Legislature(2009 - 2010)BARNES 124

02/18/2010 03:00 PM ENERGY


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03:07:15 PM Start
03:07:25 PM Overview: Rural Energy Issues
04:46:32 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Overview: Rural Energy Issues TELECONFERENCED
-- Testimony <Invitation Only> --
from Alaska Housing Finance Corporation,
The Denali Commission, Alaska Energy
Authority, Alaska Dept. of Health &
Social Services, Alaska Dept. of
Community & Regional Affairs, Alaska
Village Electric Cooperative
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE SPECIAL COMMITTEE ON ENERGY                                                                              
                       February 18, 2010                                                                                        
                           3:07 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Bryce Edgmon, Co-Chair                                                                                           
Representative Charisse Millett, Co-Chair (via teleconference)                                                                  
Representative Kyle Johansen                                                                                                    
Representative Pete Petersen                                                                                                    
Representative Chris Tuck                                                                                                       
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Nancy Dahlstrom                                                                                                  
Representative Jay Ramras                                                                                                       
                                                                                                                                
OTHER MEMBERS PRESENT                                                                                                         
                                                                                                                                
Representative Neal Foster                                                                                                      
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
OVERVIEW: RURAL ENERGY ISSUES                                                                                                   
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
RON KREHER, Chief                                                                                                               
Field Services                                                                                                                  
Division of Public Assistance                                                                                                   
Department of Health and Social Services (DHSS)                                                                                 
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified and answered questions during the                                                              
hearing on rural energy issues.                                                                                                 
                                                                                                                                
STEVEN HAAGENSON, Executive Director                                                                                            
Alaska Energy Authority (AEA)                                                                                                   
Department of Commerce, Community, & Economic Development                                                                       
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified and  answered questions during the                                                             
hearing on rural energy issues.                                                                                                 
                                                                                                                                
TARA JOLLIE, Director                                                                                                           
Division of Community and Regional Affairs (DCRA)                                                                               
Department  of   Commerce,  Community,  &   Economic  Development                                                               
(DCCED)                                                                                                                         
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified and  answered questions during the                                                             
hearing on rural energy issues.                                                                                                 
                                                                                                                                
MEERA KOHLER, President and CEO                                                                                                 
Alaska Village Electric Cooperative (AVEC)                                                                                      
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified and  answered questions during the                                                             
hearing on rural energy issues.                                                                                                 
                                                                                                                                
BOB BREAN, Director                                                                                                             
Research & Rural Development                                                                                                    
Alaska Housing Finance Corporation (AHFC)                                                                                       
Department of Revenue                                                                                                           
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified and  answered questions during the                                                             
hearing on rural energy issues.                                                                                                 
                                                                                                                                
JOEL NEIMEYER, Federal Co-Chair                                                                                                 
Denali Commission                                                                                                               
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified and  answered questions during the                                                             
hearing on rural energy issues.                                                                                                 
                                                                                                                                
DENALI DANIELS, Senior Energy Program Manager                                                                                   
Denali Commission                                                                                                               
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified and  answered questions during the                                                             
hearing on rural energy issues.                                                                                                 
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:07:15 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  BRYCE  EDGMON called  the  House  Special Committee  on                                                             
Energy meeting  to order  at 3:07  p.m.  Present  at the  call to                                                               
order  were Representatives  Tuck,  Millett (via  teleconference)                                                               
and  Edgmon.   Representatives Johansen  and Petersen  arrived as                                                               
the  meeting was  in progress.   Representative  Foster was  also                                                               
present.                                                                                                                        
                                                                                                                                
3:07:25 PM                                                                                                                    
                                                                                                                                
^OVERVIEW: RURAL ENERGY ISSUES                                                                                                
                 OVERVIEW: RURAL ENERGY ISSUES                                                                              
                                                                                                                                
                [Contains discussion of HB 305]                                                                                 
                                                                                                                                
3:07:27 PM                                                                                                                    
                                                                                                                                
CO-CHAIR EDGMON announced the only  order of business would be an                                                               
overview on rural energy issues.   The purpose of the overview is                                                               
to hear  a structured  conversation about  the services  that are                                                               
provided   to   rural    Alaska   regarding   energy,   including                                                               
recommendations  from the  providers  for  improvements to  those                                                               
services.   Participating in  the roundtable  are representatives                                                               
from  the  following  organizations:     Alaska  Housing  Finance                                                               
Corporation (AHFC),  Alaska Village Electric  Cooperative (AVEC),                                                               
Alaska Energy  Authority (AEA), Denali Commission  (DC), Division                                                               
of  Community   &  Regional  Affairs,  Department   of  Commerce,                                                               
Community,  & Economic  Development  (DCCED),  and Department  of                                                               
Health and Social Services (DHSS).                                                                                              
                                                                                                                                
