Legislature(2013 - 2014)BARNES 124

04/03/2013 08:00 AM House ENERGY


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08:04:07 AM Start
08:04:35 AM Overview(s): State Energy Policy
10:00:17 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Overview: State Energy Policy by Sara TELECONFERENCED
Fisher-Goad, Executive Director, Alaska
Energy Authority
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE SPECIAL COMMITTEE ON ENERGY                                                                              
                         April 3, 2013                                                                                          
                           8:03 a.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Doug Isaacson, Co-Chair                                                                                          
Representative Neal Foster                                                                                                      
Representative Shelley Hughes                                                                                                   
Representative Benjamin Nageak                                                                                                  
Representative Andy Josephson                                                                                                   
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Charisse Millett, Co-Chair                                                                                       
Representative Pete Higgins                                                                                                     
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
OVERVIEW(S):  STATE ENERGY POLICY                                                                                               
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
SARA FISHER-GOAD, Executive Director                                                                                            
Alaska Energy Authority (AEA)                                                                                                   
Department of Commerce, Community & Economic Development (DCCED)                                                                
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Provided a PowerPoint presentation entitled                                                              
"Alaska Energy Authority Policy Overview," and dated 4/3/13.                                                                    
                                                                                                                                
GENE THERRIAULT, Deputy Director                                                                                                
Statewide Energy Policy Development                                                                                             
Alaska Energy Authority (AEA)                                                                                                   
Department of Commerce, Community & Economic Development (DCCED)                                                                
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Participated in the PowerPoint presentation                                                              
by the Alaska Energy Authority.                                                                                                 
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
8:04:07 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  DOUG ISAACSON  called  the House  Special Committee  on                                                             
Energy meeting  to order  at 8:03  a.m.   Representatives Nageak,                                                               
Josephson,  and  Isaacson were  present  at  the call  to  order.                                                               
Representatives Foster and  Hughes arrived as the  meeting was in                                                               
progress.                                                                                                                       
                                                                                                                                
^OVERVIEW(S):  STATE ENERGY POLICY                                                                                              
               OVERVIEW(S):  STATE ENERGY POLICY                                                                            
                                                                                                                              
8:04:35 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  ISAACSON  announced that  the  only  order of  business                                                               
would be a  presentation by the Alaska Energy  Authority (AEA) on                                                               
the  state's energy  policy.   The presentation  will include  an                                                               
overview  of energy-related  activities ongoing  throughout state                                                               
government.                                                                                                                     
                                                                                                                                
8:06:29 AM                                                                                                                    
                                                                                                                                
SARA  FISHER-GOAD, Executive  Director,  Alaska Energy  Authority                                                               
(AEA), Department of Commerce,  Community & Economic Development,                                                               
(DCCED), said she  will talk about AEA's role  in and perspective                                                               
of the state's  energy policy.  She reminded  the committee AEA's                                                               
mission  is reducing  the  cost of  energy  through four  primary                                                               
areas:      Investing    in   Alaska's   Energy   Infrastructure;                                                               
Diversifying  Alaska's  Energy  Portfolio;  Energy  Planning  and                                                               
Policy; and  Technical and  Community Assistance  [slide 2].   In                                                               
addition,  the presentation  will include  information about  the                                                               
Interior Energy  Plan.  Ms.  Fisher-Goad assumed  the committee's                                                               
interest in how the state  agencies work together to proceed from                                                               
policy to  projects.   Many agencies in  state government  play a                                                               
role,  beginning with  the  administration  and executive  branch                                                               
providing  leadership, to  financing mechanisms  provided by  the                                                               
Alaska Industrial  Development &  Export Authority (AIDEA).   The                                                               
legislature has  a role in  directing AEA to  policy development,                                                               
and her agency  has provided project evaluations  on the Interior                                                               
Energy Plan to its board.   The board of directors has also heard                                                               
various project evaluations  such as an economic  analysis on the                                                               
introduction of a  high voltage direct current  (HVDC) project in                                                               
Alaska.   The agency  also has programs  and projects  to manage,                                                               
loans  and  direct  grants to  manage,  project  management,  and                                                               
project  oversight.    Through  its  programs,  AEA  has  made  a                                                               
commitment   to  the   legislature  to   provide  oversight   and                                                               
management as  an ongoing aspect of  projects under construction.                                                               
Ms.  Fisher-Goad stressed  that  in addition  to  AIDEA, AEA  has                                                               
partnerships  with   private  organizations   [slide  3].     She                                                               
presented a graph that depicted  public and private sector energy                                                               
programs, residential  programs with  the Alaska  Housing Finance                                                               
Corporation  (AHFC),  loan  programs,  AEA  assistance  programs,                                                               
Department  of Health  and Social  Services (DHSS)  programs, the                                                               
AEA Emerging  Technology program,  DCCED programs  for commercial                                                               
loans, the AIDEA Sustainable Energy  & Transmission Supply (SETS)                                                               
loan program,  and the Bulk  Fuel and Bridge Fuel  loan programs.                                                               
She concluded that  there are many agencies  involved in programs                                                               
related to in-state energy use [slide 4].                                                                                       
                                                                                                                                
