Legislature(2023 - 2024)BARNES 124
03/14/2023 10:15 AM House ENERGY
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| Audio | Topic |
|---|---|
| Start | |
| Presentation(s): Rural Energy Utilities | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ENERGY
March 14, 2023
10:15 a.m.
DRAFT
MEMBERS PRESENT
Representative George Rauscher, Chair
Representative Tom McKay
Representative Stanley Wright
Representative Mike Prax
Representative Calvin Schrage
Representative Ashley Carrick
MEMBERS ABSENT
Representative Josiah Patkotak
COMMITTEE CALENDAR
PRESENTATION(S): RURAL ENERGY UTILITIES
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
BILL STAMM, Chief Executive Officer
Alaska Village Electric Cooperative
Juneau, Alaska
POSITION STATEMENT: Provided a PowerPoint on providing
electricity in rural Alaska during the Rural Energy Utilities
Presentation.
JODI MITCHELL, Chief Executive Officer
Inside Passage Electric Cooperative
Juneau, Alaska
POSITION STATEMENT: Provided invited testimony during the
presentation "Rural Energy Utilities".
TRAVIS MILLION, CEO
Copper Valley Electric Association
Anchorage, Alaska
POSITION STATEMENT: Gave a PowerPoint titled "Copper Valley
Electric" during the presentation "Rural Energy Utilities".
ACTION NARRATIVE
10:15:36 AM
CHAIR GEORGE RAUSCHER called the House Special Committee on
Energy meeting to order at 10:15 a.m. Representatives McKay,
Schrage, Wright, Prax, and Rauscher were present at the call to
order. Representative Carrick arrived as the meeting was in
progress.
^PRESENTATION(S): Rural Energy Utilities
PRESENTATION(S): Rural Energy Utilities
10:17:11 AM
CHAIR RAUSCHER announced that the only order of business would
be a presentation titled, "Rural Energy Utilities."
10:18:46 AM
BILL STAMM, Chief Executive Officer, Alaska Village Electric
Cooperative, Provided a PowerPoint presentation, titled "Keeping
the Lights on off the Road System," [hard copy included in the
committee packet]. He began on slide 2 and stated that Alaska
Village Electric Cooperative (AVEC) provides electricity to 31
thousand residents across 58 rural communities. The cooperative
is a non-profit organization that generates the electricity it
sells. He said that AVEC has 160 diesel generators across 48
power plants and used approximately 9.1 gallons of diesel in
2022. It has 515 miles of distribution lines, and in 2022, it
sold 124.5 megawatts (MWh) of electricity generating $60.7
million in revenue.
10:21:22 AM
REPRESENTATIVE SCHRAGE asked Mr. Stamm to highlight the areas in
which wind generation had been installed.
MR. STAMM answered that wind power generation is prevalent along
the west coast of Alaska.
10:22:25 AM
MR. STAMM resumed the presentation on slide 3 and gave an
overview of the number of AVEC employees. He stated that AVEC
has a headquarters in Anchorage, Alaska, with 48 full-time
employees, along with 120 local power plant operators and 24
traveling technicians.
10:23:33 AM
MR. STAMM referred to slide 4 and described a graph that showed
the relative size of community by meter count. He
contextualized the pictures on slides 5 through 8, stating that
92 percent of the people served by AVEC are Alaska Natives. In
most communities served by AVEC, the school is the largest user
of electricity, although in some communities that have a fish
processing plant, that plant is the greatest user of
electricity.
10:27:36 AM
MR. STAMM, in response to Representative Schrage, highlighted
AVEC's power plant, shown in aerial view of Toksook Bay on slide
6.
10:27:59 AM
MR. STAMM continued describing the image on slide 7, which is
the Noatak power plant. He said that the two blue buildings
house the power generators, and the circular buildings are the
fuel tanks, which hold between 7-12,000 gallons of diesel. He
added that all diesel used by Noatak has to be flown in at great
expense.
10:29:35 AM
REPRESENTATIVE PRAX asked whether the facility was in as poor
shape as it appeared from the ariel view.
MR. STAMM conveyed that it was state of the art diesel
generation; however, without barge service, it is difficult to
transport large items for maintenance and repair.
REPRESENTATIVE PRAX observed that the fuel tanks and the tank
farms themselves appeared to be falling apart.
MR. STAMM confirmed that the tank farm was on a high priority
list for renovation and possible replacement.
10:31:46 AM
REPRESENTATIVE SCHRAGE asked why the community no longer
receives barge service.