3:10:07 PM                                                                                                                    
                                                                                                                                
RON   KREHER,  Chief,   Field   Services,   Division  of   Public                                                               
Assistance,  Department of  Health  and  Social Services  (DHSS),                                                               
stated  that he  oversees the  operation of  the state's  heating                                                               
assistance programs.  Mr. Kreher  informed the committee that the                                                               
heating assistance  programs are  performing well.   The programs                                                               
began  issuing   benefits  11/1/09,  and  applications   will  be                                                               
accepted  through  4/30/10.   There  are  two programs;  the  Low                                                               
Income  Home Energy  Assistance Program  (LIHEAP) and  the Alaska                                                               
Heating Assistance  Program (AKHAP).  LIHEAP  is federally funded                                                               
and serves  families with incomes  below 150 percent  of poverty;                                                               
AKHAP is  state funded and  serves families with  incomes between                                                               
151 percent  and 225 percent of  poverty.  In FY  2009, the state                                                               
served 10,983  households through the LIHEAP  program, and tribal                                                               
organizations  served  6,833  households,  using  federal  funds.                                                               
Also in  FY 2009,  the state served  2,047 households  and tribal                                                               
organizations served 339 households  using state funds.  Overall,                                                               
20,191  households were  served, and  he anticipated  receiving a                                                               
similar number of applications this year.                                                                                       
                                                                                                                                
3:13:25 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  EDGMON  asked whether  "last  year"  was 10/08  through                                                               
04/09.                                                                                                                          
                                                                                                                                
3:13:43 PM                                                                                                                    
                                                                                                                                
MR. KREHER  said correct.   He then explained that  both programs                                                               
are statewide  with 163  communities served  by the  state office                                                               
and  120  communities  served  by   tribal  organizations.    For                                                               
example, in Juneau, the  Tlingit-Haida Regional Housing Authority                                                               
(THRHA) is the  tribal grantee that administers  AKHAP and LIHEAP                                                               
for Native  applicants, while the state  administers the programs                                                               
for non-Native  applicants.   Across the  state there  are eleven                                                               
tribal organizations administering  heating assistance for LIHEAP                                                               
and of  those, eight are also  AKHAP providers.  Mr.  Kreher said                                                               
that tribal organizations receive  funding through their share of                                                               
the  LIHEAP  block  grant  to the  state;  actually,  the  tribes                                                               
administer about 30 percent each  of the federal and state monies                                                               
supporting LIHEAP and  AKHAP.  He turned to the  subject of award                                                               
determinations.    Each  community is  assigned  heating  degrees                                                               
according to  AkWarm guidelines from  the Alaska  Housing Finance                                                               
Corporation (AHFC).   Basically, his office looks at  the type of                                                               
housing, the location  of the community, and  heating degree days                                                               
to determine  the base  heating needs for  each household.   Upon                                                               
receipt of  an application, the  staff will determine  the number                                                               
of community  heating points  the household  is eligible  for and                                                               
then  make  further  adjustments,  based  on  the  aforementioned                                                               
variables, plus income, and the type  of fuel used.  The value of                                                               
the points and  the heating assistance award is  further based on                                                               
the amount  of the funding  that is anticipated for  the program,                                                               
the number  of applicants  that is  anticipated, and  the average                                                               
number  of community  heating points  issued in  the prior  year.                                                               
For example, FY  2010 LIHEAP points are estimated to  be $115 per                                                               
community heating  point, thus a  household with ten  points will                                                               
receive  a heating  assistance award  of  $1,150 to  give to  the                                                               
vendor  of  the  applicant's  choice.   He  opined  the  programs                                                               
supplement  a  portion  of  the   households'  need  for  heating                                                               
assistance, but  do not  pay the entire  bill.   Furthermore, the                                                               
intent of the programs is  that households with the lowest income                                                               
and  the highest  number of  heating  degree days  would get  the                                                               
highest  award;  in fact,  the  program  is heavily  weighted  to                                                               
provide the  most benefit for those  with the highest need.   The                                                               
result is that  the bulk of the payments go  to rural communities                                                               
because  rural areas  more often  have  higher community  heating                                                               
points and lower incomes.                                                                                                       
                                                                                                                                
3:20:10 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  EDGMON  observed that  the  number  of participants  is                                                               
larger in urban communities, but most  of the money goes to rural                                                               
areas throughout the state.                                                                                                     
                                                                                                                                
3:20:38 PM                                                                                                                    
                                                                                                                                
MR. KREHER said yes.  In  further response to Co-Chair Edgmon, he                                                               
confirmed that "it  works out the same way for  both programs ...                                                               
the  very  same  point  system  is  used."    There  is  also  an                                                               
adjustment by  income in  that an applicant  with no  income will                                                               
receive  100 percent  of  the allowable  points,  and those  with                                                               
incomes will receive  a smaller percentage.  For  example, in the                                                               
AKHAP program, an  applicant with an income of  above 150 percent                                                               
of poverty will  receive 40 percent of the allowable  points.  He                                                               
then  referred to  a chart  in the  committee packet  titled, "FY                                                               
2010 HAP Awards,  Gallons of Fuel Covered by  Award," that showed                                                               
the  average points  allowed by  location, the  average price  of                                                               
heating fuel by  location, and the estimated average  awards.  He                                                               
concluded that  the programs are  meeting a significant  need for                                                               
low  income  households across  the  state,  especially in  rural                                                               
Alaska.    Although  recent  funding  sources  have  been  fairly                                                               
stable,  2009 was  an interesting  anomaly in  that the  programs                                                               
received  emergency  contingency  funds from  federal  and  state                                                               
sources.   Last year his  office received $51 million  dollars to                                                               
use towards  energy assistance.   However, this year,  $5 million                                                               
was  appropriated for  AKHAP and  Alaska's share  of the  federal                                                               
block grant  was $25 million, of  which about $9 million  goes to                                                               
tribal organizations.                                                                                                           
                                                                                                                                
