Legislature(1993 - 1994)
05/08/1993 11:15 AM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
May 8, 1993
11:15 a.m.
TAPE HFC 93-132, Side 2, #000 - end.
TAPE HFC 93-133, Side 1, #000 - end.
TAPE HFC 93-133, Side 2, #000 - end.
TAPE HFC 93-134, Side 1, #000 - 271.
CALL TO ORDER
Co-Chair Larson called the House Finance Committee to order
at 11:15 p.m.
PRESENT
Co-Chair Larson Representative Hoffman
Co-Chair MacLean Representative Martin
Vice-Chair Hanley Representative Navarre
Representative Brown Representative Parnell
Representative Foster Representative Therriault
Representative Grussendorf
ALSO PRESENT
Jim Baldwin, Assistant Attorney General, Department of Law;
Mike Greany, Director, Legislative Finance Division; Brent
Petrie, Alaska Energy Authority; Cheryl Frasca, Director,
Division of Budget Review, Office of Management and Budget;
Mel Kronseng, Legislative Staff, Representative Barnes;
Shelby Stastny, Director, Office of Budget and Management;
dAVE Hutchens, Alaska Rural Electric Association, Kristina
Erhart, Volunteer, Alaska Environmental Lobby; Bill Leedy,
Alaska Applied Sciences Incorporated.
SUMMARY INFORMATION
SB 106 "An Act authorizing power transmission interties
between Anchorage and the Kenai Peninsula, between
Healy and Fairbanks, and between the Swan Lake and
Tyee Lake hydroelectric projects, and approving
the design and construction costs of the
interties; and providing for an effective date."
HCS CSSB 106(FIN) was HELD in Committee.
SB 126 "An Act making special appropriations for design
and construction of power transmission interties
between Anchorage and the Kenai Peninsula, between
Healy and Fairbanks, and between the Swan Lake and
Tyee Lake hydroelectric projects; and providing
for an effective date."
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CSSB 126(RLS) am(efd fld) was HELD in Committee.
SENATE BILL NO. 106
"An Act authorizing power transmission interties
between Anchorage and the Kenai Peninsula, between
Healy and Fairbanks, and between the Swan Lake and Tyee
Lake hydroelectric projects, and approving the design
and construction costs of the interties; and providing
for an effective date."
BRENT PETRIE, ALASKA ENERGY AUTHORITY (AEA) testified from
Anchorage via teleconference. He stated that full funding
for the Power Cost Equalization Program (PCE), as provided
for in CSSB 106(FIN) am(efd fld) and CSSB 126(RLS) am(efd
fld), will last for only 4 to 5 years. He commented on the
Tyee-Swan Lake allocation. He noted that if the Southeast
Energy Fund is used primarily for payment of the Tyee-Swan
Lake intertie that debt service payments would be
approximately $3.2 million dollars. The initial allocation
to the Southeast Energy Fund is $4.2 million dollars.
Mr. Petrie stressed that Alaska Industrial Development and
Export Authority (AIDEA) statutes may require amendment in
order to achieve comparable financing capability. He
asserted that without such amendment, revenue bond financing
for projects such as interties may be more costly.
Mr. Petrie clarified, in response to a question by Co-Chair
MacLean, that the legislation provides the following
allocations from the AEA's Power Development Revolving Loan
Fund (PDRLF):
* 30 percent ($3.1 million dollars) to the PCE/Rural
Cap Fund;
* 30 percent ($3.1 million dollars) to Power Project
Fund loans; and
* 40 percent ($4.2 million dollars) to the Southeast
Energy Fund.
He noted that the cities of Wrangell and Ketchikan would be
the major beneficiaries of the Southeast Energy Fund.
Representative Grussendorf later clarified that Petersburg
would also benefit.
Co-Chair MacLean asked the rate of decline for PCE over a
ten year period. Mr Petrie explained that if $17 million a
year is appropriated to PCE for grants, the body of the fund
would be consumed by the year 2000. After that time, 30
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percent funding for PCE is expected.
MEL KRONSENG, LEGISLATIVE STAFF, REPRESENTATIVE BARNES
explained that AEA will remain intact as a corporation. The
Alaska Energy Authority will be moved under AIDEA for
management. The AIDEA Board of Directors will function as
the Board of Directors for AEA. The transfer was
recommended by bond counsel.
