Legislature(2015 - 2016)CAPITOL 106

03/26/2015 10:15 AM House ENERGY

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10:22:30 AM Start
10:23:18 AM Presentation: Alaska Energy Authority
12:14:06 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Location Change from Capitol 17 --
"Susitna/Watana Hydroelectric Project & the
Renewable Energy Fund" by Alaska Energy Authority
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE SPECIAL COMMITTEE ON ENERGY                                                                              
                         March 26, 2015                                                                                         
                           10:22 a.m.                                                                                           
MEMBERS PRESENT                                                                                                               
Representative Jim Colver, Co-Chair                                                                                             
Representative Liz Vazquez, Co-Chair                                                                                            
Representative Benjamin Nageak                                                                                                  
Representative David Talerico                                                                                                   
Representative Cathy Tilton                                                                                                     
Representative Matt Claman                                                                                                      
Representative Adam Wool                                                                                                        
MEMBERS ABSENT                                                                                                                
All members present                                                                                                             
COMMITTEE CALENDAR                                                                                                            
PRESENTATION:  ALASKA ENERGY AUTHORITY                                                                                          
     - HEARD                                                                                                                    
PREVIOUS COMMITTEE ACTION                                                                                                     
No previous action to record                                                                                                    
WITNESS REGISTER                                                                                                              
SARA FISHER-GOAD, Executive Director                                                                                            
Alaska Energy Authority                                                                                                         
Department of Commerce, Community & Economic Development                                                                        
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Provided a PowerPoint presentation entitled                                                              
"Alaska Energy Authority:  Renewable Energy Fund and Susitna-                                                                   
Watana Hydro," and dated 3/26/15.                                                                                               
SEAN SKALING, Director of Program Development and Project                                                                       
Alaska Energy Authority                                                                                                         
Department of Commerce, Community & Economic Development                                                                        
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Participated in the presentation by the                                                                  
Alaska Energy Authority.                                                                                                        
BRYAN CAREY, Project Manager                                                                                                    
Bradley Lake Hydroelectric                                                                                                      
Alaska Energy Authority                                                                                                         
Department of Commerce, Community & Economic Development                                                                        
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Answered questions during  the presentation                                                             
by the Alaska Energy Authority.                                                                                                 
WAYNE DYOK, Project Manager                                                                                                     
Susitna-Watana Hydro                                                                                                            
Alaska Energy Authority                                                                                                         
Department of Commerce, Community & Economic Development                                                                        
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Answered a  question during the presentation                                                             
by the Alaska Energy Authority.                                                                                                 
BETSY MCGREGOR, Susitna-Watana Environmental Manager                                                                            
Alaska Energy Authority                                                                                                         
Department of Commerce, Community & Economic Development                                                                        
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:   Participated  in the  presentation by  the                                                             
Alaska Energy Authority.                                                                                                        
ACTION NARRATIVE                                                                                                              
10:22:30 AM                                                                                                                   
CO-CHAIR  LIZ  VAZQUEZ  called the  House  Special  Committee  on                                                             
Energy meeting  to order at  10:22 a.m.   Representatives Claman,                                                               
Wool, Nageak, Talerico,  Colver, and Vazquez were  present at the                                                               
call to order.  Representative  Tilton arrived as the meeting was                                                               
in progress.                                                                                                                    
^PRESENTATION:  ALASKA ENERGY AUTHORITY                                                                                         
             PRESENTATION:  ALASKA ENERGY AUTHORITY                                                                         
10:23:18 AM                                                                                                                   
CO-CHAIR VAZQUEZ announced that the  only order of business would                                                               
be a presentation  by the Alaska Energy  Authority, Department of                                                               
Commerce, Community & Economic Development.                                                                                     
10:24:06 AM                                                                                                                   
SARA  FISHER-GOAD, Executive  Director,  Alaska Energy  Authority                                                               
(AEA), Department  of Commerce, Community &  Economic Development                                                               
(DCCED), informed  the committee  AEA manages  statewide programs                                                               
under its mission:  To reduce the  cost of energy in Alaska.  She                                                               
said AEA  has the ability to  own and operate some  projects, but                                                               
cannot own new projects, except  the authority to own and develop                                                               
Susitna-Watana Hydro  was granted  in 2011.   To carry  out AEA's                                                               
mission,  most statewide  programs fall  under AS  42.45 and  the                                                               
renewable  energy  programs fall  under  the  statute for  energy                                                               
programs  for  Alaska (slide  2).    The  agency has  focused  on                                                               
communities by  taking a  holistic approach,  combining renewable                                                               
energy  projects  and  core  infrastructure  projects  for  Rural                                                               
Alaska.   This focus  will ensure communities  are in  a project-                                                               
ready  status  so  that  their basic  structure  can  accept  the                                                               