8:14:40 AM                                                                                                                    
                                                                                                                                
GENE  THERRIAULT,   Deputy  Director,  Statewide   Energy  Policy                                                               
Development,  Alaska   Energy  Authority  (AEA),   Department  of                                                               
Commerce, Community & Economic  Development (DCCED), informed the                                                               
committee  AEA seeks  to ensure  that state  agencies follow  the                                                               
energy  policy set  by  the  governor and  the  legislature.   In                                                               
recent  history,  the  renewable  energy  fund  was  established,                                                               
energy-related goals  were set, funding sources  were established                                                               
to  achieve  energy-related goals,  and  a  loan program  through                                                               
AIDEA   was   established   to  finance   energy   infrastructure                                                               
throughout the  state.  Therefore, AEA  monitors progress towards                                                               
the  state's  goals  by  coordinating  efforts  between  agencies                                                               
[slide 5].                                                                                                                      
                                                                                                                                
CO-CHAIR  ISAACSON asked  how  AEA works  with  the many  private                                                               
energy interests in Alaska.                                                                                                     
                                                                                                                                
MR. THERRIAULT  answered there is  a lot of  collaboration during                                                               
the administration  of the  renewable energy  fund, and  there is                                                               
interaction with  the Alaska Energy Efficiency  Partnership group                                                               
on implementing energy policy.                                                                                                  
                                                                                                                                
CO-CHAIR ISAACSON inquired as to the best way to communicate.                                                                   
                                                                                                                                
MR. THERRIAULT advised there is a   contact person at each agency                                                               
to act as a link.                                                                                                               
                                                                                                                                
8:18:05 AM                                                                                                                    
                                                                                                                                
MS.  FISHER-GOAD  stated  AEA's  goal for  the  Statewide  Energy                                                               
Policy  Development team  is to  serve as  a clearinghouse  and a                                                               
point  of contact  on issues  such as  access to  state land  and                                                               
state resources  for energy development, and  the Interior Energy                                                               
Plan.    For  example,  AEA  seeks how  to  utilize  the  propane                                                               
available  as a  byproduct  of the  liquefied  natural gas  (LNG)                                                               
trucking project to reduce the cost  of energy for those who will                                                               
not be connected to the  natural gas distribution system.  Within                                                               
AEA, there  are technical resources  on which Mr.  Therriault can                                                               
draw to provide policy recommendations.                                                                                         
                                                                                                                                
CO-CHAIR  ISAACSON  surmised  on  the propane  project  AEA  will                                                               
interact  with  the   Denali  Commission,  tribal  organizations,                                                               
village councils, city governments,  and Native corporations.  He                                                               
asked whether  AEA has sufficient resources  to coordinate multi-                                                               
agencies for one project.                                                                                                       
                                                                                                                                
MS. FISHER-GOAD said  the Interior Energy Plan is  a good example                                                               
of how  AEA can draw  on its internal  resources.  As  an agency,                                                               
AEA  manages  its resources  in  an  efficient manner  and  hires                                                               
effective experts  from the private  sector, or  coordinates with                                                               
other  agencies.   Another example  is  the Susitna-Watana  Hydro                                                               
Project, in which  AEA is working closely with  the Department of                                                               
Natural  Resources (DNR).    Her agency  is  successful with  the                                                               
resources  it  has,  and through  an  annual  budgetary  process,                                                               
determines how to complete its  work.  Overall, AEA is successful                                                               
and is not looking to expand.                                                                                                   
                                                                                                                                
CO-CHAIR  ISAACSON advised  this is  a  big task;  in fact,  $1.6                                                               
billion  was  spent on  energy  projects  last  year.   He  asked                                                               
whether AEA has  the resources it needs to  get affordable energy                                                               
to Alaskans.                                                                                                                    
                                                                                                                                
MS.  FISHER-GOAD  said what  the  governor  has provided  in  the                                                               
Fiscal Year 2014 (FY 14) budget  is OK; however, AEA's goal is to                                                               
develop  a comprehensive  report to  the legislature  in December                                                               
that will  reflect additional  work to be  done by  the Statewide                                                               
Energy Policy Development team in FY 15.                                                                                        
                                                                                                                                