Ms. Kronseng referred to a letter from Mr. Don Grimes, J.C.
Bradford and Company (Attachment 1). She asserted that the
current version of CSSB 106(FIN) am(efd fld) has addressed
his concerns. She noted that AEA remains a separate entity
and that there is a six month transition period. She
pointed out that the rural functions of AEA will be
transferred to the Department of Community and Regional
Affairs. She provided members with a memorandum from AEA to
the Department of Community and Regional Affairs (Attachment
2). She noted that AEA will have $19.8 million dollars
available for transfer to the Department of Community and
Regional Affairs.
Ms. Kronseng pointed out that $90.0 million dollars of the
Railbelt Intertie Reserve will be allocated as grants for
the Northern and Southern interties. The remainder will be
bonded through AIDEA.
Ms. Kronseng provided members with a chart detailing
appropriations made in CSSB 106(FIN) am(efd fld) and CSSB
126(RLS) am(efd fld) (Attachment 3). She reviewed
appropriations contained in CSSB 126(RLS) am(efd fld) as
shown by Attachment 3:
* Tyee/Swan Lake loan, $20 million dollars at 3%
over 15 years to be repaid to the Railbelt Energy
Fund;
* Sutton-Glennallen, $35 million dollars at 0% over
50 years to be repaid to the Railbelt Energy Fund;
* $3 million dollar general fund appropriation for
the Seward-Lawing Substation intertie to be repaid
in to the Power Project Fund;
Ms. Kronseng explained that Four Dam Pool money will be
divided:
* 30 percent ($3.1 million dollars) for the
PCE/Rural Cap Fund;
Ms. Kronseng clarified that the intent was to fund PCE for a
minimum of ten years.
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* 30 percent ($3.1 million dollars) for Power
Project Fund loans; and
* 40 percnet ($4.2 million dollars) for the
Southeast Energy Fund.
Ms. Kronseng noted that $13.2 million general fund dollars
will be appropriated to complete the Sutton/Glennallen
intertie.
Ms. Kronseng referred to the Railbelt Energy Fund. She
noted that interest from the fund has not been appropriated.
The interest earnings of the Railbelt Energy Fund contained
within the General Fund is $85 million dollars. The
legislation proposes to appropriate the interest to the
PCE/Rural Cap Fund. She agreed with Mr. Petrie that the
Fund will be depleted by the year 2000. Co-Chair MacLean
provided members with a spread sheet showing the decline of
the PCE/Rural Cap Endowment (Attachment 4). She reiterated
that the intent was to provide funding for 10 years.
Ms. Kronseng continued to outline appropriations made by
CSSB 126(RLS) am(efd fld):
* $5.0 million dollars for Iliamna-New Halen-
Nondalton hydroelectric power project; and
* $3.9 million for operating expenses in the
Department of Community and Regional Affairs.
Ms. Kronseng stated that Representative Barnes would favor a
10 percent decrease to the Power Project Fund and an
accompanying increase in the PCE/Rural Cap Fund.
Co-Chair MacLean noted that Mr. Petrie indicated that the
bonding capability of AIDEA would be in question. Ms.
Kronseng replied that bond counsel signified that, since
bonds will not be issued for a year of more, amendments to
bonding statutes could be delayed.
Representative Martin questioned the 0 percent interest rate
loan to complete the Sutton-Glennallen intertie. Ms.
Kronseng stressed that the 0 percent loan is needed to make
the project feasible.
Representative Grussendorf expressed concern that
legislative overview will be diminished. Ms. Kronseng
assured him that the legislative overview process will be
improved.
Representative Brown referred to CSSB 106(FIN) am(efd fld)
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page 37, section 36. She noted that the state will retain
ownership of power projects.
Co-Chair Larson discussed the FY 94 spending plan. Ms.
Kronseng reviewed fund transfers. Co-Chair MacLean asked
where AEA umbrella projects will be addressed. Ms. Kronseng
noted that projects will be addressed in the capital budget.
Co-Chair Larson relayed constituent concerns regarding the
Sutton/Glennallen intertie. Ms. Kronseng stressed that an
intertie needs to be built in the Sutton/Glennallen area to
complete the power grid system between Fairbanks, Anchorage
and the surrounding areas.
