Legislature(2007 - 2008)HOUSE FINANCE 519

07/27/2008 01:00 PM FINANCE

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01:13:07 PM Start
01:15:53 PM HB4005 || HB4006
03:04:52 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Public Testimony - Time limit may apply
Heard & Held
Public Testimony - Time limit may apply
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                       July 27, 2008                                                                                            
                         1:13 p.m.                                                                                              
 CALL TO ORDER                                                                                                                
 Co-Chair Meyer called the House Finance Committee meeting to                                                                   
 order at 1:13:07 PM.                                                                                                         
 MEMBERS PRESENT                                                                                                              
 Representative Mike Chenault, Co-Chair                                                                                         
 Representative Kevin Meyer, Co-Chair                                                                                           
 Representative Bill Stoltze, Vice-Chair                                                                                        
 Representative Richard Foster                                                                                                  
 Representative Les Gara (Testified via Teleconference)                                                                         
 Representative Mike Hawker                                                                                                     
 Representative Reggie Joule                                                                                                    
 Representative Mike Kelly                                                                                                      
 Representative Mary Nelson                                                                                                     
 MEMBERS ABSENT                                                                                                               
 Representative Harry Crawford                                                                                                  
 Representative Bill Thomas Jr.                                                                                                 
 ALSO PRESENT                                                                                                                 
 Kate   Troll,   Executive   Director,  Alaska   Conservation                                                                   
 Alliance,  Juneau;  Meer  Kohler,  President  &  CEO,  Alaska                                                                  
 Village Electric Cooperative; Julie Kitka, Alaska Federation                                                                   
 of Natives; Representative Andrea Doll; Senator Joe Thomas                                                                     
 PRESENT VIA TELECONFERENCE                                                                                                   
 Doris Cabana, Homer; Paul Kendall, Anchorage; Del Conrad,                                                                      
 CEO, Anchorage; Dr. Vi Gerald, Homer;                                                                                          
HB 4005    An Act amending the power cost equalization                                                                          
           program, repealing  the exclusion from eligibility                                                                   
           for  power  cost  equalization  for  certain  power                                                                  
           projects that take  their power from hydroelectric                                                                   
           facilities,   and  amending   the   definition   of                                                                  
           'eligible electric  utility' as it  applies to  the                                                                  
           power  cost  equalization  program  and  the  grant                                                                  
           program  for  small  power  projects  for   utility                                                                  
           improvements; and providing for an effective  date.                                                                  
           HB 4005 was HEARD  & HELD in Committee for  further                                                                  
HB 4006    An Act authorizing, as a temporary rebate of                                                                         
           state  resources   to  certain   state  residents,                                                                   
           payments to assist  in meeting heating costs  under                                                                  
           the federal and state heating assistance programs;                                                                   
           and providing for an effective date.                                                                                 
           HB 4006 was HEARD & HELD in Committee for further                                                                    
HOUSE BILL NO. 4005                                                                                                           
      An Act  amending the  power cost  equalization  program,                                                                  
      repealing the exclusion from eligibility for power  cost                                                                  
      equalization for certain power projects that take  their                                                                  
      power from  hydroelectric facilities,  and amending  the                                                                  
      definition of 'eligible electric utility' as it  applies                                                                  
      to the  power cost  equalization program  and the  grant                                                                  
      program   for   small   power   projects   for   utility                                                                  
     improvements; and providing for an effective date.                                                                         
      HB 4005  was  HEARD  & HELD  in  Committee  for  further                                                                  
HOUSE BILL NO. 4006                                                                                                           
      An Act  authorizing,  as  a temporary  rebate  of  state                                                                  
      resources  to  certain  state  residents,  payments   to                                                                  
      assist in meeting  heating costs  under the federal  and                                                                  
      state heating assistance programs; and providing  for an                                                                  
      effective date.                                                                                                           
      HB 4006  was  HEARD  & HELD  in  Committee  for  further                                                                  
 1:15:53 PM                                                                                                                   
 KATE   TROLL,   EXECUTIVE   DIRECTOR,  ALASKA   CONSERVATION                                                                   
 ALLIANCE, JUNEAU,   voiced support of funding for power  cost                                                                  
