Legislature(2009 - 2010)HOUSE FINANCE 519
04/10/2009 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB150 | |
| SB88 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 150 | TELECONFERENCED | |
| + | SB 88 | TELECONFERENCED | |
HOUSE FINANCE COMMITTEE
April 10, 2009
1:40 p.m.
1:40:23 PM
CALL TO ORDER
Co-Chair Stoltze called the House Finance Committee meeting
to order at 1:40 p.m.
MEMBERS PRESENT
Representative Mike Hawker, Co-Chair
Representative Bill Stoltze, Co-Chair
Representative Bill Thomas, Jr., Vice-Chair
Representative Allan Austerman
Representative Harry Crawford
Representative Anna Fairclough
Representative Richard Foster
Representative Les Gara
Representative Reggie Joule
Representative Mike Kelly
Representative Woodie Salmon
MEMBERS ABSENT
None
ALSO PRESENT
Erin Harrington, Staff, Representative Alan Austerman,
Sponsor; Jay Livey, Staff, Senator Hoffman, Sponsor
PRESENT VIA TELECONFERENCE
Mike Harper, Deputy Director, Rural Energy Group, Alaska
Energy Authority; Meera Kohler, President - CEO, Alaska
Village Electric Cooperative (AVEC); Bob Charles,
Association of Village Council Presidents (AVCP); Paul
Kendall, Anchorage; Michael Smith, Fairbanks, Tanana Chiefs
Council
SUMMARY
HB 150 "An Act repealing certain provisions relating to
modifying the factors that apply to calculate the
amount of power cost equalization; providing for
an effective date by repealing the effective date
of sec. 3, ch. 2, 4SSLA 2008; and providing for an
effective date."
HB 150 was heard and HELD in Committee for further
consideration.
SB 88 "An Act repealing certain provisions relating to
modifying the factors that apply to calculate the
amount of power cost equalization; providing for
an effective date by repealing the effective date
of sec. 3, ch. 2, 4SSLA 2008; and providing for an
effective date."
SB 88 was heard and HELD in Committee for further
consideration.
1:41:19 PM
Co-Chair Stoltze brought the meeting to order and
immediately called an at-ease.
AT-EASE: 1:41:57 PM
RECONVENE: 1:42:21 PM
HOUSE BILL NO. 150
"An Act repealing certain provisions relating to
modifying the factors that apply to calculate the
amount of power cost equalization; providing for an
effective date by repealing the effective date of sec.
3, ch. 2, 4SSLA 2008; and providing for an effective
date."
SENATE BILL NO. 88
"An Act repealing certain provisions relating to
modifying the factors that apply to calculate the
amount of power cost equalization; providing for an
effective date by repealing the effective date of sec.
3, ch. 2, 4SSLA 2008; and providing for an effective
date."
1:43:45 PM
ERIN HARRINGTON, STAFF, REPRESENTATIVE ALAN AUSTERMAN,
SPONSOR, explained the history of Power Cost Equalization
(PCE), which was established in 1984 at a time when the
state was making significant investments in low-cost power
generation. Specific projects included hydro plants such as
the Four Dam Pool, Bradley Lake Hydro Facility, and the
Northern Intertie, which links Fairbanks to the production
capacity in the Anchorage area.
Ms. Harrington related that PCE was set up in 1984 to
include all of the communities that generated at least 75
percent of their power with diesel. Under the current
program, 135 communities are covered. They are represented
by 85 utilities, the largest of which is the Alaska Village
Electric Cooperative (AVEC), which consists of 50
communities where the average cost of power production is
about 62 cents per kilowatt hour. Other utilities involved
include the Alaska Power and Telephone, the Inlet
Cooperative, the Middle Kuskokwim Cooperative, and many
single villages.
Ms. Harrington discussed the PCE endowment which has been
funded by various mechanisms and covers a portion of the
program's costs.
1:45:26 PM
Ms. Harrington related that currently in rural Alaska some
communities are still paying more than $7 per gallon for
heating fuel. Rural Alaska has not seen any recent
reductions in costs that other parts of the state have
experienced.