integration of  a renewable  project.   Internally, AEA  seeks to                                                               
emphasize community  development, planning,  program development,                                                               
project evaluation, and implementation (slide 3).                                                                               
10:26:26 AM                                                                                                                   
SEAN  SKALING,  Director  of   Program  Development  and  Project                                                               
Evaluation, AEA,  said one benefit  of the renewable  energy fund                                                               
program  is to  help achieve  the  state's renewable  goal of  50                                                               
percent by 2025.   In 2012, the goal was at  24 percent and there                                                               
is additional wind and hydroelectric  (hydro) power not accounted                                                               
for at this time.    Also, in certain regions  of the state there                                                               
has been  great progress towards  the goal, especially  on Kodiak                                                               
Island and in  Southeast, which has 97  percent renewable energy.                                                               
Another benefit is  that the renewable energy  fund program helps                                                               
displace volatile-priced fossil fuels;  in fact, about 15 million                                                               
gallons of fuel per year has  been displaced.  Another benefit is                                                               
that the program  expands the renewable energy  knowledge base by                                                               
"leaps and bounds" (slide 4).                                                                                                   
CO-CHAIR  VAZQUEZ asked  when the  state's renewable  energy goal                                                               
was established.                                                                                                                
MS.  FISHER-GOAD answered  the goal  was established  in 2010  by                                                               
House Bill 306 [passed in the 26th Alaska State Legislature].                                                                   
CO-CHAIR VAZQUEZ  asked how "renewable"  is defined in  regard to                                                               
this goal.                                                                                                                      
MR. SKALING  responded that renewable  is defined in  statute for                                                               
this program  as follows:   wind, hydro, biomass,  woody biomass,                                                               
geothermal,  solar, and  an option  for any  local fuel,  such as                                                               
local natural gas.                                                                                                              
CO-CHAIR VAZQUEZ surmised the state  definition differs from that                                                               
of  the  United  States Environmental  Protection  Agency  (EPA),                                                               
which excludes hydro.                                                                                                           
10:31:20 AM                                                                                                                   
MS. FISHER-GOAD said EPA and  the U.S. Department of Energy (DOE)                                                               
definitions of  renewable can include  hydro power;  however, AEA                                                               
seeks to  better define what  federal programs are  available for                                                               
developing hydro power.  For  example, financing can be available                                                               
for hydro power, but statistics  of renewable energy often do not                                                               
include hydro power.                                                                                                            
CO-CHAIR  VAZQUEZ concluded  that federal  programs will  exclude                                                               
hydro, but for  financing and for state  purposes, the definition                                                               
includes hydro.                                                                                                                 
MS.  FISHER-GOAD  acknowledged  there   is  no  black  and  white                                                               
definition; in  fact, AEA has  identified projects that  are best                                                               
for  communities,  but  that  do  not  quite  fit  the  statutory                                                               
requirements of  the renewable  energy fund  program either.   On                                                               
the  federal level,  AEA has  found that  for financing,  certain                                                               
hydro projects qualify as a renewable resource.                                                                                 
MR.  SKALING  pointed out  that  DOE  has  a strong  goal  called                                                               
Hydropower  Vision which  seeks  to utilize  hydro by  energizing                                                               
water  systems  for  irrigation   and  other  purposes;  however,                                                               
federal  support  is limited  to  certain  departments and  grant                                                               
programs.    He  returned  attention   to  the  benefits  of  the                                                               
renewable  energy fund,  noting  that the  program  has a  strong                                                               
technical  and  economic  evaluation   process  which  means  the                                                               
projects are subject to the  same vetting process, so that public                                                               
funds  are granted  for  the  best use  possible.    There is  an                                                               
emphasis on high  cost areas and providing  regional balance, and                                                               
eligible applicants also include  the transmission of renewables.                                                               
Mr. Skaling added  that projects are funded  in phases, beginning                                                               
with  a feasibility  study  and followed  by  funding for  design                                                               
and/or construction  (slide 5).   In  2014, the  renewable energy                                                               
fund program and Kodiak Electric  received a joint award from the                                                               
Clean  Energy States  Alliance, and  he restated  that in  2014 -                                                               
throughout the  state - 15  million gallons of  diesel equivalent                                                               
were  displaced (slide  6).   He provided  a funding  summary for                                                               
Rounds I through VII:  each  round is one year beginning in July,                                                               
with applications due in September.   After Round VIII, about 800                                                               
applications will  have been received  and 185  distinct projects                                                               
will  have been  funded, and  there are  about 125  active grants                                                               
(slide 7).   He  displayed a  map that  showed the  grants funded                                                               
across the  state after Rounds  I-VII, and which  illustrated the                                                               
regional  distribution of  the many  communities affected  by the                                                               
fund (slide  8).  Further, a  graph indicated the funds  spent by                                                               
resource:   wind and  hydro are approximately  35 percent  of the                                                               
fund, followed by biomass, heat  recovery, and heat pump projects                                                               
(slide 9).   Mr. Skaling  advised that the renewable  energy fund                                                               
allows sufficient  flexibility so  that AEA can  make adjustments                                                               
in response to the needs of communities.                                                                                        
10:38:48 AM                                                                                                                   
REPRESENTATIVE WOOL asked whether there  has been any ocean tidal                                                               
MR.  SKALING  responded that  there  have  been resource  studies                                                               
