Legislature(2017 - 2018)CAPITOL 17

03/09/2017 10:15 AM ENERGY

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Audio Topic
10:17:56 AM Start
10:18:19 AM Presentation: Inside Passage Electric Cooperative
10:58:34 AM Presentation: Alaska Village Electric Cooperative
11:39:43 AM Presentation: Copper Valley Electric Association
12:04:05 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Overviews: TELECONFERENCED
- AK Village Electric Cooperative by Bill Stamm,
Manager of Engineering
- Copper Valley Electric Assoc. by Travis
Million, Chief Operations Officer
- Inside Passage Electric Cooperative by Jodi
Mitchell, CEO
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE SPECIAL COMMITTEE ON ENERGY                                                                              
                         March 9, 2017                                                                                          
                           10:17 a.m.                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Adam Wool, Chair                                                                                                 
Representative Ivy Spohnholz, Vice Chair                                                                                        
Representative Matt Claman                                                                                                      
Representative Dean Westlake                                                                                                    
Representative DeLena Johnson                                                                                                   
Representative Jennifer Johnston                                                                                                
Representative George Rauscher                                                                                                  
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
PRESENTATION: INSIDE PASSAGE ELECTRIC COOPERATIVE                                                                               
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PRESENTATION: ALASKA VILLAGE ELECTRIC COOPERATIVE                                                                               
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PRESENTATION: COPPER VALLEY ELECTRIC ASSOCIATION                                                                                
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
JODI MITCHELL, CEO & General Manager                                                                                            
Inside Passage Electric Cooperative (IPEC)                                                                                      
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Presented a PowerPoint of IPEC.                                                                          
                                                                                                                                
MEERA KOHLER, President/CEO                                                                                                     
Alaska Village Electric Cooperative, Inc. (AVEC)                                                                                
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Presented  a PowerPoint  via teleconference                                                             
titled "The Thrills and Perils  of Providing Electricity in Rural                                                               
Alaska."                                                                                                                        
                                                                                                                                
BILL STAMM, Manager of Engineering                                                                                              
Alaska Village Electric Cooperative, Inc. (AVEC)                                                                                
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:   Answered questions  during the  PowerPoint                                                             
presentation.                                                                                                                   
                                                                                                                                
TRAVIS MILLION, Chief Operating Officer                                                                                         
Copper Valley Electric Association (CVEA)                                                                                       
Glennallen, Alaska                                                                                                              
POSITION STATEMENT:  Presented a  PowerPoint on the Copper Valley                                                             
Electric Association.                                                                                                           
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
10:17:56 AM                                                                                                                   
                                                                                                                                
CHAIR  ADAM WOOL  called the  House Special  Committee on  Energy                                                             
meeting to order  at 10:17 a.m.   Representatives Wool, Johnston,                                                               
Johnson, Westlake,  Rauscher, and  Spohnholz were present  at the                                                               
call to order.  Representative  Claman arrived as the meeting was                                                               
in progress.                                                                                                                    
                                                                                                                                
^Presentation: Inside Passage Electric Cooperative                                                                            
       Presentation: Inside Passage Electric Cooperative                                                                    
                                                                                                                                
10:18:19 AM                                                                                                                   
                                                                                                                                
CHAIR WOOL announced that the first  order of business would be a                                                               
presentation by the Inside Passage Electric Cooperative (IPEC).                                                                 
                                                                                                                                
10:18:48 AM                                                                                                                   
                                                                                                                                
JODI  MITCHELL, CEO  & General  Manager, Inside  Passage Electric                                                               
Cooperative (IPEC), said that she  had been with IPEC since 1993,                                                               
and she  directed attention to  slide 2, "Introduction  to IPEC."                                                               
She  reported that  IPEC had  1,368  members in  the villages  of                                                               
Angoon, Hoonah, Kake,  Klukwan, and the Chilkat  Valley, and that                                                               
the  IPEC  headquarters  were  at  Auke  Bay.    She  noted  that                                                               
logistics were one  of the biggest challenges, as  the only means                                                               
of access  to these  communities was  by boat  or airplane.   She                                                               
relayed that  IPEC was 72  percent dependent on  diesel, although                                                               
they owned  two hydro  projects with the  potential for  two more                                                               
projects in  the next decade  if funding becomes available.   She                                                               
shared  slide 3,  "Outline," which  included  the challenges  for                                                               
providing  electricity  in  Rural Southeast  Alaska,  recognition                                                               
that  small   local  hydro  was   the  best  solution   for  IPEC                                                               
communities, and a review of regulatory considerations.                                                                         
                                                                                                                                
CHAIR  WOOL  asked  if  the  villages  were  interconnected  with                                                               
transmission lines.                                                                                                             
                                                                                                                                
MS.  MITCHELL replied  that IPEC  had four  micro grids,  and she                                                               
proudly  stated   that  all  the  maintenance,   regulation,  and                                                               
administration were performed by only 11 full time employees.                                                                   
                                                                                                                                
REPRESENTATIVE  RAUSCHER asked  if the  hydro power  supplied the                                                               
remaining 28 percent of power.                                                                                                  
                                                                                                                                
MS. MITCHELL expressed her agreement,  although the percentage of                                                               
use did vary during the calendar  year.  She returned to slide 4,                                                               
"Challenges of Providing Electricity  in Rural Southeast Alaska,"                                                               
and explained that the volatility of  the price of diesel lead to                                                               
volatile rates as  the small consumer base did not  allow for any                                                               
economies  of scale.   She  declared that  these high  rates also                                                               
made  it difficult  to attract  large power  consumers, as  there                                                               
were high transportation  costs, even with good use  of the ferry                                                               
system, and  many logistical challenges.   She reported  that the                                                               
village economies  were weakening  due to  this lack  of industry                                                               
and jobs.   She added  that there was  a high cost  of compliance                                                               
with  regulatory  and environmental  policies,  as  well as  high                                                               
costs of alternative energy technologies.   She expressed concern                                                               
for the costs of compliance with  any new policies.  She moved on                                                               
to slide 5,  "2016 Aver Cost per kWh Sold,"  and pointed out that                                                               
the  largest component  of the  graph was  the fuel  and purchase                                                               
power,  even  as the  fuel  costs  were  lower  in 2016  than  in                                                               
previous years.   She  talked about the  percentages of  cost for                                                               
non-fuel production,  distribution, customer  expense, regulatory                                                               
cost, and  depreciation.  She  noted that  IPEC did not  make any                                                               
money from selling power.                                                                                                       
                                                                                                                                
