Legislature(2013 - 2014)SENATE FINANCE 532
02/01/2013 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| Presentation: Alaska Energy Authority | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE FINANCE COMMITTEE
February 1, 2013
9:07 a.m.
9:07:35 AM
CALL TO ORDER
Co-Chair Kelly called the Senate Finance Committee meeting
to order at 9:07 a.m.
MEMBERS PRESENT
Senator Pete Kelly, Co-Chair
Senator Kevin Meyer, Co-Chair
Senator Anna Fairclough, Vice-Chair
Senator Click Bishop
Senator Mike Dunleavy
Senator Lyman Hoffman
Senator Donny Olson
MEMBERS ABSENT
None
ALSO PRESENT
Sarah Fisher-Goad, Executive Director, Alaska Energy
Authority, Department of Commerce, Community and Economic
Development; Sean Skaling, Deputy Director, Alternative
Energy and Energy Efficiency, Alaska Energy Authority,
Department of Commerce, Community and Economic Development.
SUMMARY
PRESENTATION: ALASKA ENERGY AUTHORITY
Sara Fisher-Goad, Executive Director, Alaska Energy
Authority
^PRESENTATION: ALASKA ENERGY AUTHORITY
9:08:15 AM
SARAH FISHER-GOAD, EXECUTIVE DIRECTOR, ALASKA ENERGY
AUTHORITY (AEA), DEPARTMENT OF COMMERCE, COMMUNITY AND
ECONOMIC DEVELOPMENT (DCCED), provided a Power Point
presentation titled "Alaska Energy Authority Overview and
Renewable Energy Fund Update" (copy on file). She noted
that AEA had given a similar overview to the Senate Energy
Committee. She pointed out a chart (copy on file) showing
various state energy programs that were managed by Alaska
Housing Finance Corporation (AHFC), AEA, DCCED, and a new
program under the Alaska Industrial Development and Export
Authority (AIDEA).
Ms. Fisher-Goad discussed AEA's mission to reduce the cost
of energy through various strategies on slide 2:
· Energy Planning and Policy
· Technical and Community Assistance
· Investing in Alaska's Energy Infrastructure
· Diversifying Alaska's Energy Portfolio
Ms. Fisher-Goad expounded that AEA built energy
infrastructure in rural communities and granted the
finished product to the community or its utility. One of
the main strategies for reducing the cost of energy was
through diversification in the energy portfolio; the
Renewable Energy Fund was one of the primary ways
diversification was achieved.
Ms. Fisher-Goad moved to slide 3 titled "Electricity
Generation by Region." The slide provided a perspective of
annual generation throughout the state; most energy
generation occurred in the Railbelt region, which accounted
for approximately 80 percent of the state's population. She
discussed electricity prices by community; the Anchorage
and Railbelt areas had some of the lower energy costs,
while the rest of Alaska (mostly rural and less populated)
had significantly higher rates. She stated that regions of
the state with access to natural gas had substantially
lower heating costs than other areas.
9:12:36 AM
Ms. Fisher-Goad looked at slide 5 titled "Energy Policy
Development and Coordination":
· Deputy Director for Statewide Energy Policy
Development
· Serve as lead on Alaska's energy policy development
· Coordination of energy plans on statewide level
· Coordinate multi-agency efforts
· Individual project analysis and vetting
· Transmission planning
· Working with AIDEA on LNG trucking
Ms. Fisher-Goad elaborated that Gene Therriault had joined
the AEA management team as the deputy director for
Statewide Energy Policy Development and was leading the
effort towards various policy development issues. The
organization was coordinating a variety of energy plans in
Alaska; it had led the effort for the Railbelt and
Southeast Integrated Resources Plans and was involved in
the development of various regional plans that were
primarily being led by regional economic development
organizations. She furthered that AEA had been working with
a variety of regions to build on an energy pathway it had
developed a couple of years earlier with a more regional
look at energy planning.
Ms. Fisher-Goad pointed to additional information on
regional energy planning on slide 6 titled "Supporting
Regional Solutions." She shared that AEA was working on
regional projects and transmission efforts that could help
reduce the cost of energy. The effort included transmitting
power from one community powerhouse to outlying
communities.