which would  go through the  emerging energy technology  fund; in                                                               
False Pass, studies  show a strong tidal resource,  but the issue                                                               
is how to  provide a cost-effective device to serve  a very small                                                               
MS. FISHER-GOAD  added that the  False Pass project does  not fit                                                               
well into  the renewable energy fund,  but is a good  project for                                                               
hydrokinetic testing that could  be provided through the emerging                                                               
energy technology fund.                                                                                                         
REPRESENTATIVE  CLAMAN  inquired as  to  heat  projects and  heat                                                               
recovery projects.                                                                                                              
MR. SKALING  explained that heat  projects include  biomass; heat                                                               
recovery projects take excess heat  from a small community diesel                                                               
power system and  use it in a  nearby building.    Heat pumps are                                                               
direct heat  and geothermal projects generally  are electric, but                                                               
they  can have  a direct  use of  heat.   In further  response to                                                               
Representative  Claman,  he  added  that excess  wind  and  hydro                                                               
energy can  also go  to heat,  but their best  use is  to produce                                                               
electricity.  Mr. Skaling provided  a graph which illustrated the                                                               
regional  distribution of  funds  from Rounds  I-VII (slide  10).                                                               
The  first  44 projects  in  operation  funded by  the  renewable                                                               
energy fund in  the amount of approximately $314  million, have a                                                               
net present  value (NPV) of  $889 million for an  overall program                                                               
benefit cost ratio of about 2.8 (slide 11).                                                                                     
CO-CHAIR VAZQUEZ asked when the program started.                                                                                
MR.  SKALING said  the program  began in  2008, and  grew to  its                                                               
present level of  activity.  He provided a graph  that showed the                                                               
fuel displaced  by renewable energy  fund projects  in operation,                                                               
beginning in  2009.  In  2013, many projects  reached operational                                                               
stages;  it  is  projected  that 20  million  gallons  of  diesel                                                               
equivalent fuel would be displaced in 2015 (slide 12).                                                                          
REPRESENTATIVE  CLAMAN observed  that slides  11 and  12 indicate                                                               
that wind  power activity is  highest.   He asked for  the reason                                                               
wind has historically outperformed hydro.                                                                                       
10:45:44 AM                                                                                                                   
MR. SKALING  responded that wind  power can be  developed quickly                                                               
whereas  hydro requires  more time  for  permitting, design,  and                                                               
construction.  However, hydro  projects are reaching construction                                                               
at this time.                                                                                                                   
MS. FISHER-GOAD added that prior  to 2008, AEA had federal grants                                                               
for wind development through the  Denali Commission and DOE, thus                                                               
upfront  work  was done  and  some  wind projects  were  somewhat                                                               
"shovel ready" when the program was established.                                                                                
REPRESENTATIVE  CLAMAN  returned  attention   to  slide  8  which                                                               
indicated there are  many wind projects in Western  Alaska and in                                                               
the Aleutian Islands.                                                                                                           
MR. SKALING agreed.                                                                                                             
CO-CHAIR COLVER  directed attention to  slide 12 and asked  for a                                                               
description of wind to heat.                                                                                                    
MR. SKALING  said when  a wind project  is producing  more energy                                                               
than is  needed by a  community, the  project uses the  excess to                                                               
power an electric boiler in a large building, such as a school.                                                                 
REPRESENTATIVE WOOL  asked which hydro projects  reach completion                                                               
this year.                                                                                                                      
MR.  SKALING answered  Whitman Lake  Hydroelectric Project,  Blue                                                               
Lake Expansion, and possibly the Gartina Falls project.                                                                         
CO-CHAIR  VAZQUEZ  asked  for  the  megawatts  produced  by  each                                                               
MR. SKALING said Gartina Falls  will produce about 450 kilowatts,                                                               
and he will provide more information.                                                                                           
10:49:54 AM                                                                                                                   
MR. SKALING provided a graph  which indicated the funding, count,                                                               
and percentage  of projects  by region.   The funding  amount and                                                               
number of  projects can  vary, particularly when  a region  has a                                                               
number  of  small,   heat  projects  (slide  13).     Round  VIII                                                               
recommendations  before the  legislature are  from projects  that                                                               
have   proceeded  through   the   four   stages  of   evaluation:                                                               
eligibility,  technical and  economical evaluation,  ranking, and                                                               
regional distribution.   In  order to  fit within  the governor's                                                               
$15  million  budget,  AEA  recommends  34  projects:    18  heat                                                               
projects  and 16  standard projects.   The  regional distribution                                                               
formula was  adjusted at the  suggestion of the  Renewable Energy                                                               
Fund Advisory  Committee (REFAC);  for example,  Southeast Alaska                                                               
was determined  to be  overserved and thus  was limited  to 22.15                                                               
percent (slide 14).                                                                                                             
REPRESENTATIVE  TALERICO asked  how many  projects are  not fully                                                               
funded due to a funding cap.                                                                                                    
MR. SKALING said five.                                                                                                          
CO-CHAIR  VAZQUEZ questioned  what would  happen to  the projects                                                               
with limited funding.                                                                                                           
10:53:34 AM                                                                                                                   
MR.  SKALING  related  that  one   project  would  require  other                                                               