MS. MITCHELL,  in response to  Chair Wool,  explained that A  & G                                                               
meant administration  and general, which included  attorney fees,                                                               
salaries, supplies, travel, and governance fees.                                                                                
                                                                                                                                
10:25:21 AM                                                                                                                   
                                                                                                                                
MS.  MITCHELL  addressed  slide  6, "Average  Cost  of  Fuel  per                                                               
Gallon,"  which  depicted  prices  from 1998  through  2016,  and                                                               
compared this  graph with  slide 7, "As  fuel prices  rise, rates                                                               
rise."   This graph portrayed  the average  rate per kWh  and the                                                               
cost of  fuel and purchase  power per  kWh for those  same years.                                                               
She noted that  the cost had gone down in  2016, because of lower                                                               
fuel prices and the construction of a hydro project.                                                                            
                                                                                                                                
CHAIR WOOL asked  if the hydro costs figured into  this chart and                                                               
if these costs were before Power Cost Equalization (PCE).                                                                       
                                                                                                                                
MS. MITCHELL  replied that  the hydro was  included, and  that it                                                               
was part of the average cost.                                                                                                   
                                                                                                                                
REPRESENTATIVE JOHNSTON asked about the type of hydro project.                                                                  
                                                                                                                                
MS. MITCHELL  explained that these  were small diversions  in the                                                               
river,  and that  it  was possible  for  two-thirds renewable  if                                                               
there was  $25 million  available to invest.   She  declared that                                                               
hydro was almost permanent, sharing  the Juneau hydro projects as                                                               
examples.                                                                                                                       
                                                                                                                                
MS.  MITCHELL  introduced  slide  8, "As  a  non-profit  electric                                                               
cooperative," which  depicted the costs  and the years,  with the                                                               
revenue per kWh, the cost to  produce the kWh, and the net profit                                                               
per kWh.  She noted that the IPEC profit was very small.                                                                        
                                                                                                                                
REPRESENTATIVE RAUSCHER  asked why  the net operating  margin had                                                               
spiked in 2007.                                                                                                                 
                                                                                                                                
MS. MITCHELL offered her belief  that this was upon completion of                                                               
a rate case, which temporarily allowed  for a higher margin.  She                                                               
added  that subsequently,  IPEC had  moved to  a simplified  rate                                                               
filing procedure which she declared as much better for IPEC.                                                                    
                                                                                                                                
MS.  MITCHELL introduced  slide  9  "What are  we  doing to  help                                                               
reduce  energy costs  for our  members?"   She reported  that, in                                                               
2009, IPEC's  board had created  an energy plan to  become diesel                                                               
independent by 2015, which, obviously  had not yet happened.  She                                                               
reported  that the  idea for  interties  between communities  had                                                               
proven  to be  too  expensive.   She reminded  that  the rain  in                                                               
Southeast Alaska  was a  great resource, and  with help  from the                                                               
Renewable Energy  Fund, IPEC  had built  the Gartina  Falls hydro                                                               
project in Hoonah, and identified  the Gunnuk Creek hydro project                                                               
in Kake,  as well  as another  project in  Hoonah.   She reported                                                               
that  Kootsnoowoo Village  Corporation in  Angoon was  developing                                                               
the Thayer  Creek hydro project,  which was projected  to provide                                                               
100 percent of the Angoon power needs.                                                                                          
                                                                                                                                
10:30:42 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE RAUSCHER  asked for  the projected costs  for each                                                               
of the aforementioned hydro projects.                                                                                           
                                                                                                                                
MS. MITCHELL replied  that IPEC would need about  $25 million for                                                               
all three  projects.  She  said that, while Angoon  currently had                                                               
$7 million from the Renewable  Energy Fund, they were looking for                                                               
more grant money to make the project more economically feasible.                                                                
                                                                                                                                
REPRESENTATIVE RAUSCHER asked how  far along were those projects,                                                               
and if there were designs.                                                                                                      
                                                                                                                                
MS.  MITCHELL stated  that the  Gunnuk Creek  project was  shovel                                                               
ready.   In response  to Representative  Raushcer, she  said that                                                               
the  preference  was  for  the  Gunnuk  Creek  project  to  begin                                                               
immediately and could  be completed by the end of  next year with                                                               
the funding;  the Angoon project  was also shovel ready;  and the                                                               
Hoonah  project had  not yet  been designed.   She  declared that                                                               
there was  support for  all the  projects.   She relayed  that $6                                                               
million was still needed for  the Gunnuk Creek project, about $10                                                               
million  was  still  needed  for   the  Angoon  project,  and  an                                                               
estimated $9  million more for  the second Hoonah  hydro project,                                                               
as, although it had a shared  transmission line, it was harder to                                                               
build.                                                                                                                          
                                                                                                                                
MS. MITCHELL  continued with  slide 9,  stating that  grants were                                                               
necessary to reduce  the rates, and that the  projects lasted for                                                               
at least 50 years.                                                                                                              
                                                                                                                                
CHAIR WOOL asked if a low  interest loan would allow for economic                                                               
feasibility.                                                                                                                    
                                                                                                                                
MS. MITCHELL replied  that the loan would be helpful,  but not as                                                               
helpful  because there  was  a depreciation  expense  for a  loan                                                               
whereas,  there was  not any  depreciation expense  for a  grant.                                                               
She added that the interest  expense would vary with the interest                                                               
rate.                                                                                                                           
                                                                                                                                
CHAIR WOOL  questioned whether,  as there  were many  good energy                                                               
projects in the  state and not as much grant  money, the projects                                                               
would be affordable with low interest loans.                                                                                    
                                                                                                                                