8:26:50 AM                                                                                                                    
                                                                                                                                
MR. THERRIAULT  said AEA is  operating almost as a  department of                                                               
energy, and  has cooperation from other  departments and agencies                                                               
due to support  from the administration.   When needed, expertise                                                               
and  resources have  been provided  to supplement  employees from                                                               
AEA and AIDEA.                                                                                                                  
                                                                                                                                
MS. FISHER-GOAD displayed  a map which showed  AEA projects under                                                               
construction in summer  2012.  She said the  map illustrates that                                                               
state policy and funding from  the legislature have been put into                                                               
projects  for  Alaskans  to  help  reduce  the  cost  of  energy.                                                               
Illustrated  were projects  funded by  the Renewable  Energy Fund                                                               
Grant program,  systems upgrades,  upgrades to bulk  fuel systems                                                               
and tank farms  in rural Alaska, and  energy efficiency projects.                                                               
Many projects  were funded by American  Recovery and Reinvestment                                                               
Act  of 2009  (ARRA) federal  funds.   The  projects were  spread                                                               
across the state [slide 6].                                                                                                     
                                                                                                                                
REPRESENTATIVE NAGEAK  asked whether AEA conducts  site visits to                                                               
remote areas.                                                                                                                   
                                                                                                                                
MS.  FISHER-GOAD  said  yes.   As  the  executive  director,  she                                                               
visited Sand Point,  King Cove, and Bethel, and  she stressed the                                                               
importance of visiting communities to  see the work that is being                                                               
done.   She directed attention  to the  state goal of  50 percent                                                               
renewable  electricity  by  2025, noting  the  work  accomplished                                                               
through  the  Renewable  Energy  Fund  and  the  Emerging  Energy                                                               
Technology  Fund which  leveraged federal  funds from  the Denali                                                               
Commission  to provide  funding  for  16 projects.    There is  a                                                               
capital request  in the FY  14 capital  budget for $2  million to                                                               
continue  another round  of applications  to the  Emerging Energy                                                               
Technology Fund [slide 7].                                                                                                      
                                                                                                                                
8:32:33 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE NAGEAK  asked how  AEA evaluates projects  for new                                                               
technology.                                                                                                                     
                                                                                                                                
MS.  FISHER-GOAD explained  the process  for the  Emerging Energy                                                               
Technology  Fund  begins  with  a  technical  evaluation  by  its                                                               
advisory committee, which is comprised  of engineers, in order to                                                               
reduce the number  of applications.  Afterward,  AEA team members                                                               
conduct  a  more formal  process  to  rank the  projects,  taking                                                               
possible sites  into consideration, although site  visits are not                                                               
needed at that stage.                                                                                                           
                                                                                                                                
MR. THERRIAULT added that the  state goal encourages residents to                                                               
look  at  what  energy  source  is  available  to  them  locally;                                                               
however,  small utilities  may not  have the  funds necessary  to                                                               
explore and  evaluate local  sources.   Through these  funds, the                                                               
state shares  the expense  and the  risk of  evaluating renewable                                                               
sources  such   as  wind.     Also,  with   emerging  technology,                                                               
determining  whether  a  proposal  has  application  in  a  rural                                                               
setting  is  very  expensive  and  risky,  so  state  funding  is                                                               
necessary.                                                                                                                      
                                                                                                                                
REPRESENTATIVE  NAGEAK  asked   whether  the  evaluation  process                                                               
includes  a  review  of  the capability  of  the  existing  power                                                               
system.                                                                                                                         
                                                                                                                                
MR. THERRIAULT said yes.   For example, during the grant process,                                                               
the existing distribution  system is part of the  evaluation of a                                                               
project.                                                                                                                        
                                                                                                                                
8:37:24 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  ISAACSON referred  to the  proposed propane  project in                                                               
the Interior,  and noted that  recent investments have  been made                                                               
in oil infrastructure.   He asked how AEA will  evaluate the cost                                                               
to communities to prepare for  a propane distribution system, and                                                               
who will get "new" state funds.                                                                                                 
                                                                                                                                
8:38:22 AM                                                                                                                    
                                                                                                                                
MS. FISHER-GOAD advised AEA is  evaluating costs on this topic as                                                               
part  of the  Interior Energy  Plan, rural  energy programs,  and                                                               
proposed energy infrastructure.  Members  of the AEA rural energy                                                               
team will develop  a model on the costs and  source of funding to                                                               
provide  infrastructure.   The SETS  funding  program will  allow                                                               
AIDEA  to   manage  loans  so  that   entities  can  "cost-share"                                                               
projects, in addition  to the loans the  legislature can provide.                                                               
There is  conditional language  that limits  state funding  to 50                                                               
percent of the  total project cost on projects  that AEA manages.                                                               
As  an  aside,  she  said  the  Renewable  Energy  Fund  advisory                                                               
committee  is  meeting  on  4/4/13  in  Juneau  and  invited  the                                                               
committee to attend.                                                                                                            
                                                                                                                                