Co-Chair Larson asked if right-of-way rights, feasibility
studies and permits are in place for the Sutton/Glennallen
intertie.
(Tape Change, HFC 93-133, Side 1)
Ms. Kronseng assured Co-Chair Larson that right-of-way
rights have not been purchased. She stated that alternative
routes are being researched. She emphasized that further
public testimony will be taken. She stated that "if the
line is not feasible, it will not be built."
Representative Brown asked why the project should be
authorized and committed to prior to the completion of the
feasibility study. She noted that there is local opposition
to the project.
Ms. Kronseng observed that the Solomon Gulch hydroelectric
project near Valdez is at peak demand. She pointed out that
there are a variety of economic development projects in the
area waiting for sufficient electrical power to begin
operations.
Ms. Kronseng clarified, in response to a question by
Representative Therriault, that the administration could
delay appropriations to projects contained in the
legislation until the end of the fiscal year. She noted
that the effective date clause failed in the Senate.
Representative Parnell suggested that a legal written
opinion be obtained to confirm that outstanding AEA bonds
will not be affected.
JIM BALDWIN, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW
stated that the Department of Law would like to see language
added to allow moral obligation debt. He observed that
AIDEA does not have the ability to issue moral obligation
debt. He indicated that bond counsel feels that moral
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obligation bonds would be needed for issuance of intertie
projects. He pointed out that AEA does have the ability to
issue moral obligation bonds. He agreed that it is not
essential that AIDEA be given the ability to issue moral
obligation bonds at this time, since bonds will not be
issued for a year or more.
Co-Chair MacLean asked how the legislation will address
concerns regarding the comparative bond capabilities of AEA
and AIDEA. Mr. Baldwin emphasized that moral obligation
bonding is a significant marketing factor.
Mr. Baldwin discussed areas of concern to bond counsel. He
mentioned jurisdiction of the Alaska Public Utility
Commission (APUC). He noted that under existing law AEA has
APUC exemptions. He pointed out that AIDEA does not have a
similar exemption.
Mr. Baldwin maintained that in order to assure investment
bankers AIDEA should be a signatory to the grant agreements.
Representative Parnell reiterated concerns regarding AEA's
outstanding bonds. Mr. Baldwin pointed out that there are
project specific bonds and general obligation bonds. He
stressed that AEA will retain its framework with sufficient
power to fulfill bond covenants.
Representative Brown asked what authority AEA will retain.
Ms. Kronseng clarified that AEA will retain all functions
except the initiation and construction of new projects.
Co-Chair Larson provided members with resolutions from the
Matanuska-Susitna Borough regarding the Sutton/Glennallen
intertie (Attachment 5). The resolutions recommend that
alternatives be studied and that a feasibility study be
completed.
Representative Brown discussed the classification of
employees transferred to the Department of Community and
Regional Affairs. She noted that AIDEA and AEA employees
are exempt. Employees of the Department of Community and
Regional Affairs are not exempt.
Representative Brown asked if AEA's investigation authority
will be repealed. Mr. Petrie noted that in section 27,
AEA's ability to conduct reconnaissance and feasibility
studies is repealed (AS 44.83.170). Representative Brown
asked how ongoing projects will be affected. Mr. Petrie
stated that the major feasibility study being conducted by
AEA is the Sutton/Glennallen intertie feasibility study. He
stated that AEA would try to complete the study before the
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statute is repealed. He noted that the preliminary study
showed that there might be a cost savings in down scaling
the project.
Ms. Kronseng stated that AIDEA would determine the fate of
AEA's employees. Representative Brown asked if there will
be a change in how AEA's budget will be reviewed by the
Legislature. She asked if AIDEA has independent authority.
She asked if legislative oversight will be lessened.
Mr. Baldwin noted that the operating budget of AIDEA is
subject to the Executive Budget Act. The nonoperating
portion of AIDEA's budget is not scrutinized by the
Legislature. There must be legislative approval for bond
issuances of more than $10.0 million dollars.
Representative Brown noted that AIDEA could allow small
energy projects without legislative scrutiny. Ms. Kronseng
stated that it is her understanding that legislative
oversight would not be altered. She emphasized that AIDEA's
Board of Directors becomes the Board of Directors for AEA.