MS. MITCHELL  said that she  compared the  cost of fuel  with the                                                               
cost of the new asset.                                                                                                          
                                                                                                                                
MS.  MITCHELL moved  on  to slide  10,  "IPEC identified  Gartina                                                               
Falls Hydro  as the "best"  project for Hoonah," and  shared that                                                               
this successful  project was local,  good sized,  and affordable,                                                               
and it  had displaced 32  percent of the fuel  consumption, which                                                               
was significant.   She reported that  IPEC was able to  attain $8                                                               
million  in grant  funding, and  only had  to borrow  $2 million.                                                               
She noted  that the project  had to be Federal  Energy Regulatory                                                               
Commission (FERC) licensed, which cost  $1.5 million of the total                                                               
cost.  She added that the  hydro and the diesel projects ran very                                                               
efficiently together  and noted that  this was the same  plan for                                                               
the Gunnuk  Creek project in  Kake.   She shared pictures  of the                                                               
Hoonah project, slide  11, and the Gunnuk Creek  project in Kake,                                                               
slide 12.   She relayed  some history for the  projects, pointing                                                               
out that the Kake project  would include a diversion, which would                                                               
allow the fish hatchery back on line.                                                                                           
                                                                                                                                
REPRESENTATIVE RAUSCHER asked about the current power source.                                                                   
                                                                                                                                
MS. MITCHELL replied that Kake  was 100 percent diesel with three                                                               
engines,  although  the  power  plant was  being  upgraded.    In                                                               
response, she said that the hydro  and the power plant would be a                                                               
design similar to that in  Hoonah, which would be more efficient.                                                               
She said that the upgrade was fully funded.                                                                                     
                                                                                                                                
10:41:12 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  JOHNSTON   asked  about  the  small   river  flow                                                               
generation projects.                                                                                                            
                                                                                                                                
MS. MITCHELL said that she  was not familiar with these projects,                                                               
noting that  the local  rivers were  small.   She said  that they                                                               
would look at that technology and not rule it out.                                                                              
                                                                                                                                
REPRESENTATIVE JOHNSTON reported that these  had been tested on a                                                               
small creek outside of Anchorage,  and she offered to forward the                                                               
information.                                                                                                                    
                                                                                                                                
MS. MITCHELL,  in response to  Chair Wool,  said that the  dam in                                                               
Kake was originally  used for drinking water, and  that the pumps                                                               
were originally used  to pump water to the water  tank.  She said                                                               
that the tank was no longer in use.   She stated that the dam had                                                               
been designed for hydro power.                                                                                                  
                                                                                                                                
REPRESENTATIVE JOHNSON asked about the  cost for the retrofit for                                                               
the Kake project.                                                                                                               
                                                                                                                                
MS. MITCHELL replied that the  estimate for a half mile penstock,                                                               
a hatchery, and  then a powerhouse with the  hydro turbines would                                                               
be about $6  million.  She shared that Alaska  Department of Fish                                                               
& Game was supportive of the project.                                                                                           
                                                                                                                                
REPRESENTATIVE  JOHNSON   asked  if  there  was   any  additional                                                               
permitting necessary for an upgrade.                                                                                            
                                                                                                                                
MS. MITCHELL  said that a  water rights  permit and a  request to                                                               
FERC for  a determination  to its  jurisdiction had  been applied                                                               
for, as well as another  permit through Alaska Department of Fish                                                               
& Game.  She  offered her belief that the project  was not in the                                                               
FERC jurisdiction.   In response  to Representative  Johnson, she                                                               
said the timeline  for determinations was in the  next few weeks.                                                               
Once those  were determined, they  just needed money.   She noted                                                               
that  there  was  Renewable  Energy Fund  money  which  had  been                                                               
dedicated for  the Kake intertie.   She expressed her  desire for                                                               
that  money  to be  re-appropriated  for  this project,  and  the                                                               
remainder could be borrowed.                                                                                                    
                                                                                                                                
MS. MITCHELL returned  attention to slide 13,  "Small local hydro                                                               
can reduce IPEC's  rates," and stated that hydro  was a long-term                                                               
project.  She reiterated that with  the project in Angoon and the                                                               
two  projects  in  Hoonah,  IPEC  would  have  about  66  percent                                                               
renewable energy  if all  three of  these projects  came on-line.                                                               
She declared  that Southeast Alaska  was fortunate to  have hydro                                                               
as a renewable  resource, as it could help  preserve the pristine                                                               
air in Southeast Alaska.                                                                                                        
                                                                                                                                
MS. MITCHELL shared  slide 14, "A little  about IPEC's Regulatory                                                               
Concerns:"  and said  that IPEC  was fully  regulated by  the RCA                                                               
(Regulatory  Commission of  Alaska) although  they used  the much                                                               
simpler Simplified Rate Filing procedure.   She stated that there                                                               
was also a  lot of compliance with PCE, which  required an annual                                                               
report and monthly  billing, as well as audited  statements.  She                                                               
said  that   IPEC  was   required  by   the  RCA   to  commission                                                               
depreciation studies,  which were  time consuming  and expensive,                                                               
and did not appear to add any value.                                                                                            
                                                                                                                                
CHAIR  WOOL  asked if  this  was  one  of  the more  onerous  RCA                                                               
regulations.                                                                                                                    
                                                                                                                                
MS. MITCHELL  expressed her  agreement, and  said that  they were                                                               
required every five  years, and cost about $100,000, a  lot for a                                                               
small utility.   She pointed  out that  the customers had  to pay                                                               
for the study, and that  the businesses noticed the difference in                                                               
rates when the PCE went up or down.                                                                                             
                                                                                                                                
10:51:33 AM                                                                                                                   
                                                                                                                                
CHAIR  WOOL mused  about  the  PCE increase  in  rates and  that,                                                               
although the  residential consumers did not  notice any increase,                                                               
the  business  consumers  did  notice.    He  asked  if  the  PCE                                                               
adjustment was  separating the consumers from  reality and giving                                                               
them  less of  an incentive  to  conserve or  look for  alternate                                                               
means to lower their costs.                                                                                                     
                                                                                                                                