3:24:22 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  asked whether the assistance  from President                                                               
Chavez of Venezuela goes through DHSS.                                                                                          
                                                                                                                                
3:25:00 PM                                                                                                                    
                                                                                                                                
MR. KREHER indicated no.                                                                                                        
                                                                                                                                
3:25:06 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  FOSTER asked  whether fuel  received through  the                                                               
CITGO program would affect an  applicant's award through AKHAP or                                                               
LIHEAP.                                                                                                                         
                                                                                                                                
MR. KREHER said that is correct.                                                                                                
                                                                                                                                
3:25:30 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHANSEN  observed that  he would qualify  for the                                                               
program.                                                                                                                        
                                                                                                                                
3:26:45 PM                                                                                                                    
                                                                                                                                
MR.  KREHER,  in  response to  Representative  Petersen,  further                                                               
explained that  the total  funding level for  this year  is $32.6                                                               
million; therefore,  his office  has determined that  the heating                                                               
point value is $115 per community heating point.                                                                                
                                                                                                                                
REPRESENTATIVE PETERSEN asked whether $32.6 million is adequate.                                                                
                                                                                                                                
3:27:54 PM                                                                                                                    
                                                                                                                                
MR. KREHER  indicated that given  the challenges  many households                                                               
face,  and  the work  opportunities  throughout  the state,  many                                                               
working  families  are  "feeling  the pinch  pretty  hard."    He                                                               
anticipated that the community heating  point value of $115 would                                                               
meet less  than one-half  of a household's  heating cost,  and he                                                               
was unable to say whether this  amount was adequate.  Mr. Kreher,                                                               
in  response  to  Co-Chair  Edgmon,  said  his  department  would                                                               
disperse any additional funds to participants.                                                                                  
                                                                                                                                
3:29:19 PM                                                                                                                    
                                                                                                                                
CO-CHAIR MILLETT asked how many  of the applicants are elders and                                                               
seniors.                                                                                                                        
                                                                                                                                
3:29:36 PM                                                                                                                    
                                                                                                                                
MR.  KREHER responded  that  elders and  seniors  are a  priority                                                               
population, as  well as  households with children.   As  of 2/15,                                                               
awards  were made  to  5,900 LIHEAP  households  and about  1,100                                                               
AKHAP  households.   Of those,  2,000 households  had a  disabled                                                               
resident,  2,200  households had  an  elderly  resident, and  840                                                               
households had a  disabled and an elderly resident.   Mr. Kreher,                                                               
in  further response  to Co-Chair  Millett,  indicated that  DHSS                                                               
advertises the programs in rural newspapers.                                                                                    
                                                                                                                                
3:31:24 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  EDGMON  asked  for  the   percentages  of  seniors  and                                                               
disabled who participate in the programs.                                                                                       
                                                                                                                                
3:31:40 PM                                                                                                                    
                                                                                                                                
MR.  KREHER offered  to provide  the committee  data from  a full                                                               
year.                                                                                                                           
                                                                                                                                
REPRESENTATIVE   JOHANSEN   asked   for  clarification   on   the                                                               
application process and eligibility.                                                                                            
                                                                                                                                
3:32:44 PM                                                                                                                    
                                                                                                                                
MR. KREHER explained that about  30 percent of applicants are not                                                               
eligible for a variety of reasons.   In further response, he said                                                               
that the  funding amount  has not  been a  problem in  the recent                                                               
past,  except  for  tribal  organizations   that  have  had  more                                                               
eligible households than they can serve.                                                                                        
                                                                                                                                
REPRESENTATIVE JOHANSEN  asked for  further clarification  on the                                                               
scoring factors.   He asked,  "Do these scoring factors,  is that                                                               
the attempt  to ... push the  money where I would  be less likely                                                               
to get  a grant if I  were competing with somebody  who lived out                                                               
... who really needs it...?"                                                                                                    
                                                                                                                                
3:34:14 PM                                                                                                                    
                                                                                                                                
MR.   KREHER,   referring   to  the   AKHAP   program,   informed                                                               
Representative  Johansen   that  an   applicant  who   meets  the                                                               
eligibility  criteria must  complete an  application and  provide                                                               
proof  of heating  utility  costs.   Based  on  the  size of  the                                                               
household and whether there was  an elderly or disabled member of                                                               
the  household, the  applicant would  receive an  award; however,                                                               
the size of  the award would be adjusted also  on the location of                                                               
the home, the applicant's income  bracket, the type of heat used,                                                               
and other  factors.  As  awards are  not paid to  households with                                                               
fewer  than  two points,  the  amount  of  the award  could  vary                                                               
significantly.                                                                                                                  
                                                                                                                                
3:36:42 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHANSEN cautioned  that unscrupulous  applicants                                                               
may attempt to "work the system."                                                                                               
                                                                                                                                
MR. KREHER noted  that 950 applications have  been denied, mostly                                                               
due to income.                                                                                                                  
                                                                                                                                