9:14:20 AM
Ms. Fisher-Goad looked at infrastructure and large projects
on slide 7 including Bradley Lake hydroelectric, Alaska
Intertie, and Susitna-Watana hydroelectric. She detailed
that the Susitna-Watana hydroelectric project had been
authorized two years earlier under SB 42, which had allowed
AEA to move forward on owning and operating the project.
She relayed that AEA had built the Four Dam Pool projects
that were now owned by local utilities: Terror Lake is
owned by the Kodiak Electric Association; Solomon Gulch is
owned by Copper Valley Electric Association; and the
Southeast Alaska Power Agency owns Swan Lake and Tyee that
serve Ketchikan, Wrangell, and Petersburg. She shared that
the Larson Bay hydroelectric project that had been built
and owned by AEA was now in local control.
Ms. Fisher-Goad communicated that AEA's rural energy
emphasis had been on bulk fuel storage facilities and rural
power system upgrades (slide 8 titled "Rural Energy"). She
relayed that Denali Commission funds had primarily financed
projects that had been built in the past 12 years; the
program had been federally driven, but state capital
project funds had been allocated to continue the program
for the construction of power systems and tank farms. She
explained that projects were overseen by AEA and granted to
communities. The organization also provided ongoing circuit
rider technical assistance for maintenance and the
integration of renewable resources into the systems. She
pointed to an effort to ensure there was an ability to
introduce wind and have effective wind diesel systems in
communities.
Ms. Fisher-Goad reported that AEA's Technical Assistance
program had been increased in the past year; two additional
positions had been created to help advance projects in
rural communities and to develop projects that could
qualify for the Renewable Energy Fund.
9:17:17 AM
Ms. Fisher-Goad continued to discuss rural energy on slide
9. The Power Cost Equalization (PCE) program was state
funded and served rural communities where electrical rates
were three to four times higher than in urban Alaska. The
Regulatory Commission of Alaska (RCA) was responsible for
setting rates and AEA was responsible for managing funds
and making payments to utilities. She detailed that the
program had been developed in the mid-1980s (around the
same time as the Four Dam Pool projects); it was an
effective way to provide assistance to small communities
with high cost diesel driven systems, whereas large
infrastructure projects may not be economic. The program
paid for a portion of utility bills for residential
customers and for community facilities. She relayed that
the PCE Endowment had a current balance of $788 million;
PCE payments were approximately $40 million.
Senator Hoffman asked if the expected rate of return for
the PCE fund was in legislation. He believed the rate was
high. Ms. Fisher-Goad replied in the affirmative. The fund
was statutorily required to earn 7 percent over time.
Senator Hoffman was concerned that the expected rate of
return required AEA to take on additional risk that could
potentially have high and low years. He asserted that the
rate of return should be between 4.5 percent and 5 percent.
He believed the issue needed to be addressed.
9:19:43 AM
Co-Chair Kelly asked if Senator Hoffman believed the
legislature needed to appropriate funds to account for the
years of low investment return in the PCE fund.
Senator Hoffman clarified that he believed the statutory
rate of return needed to be modified. He opined that a $400
million appropriation the legislature had made two years
earlier would adequately address the low [years]. The
statutory modification would change the investment strategy
to make it more realistic with current markets.
Vice-Chair Fairclough agreed that the rate of return
created an incentive for higher risk projects. She wondered
whether the legislature should allow the PCE fund to be
invested similarly to the Permanent Fund instead of
requiring a specific rate of return. She opined that
depending on the size of the fund that it was nice to have
a diversified portfolio with some investments in higher
risk areas. She supported a change to the statute and
believed it should be flexible instead of a set 4 percent
or other required return.
Senator Hoffman agreed that flexibility would be the best
approach given that markets did change over time.
Co-Chair Kelly would talk to Co-Chair Meyer about the
issue, but he was happy to have a committee bill sponsored
if Senator Hoffman drafted the legislation.
Senator Olson asked how decreased interest rates of 4.5 to
5 percent would impact the PCE payout.
Ms. Fisher-Goad replied that the investment strategy in
statute operated differently than the program payout. She
explained that the Department of Revenue (DOR) is the
fiduciary of the fund. She was happy to work with DOR to
determine the impacts of different investment strategies.