Ms. Harrington outlined how the program works. The price
floor is set at an average of Anchorage, Fairbanks, and
Juneau's power production cost. Currently, that is about
12.8 cents. The ceiling was at 52.5 cents and was raised to
$1 last year during the special session. That ceiling had
not been changed since 1984. The bill before the Committee
extends the sunset date which would allow the $1 ceiling to
continue.
Ms. Harrington noted that the program only covers the first
500 kilowatts that are used in a household, which is less
than typically used. The program covers one meter per
residence. Businesses are not eligible for the program, but
some community buildings are.
1:48:22 PM
Ms. Harrington related that the purpose of HB 150 is to
remove the sunset date and to continue the $1 ceiling. At
times of low fuel prices, there will be no impact to the
program. The program allows for a response when prices go
up.
Ms. Harrington pointed out that HB 150 is identical to SB
88.
1:50:22 PM
JAY LIVEY, STAFF, SENATOR HOFFMAN, SPONSOR, emphasized a
couple of points. The PCE program is not designed to
equalize costs between urban and rural Alaska. The PCE
program only applies to the first 500 kilowatts of power
used, which would not finance a normal household's total
fuel costs. Even with PCE, a rural resident would still pay
more than urban residents. The intent of the bill is not to
equalize power costs, but to subsidize the first 500
kilowatts of rural usage.
1:53:08 PM
Representative Crawford wondered if PCE would deter efforts
toward finding alternative fuels. Ms. Harrington did not
believe it would because the program does not cover all
energy costs.
Representative Crawford knew there were incentives for
consumers to take cost-savings methods. He wondered if the
legislation would de-incentivize the utilities from seeking
renewable energy sources.
Mr. Livey stated that the bill gives the utility an
incentive to make power cheaper. Only 30 percent of power
produced by a local utility goes to residential customers.
Others consumers could use an incentive for cheaper power.
1:55:56 PM
Representative Gara spoke in support of moving the sunset
date. He inquired what the annual cost of PCE was. Mr.
Livey replied that if the bill were not to pass, it would
cost $32 million. If the bill were to pass, it would add
$5.5 million to the program.
Representative Gara looked at the fiscal note and requested
more information. Ms. Harrington related that when the
program was amended last year, the cost rose from about $28
million to $38 million. The expected impact in the coming
year is $5.5 million.
Representative Gara understood that part of the cost was
funded by endowment funds and part by general funds. He
asked if the $5.5 million was additional funding. Ms.
Harrington said that was correct.
1:58:41 PM
Representative Gara wondered how much comes from each
source.
Representative Austerman thought that the total cost as, a
result of passing HB 150, would be $37.6 million and would
include the $5.5 million.
Co-Chair Stoltze noted that a full analysis of the fiscal
note would be forthcoming.
Representative Gara asked if $38 million included both
endowment and the general funds. Representative Austerman
replied that it does.
2:00:09 PM
MIKE HARPER, DEPUTY DIRECTOR, RURAL ENERGY GROUP, ALASKA
ENERGY AUTHORITY, testified via teleconference. He offered
to answer questions.
MEERA KOHLER, PRESIDENT - CEO, ALASKA VILLAGE ELECTRIC
COOPERATIVE (AVEC), via teleconference, reported that her
organization accounts for about a third of PCE users. She
observed that the PCE legislation regarding the ceiling was
drafted last year in response to a need. She detailed what
would happen if the sunset date was not extended.
2:04:35 PM
Representative Joule asked about AVEC's efforts toward
renewable energy.
Ms. Kohler reported that AVEC has a wind generation program
in 10 communities. She maintained that PCE does not pose a
disincentive for alternative energy programs. She gave as
an example, Cordova's change to hydropower.
Representative Joule asked what the savings has been in
communities that have converted to wind power. Ms. Kohler
reported that more than 100,000 gallons of fuel were saved.
2:07:51 PM
Representative Salmon wanted to know the total amount of PCE
funding, the total endowment amount, and how the investment
did.