3:38:11 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE PETERSEN  asked whether more points  are given for                                                               
a home in a colder climate.                                                                                                     
                                                                                                                                
MR. KREHER said that is correct.                                                                                                
                                                                                                                                
CO-CHAIR  EDGMON posed  a question  to  the remaining  witnesses:                                                               
What  are the  strengths and  weaknesses in  terms of  delivering                                                               
energy related services to rural Alaska?                                                                                        
                                                                                                                                
3:39:18 PM                                                                                                                    
                                                                                                                                
STEVEN  HAAGENSON, Executive  Director,  Alaska Energy  Authority                                                               
(AEA),   Department   of    Commerce,   Community,   &   Economic                                                               
Development,  said that  since AEA  is not  a direct  supplier of                                                               
energy services,  or the end  user of services, he  would discuss                                                               
the areas of  energy utility assistance being provided  by AEA to                                                               
some  of  the  utilities.     The  nature  of  the  requests  for                                                               
assistance  indicate the  areas  in which  utilities need  higher                                                               
levels of assistance,  and discussion of these  requests may lead                                                               
to ideas  for expansion,  or a re-focusing  of services  to rural                                                               
utilities.   He indicated there  are requests for AEA  to provide                                                               
training   programs    for   small   diesel    plant   operators,                                                               
hydroelectric plant  operators, bulk  fuel tank  operators, power                                                               
cost   equalization   clerks,   utility   managers,   bulk   fuel                                                               
bookkeepers,  and electric  utility  bookkeepers.   Requests  for                                                               
technical assistance are also  received, and technical assistance                                                               
is provided in  many areas such as searching for  parts, and help                                                               
with malfunctioning  equipment.   Mr. Haagensen gave  examples of                                                               
questions that are  asked regarding the operation  of small power                                                               
plants.  AEA  has a team that is available  to assist on-site, or                                                               
by remote  monitoring.  Remote  monitoring is available  to about                                                               
30  small  utilities  and  could  be  expanded  to  serve  larger                                                               
utilities  or multiple  sites.   This system  could also  provide                                                               
data on the need for an  oil change to prevent equipment failure,                                                               
or  to monitor  generator efficiency  to ensure  the lowest  cost                                                               
power.    Innovation  and technology  sharing  have  resulted  in                                                               
stacked heat  recovery systems to increase  efficiencies, and the                                                               
use of used oil blenders.   He opined that networking is critical                                                               
to   optimize   electrical   utilities  because   utilities   can                                                               
participate  in the  Alaska Rural  Energy  Conference, and  other                                                               
forums, to share information; in  fact, emerging technologies can                                                               
be risky, and shared information is valuable.                                                                                   
                                                                                                                                
3:43:29 PM                                                                                                                    
                                                                                                                                
TARA  JOLLIE,  Director,  Division   of  Community  and  Regional                                                               
Affairs  (DCRA), Department  of Commerce,  Community, &  Economic                                                               
Development  (DCCED),  informed  the  committee of  the  need  to                                                               
directly    connect    community   stability    and    consistent                                                               
administration.  On the subject  of energy, the direct connection                                                               
is  between having  an economy  or  business, and  the supply  of                                                               
energy  "keeping the  lights  on  in any  public  utility."   She                                                               
opined  that  the strength  of  DCRA  is in  providing  technical                                                               
assistance at  the community level.   As  a matter of  fact, DCRA                                                               
estimates that  40 percent of  small communities off of  the road                                                               
system  are less  than  able to  adequately  manage their  energy                                                               
supply, and  are in need of  technical support.  Where  the local                                                               
utilities   get  technical   support,  businesses   can  operate.                                                               
However, in  a very small community  it is possible for  one user                                                               
to "run  the utility bill up"  and almost shut down  power to the                                                               
entire   community.     Although   DCRA   has  local   government                                                               
specialists who  can offer  technical assistance  to communities,                                                               
there  is a  need  for  more staff.    Ms.  Jollie stressed  that                                                               
funding for  community revenue sharing is  extremely important to                                                               
small communities that need help with  cash flow to pay for barge                                                               
deliveries.   DCRA can guarantee  payment to the fuel  vendor, or                                                               
provide bridge loans to communities  that could not get bulk fuel                                                               
loans.    Assisting  communities  in this  way  enables  them  to                                                               
purchase  fuel at  better prices;  in  fact, many  of the  shared                                                               
revenue funds  are used to  purchase fuel.  Ms.  Jollie concluded                                                               
that the two  most important DCRA programs  are community revenue                                                               
sharing at  its present  level of funding,  and the  expansion of                                                               
local technical assistance to communities.                                                                                      
                                                                                                                                
3:48:46 PM                                                                                                                    
                                                                                                                                
CO-CHAIR EDGMON asked whether more  staff could be used to assist                                                               
the communities with limited capabilities.                                                                                      
                                                                                                                                
3:49:11 PM                                                                                                                    
                                                                                                                                
MS.  JOLLIE  said  yes,  and  added  that  these  issues  prevent                                                               
communities  from participating  in available  programs and  from                                                               
having sound financial management.                                                                                              
                                                                                                                                
CO-CHAIR MILLETT asked all of  the witnesses whether the creation                                                               
of a department of energy is valuable to HB 305.                                                                                
                                                                                                                                