She furthered that the PCE fund was statutorily required to
earn 7 percent over time, but the payout process was a
three-year monthly average market value of up to 7 percent
over time. She explained that FY 14 was the first time the
$400 million cash injection (from the prior year) would
impact the funds available for the program. The legislature
had fully funded the PCE program for many years; it had
been a substantial amount of time since the payout of the
program needed to be prorated. The payout continued to be a
mixture of general fund and endowment funds. She specified
that of the $400 million for program management and payout,
$7 million would come from general funds. She reiterated
that the payout and change to investment strategy was a
different equation that the legislature looked at annually.
9:24:20 AM
Senator Olson asked how a change in statute [to the PCE
fund required rate of return] would impact the end users.
Ms. Fisher-Goad responded that the amount required to fund
the program would remain the same. A revision may just
change the mix of how the program was funded.
Co-Chair Kelly acknowledged that Senator Dunleavy joined
the meeting.
Co-Chair Meyer asked when the PCE fund would be self-
sufficient and no longer dependent on general fund
appropriations. Ms. Fisher-Goad replied that based on
current projections the endowment would be able to fully
fund the PCE program in FY 16. She referred to the three-
year cycle and stated that depending on earnings for the
last year it could be the coming year; however, the impact
would be seen in FY 16.
Vice-Chair Fairclough observed that a substantial loss
could occur if investors were pushed to make riskier
investments in a volatile market (because of the 7 percent
required rate of return), which would require the use of
more general funds. She stated that there was a way to
secure a flat payout if necessary. Under the current model
more or less could be provided once the fund became whole.
She wondered if the RCA rates were included in the Alaska
electricity prices shown by community on slide 4. She
remarked that the graph was helpful because it communicated
the magnitude of energy costs for families in many areas of
the state. She asked whether PCE was reflected in the
graph.
9:27:08 AM
Ms. Fisher-Goad believed that energy costs on slide 4 did
not factor in the PCE program. She noted that the PCE
program only impacted about one-third of the kilowatt hours
in eligible communities for a portion of residents'
electricity bills and community facilities. The program did
not cover anything above 500 kilowatt hours and did not
include commercial customers.
Co-Chair Kelly acknowledged that Senator Bishop joined the
meeting.
Ms. Fisher-Goad discussed the Power Project Fund on slide
10 titled "AEA Programs." The program offered lower
interest loans for the development of small-scale power
facilities; it also funded bulk fuel storage facilities and
renewable energy projects. She relayed that half of the
fund's $35 million was currently in an application process.
Pending applications included a wind diesel system for the
City of Saint George and the Reynolds Creek hydroelectric
project for Haida Energy. The fund required legislative
approval for any projects receiving state assistance above
$5 million. For example, legislative approval would be
required if an entity received grant for $4 million and
requested a $2 million loan.
Ms. Fisher-Goad introduced her colleague Sean Skaling and
asked him to continue the presentation.
Senator Hoffman acknowledged Ms. Fisher-Goad for her
remarkable job during AEA's first five years. He noted that
in the prior year the legislature had extended the program
for 10 years.
9:30:11 AM
SEAN SKALING, DEPUTY DIRECTOR, ALTERNATIVE ENERGY AND
ENERGY EFFICIENCY, ALASKA ENERGY AUTHORITY, DEPARTMENT OF
COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, addressed
energy efficiency and conservation on slide 11. He
explained that the program worked to address energy
efficiency in existing facilities before building new
facilities. The program had a state goal of improving
energy efficiency 15 percent by 2020 (set by the
legislature several years back); AEA had the goal in mind
as it analyzed opportunities for areas of the greatest
impact. He pointed to significant programs including the
Alaska Energy Efficiency Partnership and its website; the
partnership included many agencies that were led by AEA and
AHFC. The program's focus was to encourage individuals to
increase efficiency. He highlighted that the Alaska
Commercial Energy Audit Program was for privately owned
commercial buildings. He stated that AEA coordinated with
AHFC on its programs to provide services to all sectors
including commercial, public, and small-scale industrial
buildings through the Village Energy Efficiency Program.
The commercial program provided an energy audit and
customers were responsible for implementing measures
themselves; whereas, the village program provided a full-
service audit and efficiency work.
9:32:45 AM
Mr. Skaling moved to slide 12 titled "Energy Efficiency and
Conservation." He shared that AEA's efficiency and
conservation programs had touched 132 communities and 419
buildings (20,000 commercial buildings existed throughout
the state); the website www.akenergyefficiencymap.org
provided a visual and detail of activity throughout Alaska.