financing, and  the future is  unclear about the  other projects.                                                               
In  further response  to  Co-Chair Vazquez,  he  noted that  some                                                               
projects may  be eligible for  AEA's power project loan  fund, or                                                               
U.S. Department  of Agriculture (USDA), Rural  Development, Rural                                                               
Utilities Service (RUS) funding may be an alternative source.                                                                   
MS.  FISHER-GOAD  advised  that  it  was  difficult  to  maintain                                                               
regional balance  within the program's  $15 million budget.   For                                                               
the first  time, alternative financing  is sought when  a project                                                               
becomes ready for construction; in  the future, AEA and REFAC may                                                               
recommend that projects delay, although  projects like the one in                                                               
St. Mary's would be challenged.   In further response to Co-Chair                                                               
Vazquez, she said AEA is working  with all five projects that are                                                               
not fully funded.   The AEA power project loan  fund is a logical                                                               
alternative source  of funding;  however, any project  with state                                                               
participation greater than $5  million needs legislative approval                                                               
through  an  appropriation  or through  an  authorization.    She                                                               
offered the Blue Lake Expansion project in Sitka as an example.                                                                 
REPRESENTATIVE COLVER  asked for  a description  of the  top five                                                               
rated projects in Round VII.                                                                                                    
MR.  SKALING referred  to a  report  entitled, "Renewable  Energy                                                               
Fund  Status Report  and Round  VII  Recommendations," and  dated                                                               
January 2015.                                                                                                                   
11:00:52 AM                                                                                                                   
The committee took an at ease from 11:00 a.m. to 11:07 a.m.                                                                     
11:07:08 AM                                                                                                                   
MR.  SKALING  directed  attention  to  pages 10  and  11  of  the                                                               
aforementioned report  and said of  the top five  projects, three                                                               
are biomass projects, one is a  heat recovery project, and one is                                                               
a  wind  project.    The  report  provides  information  on  each                                                               
project's energy source, its  recommended phase, funding amounts,                                                               
and cumulative  funding.  Additional information  is available on                                                               
AEA's  web site.     Mr.  Skaling returned  to the  presentation,                                                               
noting  that  there  are several  temperature  zones  in  Alaska,                                                               
therefore, some areas of the  state use significantly more energy                                                               
than others  (slide 15).   Round  VIII recommended  heat projects                                                               
and  standard  electric  projects, including  transmission,  were                                                               
distributed throughout the state (slides 16 and 17).                                                                            
MS.  FISHER-GOAD  informed  the  committee REFAC  wanted  AEA  to                                                               
emphasize  heat   projects  thus  the  application   process  was                                                               
11:10:11 AM                                                                                                                   
MR. SKALING continued that displacing  15 million gallons of fuel                                                               
per year  benefits commercial businesses in  rural Alaska because                                                               
they  do  not  qualify  for the  Power  Cost  Equalization  (PCE)                                                               
program,  and also  benefits communities,  schools,  and the  PCE                                                               
program (slides  18 and 19).   Resource types within  hydro power                                                               
sources are:   conventional  with storage;  run of  river; others                                                               
such  as  hydrokinetic, tidal,  and  pumped  storage (slide  20).                                                               
Types of  woody biomass are:   cordwood boilers,  pellet boilers,                                                               
chip boilers,  and others  such as  bricks and  microchips (slide                                                               
21).  A  comparison of biomass technologies  was presented (slide                                                               
11:14:33 AM                                                                                                                   
REPRESENTATIVE NAGEAK  asked for  examples of low-  and high-cost                                                               
MR. SKALING  explained fuel pellets  are manufactured and  so are                                                               
higher cost,  and shipping adds  cost.  He  presented information                                                               
on the Thorne  Bay Biomass and Greenhouse project  which was very                                                               
successful (slide  23), and on  Kodiak's existing hydro  power to                                                               
which six  wind turbines  and battery  storage were  added (slide                                                               
24).   Power in Kodiak  is nearly  100 percent renewable  and the                                                               
residential  rates  were reduced  from  20  cents to  15.8  cents                                                               
(slide  25).   Mr. Skaling  concluded that  the renewable  energy                                                               
fund  is  achieving its  original  goals  which are:    providing                                                               
benefits  throughout the  state;  reducing  fuel; increasing  the                                                               
knowledge of renewables throughout the state (slide 26).                                                                        
11:18:11 AM                                                                                                                   
MS. FISHER-GOAD provided  a short history of  hydro, stating that                                                               
hydro has a long history  in Alaska, especially in Southeast, and                                                               
many projects are still being built.   In fact, a primary purpose                                                               
of  the Alaska  Power Authority  - which  preceded AEA  - was  to                                                               
build, own,  and operate the  Four Dam Pool Projects  which serve                                                               
Kodiak, Copper  Valley, Wrangell, Petersburg, and  Ketchikan.  In                                                               
addition,  Bradley  Lake  Hydroelectric  Project  (Bradley  Lake)                                                               
produces  low-cost  power  for the  Railbelt  utilities.    Hydro                                                               
provides long-term  diversification, promotes inflation-proofing,                                                               
rivals the  cost of  coal, is  clean, sustainable,  reliable, and                                                               
levels out  the volatile  cost of  power (slide  26).   A Susitna                                                               
hydro project  was first studied in  the '50s and pursued  in the                                                               
'80s, but was mothballed by  low oil prices and long-term natural                                                               
gas contracts.  In 2008-09,  efforts to review the project arose,                                                               
and  AEA was  funded  to  evaluate large  hydro  projects in  the                                                               