MR. STAMM stated that the river had changed course. He
expounded that the airport is in the process of being moved due
to erosion.
REPRESENTATIVE SCHRAGE commented on the difficulty of the other
primary means for getting fuel into the community.
10:33:26 AM
MR. STAMM directed attention to slide 8, which featured an image
of the power facility in Stebbins, Alaska. He described the
power plant, stating that the tanks are elevated to avoid issues
with settling, and the plant has four generators.
10:34:40 AM
REPRESENTATIVE PRAX asked how the facility fared in the recent
wind storm.
MR. STAMM shared his understanding that there was some flooding
in the community of Stebbins, but no substantial damaged was
sustained.
10:35:36 AM
CHAIR RAUSCHER asked where Stebbins is located.
MR. STAMM stated that Stebbins is southeast of Nome, Alaska
across Norton Sound.
10:36:24 AM
MR. STAMM described the map of vendors on slide 9. The map also
shows marine fuel supply routes. He explained the system of
fuel delivery and stated that many villages in Alaska receive
service from only one or two vendors.
MR. STAMM turned to slide 10 and gave an overview of renewable
energy generation for the rural utilities. He said that 4.5 MWh
was generated by wind and 0.2 MWh by solar in 2022. The total
generation from these two sources amounted to approximately 5
percent of energy generated by AVEC.
10:38:23 AM
CHAIR RAUSCHER asked what the axle height is for the wind
turbines.
MR. STAMM answered approximately 150 feet.
10:38:54 AM
REPRESENTATIVE SCHRAGE highlighted renewable energy and asked
how something variable, like wind, is integrated into the power
grid.
MR. STAMM answered that water heaters provide heat for other
building in the community, although battery storage technology
is improving.
10:40:47 AM
MR. STAMM continued to slide 11 and displayed a chart showing
power consumption and generation by AVEC. He said that AVEC has
a line loss between 5 and 6 percent, and as a result has to
generate less electricity for its 31,000 members than what a
typical community of 31,000 people typically requires.
10:42:22 AM
REPRESENTATIVE PRAX asked whether the increase of power
consumption comes from the acquisition of existing facilities.
MR. STAMM answered that it does. In response to a follow-up
question, he said that he is unsure exactly how much money has
been saved. He added that he believes that economy of scale has
given AVEC savings and opportunities that would not otherwise be
available if each community were on its own for power
production.
10:44:31 AM
MR. STAMM detailed the graph on slide 12, which showed the
average cost to operate per kWh sold in 2022. He said that the
dotted line on the graph separates the cost of fuel from other
costs such as payroll, and fuel cost accounts for over half of
spending.
10:45:31 AM
REPRESENTATIVE PRAX speculated that many of the capital
expenditures had been funded through grants, which kept the
interest expenses low. He asked whether the depreciation
expense is high enough to replace equipment.
MR. STAMM answered that it is not. In response to a follow-up
question, he stated that in order to replace equipment in the
future, AVEC will have to raise its rates.
10:47:06 AM
REPRESENTATIVE WRIGHT inquired about the lifespan of the
equipment.
MR. STAMM indicated that there is a variety of depreciation
values. He said that the wind turbines and diesel generators
have a 20 year lifespan. He said maintenance is a key part in
maintaining the systems.
10:48:06 AM
CHAIR RAUSCHER noted the exponential growth over the years, and
asked how AVEC is receiving that funding.
MR. STAMM answered that most of the funding has come from
acquiring additional locations thereby increasing its revenue
base.
10:49:05 AM
MR. STAMM outlined where the money comes from on slide 13. He
described the pie charts, noting that power cost equalization
(PCE) does not apply to commercial or state services, meaning
that when it is applied it typically reimburses half of the
costs for a residential consumer. He estimated the contribution
from membership to be 80 percent.
10:50:29 AM
MR. STAMM advanced to slides 14 and 15 and gave an overview of
why power is so expensive in rural Alaska and what AVEC is doing
in order to reduce some of those costs. He stated that the
economy of scale is small, causing efficiency to be lower.
Rural Alaska is remote and difficult to access, with
infrastructure that does not allow for more efficient means of
transportation. He said that AVEC works to interconnect
different communities to increase economy of scale, but it is
not always feasible to accept certain communities into AVEC.
10:52:38 AM
REPRESENTATIVE CARRICK asked for an example of communities to
which AVEC could reach out to offer power.
MR. STAMM said AVEC did not reach out to communities. Instead,
communities requested to join the cooperative.