3:50:34 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  EDGMON suggested  that  the question  also include  the                                                               
consolidation or  centralization of  energy services,  and should                                                               
also  address  the  current  fragmented  nature  of  all  of  the                                                               
different programs and services.                                                                                                
                                                                                                                                
MS. JOLLIE  has heard that  there is difficulty knowing  where to                                                               
go  regarding  state  services.   She  acknowledged  that  it  is                                                               
difficult to navigate  the system; in fact, DCRA  helps people do                                                               
that and collaborates across agencies.                                                                                          
                                                                                                                                
3:52:38 PM                                                                                                                    
                                                                                                                                
MR. HAAGENSON  pointed out  that centralizing  statewide services                                                               
and  centralizing energy  services may  be two  different things.                                                               
Referring just  to energy services, he  said he has not  heard of                                                               
concerns, but there are four or  five places one can go, and "I'm                                                               
sure there are places we can consolidate in that area."                                                                         
                                                                                                                                
3:54:56 PM                                                                                                                    
                                                                                                                                
MEERA  KOHLER,   President  and  CEO,  Alaska   Village  Electric                                                               
Cooperative  (AVEC),   informed  the  committee   energy  related                                                               
services  are  two-fold:    electricity and  liquid  fuel.    The                                                               
geography  of  Alaska presents  unique  problems,  such as  small                                                               
communities  that are  spread out  over a  vast and  inhospitable                                                               
terrain.   The generation  and distribution  of electricity  is a                                                               
complex system,  but isolated  communities attempt  to accomplish                                                               
this task.   Additionally, the modest level  of technical support                                                               
provided by  the state is  insufficient.  Per  capita consumption                                                               
of electricity  in rural Alaska  is about  50 percent of  that in                                                               
cities and conservation  efforts have already been  put in place.                                                               
Ms. Kohler  explained that  petroleum fuels  represent two-thirds                                                               
to three-fourths  of the  energy consumed  by Alaskans,  and also                                                               
represents   an   enormous  cost   to   rural   budgets  due   to                                                               
transportation costs  to small markets.   Furthermore,  the ultra                                                               
low sulfa  diesel rules are  adding confusion.  Ms.  Kohler noted                                                               
that  one  of  the  few  strengths in  the  rural  Alaska  energy                                                               
situation  is  the  virtual  immunity  to  terrorism  and  cyber-                                                               
attacks.   The  weaknesses are:   very  small markets;  very high                                                               
investment  per  consumer  for  electric  systems;  modest  human                                                               
capacity  for  highly  technical generation  systems,  especially                                                               
alternative  and  renewable  energy  systems;  market  isolation;                                                               
conservation   and  efficiency   efforts  resulting   in  further                                                               
compression   of   economies   of   scale;   oppressed   economic                                                               
development  due   to  high  energy  costs;   limited  local  job                                                               
opportunities  resulting in  out-migration of  the most  talented                                                               
and capable workforce.                                                                                                          
                                                                                                                                
3:58:48 PM                                                                                                                    
                                                                                                                                
CO-CHAIR EDGMON inquired as to  how to provide technical services                                                               
to  villages in  order  to  save them  money  and  allow them  to                                                               
leverage money at the local level.                                                                                              
                                                                                                                                
3:59:45 PM                                                                                                                    
                                                                                                                                
MS. KOHLER  advised that this is  a unique situation in  that the                                                               
generation  of   electricity  is  on-site  in   every  community;                                                               
elsewhere   in  the   country   communities   are  connected   by                                                               
transmission  lines, and  generation  takes place  in a  location                                                               
central to  the technicians.   She noted  that AVEC built  a wind                                                               
generation  power  plant in  Toksook  Bay  and sent  transmission                                                               
lines  out to  small communities,  thereby keeping  the need  for                                                               
technical competence  in one community.   Accordingly,  a further                                                               
reduction  in   the  number   of  communities   with  stand-alone                                                               
generation systems  from 300 to  100, would improve  economies of                                                               
scale, and focus the technical  competence in larger communities.                                                               
Ms. Kohler said,  "That is part of the solution  I do propose, is                                                               
that  we   do  have  to   get  realistic  and   aggressive  about                                                               
interconnecting  communities  and   creating,  if  nothing  else,                                                               
virtual  grids to  try and  get these  communities consolidated."                                                               
In response to Co-Chair Millett,  she agreed with the concept and                                                               
described  several  different   departments  providing  the  same                                                               
service.  She questioned whether  consolidation would include the                                                               
larger  programs such  as gas,  petroleum,  and crude  oil.   Ms.                                                               
Kohler concluded  that retail-type  services are  closely related                                                               
and would benefit from consolidation.                                                                                           
                                                                                                                                