Railbelt.  A primary  decision document identified Susitna-Watana                                                               
Hydro (Susitna-Watana)  as a large  hydro project to pursue.   In                                                               
2011,  AEA  was funded  to  obtain  a Federal  Energy  Regulatory                                                               
Commission (FERC)  license.  Studies  began on the  Susitna River                                                               
and  surrounding areas  in  2012  (slide 27).    Benefits of  the                                                               
project include:   provides 50  percent of power to  the Railbelt                                                               
region which has  80 percent of the  state's population; provides                                                               
1,000   jobs  during   peak   construction;  provides   long-term                                                               
diversification; provides  stable electric  rates for  100 years;                                                               
enables Alaska's  50 Percent Renewable Goal;  maximizes the value                                                               
of  fossil fuels;  annually  displaces 1.3  million  tons of  CO2                                                               
(slide 28).                                                                                                                     
REPRESENTATIVE CLAMAN asked whether  the economics of the project                                                               
are viable without the goal of 50 percent renewable.                                                                            
11:24:32 AM                                                                                                                   
MS. FISHER-GOAD  said the renewable goal  is not a factor  in the                                                               
feasibility of the  project; in fact, the renewable  goal set the                                                               
stage for the policy and  programs established by the legislature                                                               
in 2010.   The renewable goal is important  to Alaskans; however,                                                               
AEA  has  not suggested  that  the  project  would be  funded  by                                                               
general  fund appropriations  to  AEA, but  that financing  would                                                               
follow the example  of Bradley Lake, which received  a 50 percent                                                               
upfront capital  contribution by  the state,  and 50  percent was                                                               
debt  financing.   In 2021,  the  utilities will  have an  excess                                                               
payment which  is assumed to  be roughly  the same amount  as the                                                               
amount to be paid back to the state.   Bradley Lake was used as a                                                               
financing model;  however, AEA's financial advisors  have advised                                                               
that financing  "for Susitna-Watana is, is  assume debt financing                                                               
from the  get-go including the  eventual payback of the  state of                                                               
Alaska for  the original investment,  including what,  what we're                                                               
currently   funded  for,   and  expending,   for  the   licensing                                                               
REPRESENTATIVE CLAMAN  asked how  much it  cost to  build Bradley                                                               
MS. FISHER-GOAD estimated the cost  was $385 million.  In further                                                               
response to  Representative Claman,  she said  the cost  to build                                                               
Susitna-Watana  is over  10 times  that  of Bradley  Lake and  is                                                               
estimated  at $5.6-$5.7  billion,  including preconstruction  and                                                               
REPRESENTATIVE  CLAMAN questioned  whether  Bradley  Lake is  the                                                               
biggest hydro dam built by the state, in terms of cost.                                                                         
MS.  FISHER-GOAD   said  Susitna-Watana  would  be   the  largest                                                               
project; Bradley Lake  is currently the largest  hydro project in                                                               
11:27:56 AM                                                                                                                   
REPRESENTATIVE  WOOL   observed  that  the   proposed  production                                                               
capability of  the [project] exceeds the  Railbelt's consumption,                                                               
and asked what would be done with the excess power.                                                                             
MS. FISHER-GOAD  said the  utilities - if  the project  becomes a                                                               
reality - will retire their  old generation facilities.  She said                                                               
the  project  is  now  "right-sized  to  be  50  percent  of  the                                                               
Railbelt."   In the  '80s, the project  was projected  to produce                                                               
1,600 megawatts from two dams.                                                                                                  
CO-CHAIR VAZQUEZ  asked for information  related to  the capacity                                                               
of Bradley Lake.                                                                                                                
11:29:47 AM                                                                                                                   
BRYAN  CAREY,   Bradley  Lake   Project  Manager,   Bradley  Lake                                                               
Hydroelectric,  AEA, said  the rated  capacity used  by FERC  for                                                               
Bradley Lake is  120 megawatts.  In further  response to Co-Chair                                                               
Vazquez, he said the project  came online in 1991, following four                                                               
to five years  of construction.  In further  response to Co-Chair                                                               
Vazquez,  he advised  that  Bradley Lake  provides  power to  the                                                               
following  six  utilities:    City  of  Seward,  Homer  Electric,                                                               
Anchorage Municipal Light &  Power, Chugach Electric Association,                                                               
Matanuska  Electric  Association,   and  Golden  Valley  Electric                                                               
CO-CHAIR VAZQUEZ  asked whether  there is an  operating agreement                                                               
between the utilities to share energy.                                                                                          
MR. CAREY stated there are  many agreements between the utilities                                                               
and  AEA related  to payments  for power,  and how  the power  is                                                               
shared; all  of the utilities receive  energy and pay on  a basis                                                               
of percentage shares which were fixed in power sales agreements.                                                                
CO-CHAIR VAZQUEZ asked for the  amount of megawatts projected for                                                               
MS.  FISHER-GOAD  said the  projected  energy  is 2,800  gigawatt                                                               
hours  annually; the  capacity is  459 megawatts  based upon  the                                                               
generators  and  turbines.    In  further  response  to  Co-Chair                                                               
Vazquez,  she said  the projected  construction  period is  about                                                               
seven and one-half years.                                                                                                       
MR.   CAREY   confirmed   that   the   construction   period   is                                                               
approximately seven  and one-half  to eight  years, and  the time                                                               
period  is  "probable,  more  on  achievable  scenario,  slightly                                                               
aggressive ...."                                                                                                                
REPRESENTATIVE WOOL compared the  output and construction cost of                                                               
Bradley  Lake  with  the  proposed  Susitna-Watana  project,  and                                                               
surmised that  the "dollar per megawatt  is quite a bit  more for                                                               
