and then they add their own
distribution and administration costs on top of that
to send it around the state...
Ms. Kohler continued to explain that the regional generation of
power creates the politics of separation that force small
regions to fight for the small amount of money available.
12:14:56 PM
MR. BUTCHER clarified that by his previous comments he did not
mean to imply that the legislation proposed by Representative
Gara is "confused." He related his previous experience working
on the state budget and noted that there is often competition
between utilities for state funds. Mr. Butcher expressed his
appreciation for legislative committees that provide a forum for
all of the parties to "get together to solve a problem."
12:17:29 PM
MR. DAVIES agreed that governance for energy issues is clearly
too fragmented at the highest of levels, with each state agency
acting as a "silo", not to mention how that fragmentation
affects the function of each of the cooperative and municipal
utilities. He proposed two possible answers: create a new
state agency that has this responsibility throughout the state,
or create a cabinet level task force structured to include broad
input from the relevant agencies, the legislature, the
utilities, the municipalities, and the private sector, to ensure
that the task force can come to a policy fruition. He said he
did not advocate for the first answer. However, he does support
a task force with a mandate from the governor and participation
from the legislature. Mr. Davies stressed that directives from
a task force "at the top" can create the highest level policy
statement that can then be passed on to the agencies and
affected parties. He concluded that this was "the only way that
we can have the coordination that we need, is to have that
cabinet level task force that involves ... the appropriate
agencies from the executive side but also active participation
from the legislative side so that we can put together something
that everybody can agree on and move forward with."
12:20:35 PM
MR. ROSE stated his personal opinion that the discussion is
about two things: governance on the state level and governance
on the utility level. The situation on the state level is
fragmented because different agencies are responsible for
similar tasks; in fact, it is difficult for a business in an
energy related field, and especially for the average person, to
figure out "who's doing what at the state level." Even more
difficult is the issue of the utility governance. For example,
utilities are located in different regions; many utilities are
managed by lay persons elected for a short term; and smaller
utilities suffer from economies of scale. He recommended
looking for solutions by studying actions taken by other states.
12:24:36 PM
REPRESENTATIVE JOHANSEN stated his agreement with Mr. Davies.
He then asked whether Alaska could avoid completing regionally
for state and federal resources. For example, Southeast will
benefit most from the development of hydroelectricity (hydro),
whereas hydro is not the best solution for other regions.
12:26:50 PM
MS. KOHLER agreed that as long as there is the regional approach
there will be competition for state dollars; however, if all of
the generating assets of the state were owned at the state level
by a single organization, all of the energy dollars would be
focused on the project that delivers the most benefit into the
system as a whole. At that point the benefit would be
transmitted throughout the state, instead of $40 million spent
on one community of 800 residents.
12:28:10 PM
MR. HAAGENSON pointed out that transmission lines over long
distances are extremely expensive. He stated his support for
[power] operation as individual communities with a regional
workforce performing maintenance.
12:29:05 PM
MR. DAVIES stressed that regional competition was one of the
reasons the governance must be at a high level within state
government. It is also necessary to have a mechanism within the
energy policy to make hard and transparent decisions about the
allocation of resources since there will always be competition.
12:30:16 PM
REPRESENTATIVE JOHANSEN observed that without institutional
back-up behind requests for funding, legislative allocations are
sometimes decided by "who is sitting in the finance [committee]
chair."
MR. DAVIES agreed.
12:31:26 PM
REPRESENTATIVE DAHLSTROM warned against the creation of a single
entity that would take away a consumer's choice for power,
water, or cable service. She recalled the "phone wars" and
competition between Chugach Electric and MEA.
12:32:49 PM
REPRESENTATIVE JOHNSON expressed his understanding that the
discussion was not about creating three or four separate
regional entities, but an entity similar to the Department of
Transportation & Public Facilities [DOT&PF], with one
commissioner that manages regions within one department.
12:35:00 PM
CO-CHAIR EDGMON agreed with the comparison. He then commented
that regional competitions, like urban versus rural and majority
versus minority, are but one of the disputes dealt with by the
legislature. He requested further comments from panel members.