MS. MITCHELL said  that she did not believe so,  as the residents                                                               
were  limited to  500 kWh  per month,  after which  it gets  very                                                               
expensive, often  more than  $.045 per  kWh.   She said  that the                                                               
average residential  customer used  320 kWh  each month  in 2015.                                                               
She shared stories of residents  in communities who only used one                                                               
light at night, because power was so expensive.                                                                                 
                                                                                                                                
CHAIR  WOOL mused  that  the  500 kWh  was  the more  influencing                                                               
factor, more  than the  kWh rate,  as there  was a  price reality                                                               
after that 500-kWh use.                                                                                                         
                                                                                                                                
MS.  MITCHELL shared  that most  energy companies  had noticed  a                                                               
reduction  in   consumption  because   there  were   more  energy                                                               
efficient  appliances  and light  bulbs.    She said  that,  even                                                               
though there were  more customers, there was a  5 percent decline                                                               
in sales.  She said that made it difficult for setting rates.                                                                   
                                                                                                                                
CHAIR WOOL  mused that more  energy efficiency did not  bode well                                                               
for the utilities.                                                                                                              
                                                                                                                                
MS. MITCHELL  spoke about the  costs for the air  quality permits                                                               
which  IPEC had  to file,  and then  concluded with  slide 15,  a                                                               
picture of the  second hydro project in Hoonah.   She shared that                                                               
this project would  be similar in size and output  as the Gartina                                                               
project, and upon completion, Hoonah  would have about 67 percent                                                               
renewable energy.                                                                                                               
                                                                                                                                
CHAIR WOOL asked who designed  the plans for the currently shovel                                                               
ready projects.                                                                                                                 
                                                                                                                                
MS. MITCHELL replied  that, for the Kake project,  IPEC had hired                                                               
Paul  Berkshire,  and  that  he  had  also  designed  the  Hoonah                                                               
project.                                                                                                                        
                                                                                                                                
CHAIR WOOL asked if the  Alaska Energy Authority (AEA) had helped                                                               
with  optimization  or  review  of  possibilities,  and  if  they                                                               
entered in to the design or decision process.                                                                                   
                                                                                                                                
MS. MITCHELL acknowledged that AEA  had been very helpful, noting                                                               
that she relied  on them for information on new  technology.  She                                                               
added that AEA had also helped  with the power supply upgrades to                                                               
the powerhouses.                                                                                                                
                                                                                                                                
CHAIR WOOL asked if AEA ever brought new technologies.                                                                          
                                                                                                                                
MS.  MITCHELL   acknowledged  that  AEA  did   make  suggestions,                                                               
reiterating  that  AEA   was  very  helpful.     In  response  to                                                               
Representative  Rauscher, she  said that  a grant  of about  $1.5                                                               
million  had   been  assigned   to  design   the  Kake-Petersburg                                                               
intertie.   She asked  for the reason  to design  something which                                                               
was  not going  to  be built  anytime soon,  and  that she  would                                                               
prefer to use the money for something that would help Kake now.                                                                 
                                                                                                                                
CHAIR WOOL  asked if the  aforementioned 1,368 members  were rate                                                               
payers.                                                                                                                         
                                                                                                                                
MS.  MITCHELL  expressed  her  agreement   and  stated  that  the                                                               
population served was about 6,000.                                                                                              
                                                                                                                                
^Presentation: Alaska Village Electric Cooperative                                                                            
       Presentation: Alaska Village Electric Cooperative                                                                    
                                                                                                                                
10:58:34 AM                                                                                                                   
                                                                                                                                
CHAIR WOOL announced  that the next order of business  would be a                                                               
presentation by the Alaska Village Electric Cooperative (AVEC).                                                                 
                                                                                                                                
10:59:47 AM                                                                                                                   
                                                                                                                                
MEERA    KOHLER,   President/CEO,    Alaska   Village    Electric                                                               
Cooperative,    Inc.   (AVEC),    introduced   slide    2,   (via                                                               
teleconference)  and   reported  that  AVEC  was   in  57  Alaska                                                               
communities, had  90 full time  employees, with 16 of  them based                                                               
in  Bethel, and  the rest  based in  Anchorage.   She noted  that                                                               
there were two part time power  plant operators in each of the 47                                                               
power plant communities, and that  there were 10,800 meters.  She                                                               
reported  that  AVEC had  more  than  170 diesel  generators  and                                                               
bought about 8.5  million gallons of diesel each  year, which was                                                               
shipped in by barge.  She  relayed that AVEC had 34 wind turbines                                                               
which served 15 communities, as well as 2 solar projects.                                                                       
                                                                                                                                
MS.  KOHLER moved  on to  slide 3,  which depicted  a map  of the                                                               
United  States, with  Alaska inset  to  demonstrate its  relative                                                               
size.  She addressed slide  4, "Cost Components per Kilowatt-hour                                                               
Sold,"  a  graphic  representation  of  the  average  cost  of  a                                                               
kilowatt hour. (indisc.)  She relayed  that the cost of $0.43 per                                                               
kilowatt hour  in 2016 was  a little deceptive  because (indisc.)                                                               
was a very big chunk of that.   She stated that the AVEC concerns                                                               
were similar to those of IPEC.                                                                                                  
                                                                                                                                
MS. KOHLER moved  on to slide 5, "AVEC's  Revenue Sources," which                                                               
reflected  the various  components of  customer sales,  including                                                               
residential,  schools,  commercial,   and  community  facilities.                                                               
(indisc.)                                                                                                                       
                                                                                                                                
REPRESENTATIVE SPOHNHOLZ  asked for the reason  the percentage of                                                               
revenue from  commercial sources almost doubled  between 2013 and                                                               
2014.                                                                                                                           
                                                                                                                                
MS. KOHLER said  that Bethel [Utility] had brought  a "very large                                                               
chunk of commercial load," which was not eligible for PCE.                                                                      
                                                                                                                                