4:02:49 PM                                                                                                                    
                                                                                                                                
BOB  BREAN,  Director,  Research   &  Rural  Development,  Alaska                                                               
Housing  Finance  Corporation   (AHFC),  Department  of  Revenue,                                                               
informed the committee  that AHFC is more involved  in the demand                                                               
side of the energy picture, as  opposed to the supply side.  Thus                                                               
its work is  directly relative to the  residential and commercial                                                               
use of  energy.   Regarding the strengths  of energy  delivery in                                                               
rural  Alaska, he  advised that  AHFC successfully  sub-contracts                                                               
out to  regional entities.   AHFC is currently working  with five                                                               
weatherization  contractors statewide,  and with  twelve regional                                                               
housing  authorities,  that are  very  effective  in housing  and                                                               
infrastructure development throughout Bush  Alaska and across the                                                               
state.   AHFC  provides  technical assistance  and the  financial                                                               
aspect, but empowers regional housing  authorities to deliver its                                                               
program.   In  this  way,  the housing  authorities  are able  to                                                               
retain and  create jobs.   He  stated that this  model is  one of                                                               
AHFC's great strengths and has proven  its value.  Turning to the                                                               
subject  of weaknesses,  Mr. Brean  agreed with  Ms. Jollie  that                                                               
energy  issues in  rural communities  must be  considered in  the                                                               
light  of   other  aspects  of  community   development  in  each                                                               
community.  For  example, if a community has  invested in capital                                                               
projects there  may still  be debt,  and the  old debt  to equity                                                               
ratio will prevent  a community from beginning  new projects that                                                               
could result  in energy savings.   He recalled that DCRA  used to                                                               
coordinate all of the aspects  of local economic development with                                                               
new projects  in a database.   Continuing to  address weaknesses,                                                               
he  stressed that  all  aspects  of energy  projects  need to  be                                                               
coordinated with local economic  development such as coordinating                                                               
freighting of materials to gain  economies of scale, coordinating                                                               
dirt work  with sewer and  water projects, and doing  a financial                                                               
analysis of  the community.   Mr. Brean  advised that there  is a                                                               
division in DCCED  that is very good at  the abovementioned task.                                                               
Also, on  the issue  of the consolidation  of state  services, he                                                               
re-stated  that  AHFC's part  is  only  on  the demand  side  and                                                               
suggested the  use of the  original DCRA model; however,  this is                                                               
not limited  to energy but  must include the multiple  aspects of                                                               
economic  development  of  rural   Alaska.    For  AHFC's  formal                                                               
position,  he deferred  the  question  to its  CEO  and board  of                                                               
directors.                                                                                                                      
                                                                                                                                
4:09:49 PM                                                                                                                    
                                                                                                                                
JOEL NEIMEYER, Federal Co-Chair,  Denali Commission, informed the                                                               
committee  that the  Denali  Commission has  no  position on  the                                                               
consolidation of  state government.  He  deferred to Commissioner                                                               
Karen Rehfeld to  further address this question on  behalf of the                                                               
Denali  Commission.    He  then   pointed  out  that  the  Denali                                                               
Commission is  comprised of seven  Alaskans who are  delegated by                                                               
Congress,  and who  have administered  almost $1  billion dollars                                                               
over the last  ten years, with support from  many other Alaskans.                                                               
Mr. Neimeyer  stated that the  question posed on the  delivery of                                                               
energy  was  given to  the  Denali  Commission's energy  advisory                                                               
committee  and   the  energy  coordinator  would   speak  to  its                                                               
position.                                                                                                                       
                                                                                                                                
4:11:59 PM                                                                                                                    
                                                                                                                                
DENALI   DANIELS,   Senior   Energy   Program   Manager,   Denali                                                               
Commission,  related that  the commission  has three  points that                                                               
represent the strengths  of rural energy delivery.   The first is                                                               
an  increased  motivation  by communities  toward  greater  self-                                                               
sufficiency, and  an emerging entrepreneurial spirit  in response                                                               
to energy challenges.   Secondly, regional entities  of all types                                                               
are  strong;  for  example,  in   Chevak,  the  city  and  tribal                                                               
governments are  coordinating steps to become  more effective and                                                               
self-sufficient.   Finally,  she advised  that over  the past  11                                                               
years,  the Denali  Commission, along  with other  government and                                                               
private   funders,  has   elevated   standards  for   communities                                                               
pertaining to  the sustainability of  infrastructure development.                                                               
During that  time, the Denali  Commission has invested  over $350                                                               
million  in basic  energy infrastructure  statewide such  as bulk                                                               
fuel  storage,  rural  power system  upgrades,  renewable  energy                                                               
projects,  and   alternative  energy  projects.     In  fact,  93                                                               
communities received  improvements to  bulk fuel  facilities, and                                                               
46  communities  have  received   upgraded  or  new  rural  power                                                               
systems.                                                                                                                        
                                                                                                                                
4:14:23 PM                                                                                                                    
                                                                                                                                
MS.  DANIELS turned  to the  challenges facing  rural areas,  and                                                               
noted  that  66 communities  remain  on  the bulk  fuel  facility                                                               
deficiency  list with  an  estimated cost  for  upgrades of  $257                                                               
million.  Further,  rural power system upgrades are  needed in 78                                                               
communities.    Secondly,  the   Denali  Commission  has  limited                                                               
authority to  enforce adherence to  the requirements  attached to                                                               
its  grants; thus,  alternatives  for  post-grant compliance  are                                                               
needed  to ensure  that the  infrastructure funded  will last  30                                                               
years.   The  final  weakness noted  was  that Denali  Commission                                                               
funding  is declining  and  there  is a  greater  need for  state                                                               
support to leverage federal funding.                                                                                            
                                                                                                                                
