02/22/2011 03:00 PM House ENERGY
| Audio | Topic |
|---|---|
| Start | |
| HB103 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 103 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ENERGY
February 22, 2011
3:06 p.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Lance Pruitt, Co-Chair
Representative Bob Lynn
Representative Kurt Olson
Representative Dan Saddler
Representative Pete Petersen
Representative Chris Tuck
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 103
"An Act relating to the procurement of supplies, services,
professional services, and construction for the Alaska Energy
Authority; establishing the Alaska Railbelt energy fund and
relating to the fund; relating to and repealing the Railbelt
energy fund; relating to the quorum of the board of the Alaska
Energy Authority; relating to the powers of the Alaska Energy
Authority regarding employees and the transfer of certain
employees of the Alaska Industrial Development Export Authority
to the Alaska Energy Authority; relating to acquiring or
constructing certain projects by the Alaska Energy Authority;
relating to the definition of 'feasibility study' in the Alaska
Energy Authority Act; and providing for an effective date."
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 103
SHORT TITLE: POWER PROJECT; ALASKA ENERGY AUTHORITY
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/18/11 (H) READ THE FIRST TIME - REFERRALS
01/18/11 (H) ENE, FIN
02/15/11 (H) ENE AT 3:00 PM BARNES 124
02/15/11 (H) Heard & Held
02/15/11 (H) MINUTE(ENE)
02/17/11 (H) ENE AT 3:00 PM BARNES 124
02/17/11 (H) Heard & Held
02/17/11 (H) MINUTE(ENE)
02/22/11 (H) ENE AT 3:00 PM BARNES 124
WITNESS REGISTER
SARA FISHER-GOAD, Executive Director
Alaska Energy Authority (AEA)
Department of Commerce, Community & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: Testified during the hearing on HB 103.
BRYAN CAREY, Project Manager
Alaska Energy Authority (AEA)
Department of Commerce, Community & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: Testified during the hearing on HB 103.
CHRIS RUTZ, Procurement Officer
Alaska Energy Authority (AEA)
Department of Commerce, Community & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: Testified during the hearing on HB 103.
BRIAN BJORKQUIST, Senior Assistant Attorney General
Labor and State Affairs Section
Civil Division (Anchorage)
Department of Law (DOL)
Anchorage, Alaska
POSITION STATEMENT: Testified during the hearing on HB 103.
ACTION NARRATIVE
3:06:22 PM
CO-CHAIR NEAL FOSTER called the House Special Committee on
Energy meeting to order at 3:06 p.m. Representatives Foster,
Petersen, Tuck, Saddler and Pruitt were present at the call to
order. Representatives Lynn and Olson arrived as the meeting
was in progress.
HB 103-POWER PROJECT; ALASKA ENERGY AUTHORITY
3:07:04 PM
CO-CHAIR FOSTER announced that the only order of business would
be HOUSE BILL NO. 103, "An Act relating to the procurement of
supplies, services, professional services, and construction for
the Alaska Energy Authority; establishing the Alaska Railbelt
energy fund and relating to the fund; relating to and repealing
the Railbelt energy fund; relating to the quorum of the board of
the Alaska Energy Authority; relating to the powers of the
Alaska Energy Authority regarding employees and the transfer of
certain employees of the Alaska Industrial Development Export
Authority to the Alaska Energy Authority; relating to acquiring
or constructing certain projects by the Alaska Energy Authority;
relating to the definition of 'feasibility study' in the Alaska
Energy Authority Act; and providing for an effective date." He
recalled that at the last meeting questions were raised about
the 3/16/09 study on the proposed project prepared for the
Alaska Energy Authority (AEA) by HDR Alaska, Inc., HDR/DTA, and
Northern Economics, and said a copy of that study was included
in the committee packet.
3:08:19 PM
SARA FISHER-GOAD, Executive Director, Alaska Energy Authority
(AEA), Department of Commerce, Community & Economic Development
(DCCED), stated Mr. Carey, Project Manager, would address the
cost estimates from the aforementioned 2009 study.
3:09:33 PM
BRYAN CAREY, Project Manager, Alaska Energy Authority (AEA),
Department of Commerce, Community & Economic Development
(DCCED), referred to the 3/16/09 report and said it was an
interim memorandum = not the final report - on the project. The
memorandum estimated the construction cost of $8.3-$8.4 million
for the "full-size" Watana dam built to a height of 885 feet.