Mr. Harper reported that it would take $37.6 million to
fully fund the program, of which about $21 million is from
the endowment, and the balance is from general funds. The
endowment has taken a severe beating. He deferred to the
Department of Revenue for those figures.
Ms. Harrington pointed out that the invested assets, as of
December 31, 2008, were $288,816,014.52.
2:10:57 PM
Representative Gara voiced appreciation for Ms. Kohler's
work with AVEC. He wondered what the cost of adding school
districts to PCE would be.
Ms. Kohler thought about 1/3 of AVEC's energy sales go to
their school districts. If all schools were made eligible,
it would about double the cost of the PCE program.
Representative Gara requested information about the
endowment losses.
2:12:44 PM
Ms. Kohler addressed the endowment fund, which was
originally started with $100 million from the Constitutional
Budget Reserve (CBR). She reported that $85 million was
added when the Four Dam Pool project was sold back to the
communities. Another $182.7 million was added three years
ago by Governor Murkowski. A total of about $367 million
has been put into the endowment fund. The fund reached its
peak at $404 million and has since been drawn upon to fund
programs. As of the end of last year, the fund was at $288
million. A few weeks ago, it was at $258 million, but it
has since gone up slightly.
2:14:08 PM
BOB CHARLES, ASSOCIATION OF VILLAGE COUNCIL PRESIDENTS
(AVCP), via teleconference, thanked the legislature for
addressing the energy needs of rural Alaska and for the
increase in the PCE ceiling last year. He reported that it
helped the villages and he emphasized that the PCE program
is a priority. He requested continued funding for PCE and
the elimination of the sunset date, as contained in the
bill. He discussed what would happen if the funding does
not continue. He described the problems related to high
fuel costs in the villages. He spoke of efforts to equalize
rural/urban fuel costs.
2:20:15 PM
PAUL KENDALL, ANCHORAGE, via teleconference, disagreed with
the legislation. He spoke of individual freedom. He
suggested looking at fossil fuel issues. He thought there
should be a leadership conference. He suggested using
hydroelectric projects.
2:26:32 PM
Representative Fairclough noted that a public committee on
energy is being formed.
MICHAEL SMITH, FAIRBANKS, TANANA CHIEFS COUNCIL, via
teleconference, testified in support of SB 88 as a manner of
economic equity in rural areas. The cost of energy in rural
areas is the worst in the nation. The Tanana Chiefs Council
is concerned with conservation principals. They are looking
at how to use the energy stimulus package. He pointed out
that PCA addresses only a portion of the energy crisis. He
thought the subsidy should be extended in order to help
rural areas with economic development.
2:31:24 PM
Representative Joule spoke of a previous reference to the
cost of fuel decreasing. He wondered if the cost of
transporting the fuel was decreasing and if there were other
vessels that were cheaper. Co-Chair Stoltze wondered about
the cost of fuel storage.
Mr. Livey reported that AVEC has had contracts with fuel
distributors and could answer that question.
2:33:22 PM
Ms. Kohler addressed the issue of fuel transportation costs.
She related that ten years ago the delivery cost of fuel
was, on average, about $1.29 a gallon. That price covered
transportation and fuel costs. The transportation element
of that cost averaged about 40 cents per gallon. This year
the average transportation cost doubled over the last year
to about $1.10 per gallon. The fuel transportation charge
was at the end of a 5-year contract based on Anchorage's
CPI. The transportation element now is over $1.00 per
gallon, with small village orders averaging $1.50 or more a
gallon.
Representative Joule emphasized that those other costs
justify the need for PCE.
Representative Austerman agreed with Representative Joule's
point. He pointed out that the cost of soon-to-be-required
double-hulled barges and the fact that the Coast Guard has
banned floating fuel lines are hidden expenses.
2:37:07 PM
Representative Foster noted that taxes and insurance also
contribute to high fuel costs in villages.