KRISTINA ERHART, VOLUNTEER, ALASKA ENVIRONMENTAL LOBBY asked
that the Committee consider least cost planning and energy
efficiency as state policy. She supported the use of
integrated resource management planning (IRMP). She
emphasized that IRMP would result in net long term savings.
She stressed that a 1989 AEA study concluded that the
proposed interties are only marginally cost effective. She
noted that the study found that demand side efficiency
investments provide a higher cost benefit ratio.
Ms. Erhart asserted that subsidized power utilities have
little incentive to look for more cost effective measures.
She noted that other state industries emphasizing energy
efficiencies are adversely affected.
Ms. Erhart stated she had spoken with Sutton/Glennallen
residents. She discussed concerns of the Sutton/Glennallen
residents. She noted that conversations with AEA indicate
the feasibility study will be completed by December 1, 1993.
She noted that public testimony is being compiled and will
not be available until December 1, 1993. She asked that
authorization for the intertie be postponed until after
completion of the feasibility study.
BILL LEEDY, ALASKA APPLIED SCIENCES INCORPORATED spoke on
behalf of renewable energy interests. He emphasized that
the intertie concept is a poor investment relative to demand
side management.
(Tape Change, HFC 93-133, Side 2)
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Representative Brown requested that a statewide
teleconference be held for public comment on CSSB 106(FIN)
am(efd fld) and CSSB 126(RLS) am(efd fld).
Co-Chair MacLean provided members with AMENDMENT 1
(Attachment 6). She noted that it is the intent of the
legislature to fund the PCE program at a least 17 million
annually. She observed that this will provide funding for
only 80 percent of PCE needs. She asserted that the
allocation from the PDRLF Fund plus the initial grant of
$66.9 million dollars will not be enough to continue funding
for PCE at the $17 million dollar level. Amendment 1 would
state that it is the intent of the legislature to continue
support for PCE at the $17.0 million dollar level until the
year 2013.
Representative Martin expressed concern with the cost of
assuring equality.
Representative Grussendorf established that rural areas pay
between .34 to .54 cents a kilowatt hour. Anchorage and
other urban areas pay approximately .095 cents per kilowatt
hour.
Ms. Kronseng clarified, in response to a question by
Representative Brown, that the legislature must make an
annual appropriation from the PCE Rural Cap Fund for PCE
reimbursements. To continue the program past the year 2000,
additional legislative appropriations would have to be made.
Co-Chair MacLean MOVED to ADOPT AMENDMENT 1. Representative
Martin OBJECTED. A roll call vote was taken on the motion.
IN FAVOR: Brown, Grussendorf, Hoffman, Navarre, Foster,
Therriault, MacLean, Larson
OPPOSED: Martin, Parnell
Representative Hanley was not present for the vote.
The MOTION PASSED (8-2).
Co-Chair Larson provided members with AMENDMENT 2
(Attachment 7). Mr. Baldwin explained that Amendment 2
would allow the issuance of moral obligation debt solely for
a power transmission intertie. Co-Chair Larson MOVED to
ADOPT AMENDMENT 2. Representative Brown OBJECTED. A roll
call vote was taken on the motion.
IN FAVOR: Foster, Martin, Parnell, Therriault, Grussendorf,
Hoffman, Navarre, MacLean, Larson
OPPOSED: Brown
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Representative Hanley was not present for the vote.
The MOTION PASSED (9-1).
Representative Brown provided members with AMENDMENT 3
(Attachment 8). Representative Brown noted that section 39
should not have been added to page six of Amendment 3.
There being NO OBJECTION, section 39 was deleted from page
six of Amendment 3. She explained that the Amendment would
require railbelt utilities to develop integrated resource
plans prior to participation in the projects contained in
CSSB 106(FIN) am(efd fld) and CSSB 126(RLS) am(efd fld).
She maintained the need to assure that utilities consider
the most cost effective alternatives.
Ms. Kronseng replied that utilities operating under REAA's
are required to provide an integrated management system.