Federal stimulus funding was responsible for much of the
progress and had produced great results; on average for
every $1.00 invested there was a $0.29 immediate energy
savings (a 300 percent return on investment after 10
years). He noted that many of the efficiency measures
implemented would last longer than 10 years (especially
those in rural Alaska). Additionally, the Alaska Commercial
Energy Audit Program measures showed a 30 percent to 33
percent savings potential; the measures comfortably paid
for themselves. He added that deeper measures could be
taken, but 30 percent was a good number.
9:34:17 AM
Mr. Skaling addressed slide 13 titled "Community Highlight:
Emmonak." Emmonak had received a whole-village retrofit
through the Village Energy Efficiency Program and the
stimulus funded Energy Efficiency and Conservation Block
Grant Program. The improvements were responsible for
$90,000 in annual savings; 27 percent of savings came from
efforts to reduce electricity consumption. He reported that
the return on investment was not as high as the 300 percent
average because deeper repairs had been needed on a couple
of the community's buildings; he pointed to a before and
after picture of boilers in one of the buildings. He added
that local labor was another foundation of the programs.
9:35:51 AM
Vice-Chair Fairclough queried whether trained labor forces
were available in small communities for maintenance on
current units. Mr. Skaling confirmed that AEA and AHFC had
done a significant amount of training since 2008. He
furthered the number of energy auditors for the commercial
energy audit program had increased from between 3 and 5 to
50. He stressed that work forces had been trained. He
pointed to one contractor who was good at training local
staff (on lighting retrofits in particular); the skills
could then be applied to other buildings.
Vice-Chair Fairclough asked whether there was labor
available in Emmonak to address regular maintenance needs.
Mr. Skaling replied that the issue was an ongoing
challenge. He shared that local employees had been trained
side-by-side with the installation contractors, but an
additional need still existed; AEA, AIDEA, and the Denali
Commission were all looking for ways to further enhance
training.
Co-Chair Kelly asked Senator Bishop (former Department of
Labor and Workforce Development (DLWD) commissioner) about
programs offered by the University of Alaska and other
organizations that were doing building and power plant
maintenance in rural Alaska.
9:38:15 AM
Senator Bishop answered that DWLD had worked with AEA,
AHFC, the Denali Commission, and the Homebuilders
Association; DWLD had received a $3.6 million federal
energy grant and other funds for energy efficiency
trainings throughout the state. He pointed to an Alaska
Vocational Technical Center (AVTEC) onsite wind turbine
that had been integrated into the diesel program; students
were trained in Seward for local knowledge. He noted that
the boiler shown on slide 13 was state-of-the-art and it
was not possible to train someone completely from the get-
go; the maintenance skills could be learned over time.
9:40:40 AM
Vice-chair Fairclough questioned whether units placed in
rural communities were standardized to make it easier for a
person to train local individuals throughout Alaska;
thereby ensuring that smaller communities could use the
product. She stressed that servicepersons were easier to
come by for state-of-the-art products in an urban areas
than in small communities. She wondered if using the same
units throughout rural Alaska was one of criteria for
investing in small communities in order to make maintenance
easier to manage.
Senator Bishop commented that some villages could not
afford to operate a "washateria" after they had been built.
He stressed the importance of taking a local community's
expertise, size, and needs into consideration when a
washateria was built to ensure the community could afford
to operate it.
Mr. Skaling replied to a question by Vice-Chair Fairclough.
He stated that simpler systems were being installed and AEA
was clear with contractors that the systems were important
for consistency and easy maintenance. Additionally, many of
the same systems were being installed (e.g. Toyostoves);
seeing the same equipment time after time made it easier to
maintain and made it possible to use parts from one unit on
another. He highlighted an effort called the Rural Alaska
Maintenance Program (RAMP). He detailed that the program
took community maintenance needs into account for numerous
facilities (e.g. schools, public buildings, power houses,
water systems). The effort was to create different tiers of
employees that would work on all of the equipment in
various areas. He communicated that various challenges
existed, but a training module was currently being set up
that considered different levels of experience (there could
be a level one employee in a village and a level two
employee in a hub community who could perform deeper
maintenance).
9:44:09 AM
Co-Chair Kelly asked how much the University of Alaska was
helping with training.