CHAIR  WOOL offered  his  belief that,  with  the acquisition  of                                                               
Bethel Utility  in 2014, although  the percentages of all  of the                                                               
sources  except commercial  had  declined, it  did  not mean  the                                                               
consumption or revenue had declined.   He asked about the schools                                                               
being self-generating.                                                                                                          
                                                                                                                                
MS. KOHLER said  not exactly (indisc.)  She stated  that AVEC had                                                               
a very good relationship with the schools.                                                                                      
                                                                                                                                
11:09:29 AM                                                                                                                   
                                                                                                                                
MS. KOHLER  addressed slide 6,  "Why is Electricity  so expensive                                                               
in  rural  Alaska?"    She  said that  this  was  a  function  of                                                               
(indisc.)  because Alaska  had a  very small  population in  each                                                               
village.  She  reported that the average village  served by AVEC,                                                               
not including  Bethel, had 400  residents with an average  use of                                                               
140 kilowatts,  pointing out  that there was  not any  economy of                                                               
scale.   She stated that the  average cost of an  installed meter                                                               
was  about $17,000,  which  was  three times  the  cost of  urban                                                               
Alaska.  She added that  remote shipping was very expensive, even                                                               
on a barge,  and that AVEC budgeted shipping costs  for $1.75 per                                                               
pound to the communities.   She reported that fuel was expensive,                                                               
often  the delivery  and the  storage  exceeded the  cost of  the                                                               
fuel.   She concluded  by stating that,  as the  communities were                                                               
remote  and  required  fly-in,   the  costs  for  operations  and                                                               
maintenance were much more expensive.   She directed attention to                                                               
slide 7, "AVEC strategies to  reduce power cost," and shared that                                                               
one  strategy was  to only  add  cost-effective new  communities,                                                               
pointing out that AVEC was  often approached by communities which                                                               
they  could not  afford  to take  on.   Another  strategy was  to                                                               
interconnect villages to improve the  economies of scale, and she                                                               
suggested that the state develop  a state-wide power grid to take                                                               
advantage of  low-cost energy sources, adding  renewable energies                                                               
when economically feasible.  She  reported that AVEC captured and                                                               
sold recovered heat and excess wind energy.                                                                                     
                                                                                                                                
11:13:55 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  JOHNSTON asked  if there  were opportunities  for                                                               
the micro grids to be places of testing for energy technologies.                                                                
                                                                                                                                
MS. KOHLER said that AVEC was  open to testing programs, and that                                                               
they  collaborated  with others  and  were  open to  experimental                                                               
technologies.                                                                                                                   
                                                                                                                                
REPRESENTATIVE   JOHNSTON  asked   if   direct   current  was   a                                                               
possibility.                                                                                                                    
                                                                                                                                
MS.  KOHLER  replied  that  AVEC   was  very  interested  in  the                                                               
technology.  (indisc.)                                                                                                          
                                                                                                                                
MS. KOHLER shared slide 8,  "Add cost-effective new communities,"                                                               
and said that  non-fuel costs rise as kilowatt hour  sales in the                                                               
community shrink.   She compared the non-fuel  costs in different                                                               
communities,  stating  that the  average  AVEC  village cost  was                                                               
$0.25 per kilowatt  hour, whereas in Bethel this  was about $0.08                                                               
cents per  kilowatt hour.   She reported that this  non-fuel cost                                                               
in Cordova  was $0.19 and in  Kotzebue, it was about  $0.21.  She                                                               
reiterated that there was a  direct relationship between the non-                                                               
fuel cost and the size of the service area.                                                                                     
                                                                                                                                
CHAIR WOOL  asked if  the non-fuel costs  of $0.129  presented by                                                               
IPEC were  similar.  In response  to Ms. Kohler, he  relayed that                                                               
this   would  include   distribution,  regulatory   depreciation,                                                               
everything except fuel and power.                                                                                               
                                                                                                                                
MS. MITCHELL pointed out that  the IPEC fiscal year was different                                                               
than AVEC.                                                                                                                      
                                                                                                                                
MS. KOHLER, in response, (indisc.)                                                                                              
                                                                                                                                
MS.  KOHLER moved  on  to slide  9, "How  does  a community  join                                                               
AVEC?"  (indisc.)                                                                                                               
                                                                                                                                
11:23:29 AM                                                                                                                   
                                                                                                                                
BILL  STAMM,  Manager  of Engineering,  Alaska  Village  Electric                                                               
Cooperative,  Inc.  (AVEC), explaining  slide  9,  stated that  a                                                               
community had to  petition AVEC and ask for membership.   He said                                                               
that  AVEC would  evaluate the  existing utility  and review  the                                                               
condition  of  the  power  plant  and  the  distribution  system,                                                               
determine if the  kilowatt hour sales were adequate  to cover the                                                               
incremental costs,  and see if this  was in the best  interest of                                                               
the  existing  cooperative  members,  as  AVEC  had  a  fiduciary                                                               
responsibility to its members.   He reported that, unfortunately,                                                               
many  communities asked  to  join AVEC  when  their systems  were                                                               
failing, and the  community was not able to  maintain the system.                                                               
He pointed  out that adequate  fuel storage was important  as the                                                               
fuel deliveries  arrived during  the summer  months.   He pointed                                                               
out  that when  the rate  for kilowatt  hour sales  had not  been                                                               
adequate  to  maintain  the  systems,  it  was  a  shock  to  the                                                               
community when  the rates  went up.   He stated  that if  all the                                                               
pieces appeared  adequate, and if membership  would be beneficial                                                               
to the cooperative  as a whole, then the board  would consider an                                                               
action.                                                                                                                         
                                                                                                                                