12:35:59 PM
MR. PICKETT informed the committee that the RCA economically
regulates only 32 of the 150 electric utilities in the state;
however, the RCA does issue the Certificate of Public
Convenience and Necessity [CON] regarding the utilities' fitness
and ability to provide. The RCA is then in the position of
regulating a utility without authority over the utility's
operation until there is a problem. Furthermore, over $2
billion in state and federal monies has been invested in rural
power systems, based on a supply of electric power that some
villages struggle to generate. He warned of the severe risk,
even though villages receive some support from AEA and the
Department of Commerce, Community, & Economic Development
(DCC&ED). Mr. Pickett explained that there are about 15
villages struggling to maintain their power generation, and some
are not receiving Power Cost Equalization [PCE] money simply due
to the failure to properly apply. He described the situation in
Adak, where the community was left with the responsibility to
manage the power plant after the naval base was closed.
12:39:18 PM
MS. KOHLER responded to Representative Dahlstrom and pointed out
that many communities do not have a choice for their power
supply now. A single entity generating electricity would supply
power to each community, and then the local plant would
distribute the electricity. She restated her belief that the
best long-term solution is one self-sustaining entity,
delivering the best value, and passing along its benefit
throughout the state.
12:40:40 PM
CO-CHAIR MILLETT, regarding the task force suggested by Mr.
Davies, opined that the legislature has formed many task forces,
and although some make solid recommendations, they do not have
the authority to act. At this time, there is not "a one-stop
shop for energy" information from any state agency and rural
residents are unsure where to go for assistance. For a problem
of this scale, she asked about re-aligning government with the
authority and policy to administer.
12:42:53 PM
MR. DAVIES acknowledged that both solutions have strengths.
However, he opined that a lot of energy would be spent re-
arranging and creating a new department that could be better
spent solving the problem. Moreover, the development of an
energy plan and the creation of a vision and the policies that
follow are short-term enterprises; a taskforce with a mandate
from the governor is the best and quickest way to get the
problem solved.
12:44:24 PM
MR. BUTCHER emphasized the governor's action to put AEA at
cabinet level and said it was a step in the right direction.
However, due to the number of decisions to be made, and the
separate pieces of legislation to be dealt with, a taskforce may
be more capable than AEA.
12:45:33 PM
MS. KOHLER expressed her desire to be part of the solution.
12:45:49 PM
MR. CANNELOS opined that AEA is under-resourced for the task it
already has.
12:46:03 PM
MR. HAAGENSON said:
Governance is a tricky thing ... How do you tell
somebody through a paragraph what you want to have
come out of the other end of the chute? It's hard to
write policy, it's hard to give that direction, it may
make more sense to actually have a person who says,
"Here's where we're going." ... I think what you are
wrestling with is how do you tell somebody to go on a
specific mission with a broad direction?... That's
the challenge of the legislature all the way down to
every board of every utility in the state.
MR. HAAGENSON further explained that Administrative Order
No. 249 directed state governmental agencies to work
together better regarding economic development, of which
"energy is a piece of the economic development puzzle."
12:47:36 PM
MS. LELAND re-stated that APA is on record recommending a
cabinet level energy department. She pointed out that the
present system wherein all of the utilities come to the
legislature to request funding, whether for simple improvements,
or for very dire needs, forces competition. An energy
department can set the highest priorities and that is something
that is not being done now.
12:49:04 PM
MR. PICKETT expressed his belief that the AEA should be the
cabinet level department and the focal point for energy planning
and for managing energy programs. He concurred that AEA is
understaffed and would need more resources to accomplish its
mission. Furthermore, Alaska should develop a set of guiding
principles to evaluate energy activities, including performance
measures for accountability purposes. Mr. Pickett turned to the
greater Railbelt energy and transmission legislation and opined
that it is probably the most important legislation this
legislature will deal with and time is of the essence.
12:50:23 PM
MR. ROSE agreed that there are two choices: consolidation
within the governor's office or consolidation within a state
agency. He observed that consolidation within the governor's
office is a short-term solution; however, his personal opinion
is that the long-term solution is for a cabinet level energy
department with expert staffing.
12:51:55 PM
REPRESENTATIVE JOHNSON expressed his hope that those present
today will have the resolve to advance the ideas presented, no
matter what the price of oil. He said, "Then when we look back,
our grandkids can say, 'Those guys did what they should have
done, under adverse circumstances'.... That we don't look back
on it in a year or two years and say, 'Whatever happened to that
meeting that Saturday that was so good?'" He concluded by
saying, "Let's have the courage to finish."
12:54:22 PM
REPRESENTATIVE JOHANSEN re-stated his point that a taskforce is
a reactionary solution that can be dissolved by an executive
decision at any time. These are a long-term issues - FERC
permitting for a dam takes 15 years - that require long-term,
daily attention beyond the scope of a taskforce.