Ms. Fisher-Goad replied that the training projects for bulk
fuel and renewable energy were primarily with DWLD through
the use of AVTEC facilities and itinerant trainings in
communities. She relayed that AEA worked with the Alaska
Center for Energy and Power related to the Emerging Energy
Technology Program (EETF). The university was not
significantly involved in the training program. She listed
other partnerships including the Denali Commission that was
heading the RAMP effort with the Alaska Native Tribal
Health Consortium. She furthered that the Alaska Village
Electric Cooperative had also been involved in discussions
related to increased regional-led training efforts. She had
been collaborating with Sandra Moller, Deputy Director of
Rural Energy on the 2013 goal towards cost effectiveness
and providing the largest possible impact. She referred to
power plant trainings in Seward and shared that AEA was
looking at different ways to deliver training including
ensuring that system operators worked closely with AEA and
its contractors to build the systems. She relayed that AEA
was looking at a couple of pilot programs that would bring
individuals to Anchorage to help with the construction of
power houses.
Co-Chair Kelly recommended that AEA talk with Fred Villa at
the university. He relayed that AVTEC and DLWD did a good
job; however, the entities did not have assets in multiple
communities like the university. He detailed that the
university made a shift towards workforce development in
the early 2000s specifically for rural Alaska. He pointed
to a past virtual welder training program as an example of
innovative training. He elaborated that there were people
who were breaking down barriers for training that allowed
delivery to rural Alaska. He believed there were
individuals on the cutting edge in relation to training at
the university.
9:47:24 AM
Senator Hoffman wondered if the circuit rider technical
assistance program was adequately staffed. He communicated
that the program had helped save very costly infrastructure
projects. He believed that communities took more pride in
facilities when they took part in the construction and
subsequently took better care of the product.
Ms. Fisher-Goad replied that additional staff and funding
obtained the prior year had provided AEA with the ability
to offer a very effective circuit rider program. She
expounded that AEA incorporated a training element into its
community visits to ensure that workers understood the
equipment and could work with AEA on operation and
maintenance.
Co-Chair Kelly asked whether the circuit rider program
needed additional funding. Ms. Fisher-Goad answered that FY
13 and FY 14 funding was sufficient. She noted that AEA was
grateful for the significant funding increase provided in
FY 13.
9:50:19 AM
Mr. Skaling conveyed that AEA published an annual energy
statistics report (slide 14) that summarized the
electricity generation throughout the state. He highlighted
that the Emerging Energy Technology Fund was created by SB
220 in 2010; $8.9 million was available (funds were split
evenly between the Denali Commission the state). He
detailed that 16 projects had been selected for funding in
the first round that was currently beginning. The goal was
to provide a stepping stone to renewable energy and
efficiency with potentially breakthrough technologies that
may have a significant future impact in Alaska. The
projects were required to be commercially viable within
five years, were spread throughout the state, and varied
from simple (e.g. exhaust thimbles) to complex (e.g.
airborne wind generators).
Mr. Skaling directed attention to the Renewable Energy Fund
on slide 15. He shared that he had just begun leading the
program through the round six recommendations. He stated
that the program had good staff and that projects were
thoroughly vetted. The program had approved 227 projects
and had allocated $202.5 million. There were approximately
75 projects under construction and roughly 80 grants were
in the construction phase. He noted that applicants were
required to present project feasibility studies prior to
construction approval.
Co-Chair Kelly pointed to time constraints and asked AEA to
continue the presentation at a later time.
Senator Hoffman asked about the governor's goals for
renewable energy and how much progress had been made
towards those goals.
Mr. Skaling replied that the governor and legislature had
set a goal for 50 percent renewable energy for electric by
2025. Hydroelectric energy currently accounted for 22
percent and changed from year to year. He shared that the
last couple of months represented a breakthrough year with
some large wind projects contributing roughly 2 percent. He
concluded that renewable energy currently accounted for
approximately 20 percent to 24 percent [of total
electricity generation].
Co-Chair Kelly communicated that he wanted AEA to finish
its presentation at a later date.
9:55:20 AM
RECESSED
10:45:51 AM
RECONVENED
ADJOURNMENT
10:46:13 AM
The meeting was adjourned at 10:46 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| AEA Overview Senate Finance 02 01 13.pdf |
SFIN 2/1/2013 9:00:00 AM |
|
| State of Alaska Energy Programs.pdf |
SFIN 2/1/2013 9:00:00 AM |
|
| AEA Senate Finance REF Performance 2 1 13.pdf |
SFIN 2/1/2013 9:00:00 AM |