MR. STAMM  spoke about slide 10,  "Interconnecting Villages," and                                                               
said  that a  positive was  for greater  diesel efficiencies,  as                                                               
larger units, when run at optimum  load, were more efficient.  He                                                               
said that shutting  down a power plant could save  up to $150,000                                                               
each year.   He noted that upon intertie, a  single generator was                                                               
left for  back-up in  the joined  village, in  case the  tie line                                                               
went  down.   He pointed  out that  renewable energy  became more                                                               
cost effective  when it  was distributed  with an  intertie among                                                               
more communities.   He said that  some of the negatives  were for                                                               
the  loss of  the ability  to  recover heat  and electricity  and                                                               
distribute it  to public  facilities and  schools, and  that some                                                               
jobs were also lost when a plant was on stand-by.                                                                               
                                                                                                                                
CHAIR WOOL  mused that  there was the  possibility to  lose jobs,                                                               
lose heat,  and, if the  usage was not  enough and rates  had not                                                               
been  sufficient  to  pay  for   the  facilities,  pay  more  for                                                               
electricity.                                                                                                                    
                                                                                                                                
MR. STAMM  shared slide 11,  "The value of  connecting villages,"                                                               
and spoke  about an  experience in Toksook  Bay when  Tununak and                                                               
Nightmute  were interconnected  and 400  kilowatts of  wind power                                                               
was  installed, about  20  percent of  the total  fuel  use.   He                                                               
shared that the  introduction of wind power did  not always allow                                                               
the diesel generators to operate at their optimum fuel curve.                                                                   
                                                                                                                                
MR.  STAMM introduced  slide 12,  "Improve generator/distribution                                                               
efficiency," reporting that  AVEC had an average  of 6.5 kilowatt                                                               
hours per  gallon of fuel 30  years ago, whereas today,  this was                                                               
13.5 kilowatt hours per gallon of  fuel.  He pointed out that the                                                               
addition of wind to the systems  had brought this up to almost 20                                                               
kilowatt hours  per gallon of  fuel.   He shared that  the diesel                                                               
plants were optimized as much as possible for their size.                                                                       
                                                                                                                                
REPRESENTATIVE  JOHNSON  asked if  there  was  any idea  for  the                                                               
amount of power  used by public buildings,  including schools and                                                               
clinics.                                                                                                                        
                                                                                                                                
MR. STAMM  referred back to  the earlier pie charts,  pointed out                                                               
that  the community  facilities covered  these public  buildings,                                                               
and reported that this was about 15 percent of power sales.                                                                     
                                                                                                                                
MR. STAMM  explained slide 13,  "Add renewables  where feasible,"                                                               
noting that, although  many of the AVEC communities  did not have                                                               
hydro  potential and  that solar  PV had  not been  as effective,                                                               
there were  34 wind turbines in  11 locations.  He  reported that                                                               
900 kilowatt  turbines were  planned for  Bethel and  St. Mary's.                                                               
He directed attention  to slide 14, which depicted a  map for the                                                               
location of the wind turbines.                                                                                                  
                                                                                                                                
CHAIR  WOOL  asked  about  the  lines  on  the  map  joining  the                                                               
communities.                                                                                                                    
                                                                                                                                
MR. STAMM  opined that  the lines  were most  likely rivers.   He                                                               
explained  slide 15,  "A snapshot  of Wind  Production in  2016,"                                                               
which reported on  the wind percentages, as  those were dependent                                                               
on the  wind regime  and the  turbines in place.   He  noted that                                                               
although  the  Kaltag wind  project  was  small, it  was  working                                                               
flawlessly.                                                                                                                     
                                                                                                                                
11:34:32 AM                                                                                                                   
                                                                                                                                
MR.  STAMM  shared that  the  picture,  slide 16,  "Kaltag  Solar                                                               
Project," was  the solar array on  Kaltag.  He stated  that slide                                                               
17 was a graph of the  solar production on a "Cloudless September                                                               
Day"  and that  slide 18  graphed  the effect  from clouds,  "The                                                               
Effect  of  Partial  Clouds."    He  explained  slide  19,  "Sell                                                               
recovered heat, wind energy," reporting  that the efficiency of a                                                               
typical  diesel  generator was  33  percent  for electricity,  33                                                               
percent to  jacket the  water-cooling system,  and 33  percent in                                                               
the exhaust.   He stated that  heat was captured for  the schools                                                               
and community facilities in most of the AVEC communities.                                                                       
                                                                                                                                
MR.  STAMM declared  that it  was the  dedicated board  and staff                                                               
which made  all of this  possible, slide  20, "What makes  it all                                                               
possible?"  He  added that persistence, a  commitment to improved                                                               
efficiencies, and members' tolerance  for higher outage rates was                                                               
also  necessary.     He  stated   support  for  the   Power  Cost                                                               
Equalization (PCE) program.                                                                                                     
                                                                                                                                
CHAIR WOOL asked about the average cost of a kilowatt hour.                                                                     
                                                                                                                                
MR. STAMM replied that it was $0.43 per kilowatt hour.                                                                          
                                                                                                                                
CHAIR WOOL  offered his  belief that, when  PCE was  applied, the                                                               
cost was about $0.22 per kilowatt hour.                                                                                         
                                                                                                                                
MR. STAMM  expressed his agreement  that it was similar  for AVEC                                                               
communities.                                                                                                                    
                                                                                                                                
CHAIR  WOOL asked  if this  was  enough incentive  for people  to                                                               
conserve.                                                                                                                       
                                                                                                                                
MR.  STAMM emphasized  that it  was an  incentive, and  he opined                                                               
that  should anyone  in  Fairbanks and  Anchorage  pay $0.22  per                                                               
kilowatt hour, they would use less power.                                                                                       
                                                                                                                                
MS. KOHLER  reminded that  PCE was only  available for  the first                                                               
500 kilowatt  hours.  She  stated that  winter required a  lot of                                                               
electric use.   She reported that  it was often necessary  to fly                                                               
fuel into the  communities, and she offered an example  of a cost                                                               
of  $0.70 per  kilowatt hour  over the  500 allowable  PCE hours.                                                               
She  pointed out  that  communities with  piped  water and  sewer                                                               
systems  typically had  means  to keep  the  pipes flowing  which                                                               
added to the hourly usage.                                                                                                      
                                                                                                                                