 equalization (PCE)  and LIHEAP to  provide energy assistance                                                                   
 for the  entire state  of  Alaska.   She signified  that  the                                                                  
 economic welfare  of the  villages and  rural communities  is                                                                  
 being threatened by the high energy costs. Additionally,  the                                                                  
 Alaska Conservation  Alliance wished  to convey  the  message                                                                  
 through  Ms.  Troll,   to  "make  a   connection  to   energy                                                                  
 conservation" throughout  the state.   She noted the  handout                                                                  
 (Energy  Cost   Relief   and  Energy   Conservation),   which                                                                  
 indicates  ways  to  promote  energy  conservation  (copy  on                                                                  
 file.) She encouraged long term solutions.                                                                                     
 1:20:24 PM                                                                                                                   
 Representative  Nelson   stated  that   the  average   person                                                                  
 eligible for power cost  equalization uses less that 400  kWh                                                                  
 per month.  In comparison,  the average  electric energy  use                                                                  
 per  person in  Anchorage  is  750  kWh.    She  stated  that                                                                  
 conservation has been taken to heart in the village areas.                                                                     
 1:21:11 PM                                                                                                                   
 Representative  Kelly  asked   if  the  Alaska  Conservation                                                                   
 Alliance would support alternative heating source efforts  in                                                                  
 both the rural and urban areas.                                                                                                
 Ms. Troll replied that the Alaska Conservation Alliance  does                                                                  
 support  any   type  of   technology  measure   that   offers                                                                  
 1:22:59 PM                                                                                                                   
 Representative Kelly commented  on the Susitna Hydroelectric                                                                   
 project and the Alaska Conservation Alliance's opposition  in                                                                  
 the past.  He asked if  the Alliance would now support  those                                                                  
 projects.    Ms.  Troll   responded  that  the  Alliance   is                                                                  
 reviewing Susitna in relationship  to Railbelt energy  needs.                                                                  
 She announced that a firm position would be taken, following                                                                   
 the   current   review.   The   Alliance   currently    views                                                                  
 hydroelectric power as part of the renewable energy mix.                                                                       
 1:25:49 PM                                                                                                                   
 Representative  Gara  appreciated   the  positive  proposals                                                                   
 submitted by  the environmental  organization.   He asked  if                                                                  
 the Alaska  Conservation  Alliance would  support additional                                                                   
 funds to enhance the ability  to meet renewable energy  needs                                                                  
 in  the  future.     Ms.  Troll   replied  that  the   Alaska                                                                  
 Conservation Alliance absolutely would support the measure.                                                                    
 1:27:47 PM                                                                                                                   
 Representative Gara commented  that Ms.  Troll should not  be                                                                  
 held  responsible  for  the   past  actions  of  the   Alaska                                                                  
 Conservation  Alliance.    Representative  Kelly  noted   his                                                                  
 positive treatment of the current environmental group.                                                                         
 1:28:50 PM                                                                                                                   
 MEER  KOHLER,   PRESIDENT   CEO,  ALASKA   VILLAGE   ELECTRIC                                                                  
 COOPERATIVE, testified  in support  of HB 4005  and HB  4006.                                                                  
 Alaska Village Electric  Cooperative (AVEC) is a  non-profit,                                                                  
 member-owned electric  utility serving 53  villages in  rural                                                                  
 Alaska. She described that "although our villages are  small,                                                                  
 our combined population is 22,000, about the same  as Bethel,                                                                  
 Cordova,  Dillingham,  Kotzebue,  Nome  and  Unalaska  rolled                                                                  
 together." She provided members with written testimony  (copy                                                                  
 on file):                                                                                                                      
      AVEC operates 48 power plants and 47 bulk fuel tank                                                                       
      farms.  Our  costs  of  operation  are  extremely   high                                                                  
      because of the  lack of efficiencies  of scale. Our  per                                                                  
      capita electricity  consumption  is 242  kWh per  month,                                                                  
      compared with 542 in Bethel and over 1,000 in  Anchorage                                                                  
      or Fairbanks, reflecting the impact of the higher  level                                                                  
      of commerce associated with lower cost electricity.                                                                       
      Consumption has always been very  low, because the true                                                                   
      cost of  electricity in  the villages  has always  been                                                                   
      high. It is high  because we must have  one power plant                                                                   
      and tank  farm per  every 400  in population  - compare                                                                   