this project, correct."                                                                                                         
MS.  FISHER-GOAD  answered  that   she  would  present  financing                                                               
examples  that  analyze  cost  per  kilowatt  hour  or  capacity;                                                               
however,  the  two  projects  may   not  be  an  apples-to-apples                                                               
comparison, due  to inflation.   She  offered to  provide further                                                               
11:34:56 AM                                                                                                                   
REPRESENTATIVE  WOOL  suggested  economy  of  scale  would  be  a                                                               
MS. FISHER-GOAD  agreed that  all parties want  to know  what the                                                               
project  will cost  per kilowatt  hour.   The  estimates in  this                                                               
presentation are based on 2014  dollars, and the calculations are                                                               
not inflation-proof.                                                                                                            
REPRESENTATIVE  CLAMAN restated  the question  and observed  that                                                               
Susitna-Watana  is eight  to ten  times the  expense of  [Bradley                                                               
Lake]  but will  not provide  four times  the megawatt  capacity.                                                               
Bradley  Lake  produces  120   megawatts  and  Susitna-Watana  is                                                               
estimated to produce 459 megawatts.                                                                                             
MS. FISHER-GOAD remarked:                                                                                                       
     ...  what we've  been using,  it's not,  it's not  just                                                                    
     looking at  the capacity  of the generators  that, that                                                                    
     are  there,  it's actually  looking  at  the amount  of                                                                    
     energy that's produced, and so  the more, the number to                                                                    
     use  that I  don't  think is  being  recognized is  the                                                                    
     2,800  gigawatt  hours per  year  that  the project  is                                                                    
     estimated  to  produce.  ... It's  actually  about  the                                                                    
     energy generated.                                                                                                          
REPRESENTATIVE  CLAMAN asked  for  the  gigawatt generation  from                                                               
Bradley Lake on an annual basis.                                                                                                
MR. CAREY answered that the  annual generation of Bradley Lake is                                                               
approximately 380,000 megawatt hours,  which is about one-seventh                                                               
of that proposed by Susitna-Watana.                                                                                             
11:37:38 AM                                                                                                                   
MS.  FISHER-GOAD returned  to the  presentation and  informed the                                                               
committee that the project is  currently within a FERC integrated                                                               
licensing  process.   Three environmental  field  seasons and  58                                                               
FERC-approved  studies have  been completed.   The  initial study                                                               
report was filed in June 2014,  and tech memos have been filed in                                                               
support   of  the   initial  study   report.     The  engineering                                                               
feasibility report  was released  in January 2015,  which refined                                                               
cost  estimates  and   provided  additional  design  information.                                                               
Because of  [Governor Bill Walker's Administrative  Order No. 271                                                               
(AO  271)   executed  12/26/14]   directing  AEA  not   to  spend                                                               
nondiscretionary  funds,  AEA  requested,  and  FERC  granted,  a                                                               
licensing abeyance; were it not for  AO 271, AEA would be holding                                                               
a series  of meetings  related to  study reports,  filing further                                                               
information  with  FERC,   and  soliciting  stakeholder  comments                                                               
(slide 29).                                                                                                                     
CO-CHAIR COLVER asked for the  amount of project funding on hand,                                                               
and how much is unencumbered.                                                                                                   
MS.  FISHER-GOAD explained  that  from authorized  funds of  $192                                                               
million, as of  12/31/14, $19 million was encumbered.   There are                                                               
essential tasks  to be completed  such as removing  radio collars                                                               
from animals  and field  work to  remove equipment  in compliance                                                               
with  a pause  in the  project schedule,  and budgeted  personnel                                                               
costs.   Nondiscretionary funds at  the time of AEA's response to                                                               
AO  271  are about  $26-$27  million.    She  noted that  of  the                                                               
encumbered funds, many have been  expended; however, $6.6 million                                                               
are available pursuant to AO 271.                                                                                               
CO-CHAIR COLVER questioned whether  AEA's project personnel costs                                                               
are in its operating budget.                                                                                                    
MS.  FISHER-GOAD  advised  that  AEA has  staff  devoted  to  the                                                               
project and some accounting and  procurement staff working within                                                               
the Alaska  Industrial Development and Export  Authority (AIDEA),                                                               
DCCED.  In  further response to Co-Chair Colver,  she pointed out                                                               
that  if the  $6.6 million  were  made available  for other  non-                                                               
project  purposes,  AEA  plans  to "button  up"  the  project  by                                                               
December 2015; however,  if the $6.6 million is  not removed from                                                               
the project,  AEA would continue  to pursue the project  and best                                                               
preserve the investment  that the state has made  in the project.                                                               
Ms. Fisher-Goad said there will  be continued discussion with the                                                               
administration and legislative committees.                                                                                      
11:44:01 AM                                                                                                                   
REPRESENTATIVE  NAGEAK observed  that  energy is  needed for  the                                                               
growing population,  and so  Alaska can  continue to  extract its                                                               
natural  resources.    Furthermore,   millions  of  dollars  have                                                               
already been  spent.   He suggested that  power from  the project                                                               
could be sent to many villages and save money on fuel.                                                                          
REPRESENTATIVE  CLAMAN   inquired  as  to  how   many  staff  are                                                               
dedicated to Susitna-Watana.                                                                                                    
MS. FISHER-GOAD  said seven  staff are  dedicated to  the project                                                               