The project now presented is the "low" Watana project -
construction of a dam to a height of 700 feet - for which the
interim memorandum estimated a cost of $6.9 million. There are
errors in the cost numbers, such as in the size of, and
improvements to, the construction camp, and costs for the
construction camp are also lower now due to the efficiency of
present-day equipment. He estimated this reduction made a
difference of about $400-$500 million. Also included in the
memorandum were almost $600 million for access via a road and a
large suspension bridge over Devil Canyon; however, the project
now proposes only the road. Furthermore, Mr. Carey advised that
in 1982, the transmission system around Anchorage and in the
Mat-Su Valley was much less developed, thus the older estimate
included more transmission lines and submarine cable than are
necessary now. In fact, the transmission lines from Gold Creek
were removed from the estimate and there have been changes to
the transmission substations that affect costs throughout the
project. In addition, because the contingency allowance is a
percentage of 20 percent, any major changes reduce that cost
also. Similarly, engineering and environmental construction
management were estimated at 11 percent, and since a substantial
amount of that work has been performed, that number was reduced
to reflect the studies that have already occurred. Because the
basics of the dam have not changed much, even though
construction costs increase with a larger dam, costs based on
percentages, such as design, engineering and environmental
construction management, do not increase as much. He concluded
that these changes account for the large drop in costs.
3:16:04 PM
REPRESENTATIVE SADDLER asked for the amount of savings in the
categories of earth moving, camp housing, access, and
transmission lines.
MR. CAREY explained that the reduction in cost for the
construction camp is $429 million, and the interim estimate was
$612 million.
MS. FISHER-GOAD suggested that AEA provide a spreadsheet of the
differences in figures "from now to then."
3:18:22 PM
REPRESENTATIVE TUCK asked that the spreadsheet include the
difference in costs for the transmission line from Gold Creek.
MR. CAREY, in response to Ms. Fisher-Goad, restated he will
prepare a spreadsheet that shows the change in numbers that has
occurred from "March to November, and as part of the spreadsheet
also it has the Gold Creek to other points type of costs."
REPRESENTATIVE PETERSEN asked whether the estimates should
include upgrading to a smart grid.
3:19:46 PM
MR. CAREY advised a cost estimate pertaining to a smart grid
would take several months to generate unless it is already
available in the Regional Integrated Resource Plan (RIRP).
CO-CHAIR PRUITT encouraged the committee to discuss the kilowatt
per hour (kWh) cost to consumers. In addition, he requested "an
estimate of what we expect if the state kicked in at different
levels, what it might be to the consumer so we have an idea of
what ... to expect, and then compare that to the cost of what it
is now and to other sources of generation."
3:21:46 PM
REPRESENTATIVE TUCK referred to page 4 of the interim
memorandum, pointing out that the project spent $145 million
during Fiscal Year 1979 (FY79) to FY86, and in FY09, AEA was
authorized to reevaluate the project. He asked if these studies
were the engineering and environmental work that was already
done.
MR. CAREY advised that most of the work was done in the early
'80s, observing that it is hard to get time and resources spent
by federal agencies without a preliminary permit. Thus the
funds authorized for AEA in FY09 were not spent on a substantial
amount of environmental work, but mostly on engineering and
conceptual studies of embankment and roller-compacted concrete
dam construction. Cost estimates of environmental work are
still required to reflect changes in regulations and the
resources affected.
3:24:17 PM
REPRESENTATIVE TUCK emphasized the need to compare similar
costs. He then asked how the time necessary for Federal Energy
Regulatory Commission (FERC) licensing was reduced from eight to
five years.
MR. CAREY said the amount of time needed to receive the FERC
license is subject to different opinions. The agency was
advised by a former FERC employee that a five-year time period
is possible with an aggressive schedule. In further response to
Representative Tuck, he said he would attempt to address the
timeline, although this is difficult to forecast.
3:27:20 PM
CO-CHAIR FOSTER referred to the Table 1 Summary on page 3 of the
interim memorandum, pointing out that the estimated cost per kWh
during the first 50 years of operation of the proposed low
Watana project is $0.20, and asked how that cost compares with
other hydroelectric (hydro) projects.
MR. CAREY explained that $0.20 per kWh is a higher cost than
other current hydro projects in and out of the state. However,
this estimate is based on construction costs of $6.9 million
funded by private equity financing. Generally, hydro power in
the Pacific Northwest costs less than $0.05 per kWh.
3:29:14 PM
REPRESENTATIVE PETERSEN surmised that if the state invested 50
percent of the cost of construction, after a 50-year payback,
the cost of power would be about $0.10.
MR. CAREY gave the example of the Bradley Lake Hydroelectric
Project (Bradley Lake Hydro), and said after 35 years the bonds
will be paid back and then the payback to the state for its
contribution begins. He then said, "Depending on the length of
the time that the state is to be receiving funds back on it,
when the state no longer wishes to be, receive funds back for
the project, then the cost of generation at that time will be
likely less than a penny per kilowatt."