REPRESENTATIVE  NAGEAK  asked about  the  length  of the  vetting                                                               
process on new, emerging technology.                                                                                            
                                                                                                                                
8:42:37 AM                                                                                                                    
                                                                                                                                
MS. FISHER-GOAD answered  that the process is  an extensive, two-                                                               
phase process, followed by an  appeal period after each decision.                                                               
First, there is a "statutory  construct," followed by regulations                                                               
for the project, and a final opportunity for appeal.                                                                            
                                                                                                                                
REPRESENTATIVE NAGEAK clarified that  his question is whether AEA                                                               
can  test a  system to  ensure it  will not  break down  in rural                                                               
areas; for example, wind or geothermal technology.                                                                              
                                                                                                                                
MS.   FISHER-GOAD   opined   hydroelectric   (hydro)   structures                                                               
typically  have  a 50-year  life  and  provide long-term,  stable                                                               
power.  Wind projects are expected to last 20 years to 30 years.                                                                
                                                                                                                                
MR. THERRIAULT  added that a  grant application has to  show that                                                               
the  proposed project  using new  technology will  have a  useful                                                               
application in  Alaska within  five years.   He pointed  out that                                                               
the intent  of House  Bill 306  was that  the power  project fund                                                               
will  serve as  the main  source of  state assistance  for energy                                                               
projects.   Following that, the legislature  established the SETS                                                               
loan   program   to   underpin   state   investment   in   energy                                                               
infrastructure,  and  limited  the state's  participation  to  50                                                               
percent.   Mr. Therriault said  AEA interprets  these legislative                                                               
actions to  mean that  limited funds will  still be  available in                                                               
the event of declining state budgets.                                                                                           
                                                                                                                                
8:47:53 AM                                                                                                                    
                                                                                                                                
MS.  FISHER-GOAD   directed  attention  to  the   state's  energy                                                               
efficiency  goal of  improving  energy efficiency  15 percent  by                                                               
2020.   Her agency works  in partnership with the  Alaska Housing                                                               
Finance   Corporation  (AHFC)   on   residential  homes,   public                                                               
buildings, and commercial buildings.  There  is a focus by AEA on                                                               
commercial   buildings,   rural  public   buildings,   industrial                                                               
facilities  and  the  supply-side efficiency  of  power  systems.                                                               
Coordination of state agencies is provided by AEA [slide 8].                                                                    
                                                                                                                                
REPRESENTATIVE  HUGHES  inquired as  to  how  the 15  percent  is                                                               
applied.                                                                                                                        
                                                                                                                                
MS.  FISHER-GOAD responded  that  the  goal is  to  achieve a  15                                                               
percent reduction in usage.                                                                                                     
                                                                                                                                
CO-CHAIR  ISAACSON asked  how  AEA will  ensure  the increase  in                                                               
efficiency is spread across the  state, so that the benefits will                                                               
reach all communities.                                                                                                          
                                                                                                                                
MS.  FISHER-GOAD  pointed out  the  previously  displayed map  of                                                               
construction  projects  shows  the  projects  that  are  underway                                                               
throughout the  state.  The  Village End Use  Efficiency Measures                                                               
(VEUEM) program  targets small rural communities,  and industrial                                                               
facilities - such  as fish processing - are  assisted through the                                                               
Industrial Energy Audit  of Seafood Processing Plants.   She said                                                               
AEA  and AHFC  seek to  ensure  that assistance  and funding  are                                                               
accessible to all regions and entities in the state.                                                                            
                                                                                                                                
8:52:08 AM                                                                                                                    
                                                                                                                                
CO-CHAIR ISAACSON  surmised AEA participates in  loans to achieve                                                               
energy goals;  however, other programs  such as the  Rural Alaska                                                               
Community Action Program, Inc. (RurAL  CAP), administer grants to                                                               
help efficiency  and local  employment.  He  asked how  AEA works                                                               
with different organizations.                                                                                                   
                                                                                                                                