^Presentation: Copper Valley Electric Association                                                                             
        Presentation: Copper Valley Electric Association                                                                    
                                                                                                                                
11:39:43 AM                                                                                                                   
                                                                                                                                
CHAIR WOOL announced that the final  order of business would be a                                                               
presentation by the Copper Valley Electric Association.                                                                         
                                                                                                                                
11:40:57 AM                                                                                                                   
                                                                                                                                
TRAVIS MILLION,  Chief Operating Officer, Copper  Valley Electric                                                               
Association (CVEA), offered to move  quickly through the overview                                                               
in  order  to  allow  more  time  for  questions.    He  directed                                                               
attention to slide  2, "CVEA Facts," and explained  that CVEA was                                                               
a member  owned, not for  profit, cooperative with  3,750 meters,                                                               
with assets  of $150 million,  and with annual revenues  of about                                                               
$20 million.   He  relayed that  there was  a very  large service                                                               
area, about  the size  of the  State of  West Virginia,  with 600                                                               
miles of transmission and distribution  facilities, staffed by 44                                                               
employees.   He shared the  map on slide 3,  "Service Territory,"                                                               
noting that  the majority of the  service area falls on  the road                                                               
system.                                                                                                                         
                                                                                                                                
MR. MILLION shared  slides 4 through 8, "Generation  Plants."  He                                                               
spoke about  Solomon Gulch, the  "workhorse of our system"  as it                                                               
generated 55  percent of its energy  needs.  He reported  that it                                                               
began  operation  in  1982  and was  a  12-megawatt  dam  storage                                                               
project.   It included a lake  at an elevation of  about 685 feet                                                               
that allowed for the back-up and  storage of water.  He said that                                                               
water was  utilized through penstocks,  or pipes, which  spun two                                                               
turbines in  the power plant.   He explained that  these turbines                                                               
used  a lot  of flow,  although  not much  pressure, to  generate                                                               
electricity.  He  added that most of the  generation capacity was                                                               
in the  summer, and then the  lake was utilized in  the winter to                                                               
allow for a yearly mix which  included a 25 percent mix of hydro.                                                               
He reported  that this plant  was the dispatch center,  that most                                                               
of the  other power plants could  be run from this  facility, and                                                               
that it was  manned full time.  He spoke  about the Allison Creek                                                               
Hydroelectric  Plant, completed  in  October 2016,  slide 5,  and                                                               
stated that this  was considered a "run of the  river project" as                                                               
the water was diverted through  a penstock to the powerhouse, and                                                               
there  was not  much  storage  of water.    He  pointed out  that                                                               
Allison Creek could only be  used when water was available, hence                                                               
no  operation once  there was  freeze up.   He  shared that  this                                                               
plant  used high  head  pressure,  with low  flow,  similar to  a                                                               
garden  hose.    He  offered his  belief  that  the  6.5-megawatt                                                               
capacity  would  add  about  14  percent  to  the  overall  hydro                                                               
portfolio.   He explained that  there was 1.2 miles  of penstock,                                                               
starting at an elevation of 1300  feet, with the powerhouse at an                                                               
elevation of 160 feet.  He  added that this created about 520 psi                                                               
(pounds per  square inch) of  water pressure at the  power house.                                                               
He said it  was designed to allow for efficient  use of the water                                                               
flows, from 80  cfs down to about 3 cfs  (cubic feet per second).                                                               
He stated that the cost of  the plant was $55 million, with $23.3                                                               
million provided by the state.                                                                                                  
                                                                                                                                
CHAIR WOOL asked  if the project would have been  feasible if the                                                               
money had to be borrowed.                                                                                                       
                                                                                                                                
MR. MILLION  replied that it  would not have been  cost effective                                                               
if 100 percent of  the project cost had to be  borrowed.  He said                                                               
it was already commercially operable,  first producing on October                                                               
5, 2016.                                                                                                                        
                                                                                                                                
MR.  MILLION  directed  attention to  the  Cogeneration  Project,                                                               
slide 6,  located in the  Petro Star refinery in  Valdez, Alaska.                                                               
He said  it was a 5.2-megawatt  gas turbine using a  less refined                                                               
liquid fuel, light straight run  (LSR), and it became operational                                                               
in 2000.   He acknowledged that the fuel was  cheaper but did not                                                               
generate as  much heat,  BTUs, and was  bought directly  from the                                                               
Petro Star  refinery.   He said  the exhaust  heat was  then sold                                                               
back  to Petro  Star, a  good,  cost effective  process for  both                                                               
entities.                                                                                                                       
                                                                                                                                
REPRESENTATIVE   SPOHNHOLZ   asked    for   an   explanation   of                                                               
cogeneration.                                                                                                                   
                                                                                                                                
MR. MILLION explained that cogeneration  meant the utilization of                                                               
two different  sources at the  same time,  in this case  heat and                                                               
electricity   from  a   turbine,  which   meant  a   much  higher                                                               
efficiency.  He  added that this plant was  the winter workhouse,                                                               
producing about 25 percent of the energy needs.                                                                                 
                                                                                                                                
CHAIR WOOL  mused that  Petro Star  did not want  to go  into the                                                               
electrical generation business.                                                                                                 
                                                                                                                                
MR.  MILLION  spoke  about  the Valdez  Diesel  Plant,  slide  7,                                                               
operational since  1964 after the  earthquake.  He  reported that                                                               
there  were  five diesel  reciprocating  units  ranging from  600                                                               
kilowatts to  2.4 megawatts.   He added  that two of  these units                                                               
were  operated  remotely from  Solomon  Gulch,  with another  two                                                               
units becoming remotely  operated at the end of 2017.   He shared                                                               
that  the four  oldest units  had  been replaced  with two  newer                                                               
units  which  almost doubled  the  efficiency  compared with  the                                                               
replaced units.   He stated that this plant produced  between 3 -                                                               
5 percent of the energy needs.                                                                                                  
                                                                                                                                