She emphasized that larger utilities are already performing
integrated management plans. She felt that Amendment 3
would be redundant. She asserted that the Amendment would
allow APUC to tell utilities how to construct their
projects. Representative Brown stressed that the Amendment
would only affect large railbelt utilities. She observed
that projects executed by AIDEA will be subject to APUC
jurisdiction. Ms. Kronseng replied that AIDEA will not be
constructing the interties. The interties will be
constructed by the utilities.
DAVE HUTCHENS, ALASKA RURAL ELECTRIC COOP ASSOCIATION
(ARECA) stated that utilities are already providing
planning. He asserted that the Amendment would transfer
responsibility for the planning process from utilities to
APUC. He noted that ARECA is opposed to the Amendment.
Representative Brown MOVED to ADOPT AMENDMENT 3.
Representative Therriault OBJECTED. A roll call vote was
taken on the motion.
IN FAVOR: Brown, Grussendorf, Hoffman, Navarre
OPPOSED: Foster, Martin, Parnell, Therriault, MacLean,
Larson
Representative Hanley was not present for the vote.
The MOTION FAILED (4-6).
Co-Chair MacLean provided members with AMENDMENT 4
(Attachment 9). She explained that Amendment 4 would
increase the allocation percentage to the PCE Rural Fund
from 30 to 40 percent and decrease the allocation for the
Power Project Fund to 20 percent. She asserted that the 30
percent allocation does not come close to providing adequate
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funding for capital projects administered by AEA. Ms.
Kronseng stated that Representative Barnes supports
Amendment 4. She noted that funding for statewide projects
will be reduced.
Members discussed uses for the Power Project Fund. Mr.
Petrie noted that repairs are needed on a section between
Wrangell and Petersburg. Repair costs are estimated at $12
million dollars.
Representative Navarre asked how long revenues will be
received from the Four Dam Pool agreement. Mr. Petrie
stated that revenues will continue until the year 2030 at
approximately $12 million dollars a year.
Representative Navarre questioned the ability to finance the
Tyee/Swan Lake intertie based on an annual appropriation.
Mr. Petrie agreed that obtaining financing based on annual
legislative appropriation will be difficult. The total
project cost is $60 million dollars.
Representative Navarre suggested that varying energy
policies are being set up for different areas of the state.
Members discussed financing for the Tyee/Swan Lake intertie.
Representative Navarre noted that the city of Ketchikan will
need to guarantee financing.
Co-Chair MacLean MOVED to ADOPT AMENDMENT 4. Representative
Navarre OBJECTED. A roll call vote was taken on the motion.
IN FAVOR: Foster, Hoffman, Martin, Parnell, Therriault,
MacLean, Larson
OPPOSED: Martin, Navarre, Grussendorf
Representatives Brown and Hanley were not present for the
vote.
The MOTION PASSED (6-3).
Mr. Hutchens, in response to a question by Representative
Foster, stressed that AEA's existing programs for rural
energy can be administered by the Department of Community
and Regional Affairs. He noted that the Department of
Community and Regional Affairs would need to gain expertise
and surmised that personnel from AEA would be transferred to
the Department.
(Tape Change, HFC 93-134, Side 1)
Ms. Kronseng explained how the dissolution of AEA became
incorporated into CSSB 106(FIN) am(efd fld). She asserted
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that it is appropriate that the rural functions of AEA be
performed by the Department of Community and Regional
Affairs. She noted that AEA was originally established to
oversee large energy projects. She emphasized that except
for the interties there are no major projects on the
horizon.
Representative Hoffman asked if there is adequate
representation on the AIDEA Board to address rural concerns.
The Board consists of the commissioners of the Department of
Community and Regional Affairs, Department of Revenue,
Department of Commerce and Economic Development and two
public members. The two public members are not currently
from rural Alaska.
Representative Grussendorf expressed concern that the
legislation goes to far.
Representative Therriault MOVED to report HCS CSSB 106(FIN)
out of Committee with individual recommendations and with
the accompanying fiscal note. Representative Brown
OBJECTED. She noted that there are fifteen fiscal notes
associated with the legislation. Mr. Petrie observed that
the existing fiscal notes did not apply to the HCS CSSB
106(FIN) version. Representative Brown suggested that the
bill be held until the Committee could obtain updated fiscal
notes.
HCS CSSB 106(FIN) was was HELD in Committee.
ADJOURNMENT
The meeting adjourned at 1:56 p.m.
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