MS. FISHER-GOAD advised the  Alaska Energy Efficiency Partnership                                                               
consists of many entities, including  RurAL CAP,that are involved                                                               
in energy efficiency efforts.   In addition, AEA has granted pass                                                               
through  ARRA funds  to  entities such  as  the Renewable  Energy                                                               
Alaska Project  (REAP).   She said  many other  organizations are                                                               
working  diligently  towards the  energy  efficiency  goal.   The                                                               
Alaska Energy  Efficiency Partnership  serves as  a clearinghouse                                                               
and  meets  quarterly to  discuss  the  variety of  programs  and                                                               
funding  sources that  are available.   The  coordination between                                                               
AEA and  AHFC has  been successful  for many  years.   Turning to                                                               
rural energy infrastructure,  she gave the example  of St. George                                                               
as a  community that  applied for a  Renewable Energy  Fund Grant                                                               
for  a  wind system  that  was  partially  funded by  the  Denali                                                               
Commission.   As the  project was assessed,  it was  apparent the                                                               
powerhouse   was  in   need   of   significant  upgrades   before                                                               
electricity  generated  by  wind  could be  integrated  into  the                                                               
system.   At  this time,  AEA is  working with  the community  to                                                               
rebuild  its  powerhouse, although  at  the  time the  grant  was                                                               
denied,  community members  were very  unhappy because  they were                                                               
ready  to  proceed  with  economic   development  plans  for  the                                                               
community [slide 9].                                                                                                            
                                                                                                                                
8:57:49 AM                                                                                                                    
                                                                                                                                
MR. THERRIAULT  recalled that  at the  time the  renewable energy                                                               
fund  was  established,   the  cost  of  power   was  rising  and                                                               
assistance  was  needed,  but  individual  legislators  were  not                                                               
always  able to  determine  the  needs of  a  community in  their                                                               
district.  The  renewable energy fund enables AEA to  plan with a                                                               
community and develop the proper path to a solution.                                                                            
                                                                                                                                
MS.  FISHER-GOAD informed  the  committee  AEA supports  regional                                                               
solutions and regional  energy planning.  Alaska is  a very large                                                               
state  with diverse  resources and  has no  one answer  for power                                                               
generation.   A  regional planning  effort is  necessary and  AEA                                                               
seeks  to   help  develop   regional  plans,   provide  technical                                                               
assistance,  and  assist  in  developing  financing  options  for                                                               
projects.    The  Railbelt  Integrated  Resources  Plan  and  the                                                               
Southeast Integrated  Resources Plan  have led to  large projects                                                               
[slide 10].   She  provided a  map of  energy regions  and Alaska                                                               
Native Claims  Settlement Act (ANCSA)  boundaries, and a  list of                                                               
current regional  plan contracts [slides  11 and  12].  An  FY 14                                                               
capital  request has  been submitted  to  continue with  regional                                                               
planning efforts.                                                                                                               
                                                                                                                                
CO-CHAIR ISAACSON asked  if AEA or regional  leaders initiate the                                                               
beginning of a regional plan;  in fact, a regional plan supported                                                               
by AEA may call for the  consolidation of utilities, but may meet                                                               
with resistance.  He provided an example.                                                                                       
                                                                                                                                
9:04:23 AM                                                                                                                    
                                                                                                                                
MR.  THERRIAULT said  whether regional  leaders  approach AEA  or                                                               
not,  AEA's interest  is for  a discussion  about energy  to take                                                               
place  at the  regional level.    He noted  that some  geographic                                                               
areas have a  regional hub community, and smaller  areas may not,                                                               
but  to be  successful the  community must  embrace the  regional                                                               
plan.   The  agency looks  for a  local contractor  to coordinate                                                               
between  villages, and  identify potential  resources to  develop                                                               
and share  within geographic areas  or sub-regions.    He pointed                                                               
out that almost  all of the state is involved  in energy planning                                                               
at this time, albeit at different stages.                                                                                       
                                                                                                                                
CO-CHAIR ISAACSON opined community  resources must be combined to                                                               
be efficient.                                                                                                                   
                                                                                                                                
MR.  THERRIAULT advised  that there  is a  small team  within AEA                                                               
that  is   able  to  determine   whether  excess  power   can  be                                                               
economically transported between villages.                                                                                      
                                                                                                                                
9:09:17 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HUGHES  expressed   her  concern  that  statewide                                                               
energy  planning and  policy is  not  AEA's main  priority.   She                                                               
agreed that regional planning and  statewide goals for efficiency                                                               
and renewables  are important, but  stressed that there  needs to                                                               
be  an overall  plan  for the  future beyond  2020,  and for  the                                                               
future  demand for  power  in 50  years.   Representative  Hughes                                                               
opined  the state  will continue  to stifle  economic development                                                               
without affordable  energy and  energy infrastructure  across the                                                               
state.                                                                                                                          
                                                                                                                                