      that  with   one   power  plant   for  Bethel's   6,000                                                                   
      population, or  three  power plants  for Fairbanks,  or                                                                   
      five for Anchorage.                                                                                                       
      We support  expansion of  the PCE  program  to include                                                                    
      any  community  contending  with very  high  costs  of                                                                    
      electricity because  we know  how crippling  it  is to                                                                    
      contend with  such costs  even as  other energy  costs                                                                    
      are catapulting at the same time.                                                                                         
      We  respectfully   protest  the   implementation  of   a                                                                  
      seasonal   kWh   limit   because,   despite   its   good                                                                  
      intentions, it would  actually cost  all of our  current                                                                  
      PCE beneficiary's  money, rather  than increasing  their                                                                  
      assistance  by 23%  as  suggested in  the  model.  AVEC,                                                                  
      Cordova,  Inside  Passage  Electric,  Kotzebue,  Naknek,                                                                  
      Nome  and  Nushagak  Electric  in  Dillingham  have  all                                                                  
      conducted analyses of the change and all have  concluded                                                                  
     that this change will be detrimental to consumers.                                                                         
      Instead,  we  request  that  this  committee  consider                                                                    
      restoring the eligible  PCE cap to  700 kWh per  month.                                                                   
      This is the level at  which PCE operated for the  first                                                                   
      15  years -  from  1984  to  1999.  It  represents  the                                                                   
      average  kWh   consumed  by   citizens  of  Anchorage,                                                                    
      Fairbanks and Juneau. When the program was cut  back in                                                                   
     1999, eligible residential kWh fell by about 22%.                                                                          
      Since eligible kWh today is almost unchanged  from 1999,                                                                  
      the most  likely  impact  is that  the  residential  kWh                                                                  
      covered would  go back up  by the 22%  that it  declined                                                                  
      eight years  ago.  The legislative  analysis previously                                                                   
      presented by  staff projects that  the 300/700  seasonal                                                                  
      cap would result  in additional kWh  usage of about  23%                                                                  
      over current levels.  The financial  impact of a  change                                                                  
      to the  flat 700  kWh  cap should  be identical  to  the                                                                  
      seasonal cap's impact as calculated by staff.                                                                             
      In  May  of  this  year,  the  AVEC  board  adopted   a                                                                   
      resolution  declaring  a  fuel  cost  emergency.   That                                                                   
      resolution was sent  to all legislators  and a copy  is                                                                   
      attached to this testimony. The crisis we declared  two                                                                   
      months ago is coming to its predicted peak right now.                                                                     
      We are  two thirds of  the way  into our  fuel delivery                                                                   
      season and have  fuel bills of  $16 million to  pay for                                                                   
      and will have another  $12 million due  within the next                                                                   
      six weeks.  Our fuel  bill last  year was  $14 million,                                                                   
      and  we are  only  half  way through  collecting  those                                                                   
      monies.  We have  an emergency  amendment  to our  line                                                                   
      of credit,  raising  it  to  $15 million.  The  cost of                                                                   
      that borrowing will add another  two cents a kWh to our                                                                   
      already high electricity rates.  There is no state fund                                                                   
      available to borrow from  to purchase our fuel and  the                                                                   
      small  amount   available  in   the  AEA's  fuel   loan                                                                   
      program   will  not   cover   five  percent   of  rural                                                                   
      Alaska's needs.                                                                                                           
      AVEC has proposed  having the State  provide assistance                                                                   
      to  cap  the  delivered  cost  of  fuel  for generating                                                                   
      electricity  at  $10  per  million  btu.  Alaska   Power                                                                  
      Association endorses  this approach  and also  advocates                                                                  
      for the  State  providing no-cost  loans to  cover  this                                                                  
      year's  fuel  purchase.   Something   needs  to  happen                                                                   
      soon, or  rural Alaska  is going  to enter  this winter                                                                   
      without adequate  fuel on hand to  see them through  the                                                                  
      season.  We  will  then be  faced  with  the  even  more                                                                  
      crippling cost of flying fuel in on an emergency basis.                                                                   
      This  is not  tenable,  especially  when  our  state  is                                                                  
      bursting at  the seams  from revenues  gleaned from  the                                                                  
     burgeoning cost of a barrel of Alaskan crude oil.                                                                          
      Please support  the changes proposed  to PCE,  with the                                                                   