3:30:50 PM
CO-CHAIR PRUITT asked who owns the land that will be impacted.
MS. FISHER-GOAD stated the major landholders are the federal
government, Tyonek Native Corporation, Cook Inlet Region Inc.
(CIRI), the state, and others who are not indentified at this
time.
3:31:57 PM
CO-CHAIR PRUITT asked whether the landowners are supportive of
the project.
MR. CAREY advised that Tyonek Native Corporation will provide a
letter of support, and discussions with CIRI are ongoing.
CO-CHAIR FOSTER referred to section 1 of the bill and asked how
the changes regarding procurement will help advance the dam.
3:33:39 PM
MS. FISHER-GOAD explained the procurement section of HB 103 is
not focused on the project, but addresses AEA's internal
processes as a state corporation. The purpose of the section is
to give AEA authority - similar to the Alaska Housing Finance
Corporation (AHFC) - to establish one set of procurement rules
for all of the procurement processes with which AEA is involved.
Currently AEA operates under AS 36.30, and it also handles the
procurement of services for its work with communities through
grants. The intent is to allow AEA to operate under one set of
rules and adopt regulations through a public process. She noted
that often specific procurement plans are established for a
large project such as this.
3:35:37 PM
CHRIS RUTZ, Procurement Officer, Alaska Energy Authority (AEA),
Department of Commerce, Community & Economic Development
(DCCED), informed the committee he sought advice from Montgomery
Watson Alaska (MW Alaska), Anchorage, Alaska, which is an
engineering firm assisting with the project. Regarding
procurement plans on big projects, MW Alaska recommended a
"qualifications-based selection process," not a standard low-bid
process. Other models discussed were "partnering" and "owner-
supplied materials," in which arrangements are made in advance
for key components. Mr. Rutz opined this project would be a
very complex procurement involving analyzing risk, determining
the best methods, and selecting competent contractors.
Furthermore, the legislature will probably be interested in
securing jobs for Alaskans through contracts that encourage the
use of local labor. Regardless of whether AEA is operating
under AS 36.30 or its own rules, there will be many discussions
with the industry on the best procurement process for this
project.
3:39:21 PM
REPRESENTATIVE TUCK asked what procurement code was used for
the construction of the Bradley Lake Hydroelectric Project.
MR. RUTZ was unsure, but added that the Bradley Lake project was
built before the procurement code was established in 1988.
3:40:09 PM
The committee took an at-ease from 3:40 p.m. to 3:42 p.m.
3:42:13 PM
The committee took a brief at-ease.
3:43:33 PM
REPRESENTATIVE PETERSEN has heard concerns from legislators and
constituents that there are more salmon and other fish in the
area than indicated by the interim memorandum. He suggested
there may be "push back from fish ... environmental-type
groups."
MS. FISHER-GOAD stated her department has received a request
from the commissioner of the Alaska Department of Fish & Game
(ADFG) and from legislators asking for further information on
fish impacts, and she reminded the committee that the
preliminary permit application begins the analysis process.
Federal licensing agencies and resource agencies will determine
what needs to be studied and what additional habitat, fish, and
game issues are to be addressed.
BRIAN BJORKQUIST, Senior Assistant Attorney General, Labor and
State Affairs Section, Civil Division (Anchorage), Department of
Law (DOL), added that FERC is required to work with resource
agencies and incorporate fish and wildlife protections into the
conditions of the license.
3:46:32 PM
CO-CHAIR PRUITT asked whether a business plan for the project is
in place.
MS. FISHER-GOAD advised that the project will progress through
several stages of analyses beginning with the application for
the FERC license, a financing plan addressing the utilities and
power sales agreements (PSAs), and the discussion of the state's
role regarding its capital contributions and issuing debt. She
said, "There's a variety of places that there'd be decision
points."
3:48:18 PM
CO-CHAIR PRUITT clarified that he wants to ensure that a proper
plan is in place to get to the end result, beyond just knowing
the total cost.
MS. FISHER-GOAD relayed that the capital project request
included an estimated schedule for the steps that will be taken
during expenditure of the $65 million allocation. She opined
the FERC licensing process and PSAs will be completed in about
five years. In the '80s, the project was set aside for a
variety of reasons; the process was started again in 2008
because of the state's new goal of 50 percent renewable power
for electricity.