10:53:49 AM
REPRESENTATIVE PRAX asked whether AVEC charged a standard rate
to its member communities.
MR. STAMM answered that it depends on the community. For
example, Bethel and Yakutat are "standalone" communities that
have different rates.
10:55:08 AM
REPRESENTATIVE WRIGHT asked how energy education and workforce
development is promoted and provided to the members of AVEC.
MR. STAMM stated that AVEC works with other nonprofits that
provide education in K-12 schools. Additionally, he detailed
various other projects that promote workforce development with
Native Corporations and the Alaska Energy Authority (AEA).
10:56:58 AM
MR. STAMM continued to slide 16, which displayed a map of St.
Mary's Family Projects, including: a 900 kWh wind turbine, a 20
mile intertie to Mt. Village, 410,000-gallons in bulk fuel
storage, and a 3 MWh power plant.
10:58:42 AM
REPRESENTATIVE PRAX inquired about the sustainability of the
project.
MR. STAMM reiterated that additional funding sources would be
needed in the future.
10:59:28 AM
REPRESENTATIVE PRAX asked whether there was a long-term plan for
any costs the state might incur 20 years from now.
MR. STAMM clarified that this was not a new problem, as many
facilities in Alaska need replacement. In response to a follow-
up question, he said that AVEC's goal is to be sustainable.
REPRESENTATIVE PRAX asked whether AVEC is looking for the best
possible return.
MR. STAMM stated that AVEC uses years of studies to make
decisions.
11:02:41 AM
REPRESENTATIVE PRAX asked whether the cooperative was funding
the cost of those studies.
MR. STAMM answered that AVEC does fund some of its own studies,
in addition to using studies from a variety of other sources
including AEA and the United States Department of Agriculture
(USDA).
11:04:02 AM
JODI MITCHELL, Chief Executive Officer, Inside Passage Electric
Cooperative, stated that Inside Passage Electric Cooperative
(IPEC) serves four separate microgrids in Southeast Alaska. She
touched on the remoteness of communities and stated that the
unreliability of the ferry service makes it difficult to source
materials. She stated that it has been challenging, but IPEC
has been trying to reduce reliance on diesel over the years.
The average price of diesel was $2.77 but has increased to over
$6 in recent years. She said IPEC has been focusing on building
small hydroelectric projects to reduce diesel consumption and
save money. She shared, for example, that Hoonah, Alaska, is
powered by a small hydroelectric project.
11:09:02 AM
MS. MITCHELL discussed the small hydroelectric project in Kake,
characterizing these projects as "small but mighty." She noted
that hydroelectric projects use assets with a long-life span,
saving money over time, reporting that Gold Creek in Juneau has
been online for 120 years. She opined that reliance on diesel
generated power would never be completely eliminated.
Additional projects are in the works, including the Fair Creek
Hydroelectric Project in Angoon, Alaska. She stated that the
project would provide 99 percent of the power needed by the
community with room for new businesses and economic tourism.
She said that another project being built, the Gartina Falls
Hydroelectric Project, would bring Hoonah to between 50 and 60
percent renewable energy.
11:14:15 AM
MS. MITCHELL discussed the relationship between PCE and larger
communities. She explained that PCE rates are dependent on
larger community rates, aiming to lower the cost difference
between the two. The high rates currently facing customers make
it difficult to attract new communities to the cooperative. She
indicated that the goal is to have a sustainable restaurant in
each community and to provide enough energy to support those
businesses. She indicated that relying on solar energy
generation is a problem due to frequent overcast skies that
could cause a brown out or black out but did suggest that some
solar generation should be utilized, owned, and operated by the
utility.
11:18:19 AM
REPRESENTATIVE CARRICK inquired about the options for other
rural communities in southeast Alaska that were not part of the
cooperative.
MS. MITCHELL answered that she is unsure. She suggested that
there is a desire from certain communities to remain
independent. In response to a follow-up question, she said that
there have been discussions for other communities to join the
cooperative, but nothing has solidified.
11:20:31 AM
REPRESENTATIVE PRAX asked what the "selling point" is for other
communities to join IPEC.
MS. MITCHELL answered that IPEC has much to offer as a non-
profit organization, and added that IPEC is made up of "the
diesel experts of the Southeast." She added that increased
economy of scale would result in lower electric rates.
11:22:35 AM
TRAVIS MILLION, CEO, Copper Valley Electric Association, began
on slide 2 and stated that Copper Valley Electric Association
(CVEA) also uses a cooperative business model. He said that
CVEA has assets totaling approximately $150 million. It has 45
employees and does not benefit from the PCE program.