MS.  FISHER-GOAD pointed  out that  the  state's larger  projects                                                               
will be discussed later in  the presentation.  She restated AEA's                                                               
mission is to  reduce the cost of energy for  Alaskans and energy                                                               
planning and policy  is one of the four primary  areas to achieve                                                               
its  mission.   Legislation does  not necessarily  develop in  "a                                                               
nice  linear   fashion;"  in   fact,  legislation   creating  the                                                               
renewable energy  fund program preceded that  for energy planning                                                               
and policy, and may have  provided impetus for the formulation of                                                               
planning   and  policy.     She   acknowledged  there   has  been                                                               
recognition that AEA's leadership role  is to pull all the pieces                                                               
together.   The  Susitna-Watana Hydro  Project is  an example  of                                                               
looking at  the long-term diversification  of the  state's energy                                                               
portfolio.                                                                                                                      
                                                                                                                                
9:15:39 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HUGHES  urged for AEA  - in its leadership  role -                                                               
to  ensure that  its  tasks are  in the  "right  order," with  an                                                               
energy  plan  at the  top.    With  an  energy plan,  AEA's  many                                                               
programs and  large budget will  be better understood  by leaders                                                               
of industry.                                                                                                                    
                                                                                                                                
MR. THERRIAULT  pointed out that  AEA's top goal of  reducing the                                                               
cost  of  energy  is  established  in  statute,  as  are  further                                                               
directives from  the legislature.   He acknowledged AEA  has many                                                               
programs and part  of his responsibility is to  interact with all                                                               
of   the  program   managers  and   ensure   that  programs   are                                                               
successfully implemented and measured.   Because of rising energy                                                               
costs,  the legislature  responded to  its constituency  with the                                                               
passage  of  the  renewable  energy   fund,  which  led  to  long                                                               
discussions with  residents to  address the  geographic diversity                                                               
of the  regions and  sub-regions of  the state.   At  that point,                                                               
goals  and plans  were established  for regions  and sub-regions,                                                               
and  it  was  recognized  that  one plan  would  not  work.    In                                                               
addition, the  programs needed to  be tailored for  the different                                                               
regions and sub-regions throughout the  state, and he said due to                                                               
the distribution of resources, one  plan that is "workable in all                                                               
of the state," is probably near to impossible.                                                                                  
                                                                                                                                
9:21:07 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HUGHES understood the  regional differences of the                                                               
state.   She asked whether  leaders of industry were  included in                                                               
the  abovementioned  discussions,  and  whether  the  discussions                                                               
should be revived for further development of an energy plan.                                                                    
                                                                                                                                
MR. THERRIAULT  was unsure of  all of the  participants, however,                                                               
legislators and regional leaders were included.                                                                                 
                                                                                                                                
MS.   FISHER-GOAD   said   representatives   of   the   utilities                                                               
participated,  as did  members of  the Alaska  Power Association,                                                               
the Alaska Village  Electric Cooperative, and AEA.   She recalled                                                               
that previously  the House and  Senate sought to  consolidate and                                                               
combine energy-related bills in an  effort to "coalesce this into                                                               
one packet  of energy  legislation."   Through a  unique process,                                                               
the House  led the effort  on policy development, and  the Senate                                                               
addressed the development of related programs.                                                                                  
                                                                                                                                
9:25:54 AM                                                                                                                    
                                                                                                                                
CO-CHAIR ISAACSON  urged new members  of the committee  to review                                                               
past energy-related legislation.                                                                                                
                                                                                                                                
REPRESENTATIVE HUGHES  was not  convinced that  a plan  exists or                                                               
that industry was involved.                                                                                                     
                                                                                                                                
REPRESENTATIVE NAGEAK cautioned that there  is much work ahead to                                                               
lower   costs   for   the  entire   state,   encourage   economic                                                               
opportunities,  provide  access for  rural  areas  to a  regional                                                               
center, and provide road access for the rest of the state.                                                                      
                                                                                                                                
CO-CHAIR ISAACSON agreed that  transportation corridors for roads                                                               
and pipelines are necessary to  connect communities to each other                                                               
and to markets.   He stressed that along with  projects that will                                                               
impact 80  percent of the state,  there also must be  support for                                                               
micro   projects  that   will   help  areas   that  are   removed                                                               
geographically.                                                                                                                 
                                                                                                                                