3:50:57 PM
MR. BJORKQUIST pointed out that the time for a business plan is
after the issuance of the FERC license, and when the utilities
are prepared to execute PSAs, the Regulatory Commission of
Alaska (RCA) is prepared to approve the PSAs, and the
legislature is willing to appropriate funds. Further components
that must be complete prior to the aforementioned are the
finalization of PSAs, operating and maintenance agreements, and
plans for the transmission of power. Presently, only
preliminary information can be provided.
REPRESENTATIVE SADDLER asked whether hydro energy is considered
renewable under a federal definition.
3:53:20 PM
MR. BJORKQUIST expressed his understanding that for certain
federal programs hydro power is not considered renewable. He
explained that in the Lower 48 energy is available from many
suppliers; however, in Alaska, the only option may be between
hydro and diesel, and that calls for "a completely different ...
frame of reference." In further response to Representative
Saddler, he said, "I couldn't tell you the specifics."
CO-CHAIR FOSTER noted the Alaska Power Association is urging a
change in the federal definition. He then asked whether copies
of legislators' letters to AEA regarding fish issues are
available for the committee.
3:55:37 PM
MS. FISHER-GOAD indicated yes.
CO-CHAIR FOSTER asked Ms. Fisher-Goad to elaborate on the
concerns about HB 103 regarding the expansion of the scope of
AEA's power.
3:56:19 PM
MS. FISHER-GOAD acknowledged that the bill provides general
authority for AEA to construct and own new projects. This
specific project would be funded by a capital appropriation in a
separate bill. Although money to capitalize the Alaska Railbelt
Energy Fund would require a legislative appropriation, existing
law allows AEA to issue grants and perform certain tasks without
further legislative appropriation. Thus the concern is about
what authority the legislature wants agencies to have regarding
expending funds. For example, the legislature has a variety of
procedures for funding, such as the Emerging Energy Technology
Fund from which AEA can issue grants without further authority,
and the Renewable Energy Grant Recommendation Program that
requires AEA to submit a list of projects to the legislature for
funding. The proposed language in HB 103 is similar to the
procedure of the Emerging Energy Technology Fund, whereas AEA
has "a certain amount of latitude to spend the funds, without
further legislative appropriation." Ms. Fisher-Goad pointed out
that there is no money in the fund at this time.
3:59:31 PM
CO-CHAIR PRUITT called attention to section 8 of the bill, and
suggested there is a misconception that creating a subsidiary
may result in the subsidiary having additional powers.
MR. BJORKQUIST assured the committee that AEA can only grant to
the subsidiary powers that it holds; therefore, the boundaries
of the subsidiary are the same as the statutory authority of
AEA. Moreover, AEA can choose to grant the subsidiary less
power than it holds.
4:01:23 PM
CO-CHAIR PRUITT observed that AEA currently handles other funds,
and asked for clarification that the proposals in the bill
address not only the low Watana project, but all AEA funds in
the state. Additionally, he asked for an opinion on the pros
and cons of limiting the legislation to the low Watana project.
MS. FISHER-GOAD confirmed that HB 103 provides AEA the ability
to own and construct new projects; in fact, it is important for
AEA to return to its pre-1993 status in order to pursue future
opportunities. However, her agency should establish criteria to
distinguish between projects that require different levels of
ownership by the state, such as those in smaller communities.
She expressed her intent to discuss with AEA board members how
to implement the proposed expansion of powers. Ms. Fisher-Goad
reminded the committee that AEA does not have funds waiting be
invested into new projects. She cautioned that AEA is unable to
act on opportunities that arise during interim, and opined this
is a tool to reestablish AEA's programs and responsibilities.
4:06:43 PM
CO-CHAIR PRUITT asked how this affects the Alaska Industrial
Development & Export Authority (AIDEA), and whether AEA will
have the bonding ability to establish projects without
legislative approval.
4:07:07 PM
MS. FISHER-GOAD explained that AIDEA and AEA are separate and
distinct corporations, except for some staffing issues, and that
the board members are the same people, although it is not a
joint board. She stressed that AEA is recognized as an
independent corporation and retains the ability to issue bonds.
The idea of whether AEA would issue bonds and own projects begs
the question of what would service the debt.
4:08:49 PM
CO-CHAIR FOSTER announced HB 103 was held over for public
testimony.
4:09:21 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Energy meeting was adjourned at 4:09 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Susitna Hydroelectric Project Evaluation, 16 March 2009.pdf |
HENE 2/22/2011 3:00:00 PM |
2009 Report Prepared for the Alaska Energy Authority |
| AEA Cost Comparison between 2009 and recent estimates for Susitna Hydroelectric Project, 23 February 2011.pdf |
HENE 2/22/2011 3:00:00 PM |
AEA Cost Comparison, 23 February 2011 |