MR.  MILLION  discussed the  Glennallen  Diesel  Plant, slide  8,                                                               
which went into  commercial operation in 1959,  with seven diesel                                                               
units  ranging from  600 kilowatts  to 2.8  megawatts.   He added                                                               
that four  of these units  were remotely operated  Solomon Gulch.                                                               
He stated that  this plant produced between 3 -  5 percent of the                                                               
energy needs.   He moved on to  slide 9, "Cost per  kWh Hydro vs.                                                               
Fuel," which graphed the blended  power from June through May and                                                               
portrayed  the increase  in cost  per kilowatt  hour from  summer                                                               
into  winter,  peaking in  December  as  most  of the  water  had                                                               
frozen,  which dramatically  reduced  hydro production.   As  the                                                               
water and snow melted, the need for diesel fuel was reduced.                                                                    
                                                                                                                                
11:51:07 AM                                                                                                                   
                                                                                                                                
MR.  MILLION   reported  that   there  were   three  transmission                                                               
substations,  and   five  distribution  substations,   slide  10,                                                               
"System."    He  said  that  there was  a  106  mile,  138k  volt                                                               
transmission  line  and  more  than 500  miles  of  overhead  and                                                               
underground distribution  lines.  He  stated that there  were two                                                               
offices,  the corporate  offices in  Glennallen with  three power                                                               
plant operators  for the one  power plant, four linemen,  and the                                                               
office staff; the remote office  in Valdez with eight power plant                                                               
operators for  four plants, three  linemen and the  office staff,                                                               
slide 11, "Staffing."                                                                                                           
                                                                                                                                
MR.  MILLION  shared  slide 12,  "Major  Issues/Challenges,"  and                                                               
stated that the aging of the  workforce was a major challenge, as                                                               
almost 40 percent of the power  plant operators and 33 percent of                                                               
the linecrew  had retired  in the  past three  years.   He opined                                                               
that 10 - 20 percent of the  staff would retire in the next three                                                               
to  five  years; hence,  recruitment  and  the  loss of  all  the                                                               
experience was a primary  issue.  He said the age  of some of the                                                               
diesel units,  and the need  for replacement,  was an issue.   He                                                               
reported  that   there  were  limitations   for  the   amount  of                                                               
generation  due to  air quality  out of  each diesel  plant.   He                                                               
shared  that  the  Federal Energy  Regulatory  Commission  (FERC)                                                               
regulations created  some difficulties,  as there  were necessary                                                               
regulations that did not pertain to these operations.                                                                           
                                                                                                                                
REPRESENTATIVE RAUSCHER asked if these were state regulations.                                                                  
                                                                                                                                
MR. MILLION replied that most  of these were federal regulations,                                                               
although   there   were    some   Department   of   Environmental                                                               
Conservation and Department of  Natural Resources regulations, as                                                               
well.  In response to Chair Wool,  he said it was hard to predict                                                               
if  any of  these regulations  would change  in the  future.   In                                                               
response  to Representative  Rauscher,  he said  there was  close                                                               
work with  the Alaska  Power Association  for a  collective voice                                                               
for smaller projects.                                                                                                           
                                                                                                                                
MR. MILLION  returned to slide 12  and reported that the  cost of                                                               
liquid fuel increased in the  winter months, and consequently the                                                               
rates went up.  He said  that the distribution assets were aging,                                                               
and  the cost  of maintenance  increased.   He  pointed out  that                                                               
there  were  always  challenges with  weather  and  terrain,  the                                                               
rising cost of  labor and parts, and the isolated  grid which was                                                               
not connected to any other utility.                                                                                             
                                                                                                                                
MR.  MILLION turned  to slide  13, "Major  Projects," and  shared                                                               
that  there  were upgrades  on  the  communications and  controls                                                               
protection systems to bring them up  to date.  He reiterated that                                                               
the Valdez  plant had received  upgrades of more  efficient units                                                               
and  there  was   replacement  for  a  lot   of  the  underground                                                               
residential  distribution  cables.    There  were  more  detailed                                                               
inspections on the transmission  and distribution facilities, and                                                               
there  was  aggressive  clearing  of  the  right  of  ways.    He                                                               
concluded with  slide 14,  "What We Need,"  and said  that having                                                               
funding  available  for  projects and  interconnectivity  to  the                                                               
Railbelt  grid  was beneficial.    He  suggested that  a  reduced                                                               
regulatory  burden, a  reduction  in land  fees, and  streamlined                                                               
permitting would all be beneficial.                                                                                             
                                                                                                                                
MR. MILLION,  in response to  Representative Rauscher,  said that                                                               
the  majority of  the  regulatory issues  were  federal, as  many                                                               
state  regulatory  issues  were  driven  by  the  Federal  Energy                                                               
Regulatory Commission.                                                                                                          
                                                                                                                                
MR. MILLION,  in response to  Representative Westlake,  said that                                                               
they were  an associate  member of  a Railbelt  membership group,                                                               
and they all worked closely.                                                                                                    
                                                                                                                                
CHAIR WOOL  asked about  the importance  of connection  along the                                                               
Glenn Highway.                                                                                                                  
                                                                                                                                
MR. MILLION  said that  the difficulty was  for a  very expensive                                                               
project for a very short distance.                                                                                              
                                                                                                                                
MR. MILLION  returned to slide 14  and said there had  been a 700                                                               
percent increase  of land use fees  from FERC in four  years.  He                                                               
asked for  any support  to bring down  energy costs,  noting that                                                               
they did not receive any PCE.   He suggested a debt reimbursement                                                               
program for project funding.                                                                                                    
                                                                                                                                
CHAIR WOOL  asked about  the feasibility for  barging in  LNG, or                                                               
other gases.                                                                                                                    
                                                                                                                                
MR. MILLION  replied that  they had talked  to many  LNG shippers                                                               
and providers, pointing  out that there was only a  need for 5-10                                                               
percent  of diesel  generation  to  offset.   He  said there  was                                                               
research into a dual fuel option to increase efficiencies.                                                                      
                                                                                                                                
12:04:05 PM                                                                                                                   
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Special Committee on Energy meeting was adjourned at 12:04 p.m.