and the  percentage of  shared services is  unclear.   In further                                                               
response to  Representative Claman, she explained  that all AIDEA                                                               
employees  and  their  work  for AEA  is  accounted  as  separate                                                               
personal services, although  there is a separation  of duties and                                                               
supervision.  This  is done for efficiency and  economy of scale.                                                               
In further response to Representative  Claman, she said AEA would                                                               
need until 12/31/15  to responsibly suspend the  project, and she                                                               
REPRESENTATIVE CLAMAN  asked how much  it would cost to  "wind it                                                               
down most effectively as possible."                                                                                             
MS.  FISHER-GOAD clarified  that the  $6.6 million  is for  after                                                               
12/31/15,  in  compliance with  AO  271.    She returned  to  the                                                               
presentation and described the  environmental study process, that                                                               
is  in  the  study  implementation  phase,  and  which  would  be                                                               
followed by  an impact  assessment and a  process to  develop the                                                               
protection, mitigation,  and enhancement measures (PMEs)  for the                                                               
project (slide 30).   Last year, AEA had more  than 200 people in                                                               
the  field and  completed  data collection  for 13  FERC-approved                                                               
studies (slide 31).  Regarding  economic impact, she provided the                                                               
following:   65 percent  of workers  were Alaska  residents; many                                                               
workers had  hydroelectric expertise;  $7 million were  earned in                                                               
Alaska wages  in 2014; in  2013, $6  million were spent  in goods                                                               
and services in the Ma t-Su Valley (slide 32).                                                                                  
CO-CHAIR COLVER  requested that AEA  provide the firms  that were                                                               
hired  and their  contract amounts,  disciplines, locations,  and                                                               
local hire component.                                                                                                           
MS. FISHER-GOAD turned to the  remote siting of the project which                                                               
requires  significant  work  prior   to  filing  a  comprehensive                                                               
license  application.   A majority  of the  studies have  been to                                                               
understand  the Susitna  Basin  and the  impact  of the  project,                                                               
including PMEs.   Past work has advanced the science  in order to                                                               
understand the area, and has  been done in close cooperation with                                                               
the Alaska Department  of Fish & Game (ADF&G),  the University of                                                               
Alaska Fairbanks, and the Department  of Natural Resources (slide                                                               
REPRESENTATIVE  CLAMAN  asked  for  AEA's  official  position  on                                                               
whether Susitna-Watana will enhance salmon habitat.                                                                             
11:55:01 AM                                                                                                                   
WAYNE DYOK, Project Manager,  Susitna-Watana Hydro, AEA, informed                                                               
the  committee there  are several  attributes that  may help  the                                                               
salmon  fishery:  reducing  turbidity  could  have  a  beneficial                                                               
impact;  managing water  temperature  and providing  temperatures                                                               
that are  appropriate for the  fishery; managing flows  to better                                                               
meet the  needs of  salmon.   He said  AEA is  in the  process of                                                               
assessing  these  aspects  through  modeling,  and  its  official                                                               
position is that  there could be possible benefits,  but they are                                                               
unknown until the analyses are complete.                                                                                        
CO-CHAIR  COLVER  returned attention  to  slide  33, noting  that                                                               
4,500  tissues   samples  were  submitted   to  the   ADF&G  Gene                                                               
Conservation Lab, and questioned  whether genetic analyses on the                                                               
samples were prefunded, as the lab  has an extensive backlog.  He                                                               
expressed  concern  about  completing the  genetic  analyses  and                                                               
cataloguing the data.                                                                                                           
MS.  FISHER-GOAD offered  to provide  the requested  information.                                                               
She referred to the wildlife  surveys done on moose, caribou, and                                                               
Dall's sheep, noting that AEA  and ADF&G need to complete studies                                                               
of the  animals that have  been fitted with radio  collars (slide                                                               
34).   Turning to the  cultural resources  of the area  and human                                                               
uses  of the  region,  she  related that  Ahtna  are the  primary                                                               
traditional  users   of  the  area;  furthermore,   AEA  has  not                                                               
completed its studies  of the Dena'ina (slide 35).   A map of the                                                               
Susitna River illustrated the basin (slide 36).                                                                                 
12:00:14 PM                                                                                                                   
BETSY  MCGREGOR,   Susitna-Watana  Environmental   Manager,  AEA,                                                               
stated that  AEA has implemented  fish distribution  and relative                                                               
abundance  studies,  collected  water  sediments,  bed  load  and                                                               
hydrology  and  ice processes  data,  and  calibrated models  for                                                               
baseline conditions.   Based on the results,  similarities to the                                                               
'80s  were found,  and  areas of  potential  impact were  defined                                                               
(slide  37).    The  average annual  flow  contributions  provide                                                               
context for the relative portion  of the total Susitna River flow                                                               
impacted by the dam, and  for significant influences of potential                                                               
project effects related to flow,  sediment, water quality and ice                                                               
processes.   Above  the  dam, the  Susitna  River contributes  16                                                               
percent of  the total Susitna River  flow.  In the  middle river,                                                               
tributaries  contribute another  4  percent,  the Chulitna  River                                                               
contributes  approximately 18  percent, and  the Talkeetna  River                                                               
contributes   approximately  8   percent.     These  two   rivers                                                               
significantly influence  the river downstream, and  the main stem                                                               
of  the river  quadruples below  this  confluence.    The  Yentna                                                               
River  contributes  40  percent  of   the  total,  which  is  why                                                               