4:17:43 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHANSEN  asked  how  many  different  divisions,                                                               
departments, and  agencies the Denali Commission  deals with when                                                               
working on energy projects within the state.                                                                                    
                                                                                                                                
4:18:27 PM                                                                                                                    
                                                                                                                                
MR.  NIEMAYER stated  in his  25 years  of experience  working in                                                               
rural Alaska, what  he has seen with state  and federal agencies,                                                               
and with stakeholder  groups, are "silos of funding  and silos of                                                               
programs."   This  situation  leads to  lost  opportunities.   He                                                               
encouraged the legislature to "reduce  those silos, or make those                                                               
silos  work better  with  one  another."   For  example, a  rural                                                               
community  may  have twenty  to  forty  community buildings,  and                                                               
seven   or  eight   different  funding   streams  interested   in                                                               
weatherizing the  buildings.  An  energy efficiency project  on a                                                               
2,000 square foot  building is a modest  undertaking; however, if                                                               
the  funding streams  are coordinated  and  the project  includes                                                               
buildings in 200 communities, it  becomes very complex.  Further,                                                               
if  the funding  streams work  together on  a specific  location,                                                               
there  would be  an opportunity  to  leverage the  funds, even  a                                                               
small  community  could  participate, and  a  significant  impact                                                               
could be made.                                                                                                                  
                                                                                                                                
4:22:07 PM                                                                                                                    
                                                                                                                                
CO-CHAIR EDGMON  observed that considering  the way  services are                                                               
delivered in  Bush Alaska,  two key  participants not  present at                                                               
this discussion  are the regional  not for  profit organizations,                                                               
and the  regional housing  authorities.   For example,  he opined                                                               
the Bristol Bay Native Association  (BBNA) serves as the de facto                                                               
department of  energy for  the Bristol Bay  region.   He recalled                                                               
testimony  that   there  are   silos  throughout   the  statewide                                                               
directory of  services and programs.   Co-Chair Edgmon  asked the                                                               
witnesses for  recommendations as  to what the  legislature could                                                               
do to improve the situation.                                                                                                    
                                                                                                                                
4:23:24 PM                                                                                                                    
                                                                                                                                
MR. HAAGENSON  pointed out  Alaska's two curses:   low  usage and                                                               
long distance.   He  encouraged the  rural utilities  to organize                                                               
under one  umbrella in a  manner similar to the  Greater Railbelt                                                               
Energy Transmission  Corporation (GRETC).   This would  allow for                                                               
remote monitoring,  bulk fuel purchasing, and  planning for joint                                                               
financing and  deliveries, to develop needed  economies of scale.                                                               
He  stressed  that   the  business  model  must   come  from  the                                                               
utilities,  and  the ultimate  solution  must  be picked  by  the                                                               
communities.                                                                                                                    
                                                                                                                                
4:25:45 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  EDGMON announced  the  Alaska  Rural Energy  Conference                                                               
will be held 4/27-29/10 in Fairbanks.                                                                                           
                                                                                                                                
4:26:05 PM                                                                                                                    
                                                                                                                                
MS.  KOHLER agreed  that rural  utilities need  a generation  and                                                               
transmission  (G&T)  concept  for  rural  Alaska  to  consolidate                                                               
competent operations under one roof,  and to supply the technical                                                               
support necessary  to operate  a competent  utility.   The issue,                                                               
however, is how  that would be funded.  She  suggested that there                                                               
should be a  rural connection to GRETC wherein  savings on energy                                                               
in  the Railbelt  would be  spread  across the  state to  operate                                                               
competent utilities in  rural Alaska.  Ms. Kohler  said this idea                                                               
is supported  by the fact  that the benefits outweigh  the costs.                                                               
She encouraged  the legislature to  adopt and fund  an aggressive                                                               
plan to connect Alaskan communities  to a common grid, physically                                                               
or  virtually, for  a variety  of  reasons.   Also, working  with                                                               
private  industry,  the  legislature needs  to  ensure  broadband                                                               
access  to  rural Alaska.    The  lack  of internet  service  has                                                               
hampered the operation and  management control capabilities vital                                                               
to   the  development   of  alternative   and  renewable   energy                                                               
technologies in  rural Alaska, as  well as  economic development.                                                               
Furthermore,   the   legislature   needs   to   ensure   that   a                                                               
comprehensive  communication plan  is developed  to assist  rural                                                               
Alaska comply  with Environmental  Protection Agency  (EPA) rules                                                               
for conversion to ultra low  sulfur diesel.  Ms. Kohler cautioned                                                               
that  there  is fear  in  the  villages  about  this issue.    In                                                               
response  to  Co-Chair Millett,  she  said  that although  energy                                                               
services are  provided by numerous departments  within the state,                                                               
there is not  a cabinet level position with a  direct line to the                                                               
governor,  and  she stated  her  strong  support of  consolidated                                                               
energy programs.   In conclusion, Ms. Kohler  asked the committee                                                               
to review the  University of Alaska Anchorage  (UAA) Institute on                                                               
Social  and  Economic Research  (ISER)  report  about rural  fuel                                                               
costs.   She then announced  that AVEC  is building new  tugs and                                                               
barges  to help  bring  competition to  the  Western Alaska  fuel                                                               
market.                                                                                                                         
                                                                                                                                