11:23:42 AM
MR. MILLION continued to slide 3 and detailed the service area
covered by CVEA. He noted that the number of employees at CVEA
is small compared to the amount of land covered by CVEA. He
stated that the corporate headquarters for CVEA is located in
Glenallen, and the total service area is approximately the size
of the state of Maryland.
11:24:28 AM
CHAIR RAUSCHER asked whether it would be dangerous to set up
lines connecting CVEA to Matanuska Electric Association (MEA).
MR. MILLION answered that the limitations of the different lines
being used in remote areas means that it would not be very
effective. In response to a follow-up question, he said that
there is only one home that he knows of that is within CVEA's
range but not serviced.
11:26:53 AM
MR. MILLION detailed the CVEA's system on slide 4 and stated
that CVEA has three transmission and six distribution
substations, 106 miles of transmission lines and over 500 miles
of distribution lines.
MR. MILLION continued to slides 5 and 6 and gave a brief
overview of some of CVEA's generation plants. He stated that
between 60 and 70 percent of its electricity is generated from
hydroelectric plants, including those at Solomon Gulch and
Allison Creek. He said CVEA is still able to generate
hydroelectric power during the winter; it generates
approximately 25 percent of its electricity with its 5.2 MWh gas
turbine cogeneration plant.
11:31:08 AM
CHAIR RAUSCHER asked for the source of the natural gas bought by
CVEA.
MR. MILLION answered the Petro Star refinery. In response to a
follow-up question, he confirmed that there is some trade-off
when CVEA sells the heat back to Petro Star.
11:31:24 AM
MR. MILLION described the diesel generation plants operated by
CVEA, saying that between 5 and 15 percent of its energy is
generated by diesel. The plant in Glenallen has a capacity of
9.2 MWh and the plant in Valdez has a capacity of 8.6 MWh. He
stated that CVEA has placed significant emphasis on maintenance
over the last five years.
11:33:22 AM
MR. MILLION discussed the graph on slide 8 featuring cost per
kWh generated by hydroelectric plants versus diesel plants. He
discussed the high cost of fuel, peaking at more than double
summertime rates during the winter when CVEA needs diesel to
make up the difference in generated power.
MR. MILLION continued to slide 9 and gave an overview of the
challenges faced by CVEA. He said that CVEA has seen several
long-time employees enter retirement, with more set to retire in
the coming years.
11:35:53 AM
CHAIR RAUSCHER asked whether CVEA has been able to hire enough
new employees to replace those who have retired.
MR. MILLION answered that CVEA has been fortunate enough to fill
all of its positions and currently have no openings. In
response to a follow-up question, he stated that all employees
are required to live within the coverage area of CVEA.
11:36:54 AM
REPRESENTATIVE PRAX asked whether depreciation costs were
accounted for.
MR. MILLION answered that CVEA is recouping the necessary costs
to replace its aging infrastructure. He reiterated that some of
its projects receive funding from grants.
REPRESENTATIVE PRAX stated that he had heard that CVEA was in
talks with Alyeska to exchange power, and asked whether that was
true.
MR. MILLION answered that it is true. He said that the
Regulatory Commission of Alaska has already approved some
aspects of the plan.
11:41:05 AM
MR. MILLION resumed the presentation on slide 9 and discussed
increasing regulations. He said that the federal government has
increased regulations on hydroelectric power. He noted that a
feasibility study had been conducted to consider deploying a
micro module reactor in CVEA's coverage area. He highlighted
the rising cost of materials, noting a 300 percent rate increase
in the cost of transformers. He said that CVEA has also had
some difficulties in working with the Alaska Department of
Natural Resources due to staff turnover at the department.
11:44:48 AM
CHAIR RAUSCHER inquired about the price of the micro reactor.
MR. MILLION answered that CVEA had provided a price range to
vendors that would keep CVEA competitive. In response to a
follow-up question, he said the price depends on the vendor, but
could be around $100 million.
CHAIR RAUSCHER asked for a projection on the cost of an intertie
between CVEA and MEA.
MR. MILLION answered that the cost estimate is $566 million.
11:47:49 AM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Energy meeting was adjourned at 11:47 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 2023 House Energy_Rural Energy_AVEC.pdf |
HENE 3/14/2023 10:15:00 AM |
AVEC |
| House Energy Committee Copper Valley.pdf |
HENE 3/14/2023 10:15:00 AM |
Copper Valley |