      exception of restoring  the 700 kWh  cap. It is  a stop                                                                   
      gap measure  as  we continue  our quest  to build  wind                                                                   
      systems   across   our  villages   and   tap   emerging                                                                   
      technologies to reduce our dependence on diesel fuel.                                                                     
 1:34:40 PM                                                                                                                   
 Co-Chair Chenault asked  if it is crucial  that there be  one                                                                  
 power plant and  tank farm for every  400 in population.  Ms.                                                                  
 Kohler answered that  the long term plan  is to tie  villages                                                                  
 together, by  building  micro grids  to  connect them.    The                                                                  
 grids  could  eventually  connect,  forming  regional  grids,                                                                  
 which could  then  be connected  to  form a  statewide  grid.                                                                  
 This would allow villages to tap into more renewable  energy.                                                                  
 She stated that  this connection  would eventually eliminate                                                                   
 the  need   for   power   plants  and   tank   farms,   which                                                                  
 unfortunately, would also eliminate crucial jobs.                                                                              
 1:36:17 PM                                                                                                                   
 Vice-Chair Stoltze  asked  if  some of  the  proposed  mining                                                                  
 projects would facilitate the micro grid process.                                                                              
 1:36:44 PM                                                                                                                   
 Ms. Kohler  explained  that  the  mining  projects  had  been                                                                  
 considered  years  ago by  Novista  Light  and  Power.    She                                                                  
 informed that the  problem was that  200 mega-watts of  power                                                                  
 are necessary for  heating the villages,  which is much  more                                                                  
 than the projects could provide.                                                                                               
 1:38:01 PM                                                                                                                   
 Representative  Kelly  asked   if  transmission  lines   were                                                                  
 available to  allow  for  the connection  lines.  Ms.  Kohler                                                                  
 responded that AVEC  was working on  those developments.  She                                                                  
 said that  they promote  about eight  or nine  potential  tie                                                                  
 lines for interconnection. She  stated that AVEC has  pursued                                                                  
 in vain, funding from the legislature for the development  of                                                                  
 the proposed micro projects.                                                                                                   
 1:40:19 PM                                                                                                                   
 Representative Hawker asked Ms. Kohler to shed more  light on                                                                  
 her expressed  concern  about  legislative  funding  for  the                                                                  
 revolving bulk fuel  acquisition loan.  Ms. Kohler responded                                                                   
 that they want  to be sure  that they take  advantage of  the                                                                  
 low cost of fuel  early in the season.  She pointed out  that                                                                  
 in years past, some villages  placed their orders in  August,                                                                  
 which was too late to borrow the $500 thousand [per  village]                                                                  
 needed to  barge the  fuel. She  stated that  her concern  is                                                                  
 that she did not  want to fly fuel  in because there were  no                                                                  
 loan funds available. Representative Hawker asked Ms.  Kohler                                                                  
 to quantify the deficiency in the revolving loan fund  before                                                                  
 the end of special session.  Ms Kohler opined that $35 -  $40                                                                  
 million would be necessary,  as opposed to the now available                                                                   
 five million dollars.                                                                                                          
 1:43:35 PM                                                                                                                   
 Representative Hawker stated that the committee would  try to                                                                  
 set up an additional  meeting on the  topic of the revolving                                                                   
 loan  fund  with  Alaska  Energy  Authority  Director   Steve                                                                  
 1:44:19 PM                                                                                                                   
 Representative Kelly focused on the 52.5 cents cap and  asked                                                                  
 why the state  would consider  going that high.   Ms.  Kohler                                                                  
 replied that the Alaska Power Association (APA) supports  the                                                                  
 PCE cap change to 72.5 cents.  That number was determined  by                                                                  
 looking at the  fuel price when the  PCE program first  began                                                                  
 in 1984, which  was at  $1.17 a gallon.  They then escalated                                                                   
 that number with 3% inflation, arriving at an expected  price                                                                  
 of $2.30  per gallon.   For every  50 cent  increase cost  in                                                                  
 fuel, an  increase  in kWh  of about  4  cents is  seen.  She                                                                  
 continued to  explain  the formula  used  to arrive  at  72.5                                                                  
 cents: "$2.50 divided by 50 gives you five, times four  gives                                                                  
 you twenty, add to 52.5 gives you 72.5".                                                                                       