4:31:07 PM                                                                                                                    
                                                                                                                                
CO-CHAIR MILLETT  asked how consumers  are protected if  there is                                                               
no Regulatory  Commission of  Alaska (RCA)  oversight of  a large                                                               
scale G&T cooperative.                                                                                                          
                                                                                                                                
MS.  KOHLER  explained that  AVEC  is  a cooperative  serving  53                                                               
villages, and it is not economically  regulated by the RCA.  AVEC                                                               
is regulated by its Power  Cost Equalization (PCE) rates and this                                                               
process is  similar, except  for the  investigation aspect.   She                                                               
opined  that  the  relative  size  of  rural  Alaska  allows  for                                                               
effective  regulation  by local  boards  of  directors, with  the                                                               
possible exception of investor-owned utilities.                                                                                 
                                                                                                                                
4:33:19 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  MILLETT  re-stated  her  search  for  guidance  on  the                                                               
balance  between the  overregulation of  utilities, and  consumer                                                               
protection.                                                                                                                     
                                                                                                                                
MS.  KOHLER  advised  that  an  acceptable model  is  a  work  in                                                               
progress,  but  it can  be  more  easily  achieved in  a  smaller                                                               
community than in a larger community.                                                                                           
                                                                                                                                
CO-CHAIR EDGMON  announced the presence of  Kathie Wasserman from                                                               
the Alaska Municipal League.                                                                                                    
                                                                                                                                
4:35:04 PM                                                                                                                    
                                                                                                                                
MS. JOLLIE  clarified that her previous  comment on consolidation                                                               
referred  to statewide  services,  and was  not  specific to  the                                                               
subset of  energy services.   From the  perspective of  DCRA, she                                                               
then recommended  that the legislature  provide full  funding for                                                               
community revenue sharing.   She also agreed with  Mr. Brean that                                                               
the holistic approach to community  development is key in smaller                                                               
communities,  and   urged  funding  for  three   additional  DCRA                                                               
positions to provide the level of community assistance needed.                                                                  
                                                                                                                                
4:37:21 PM                                                                                                                    
                                                                                                                                
CO-CHAIR EDGMON asked whether  DCRA has partnership opportunities                                                               
with the tribes.                                                                                                                
                                                                                                                                
MS.  JOLLIE said  DCRA works  with the  tribes all  the time,  in                                                               
addition to  working with  non-profits, tribal  councils, housing                                                               
authorities,  city   administration,  and  municipalities.     In                                                               
response to Co-Chair  Edgmon, she said there 386  entities in the                                                               
state of which 232 are municipalities and unincorporated.                                                                       
                                                                                                                                
4:38:35 PM                                                                                                                    
                                                                                                                                
MR.  BREAN spoke  of two  of  AHFC's goals  for this  legislative                                                               
session.    Firstly,  AHFC  has  proposed  an  energy  efficiency                                                               
revolving loan fund.   The intent of this proposal  is to use $18                                                               
million  dollars  of federal  stimulus  money  as seed  money  to                                                               
create  a  revolving  loan  fund.    Using  AHFC's  vehicles  and                                                               
mechanisms, the  $18 million  would then  be leveraged  into $250                                                               
million to  $275 million.   Retro-fits are  not cheap  in Alaska,                                                               
and the higher  amount would result in a  meaningful program that                                                               
could  be made  available to  municipalities, schools,  and state                                                               
agencies   for   energy   conservation   retro-fits   on   larger                                                               
facilities.   Secondly,  AHFC is  having great  success with  the                                                               
$200  million weatherization  program, and  anticipates that  the                                                               
money will be fully encumbered by  2011.  The $160 million rebate                                                               
program is also fully obligated.   Contractors continue to "ramp-                                                               
up" their  capacities to provide  the labor and  materials needed                                                               
for  these programs,  and he  cautioned about  a "boom  and bust"                                                               
situation when the  program runs out of funds.   In fact, between                                                               
10 percent  and 15 percent of  new program monies could  be saved                                                               
by a continuation of the program,  as opposed to a "ramp down and                                                               
ramp up."   AHFC estimates that 2,000 jobs are  being retained or                                                               
created    by   the    weatherization   and    rebate   programs.                                                               
Weatherization will  be completed on  10 percent of the  homes in                                                               
need, and  Mr. Brean  concluded that  if funding  remains static,                                                               
AHFC could do more.                                                                                                             
                                                                                                                                
4:42:46 PM                                                                                                                    
                                                                                                                                
MS. KOHLER  expressed her hope  for additional progress  on these                                                               
issues.                                                                                                                         
                                                                                                                                
4:43:33 PM                                                                                                                    
                                                                                                                                
CO-CHAIR EDGMON  announced that HB  296 is scheduled to  be heard                                                               
on 2/23/10,  and he  then reviewed  the agenda  for 2/20/10.   He                                                               
thanked the witnesses and invited further written comments.                                                                     
                                                                                                                                
4:46:32 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Special Committee on Energy meeting was adjourned at 4:46 p.m.                                                                  

Document Name Date/Time Subjects
AKHAP Energy Meeting 021810.pdf HENE 2/18/2010 3:00:00 PM
House Energy Committee AVEC 02182010.pdf HENE 2/18/2010 3:00:00 PM