Vice-Chair Thomas stated support for the bill. He reported
that he researched adding municipalities, schools, and
businesses to the bill, but it would have cost $65,580,000
million more. He listed areas in his district that are
experiencing problems related to high fuel costs. He
mentioned Hoonah Cold Storage's fuel expenses. Haines hydro
from IPEC has a high fuel cost. Yakutat has high fuel costs
for their cold storage. Cordova is on PCE and saved $9
million by going from diesel to hydro, which saves PCE
money. Gustavus will also be using less PCE money when its
goes to hydro. He stressed the importance of subsidizing
high fuel costs and stated support for the bill. He spoke
of a proposed amendment which he would not put forth due to
the additional cost.
2:42:21 PM
Representative Foster spoke in favor of the bill.
Representative Salmon highlighted some of the problems in
his district. Some of the villages do not receive barge
services, but receive their fuel by plane. Storage costs
are high and there is not adequate storage.
Representative Austerman discussed why someone from Kodiak
would introduce legislation on PCE. He emphasized that PCE
affects all Alaskans. There are 13 communities in his
district that are not connected to hydro and need economic
assistance. The cost factors are quite different and should
be equalized.
Representative Joule suggested not loosing sight of
exploration for alternative, renewable energy such as
natural gas and wind energy. The state has lands that also
hold promise for alternative energy sources.
2:47:54 PM
Representative Kelly stated that between 2009 and 2010 there
will be a deficit of $2 billion. He recalled that last year
when he had a concern about raising the PCE ceiling to $1,
he was assured that it was a one-time, one-year issue.
Currently, he did not feel that it was time to add onto this
program in light of the fact that fuel costs are dropping
and the price of oil remains somewhat stable. He testified
against the legislation. He recalled that "Susitna did not
get built". He agreed with Representative Joule about the
need to "look ahead". He suggested building a road and a
power line to the villages.
2:50:43 PM
Representative Gara thought the Committee should not lose
sight of the benefits of PCE. He maintained that the bill
costs $20 million less than what was budgeted last year. He
agreed with Representative Joule's suggestions about
alternative energy. He highlighted the higher costs of
power in rural areas. He noted that urban areas receive a
great deal of federal money for power. He suggested
cleaning up diesel fuel plants.
Representative Kelly drew attention to the per capita
distribution of the budget, which he opined addresses rural
Alaskan needs.
HB 150 was heard and HELD in Committee for further
consideration.
SB 88 was heard and HELD in Committee for further
consideration.
ADJOURNMENT
The meeting was adjourned at 2:54 PM.
| Document Name | Date/Time | Subjects |
|---|---|---|
| GVEA residential rates.doc |
HFIN 4/10/2009 1:30:00 PM |
SB 88 |
| CCED PCE Overview .pdf |
HFIN 4/10/2009 1:30:00 PM |
SB 88 |
| HB 150 Support Packet Attachment.PDF |
HFIN 4/10/2009 1:30:00 PM |
HB 150 |
| HB 150 Sponsor Statement.pdf |
HFIN 4/10/2009 1:30:00 PM |
HB 150 |
| HB 150 Sectional Analysis.pdf |
HFIN 4/10/2009 1:30:00 PM |
HB 150 |
| HB 150 Public Testimony Summary.pdf |
HFIN 4/10/2009 1:30:00 PM |
HB 150 |
| HB 150 Public Support III.pdf |
HFIN 4/10/2009 1:30:00 PM |
HB 150 |
| HB 150 PCE One-Page Briefing Paper.pdf |
HFIN 4/10/2009 1:30:00 PM |
HB 150 |
| HB 150 Attachment to Sectional Analysis.PDF |
HFIN 4/10/2009 1:30:00 PM |
HB 150 |
| HB150-CCED_PCE_Overview_.pdf |
HFIN 4/10/2009 1:30:00 PM |
HB 150 |
| HB150 - SB4002Z-1.pdf |
HFIN 4/10/2009 1:30:00 PM |
HB 150 SB4002 |
| Legal memo 012809.pdf |
HFIN 4/10/2009 1:30:00 PM |
SB 88 |
| Naneng Testimony.pdf |
HFIN 4/10/2009 1:30:00 PM |
SB 88 |
| Sponsor Statement SB 88.doc |
HFIN 4/10/2009 1:30:00 PM |
SB 88 |