 1:46:28 PM                                                                                                                   
 Representative Kelly  asked  if the  number was  72.5  cents.                                                                  
 Ms. Kohler  replied yes, adding  that the  proposed 12.5  kWh                                                                  
 was significantly higher than  what is currently embedded  in                                                                  
 the PCE statute.  The  generation efficiency in statute is  a                                                                  
 very  high   standard.     There  is   room  to  incentivize                                                                   
 alternative  energy.     She  continued   that  the  use   of                                                                  
 alternative energy  increases the  efficiency  per gallon  of                                                                  
 1:47:54 PM                                                                                                                   
 Representative Nelson inquired  about raising the cap by  $2.                                                                  
 She thought  that the prices  would never  decrease in  rural                                                                  
 Alaska.  Some places are now  paying over a $1 per kWh.   She                                                                  
 felt the prices were outrageous.   There is recognition  that                                                                  
 the villages  with those excessively  high rates  are in  the                                                                  
 minority, however  they  must be  accommodated.   Ms.  Kohler                                                                  
 agreed that there are a few villages in that situation.   She                                                                  
 stated that AVEC promoted that future changes in the  cost of                                                                  
 fuel be accompanied  by a similar adjustment  so that if  the                                                                  
 cost moves higher or lower, then the cap would also  float up                                                                  
 and down.  In the case  of these villages paying excessively                                                                   
 high prices  per kWh,  the conflict  is with  the perception                                                                   
 that the cap is somehow encouraging excessive consumption  of                                                                  
 electricity.   There should be  extra attention  paid to  how                                                                  
 those costs can be  reduced.  She thought  that with the  new                                                                  
 generating system  that  they  had in  those  villages,  they                                                                  
 should now be seeing lower costs.                                                                                              
 1:50:55 PM                                                                                                                   
 Representative Hawker  referenced the cap  of the PCE  amount                                                                  
 and the discrimination  in the determining  methodology.   He                                                                  
 commented on the economy  of scale because certain  providers                                                                  
 are serving relatively few  households for comparable  costs.                                                                  
 Ms. Kohler agreed  that this is a dilemma.   She stated  that                                                                  
 AVEC  serves  a  couple   of  villages  that  have  only   20                                                                  
 households.   She maintained  that because  AVEC has  brought                                                                  
 together 53 communities  there are some  modest economies  of                                                                  
 scale.   She mentioned  individual  fuel costs;  villages  do                                                                  
 have options  to band  together with  others  to help  reduce                                                                  
 costs.  She encouraged that mechanism.                                                                                         
 1:53:57 PM                                                                                                                   
 Representative  Hawker  asked   if  the  legislature   should                                                                  
 encourage more  collective organization  of power statewide.                                                                   
 Ms. Kohler noted  that it  can work, pointing  out that  they                                                                  
 are a  small  village utility.    She reiterated  that  their                                                                  
 approach does work.                                                                                                            
 1:55:10 PM                                                                                                                   
 Representative Nelson  asked if  the AVEC board  has to  okay                                                                  
 communities coming  into the coop.   She  commented that  "if                                                                  
 they  are  in  such  dire  straits  your  board  has  refused                                                                  
 membership to certain communities."   Ms. Kohler stated  that                                                                  
 was correct.  She  cited a recent example  of refusal to  the                                                                  
 village of Tuluksak; the system  was in such a poor state  of                                                                  
 repair that a large  infusion of investment  was going to  be                                                                  
 necessary to bring  them up to operating  standards and  AVEC                                                                  
 did not  believe that  their membership  should  pick up  the                                                                  
 tab.  She  stressed that  AVEC was  willing to do  it if  the                                                                  
 state would  bring the  system  up to  a condition  where  we                                                                  
 could bring it into our system.  She pointed out that  it was                                                                  
 the state's decision not to upgrade the system.                                                                                
 1:56:33 PM                                                                                                                   
 Representative Nelson reiterated that villages can only  join                                                                  
 can at their (AVEC board's) discretion.                                                                                        
 1:57:10 PM                                                                                                                   
 Representative  Hawker asked  how  many  households  live  in                                                                  
 Tuluksak village and what  would be the capital construction                                                                   
 cost to provide  a barrier.  Ms.  Kohler observed 500  people                                                                  