12:57:20 PM
CO-CHAIR EDGMON advised that today the core elements of
government services such as health, transportation, or
education, also include the critical need for energy. This is
the time to recognize providing energy will take a lot of effort
and money on the part of the state. Bush residents report that
their communities will not survive another winter like last
year. Co-Chair Edgmon then presented question three: Discuss
the strengths and weaknesses in the regulatory framework that
governs energy in Alaska.
12:59:32 PM
MR. PICKETT described some of the challenges of regulation such
as balancing the interests of disparate parties and "gaps" in
the Alaska statutes governing the regulatory system. The rate-
making model for economically regulating utilities is time-
consuming, very expensive, and can be frustrating. Relating
these regulations to the larger electric utilities has been
highly contentious, and prone to litigation and hard feelings.
He expressed his hope that the [Greater Railbelt Energy and
Transmission Corporation] legislation will be a benefit to the
utilities and the state. Mr. Pickett spoke about misconceptions
regarding the responsibilities of the RCA, particularly with
issuance of CONs, and clarified that some utilities are exempt
from cost regulation by statute or by FERC. In fact, in 2002-
2003, the Village Safe Water Program [VSP] was concerned about
the capacity of smaller water and sewer utilities. As the
utilities were technically exempted, the funding source only
required that utilities apply for provisional certification.
During the past five years, the certifications were not
completed, and now the RCA must decide on the certifications for
ten communities. The question as to whether there is protection
for those communities is quite debatable. Furthermore,
additional work needs to be done on the regulations for entities
producing power, as the present model does not make sense and
does not work.
1:04:05 PM
MS. LELAND informed the committee that she has been involved
with the RCA on the net metering issue. She commended the RCA
for holding workshops for all of the interested parties and
surmised the workshops are leading to an agreement on the issue.
Unfortunately, the amount of processing time the RCA needs to do
its work is a weakness. Regarding her interaction with the
Department of Transportation & Public Facilities (DOT&PF), she
related her suggestion for using a negotiated rulemaking process
or workshops for public comment was rejected by the department.
1:07:01 PM
MR. HAAGENSON understood the RCA is trying to balance the health
of the utilities with low cost to the consumer. It is a
controversial position, and a "terrible position for them to be
in, but they do it very well." As Commissioner Pickett
mentioned, regulations addressing independent power producers
(IPPs) guarantee that when there is state grant money going into
a power project, the project will result in a public benefit.
Recalling his experience with cooperatives, Mr. Haagenson noted
that cooperatives are not regulated in the Lower 48. He
concluded that the RCA has strengths and weaknesses.
1:09:43 PM
MS. KOHLER noted that AVEC is not economically regulated by the
RCA. However, from her previous work experience, she said the
RCA must sit in judgment in rate cases and "utility wars". Her
perspective from rural Alaska is that the RCA bends over
backward for non regulated utilities and makes an effort to
bring non compliant utilities into compliancy. On the other
hand, the commission "is spread too thin" and loses its
experienced staff to the utilities.
1:11:48 PM
MR. BUTCHER expressed his belief that the state is lucky to have
Mr. Pickett as commissioner of the RCA.
1:12:13 PM
MR. DAVIES agreed that the statutes governing the RCA work
reasonably well. However, with respect to the issues of the
energy plan and energy efficiency, the utilities do well with
the supply side but not with conservation. If the utilities and
the RCA become involved in permitting or requiring system
benefit charges, that will require policy guidance from the
state. He expressed further concern, not about the framework of
the regulations, but about the lack of policy guidance regarding
energy efficiency.
1:13:49 PM
MR. ROSE stated that REAP does not have direct involvement with
the RCA. Assuming there will be [a new state energy policy], it
will be important for the regulatory framework to fit the new
vision to put energy efficiency first. In addition, it is
important for the RCA to have sufficient tools to put
externalized cost on some fuels until there is federal
regulation on carbon. It is inevitable that these fuels will
have a higher price. Lastly, the RCA must have the resources to
forecast fuel prices for new projects.
1:16:46 PM
REPRESENTATIVE TUCK stated the importance of regulations that
set the foundations to bring energy costs down, provide
services, and make it so families can survive and businesses can
flourish. There must be a centralized structure to provide
water and the transmission of power for the benefit of all.
Historically, the United States became a superpower largely
because of its investment in a system of railroads envisioned by
President Lincoln. In a similar manner, Alaska's economy will
benefit from its investment in an energy system. Furthermore,
Alaska can lead the nation by stimulating its economy through
weatherization and more efficient sources of power. He pointed
out that from 1991 to 2007 there was a 30 percent increase in
the demand and supply of electricity. However, due to
deregulation, there was an increase in transmission [lines] of
only 10 percent. Representative Tuck stressed that all sources
of energy, including renewable energy, must be transmitted, and
limited transmission systems result in blackouts. Alaska needs
regulatory certainty to get new sources of power to its
population. He concluded that the success of this vision will
rely heavily on the RCA.