potential impacts of the dam  to river resources below the Yentna                                                               
River will  be insignificant  (slide 38).   Ms.  McGregor further                                                               
explained   that   the   average   annual   bed   material   load                                                               
contributions show both  the water and sediment  balances for the                                                               
middle  and  lower  Susitna  River  are  similar  to  information                                                               
gleaned in the  '80s.  The Chulitna River is  the dominant source                                                               
of  gravel, and  the  Talkeetna River  contributes a  significant                                                               
quantity  as well.   In  fact, the  Yentna River  is the  largest                                                               
contributor  of both  water and  bed load  material with  the bed                                                               
load dominated by sand.   Referring to earlier comments regarding                                                               
the impact  to salmon,  she observed that  the quality  of salmon                                                               
substrate will  not be negatively  impacted in the  Susitna River                                                               
main stem  by the dam, because  the upper Susitna River  is not a                                                               
source for  this spawning  substrate; water  in the  middle river                                                               
will be  clearer due to  the dam  capturing the silt  (slide 39).                                                               
To understand the  impact of the dam on fish,  it is necessary to                                                               
understand what  species of  fish in life  stages use  the river,                                                               
their locations, and their habitat.   Of the total Susitna River,                                                               
95 percent of  the total river escapement for  Chinook, coho, and                                                               
chum salmon  occurs in  the lower river  below the  three rivers'                                                               
confluence,  and primarily  within the  tributaries of  the lower                                                               
river.    For  sockeye  salmon,  less than  l  percent  of  total                                                               
escapement  enter the  middle river.   Distribution  is important                                                               
because  the impact  to riverine  processes and  the quality  and                                                               
quantity  of  habitat will  be  attenuated  in the  lower  river;                                                               
however,  the majority  of spawning  occurs in  tributaries which                                                               
will not  be impacted  by the  dam (slide  40).   An illustration                                                               
provided more  detailed information on the  spawning distribution                                                               
of Chinook salmon.   She pointed out that less  than 5 percent of                                                               
the  total  escapement pass  above  Devils  Canyon, which  is  an                                                               
impediment for  all anadromous fish except  Chinook salmon (slide                                                               
41).  In 2014, AEA employed  sonar at the dam site which revealed                                                               
that 24 fish  greater than 50 centimeters in  length passed above                                                               
the dam site.                                                                                                                   
12:06:24 PM                                                                                                                   
MS.  MCGREGOR   presented  an   illustration  of   more  detailed                                                               
information on  the spawning  distribution of  coho salmon.   The                                                               
total escapement  is to the  lower river  basin with less  than 6                                                               
percent spawning in  the main stem lower river.   Approximately 5                                                               
percent escaped  to the  middle river  watershed, with  less than                                                               
0.5 percent  spawning in the  main stem middle Susitna  River; no                                                               
coho salmon have been documented  above Devils Canyon (slide 42).                                                               
There followed  a chart illustrating the  radio telemetry studies                                                               
regarding  Chinook salmon  and which  indicated salmon  that were                                                               
tagged at  Curry, and subsequently  were found at  Devils Canyon,                                                               
above Devils Canyon, and above the  project site.  She noted that                                                               
the canyon has three impediments (slide 43).                                                                                    
CO-CHAIR  COLVER expressed  his understanding  that in  the '80s,                                                               
one of  the problematic issues  was that a large  reservoir would                                                               
impede  the crossing  of  the  Nachena caribou  herd.   He  asked                                                               
whether there was research on the  ability of the herd to migrate                                                               
through the area.                                                                                                               
MS. MCGREGOR related  that AEA is funding an  ongoing ADF&G study                                                               
of  the Nachena  and  Delta caribou  herds  and their  migration,                                                               
productivity, and calf survival,  augmented by global positioning                                                               
system (GPS) radio  collars.  Results compiled by  ADF&G thus far                                                               
are found  in the initial study  report.  In further  response to                                                               
Co-Chair  Colver,  she said  she  would  provide  a copy  of  the                                                               
MS.  FISHER-GOAD displayed  a  comparison  of Susitna-Watana  and                                                               
Hoover  Dam, with  the goal  to look  at the  differences between                                                               
capacities  and   estimated  annual   generation,  in   order  to                                                               
determine cost  per kilowatt hour  (slide 44).  The  project base                                                               
cost estimate  is $5.6-$5.7 billion,  and the cost  estimate will                                                               
not be updated again until  more geotechnical work is done (slide                                                               
45).  Financing  options include USDA RUS financing for  up to 50                                                               
percent,  blended rates,  and  the Bradley  Lake  model of  state                                                               
investment upfront with repayment (slide 46).                                                                                   
12:12:20 PM                                                                                                                   
MS. FISHER-GOAD  continued to a  comparison of the cost  of power                                                               
from Susitna-Watana and  the cost of power from  natural gas over                                                               
time.   Although hydro  is more expensive  in the  beginning, the                                                               
cost of  hydro is inflation-proofed,  and costs  decrease, unlike                                                               
natural gas generation (slide 47).                                                                                              
12:13:32 PM                                                                                                                   
CO-CHAIR  VAZQUEZ  asked the  committee  to  submit questions  in                                                               
writing.  She related her earlier involvement in the project.                                                                   
12:14:06 PM                                                                                                                   
There being no  further business before the  committee, the House                                                               
Special Committee on Energy meeting was adjourned at 12:14 p.m.                                                                 

Document Name Date/Time Subjects
AEA REF Susitna House Energy 03.26.15.pdf HENE 3/26/2015 10:15:00 AM