9:31:03 AM                                                                                                                    
                                                                                                                                
MS.  FISHER-GOAD turned  attention  to  the Susitna-Watana  Hydro                                                               
Project, noting that this project  will benefit 80 percent of the                                                               
state's  population, but  does  not compete  with  a natural  gas                                                               
pipeline because  the pipeline will  provide North  Slope natural                                                               
gas for heat,  and the Susitna-Watana Hydro Project  is an effort                                                               
to  diversify   the  state's  electrical   generation  portfolio,                                                               
provide  a long-term  source  of clean  energy,  and promote  the                                                               
integration  of   variable  power   sources  [slide  13].     She                                                               
acknowledged HVDC  technology may be utilized  for a transmission                                                               
system   for  the   Railbelt  in   order  to   "unconstrain"  the                                                               
transmission system  from Bradley Lake  Hydroelectric, regardless                                                               
of whether  Susitna-Watana Hydro is completed.   Furthermore, AEA                                                               
has  analyzed  HVDC  because  of  its  potential  use  in  remote                                                               
applications;  however,  there has  not  been  much support  from                                                               
local utilities.  Regarding road  corridors, she advised AIDEA is                                                               
looking at  a road  project in  Ambler.   She indicated  that AEA                                                               
will respond to  the committee's questions about the  size of the                                                               
Susitna-Watana Hydro Project and the cost of expansion.                                                                         
                                                                                                                                
9:36:01 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HUGHES  has  heard  some  residents  support  the                                                               
construction of  a natural gas  pipeline instead  of a dam.   She                                                               
referred to  published data  that electricity  from the  dam will                                                               
not be cheaper than that from natural gas for 12 years.                                                                         
                                                                                                                                
MS. FISHER-GOAD said  that AEA compared the cost of  gas to hydro                                                               
once the  hydro project is  producing and the cost  of production                                                               
is  inflation-proof.    This comparison  is  available  in  AEA's                                                               
annual report.                                                                                                                  
                                                                                                                                
MR. THERRIAULT emphasized that hydro  brings price stability to a                                                               
power  distribution  system  and  although  gas  may  be  cheaper                                                               
initially, hydro will be cheaper 20  years or 100 years from now.                                                               
The  investment  in   a  renewable  source  of   hydro  power  is                                                               
multigenerational.    However, the  use  of  power from  Susitna-                                                               
Watana Hydro for space heat is  not expected to be economic, thus                                                               
natural gas will continue to play an important role.                                                                            
                                                                                                                                
9:40:08 AM                                                                                                                    
                                                                                                                                
MS.  FISHER-GOAD turned  attention to  the Interior  Energy Plan,                                                               
which  is  a  predecessor  to  a gas  pipeline  and  provides  an                                                               
opportunity to market  North Slope natural gas  and propane prior                                                               
to the  construction of  a gas pipeline.   The  financing package                                                               
brings  customers and  private entities  together and  with AIDEA                                                               
and   private  partners   taking   an  equity   ownership  of   a                                                               
liquefaction plant  on the North  Slope.  She stressed  that this                                                               
is a  financing package,  not a grant  package, which  will allow                                                               
the  Interior  region,  with  the assistance  of  the  state,  to                                                               
achieve  savings in  residential and  commercial heating,  and to                                                               
address  air quality  issues in  the Fairbanks  area [slide  14].                                                               
The project goals  of the Interior Energy Plan are:   provide the                                                               
lowest cost energy  to the Interior as soon  as possible; develop                                                               
a distribution  system that will  be served by the  pipeline; and                                                               
utilize  private sector  mechanisms  as much  as possible  [slide                                                               
15].    The proponents  of  the  plan  are working  with  AIDEA's                                                               
technical  team  and other  potential  partners.   The  financing                                                               
package is:  $150 million AIDEA  bonds; $50 million  general fund                                                               
(GF)   appropriation   to   AIDEA;    and   $125   million   SETS                                                               
capitalization  [slide  16].   She  offered  to  provide  further                                                               
information on the future plans  to provide propane to regions of                                                               
the  Interior  which  will  not be  served  by  the  distribution                                                               
system.   The  Interior  Energy Plan  is  very important  because                                                               
about  a  50  percent  reduction  in cost  for  home  heating  is                                                               
expected for residents [slide 17].                                                                                              
                                                                                                                                
REPRESENTATIVE FOSTER  asked for more information  on the propane                                                               
distribution  system  to rural  areas  after  LNG is  trucked  to                                                               
Fairbanks  from the  North  Slope.   He  inquired  as to  whether                                                               
current planning  includes the distribution  of propane  to rural                                                               
parts of the state.                                                                                                             
                                                                                                                                