1:20:20 PM
REPRESENTATIVE EDGMON presented question 4: Discuss how the
state should address the challenge of providing affordable
energy in both urban and rural Alaska.
1:21:09 PM
MR. DAVIES advised the state must develop a coherent energy plan
for all of Alaska that has a clear cabinet level presence,
either as an agency or a taskforce, and that has policy guidance
from the legislature. Secondly, he recommended using a process
equivalent to an integrated design process. He explained that
an integrated design process in construction brings all of the
parties, including subcontractors and suppliers, along with the
owner, architect, builder, and users, together at the outset for
collaboration before construction decisions are made. He
described this as a circular, rather than linear, process and
suggested this "holistic" view can be applied to the energy
needs of a building, a neighborhood, or a community. Regarding
rural Alaska, Mr. Davies urged the state to provide tools to
assist villages with their energy plans beyond providing
information about the resources available. For example,
providing assistance with grant applications, and evaluating
unproven systems through applied research and development prior
to their installation in the Alaska environment. Next, the
state must provide capital for infrastructure improvements to
energy systems. Lastly, state programs must foster local
manufacture and agriculture, emphasizing the use of local
materials and labor, in order to strive for sustainability.
1:27:28 PM
MR. BUTCHER observed that the size of the state inhibits
residents from sharing goals. While serving on the governor's
gas line team he realized that residents in Sitka and Ketchikan
did not see how the gas line would benefit them, since it would
not reduce energy costs or provide jobs in Southeast. On the
other hand, the increased cost of energy has raised the level of
urban areas understanding of rural energy problems. The result
is that Alaskans are beginning to relate to one another better.
The other issue is the difference between short- and long-term
goals; energy efficiency can begin immediately whereas decisions
also need to be made now for projects ten or fifteen years away.
1:30:13 PM
MS. KOHLER informed the committee she is currently paying 14.2
cents per kWh, Marilyn [Leland] pays a little over 10 cents,
Fairbanks residents pay 23 cents, Sitka residents pay 8.5 cents,
Juneau residents pay 10 cents, Barrow residents pay 8 cents, and
in Ambler, a business pays almost 80 cents. This incredible
disparity is unique to Alaska. The rural percentage of
consumption is so small, its voice is not heard. She re-stated
that her concept of all generation sold at the same cost across
the state would result in a very small increase for urban areas.
Regarding heating fuel, she stated a village homeowner pays 10
times the cost of a Btu in Anchorage. There is a need to look
at the large picture of energy consumption across the state to
make a more equitable solution. Some areas of the state have
alternative sources for fuel but the rural areas do not. Ms.
Kohler concluded that electricity is a basic human necessity and
should be provided at a reasonable cost.
1:33:09 PM
MR. CANNELOS gave examples of state and federal capital
projects. In Ft. Yukon, the Denali Commission recently opened a
clinic and other [state] agencies are improving water and sewer
systems, roads, the airport, and housing. However, now the
village does not have sufficient electricity generating
capacity. He urged government communication through some
mechanism to avoid "these train wrecks." In Stevens Village, a
water and sewer system that was too expensive for residents to
pay for was cancelled when the agency and the tribe looked at
the situation honestly. Mr. Cannelos stressed that state
agencies must fund projects with payback, such as simple moorage
systems in the Yukon, Kuskoquim, and Koyukuk rivers that will
enable fuel barges to tie up and prevent damage to land and
fish. Lastly, he noted that Alaska must be ready for "good
surprises" and "game changers" such as high voltage direct
current.
1:36:31 PM
REPRESENTATIVE JOHANSEN related his experience with the Swan-
Tyee Intertie. Costs were greatly reduced when the project
coordinated with existing DOT&PF road projects. He concluded
that the citizen/consumer ultimately benefits when agencies team
up and save money.
1:38:15 PM
MR. HAAGENSON presented two viewpoints: the pipeline is great
for Alaska, but not for Alaskans; the bullet line is good for
Alaskans, but not for Alaska. He asked whether the state can
share the wealth without increasing the "passiveness" of its
residents. Today's economic model must change. He urged
Alaskans to begin looking at the long-term supplies of fuel and
to anticipate increased costs and shortages; in fact, Anchorage
has only five more years of a cheap supply of natural gas. He
supported directing state funds toward building infrastructure,
with the operating costs after construction paid by local users.