 live in Tuluksak. She remembered  that their project had  not                                                                  
 been well operated.  She informed that it  was under size  in                                                                  
 capacity.  It was not capable of handling the power  needs of                                                                  
 the school, nor did it have a tank farm available.   AVEC put                                                                  
 together a list  to bring it  up to pare.   She thought  that                                                                  
 estimate was about $2-$2.5 million.                                                                                            
 1:58:57 PM                                                                                                                   
 Representative Joule  asked how many  villages are operating                                                                   
 their   own   electrical   utility.   Ms.   Kohler   answered                                                                  
 approximately 75.                                                                                                              
 2:00:49 PM                                                                                                                   
 Co-Chair Meyer questioned the proposal on the bill to  change                                                                  
 from 500 kWh per month to a split 700/300 kWh per month.  Ms.                                                                  
 Kohler answered  that the  analysis done  by the Legislative                                                                   
 Finance Division had predicted  that with the 700/300  split,                                                                  
 eligible residential  kWh  would go  up  by 23%.  Ms.  Kohler                                                                  
 disagreed  with the  prediction  and  felt  that eligibility                                                                   
 actually  falls  by  5  -  10%.  She  proposed  that   simply                                                                  
 restoring the cap  to 700 kWh would  be equitable because  it                                                                  
 would  represent   the   average  usage   in   the   compared                                                                  
 communities of Anchorage,  Fairbanks, and Juneau. She  stated                                                                  
 that it  would not  increase  the usage  in the  summer,  but                                                                  
 would allow for more coverage in the winter.                                                                                   
 Co-Chair Meyer stated  that he appreciated  the feedback.  He                                                                  
 questioned if they  were to bump  up to 700  kWh, would  that                                                                  
 keep people from  conserving. Ms. Kohler  responded that  she                                                                  
 would like to see a  program that encouraged the development                                                                   
 of renewable  and  alternative energy  in  the village/rural                                                                   
 areas. She pointed  out that AVEC is  a firm advocate of  the                                                                  
 power cost monitor plan discussed by Ms. Troll.                                                                                
 2:05:46 PM                                                                                                                   
 Co-Chair Meyer asked about computers, assuming they  probably                                                                  
 use a lot of  electricity. Ms. Kohler  stated that computers                                                                   
 were actually  conservative, since  they went  into sleep  or                                                                  
 low power mode, when  not in use.   She explained that  using                                                                  
 power strips to control electricity usage was also helpful.                                                                    
 2:06:52 PM                                                                                                                   
 Representative  Joule asked  about  the 700  kWh  versus  the                                                                  
 700/300 kWh split. He emphasized that what the committee  was                                                                  
 discussing    was    residential    electric    use    versus                                                                  
 commercial/school use. He  asked if there  had been a  change                                                                  
 of consumption in Nelson  Island Communities with the use  of                                                                  
 wind power.  Ms. Kohler responded  that she  had not  noticed                                                                  
 any  change  in  energy  consumption.  Representative   Joule                                                                  
 deduced that the  areas hardest hit  don't take advantage  of                                                                  
 some flexibility.                                                                                                              
 2:08:52 PM                                                                                                                   
 Representative Kelly asked if the administration was  working                                                                  
 on increasing the  financing cap. Ms.  Kohler responded  that                                                                  
 as a  practical matter  there is  no other  source of  funds,                                                                  
 without  an  appropriation   from  the  administration.   She                                                                  
 thought that it  would be easy  to put money  in a revolving                                                                   
 loan fund. She expressed that she would like to see  a cap on                                                                  
 the interest rate charged.  Representative Kelly pointed  out                                                                  
 that the legislature  was there to  address an emergency  and                                                                  
 he felt that moving the cap made sense.                                                                                        
 2:12:04 PM                                                                                                                   
 Representative Gara  commented that  perhaps a  tie in  would                                                                  
 benefit the  rural  areas,  due  to the  potential  for  wind                                                                  
 power.  He asked if AVEC  could apply for a renewable  energy                                                                  
 project, for  the  purpose  of tying  in  rural communities.                                                                   
 Ms.  Kohler  answered  that  it  was  her understanding   the                                                                  
 renewable energy fund included  money for intertie  projects;                                                                  
 she does  know that  nothing had  happened yet  with the  $50                                                                  