9:45:24 AM                                                                                                                    
                                                                                                                                
MS. FISHER-GOAD  explained the economic analysis  of the Interior                                                               
Energy Plan  is driven by  trucking LNG to Fairbanks  for storage                                                               
and  delivery in  the  Fairbanks  area.   However,  AEA seeks  to                                                               
capitalize  on   the  propane  byproduct   of  the   LNG  system.                                                               
Emerging energy  technology suggests that  LNG can be  stored and                                                               
shipped in  ISO (intermodal)  containers, but  "that's definitely                                                               
something much further  down the line."  The present  focus is on                                                               
the  distribution system  that  will be  served  by the  trucking                                                               
scheme and that will eventually be served by a pipeline.                                                                        
                                                                                                                                
CO-CHAIR ISAACSON observed  the present plan estimates  a cost of                                                               
$1 billion  just for  the Fairbanks  and North  Pole distribution                                                               
area without any funds for  transportation along the river system                                                               
or up the coast.                                                                                                                
                                                                                                                                
MR. THERRIAULT  pointed out the  ultimate build-out hoped  for by                                                               
the  Fairbanks  North Star  Borough  is  also  in excess  of  the                                                               
present finance plan.   In response to  Representative Foster, he                                                               
stated that  the economics  of delivering propane  or LNG  on the                                                               
road  system  are  very  different than  delivery  on  the  river                                                               
system.   Coastal communities are interested  in barge deliveries                                                               
of  propane; however,  AEA must  consider that  the economics  of                                                               
each sub-region are different.                                                                                                  
                                                                                                                                
9:50:41 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE FOSTER  cautioned that  five years down  the road,                                                               
additional  funding  for  a  rural  distribution  system  may  be                                                               
difficult after  80 persent  to 90 percent  of the  population in                                                               
the Interior is taken care of, and there is no "urgency."                                                                       
                                                                                                                                
MS. FISHER-GOAD  assured the  committee AEA  is committed  to its                                                               
rural  energy  infrastructure  program   that  will  continue  to                                                               
provide  maximum  access, and  to  ensure  that natural  gas  and                                                               
propane  can  fit into  rural  plans  for  future projects.    In                                                               
addition, regional  energy plans  and contractors are  working to                                                               
incorporate  the  use  of  natural gas  and  propane  in  regions                                                               
outside of  the Interior  Energy Plan.   Ms.  Fisher-Goad closed,                                                               
saying that  AEA has many energy  policy issues on which  to work                                                               
and  will continue  to report  to the  committee on  developments                                                               
[slide 18].                                                                                                                     
                                                                                                                                
9:53:50 AM                                                                                                                    
                                                                                                                                
MR. THERRIAULT  stated that one  of two access issues  before AEA                                                               
is access to timber as a  fuel source.  Residents in the Interior                                                               
are  interested   in  long-term  access  to   volumes  of  timber                                                               
resources on state  land for a source of fuel.   The agency wants                                                               
to ensure that  regulations and statutes are in place  - not only                                                               
to cut  dimensional lumber - but  also to allow for  contracts to                                                               
utilize timber as  a source for energy.   Another access question                                                               
arises when a potential renewable  source of energy is located on                                                               
state land, or  if state land must be crossed  to transmit power.                                                               
For  instance,   the  Nuvista  Light  &   Power  Chikuminuk  Lake                                                               
Hydroelectric  and Alternative  Energy  Project  needs access  to                                                               
Wood-Tikckik  State  Park  for research,  and  near  Haines,  the                                                               
Connelly  Lake  Hydroelectric  Project  requires  access  to  the                                                               
Alaska Chilkat Bald Eagle Preserve.   Mr. Therriault advised that                                                               
the legislative  intent at the  time these geographic  areas were                                                               
designated  must  be  revisited  to determine  whether  to  grant                                                               
access to  state land  for the development  of resources  and for                                                               
the transmission of  power.  An additional issue  in Southeast is                                                               
whether sources of  power near Ketchikan can be  developed by the                                                               
private sector and transmitted on  the power grid.  This question                                                               
is  also  raised  in  the Railbelt,  where  there  are  potential                                                               
sources  of  renewable  power  that could  be  developed  by  the                                                               
private  sector and  integrated  into  the Railbelt  transmission                                                               
grid.   The final issue  is the  duplication of utilities  in the                                                               
Railbelt.                                                                                                                       
                                                                                                                                
10:00:17 AM                                                                                                                   
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Special Committee on Energy meeting was adjourned at 10:00 a.m.                                                                 

Document Name Date/Time Subjects
Agenda (H) ENE 04032013.docx HENE 4/3/2013 8:00:00 AM
(H) ENE Agenda April 3, 2013
AEA Overview House Energy April 3.pdf HENE 4/3/2013 8:00:00 AM
State Energy Plan Overview PowerPoint AEA April 3, 2013