Mr. Haagenson read from Administrative Order 249, "Alaska needs
to learn how to retain wealth." He then gave the example of
federal money that came into the state for a project but was
immediately used to purchase hardware from Vermont. Mr.
Haagenson turned to the subject of reducing imports of energy,
food, technology, labor, and leadership. He opined that
reducing imports is the way to grow Alaska's economy. At the
same time the state needs to export value-added products instead
of raw materials. He concluded that all of these ideas need the
participation of "an actively involved Alaskan, not a passive
Alaskan."
1:42:28 PM
MS. LELAND expressed her belief that the state needs an energy
department at the cabinet level; this department needs to be
charged with creating a successful energy plan, educating
Alaskans on energy conservation, coordinating state agencies,
prioritizing energy needs statewide, and coordinating the
research and development of energy products. She also mentioned
that the Alaska Natural Gas Development Authority (ANGDA) is
creating a gas supply cooperative for the Railbelt utilities.
She advised that this needs to be done for the entire state so
in times of high prices "fuel hedging" would be possible.
1:45:21 PM
MR. PICKETT added that the reliability of energy should be
considered in addition to affordability. Alaska's geography is
different compared to the Lower 48 in that the state is isolated
from the Lower 48, and isolated within itself. He doubted
whether the state is prepared to respond to a loss of the supply
of any product that can become a matter of life and death.
Furthermore, he stressed that the state's commitment to this
issue should survive from one administration to the next;
otherwise, the issue returns year after year "like it never
happened." Given the aging of the state's infrastructure, delay
is not an option. Mr. Picket stressed that the Railbelt
legislation must be addressed as the utilities must make
decisions now, or the RCA will require them to make decisions on
capital plans as individual entities. He concluded that this is
an historical opportunity that must not be missed.
1:48:09 PM
MR. ROSE urged the committee to consider that energy is the most
important issue in the state; in fact, without energy Alaska
cannot have a vibrant economy and some villages will have no
economy at all. He suggested starting with restructuring the
governance, looking at regional planning, and developing a
vision; these are things that can be done now along with energy
efficiency measures. In the long-term, renewable energy will be
an important factor as it will stabilize the rate for
electricity. As far as heat and transportation issues, there
are new possibilities being developed such as bio mass, solar
thermal, tidal and wave, and hydroelectric. Mr. Rose stressed
the importance of diversity and warned that even with a pipeline
bringing a new supply of natural gas, there is no way to know
what the world price of gas will be. Problems unique to Alaska
include: diversification; transmission systems; limited dollars;
economies of scale; and long distances. A vision and long-term
policies will stabilize the atmosphere for oil companies and
business investors. In order to expand the renewable energy
grant program more loans and technical assistance are needed.
He supported research and development and pointed out that
systems must be specific to Alaska, especially in rural areas.
Mr. Rose re-stated his support for workforce development,
increased manufacturing and agriculture, blended value
investing, and in-state investment of the Alaska Permanent Fund.
He concluded that with the right vision, Alaska has the
resources and the money to be a world leader.
1:54:23 PM
CHAIR EDGMON commended the panel on their participation. He
asked for final comments from committee members.
1:55:05 PM
REPRESENTATIVE MILLETT expressed her appreciation to the panel
members and to others who have contributed. The energy
committee has the direction it needs to continue its work during
the interim.
1:57:02 PM
CHAIR EDGMON encouraged participants and others to submit
comments in writing.
1:57:19 PM
REPRESENTATIVE TUCK also appreciated the deep passion
participants have for the future of Alaska. He re-stated the
need for a vision, quick action, retaining wealth, creating
wealth, and low cost energy. He noted the increased potential
for manufacturing in Alaska such as the shipyards in Southeast,
and developments by the University of Alaska in science and
technology.
2:00:10 PM
REPRESENTATIVE JOHANSEN asked for more information on the
economic development committee.
MR. HAAGENSON responded that the legacy team organized by the
governor is working on an overview of economic development.
2:01:11 PM
REPRESENTATIVE JOHANSEN expressed his appreciation for the work
of the panel and of the energy committee co-chairs.
2:02:01 PM
REPRESENTATIVE DAHLSTROM agreed with the comments by the other
committee members.
2:02:21 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Energy meeting was adjourned at 2:02 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Roundtable Topics.pdf |
HENE 4/4/2009 10:00:00 AM |