 million that was appropriated. Representative Gara asked  Ms.                                                                  
 Kohler to review the language  on the renewable energy  fund,                                                                  
 and look for a solution.   He also asked if there would  be a                                                                  
 benefit to raising  the amount  for the last  three years  of                                                                  
 the renewable energy fund, currently funded at $50 million  a                                                                  
 year. Ms. Kohler  responded in  support of  the idea  because                                                                  
 AVEC had at  least three  years worth of  projects that  were                                                                  
 ready and in need of this funding.                                                                                             
 2:15:30 PM                                                                                                                   
 Vice-Chair Stoltze said  that he wanted  the monies given  to                                                                  
 districts to be equitable. Ms Kohler did not disagree.                                                                         
 2:17:33 PM                                                                                                                   
 Representative Joule asked if the recommended 72.5 cent  fuel                                                                  
 cap  (versus  the  proposed  52.5  cent  cap)  was  based  on                                                                  
 information from  small communities or  from broader  Alaska.                                                                  
 Ms. Kohler responded that  the number was extrapolated  based                                                                  
 on the cost of fuel when the PCE was first instituted.                                                                         
 2:19:09 PM                                                                                                                   
 JULIE KITKA,  ALASKA  FEDERATION  OF  NATIVES,  responded  to                                                                  
 earlier testimonies.   In regard  to the  issue of emergency                                                                   
 fly-in of  fuel, she  suggested that  the committee  ask  the                                                                  
 state and the emergency  response office for a detailed  cost                                                                  
 of the  last  three  to  five years.    She  also suggested,                                                                   
 inviting the head of  the Denali Commission's energy  program                                                                  
 to testify  as well  as the  federal co-chair  of the  Denali                                                                  
 Commission with the purpose  of answering specific  questions                                                                  
 proposed earlier regarding  bulk fuel.  She thought that  the                                                                  
 Denali Commission could  also give details about cooperative                                                                   
 buying  agreements  and  cooperative  management  agreements                                                                   
 among  villages.  She  observed   that  there  was  talk   of                                                                  
 coordinating federal  agencies and  negotiating  a bulk  fuel                                                                  
 purchase agreement with the  Department of Defense in a  past                                                                  
 Denali Commission meeting.                                                                                                     
 2:22:59 PM                                                                                                                   
 Representative Kelly asked  about any possible impediment  to                                                                  
 wood burning from the Division of State Forestry.  Ms.  Kitka                                                                  
 replied that  she was not  aware of  any such  reports.   She                                                                  
 expressed that  she was  in  favor of  wood burning  and  the                                                                  
 technology available to enhance the process.                                                                                   
 2:24:59 PM                                                                                                                   
 Ms. Kitka  was encouraged  with some  of the  new innovative                                                                   
 fuel burning projects.   There  is a range  of new, low  cost                                                                  
 ideas that could be implemented relatively quickly.                                                                            
 2:25:03 PM                                                                                                                   
 Representative Kelly requested  news of any blocks issued  in                                                                  
 the future regarding the burning  of wood.  Ms. Kitka  agreed                                                                  
 to report any information on this subject.                                                                                     
 2:25:51 PM                                                                                                                   
 DORIS CABANA, HOMER  testified via  teleconference, in  favor                                                                  
 of both HB 4005 and HB  4006.  She expressed support for  all                                                                  
 people in  the  state.    She stated  that  her  family  does                                                                  
 commercial  fishing,  which  has  been  hit  hard  with   the                                                                  
 increased cost in fuel.  She urged that the legislation  move                                                                  
 quickly  as  the  need  is  critical.    She  felt  that  the                                                                  
 assistance should  not  be  attached to  the  Permanent  Fund                                                                  
 Dividend  (PFD).    Many  seniors  and  families  with  small                                                                  
 children need to be helped quickly.  She worried about  those                                                                  
 that  will  "fall  through  the  cracks  this  winter".   She                                                                  
 indicated support  and appreciation for  the legislature  and                                                                  
 for all of the bills proposed by the governor.                                                                                 
 2:30:00 PM                                                                                                                   
 PAUL KENDALL,  ANCHORAGE,  testified via  teleconference.  He                                                                  
 opposed  previous  comments  and  the  cost  associated  with                                                                  
 energy  assistance.    He  thought  that  all  the   previous                                                                  
 testimony was "fear  based". He felt  that the problem  stems                                                                  
 from the leadership.   "The source of  the problem is  people                                                                  
 with an interest in the fossil fuel distribution network."                                                                     
 Mr. Kendall  recommended a  90-day energy  review and  energy                                                                  
 form, which should  occur in Anchorage.   He maintained  that                                                                  
 there are too many parties  that need to have accountability                                                                   
 and stressed  that  the focus  should  be  on the  whole.  He                                                                  
 worried  that  the  state  will  move  toward  bankruptcy  by                                                                  
 providing "those  people the  money". He  proposed that  each                                                                  
 dwelling have an energy  allotment and then be encouraged  to                                                                  
 incentivize. He asserted that the producers and distributors                                                                   
 must be  accountable.    "If  they  refuse,  those producers                                                                   
 should be sued."                                                                                                               
 AT EASE:       2:43:45 PM                                                                                                    
 RECONVENED:   2:53:49 PM                                                                                                     
 DEL CONRAD,  CEO RURAL  ALASKA  FUEL SERVICES,  MANAGER  BULK                                                                  
 FUEL   BRIDGE   LOAN   PROGRAM,   ANCHORAGE   testified   via                                                                  
 teleconference.   He commented on  the amount  of money  that                                                                  
 has been lent  on outstanding  loans and  cash pending  loans                                                                  
 for  the  upcoming  fuel  season.    He  addressed  the  loan                                                                  
 program's  status. Last  year,  the  bulk  fuel  bridge  loan                                                                  
 program loaned  $2.3 million dollars.   This  year there  has                                                                  
 been an  increase in  autumn  deliveries, meaning  that  $2.3                                                                  
 million dollars will  not be enough.   He asserted that  last                                                                  
 year's amount  will not  meet  the needs.   The  bridge  loan                                                                  
 program is set up so that  only borrowers turned down by  AEA                                                                  
 become eligible.  He stated  that in order to meet the  needs                                                                  
 this year, there will need  to be greater funding.  He  hoped                                                                  
 to see an  increase in the  program of about  $5 million,  in                                                                  
 order to  meet the  needs, with  the increased  cost of  fuel                                                                  
 deliveries.  Currently,  there is  a  loan  limit  amount  of                                                                  
 $500,000 dollars.   He requested an  increase to $750,000  in                                                                  
 the loan limits.                                                                                                               
 2:58:00 PM                                                                                                                   
 Representative Nelson asked  if the requested increase to  $5                                                                  
 million was  truly  adequate.   Mr.  Conrad thought  that  $5                                                                  
 million would be sufficient  for this year and noted that  it                                                                  
 depends on  the  price of  oil.   Fuel  prices  are  tracking                                                                  
 closely with what  is happening with  the worldwide price  of                                                                  
 oil. With oil up over $150 a barrel, $5 million dollars  will                                                                  
 probably be  a  questionable  amount.   He  thought  that  $5                                                                  
 million should be  the minimum; and  he was more comfortable                                                                   
 with $7.5 million dollars.                                                                                                     
 2:59:39 PM                                                                                                                   
 Representative Hawker  asked Mr. Conrad  about the loan  loss                                                                  
 history.  Mr. Conrad pointed  out that they are working  with                                                                  
 borrower's  that are  not  able  to borrow  money  from  AEA.                                                                  
 There have been  "slow" borrowers.   Everyone has ultimately                                                                   
 paid back their loans.  The  program differs in that it  goes                                                                  
 out to  the  communities and  reviews  the cost  matrixes  to                                                                  
 cover all costs.   Sometimes the borrowers  run out of  cash,                                                                  
 because the charged  prices were too  low.  Sometimes  credit                                                                  
 collection  policies   are  developed.      The  issues   are                                                                  
 identified and provide  better acceptance  in addressing  the                                                                  
 actual costs.   Some  loans have  been delinquent,  yet  none                                                                  
 ever lost.                                                                                                                     
 3:02:03 PM                                                                                                                   
 DR. VI GERALD, HOMER testified  in support of HB 4005 and  HB                                                                  
 4006 via teleconference.  She  added her support for the  PCE                                                                  
 bills and noted her appreciation of the legislature's work.                                                                    
 3:03:11 PM                                                                                                                   
 HB 4005  and  HB 4006  were HEARD  &  HELD in  Committee  for                                                                  
 further consideration.                                                                                                         
 3:04:52 PM                                                                                                                   
 The meeting was adjourned at 3:05 PM                                                                                           

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