Legislature(1993 - 1994)
03/03/1993 09:10 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
MINUTES SENATE FINANCE COMMITTEE March 3, 1993 9:10 a.m. TAPES SFC-93, #33, Side 1, (363-end) SFC-93, #33, Side 2, (575-end) SFC-93, #35, Side 1, (000-428) CALL TO ORDER Senator Drue Pearce, Co-chair, convened the meeting at approximately 9:10 a.m. PRESENT Sen. Pearce, Co-chair. Sen. Frank, Co- chair. Sen. Jacko Sen. Kelly Sen. Rieger Sen. Sharp Senator Kerttula arrived soon after the meeting began. ALSO ATTENDING: Sen. Lincoln; Sen. Taylor; Rep. Olberg; Dean J. Guaneli, Chief, Assistant Attorney General, Criminal Division, Dept. of Law; Ron Garzini, Executive Director, Alaska Energy Authority; Dave Hutchens, Executive Director, Alaska Rural Electric Cooperative Association; Jim Kohler, Southeast Conference; Darsie Beck, Alaska Environmental Lobby; John L. Shepherd, aide to Senate President Rick Halford; and aides to committee members and other members of the legislature. SUMMARY INFORMATION SB 19 - Act relating to the crime of conspiracy. Testimony was presented by Dean Guaneli and John Shepherd. A letter of intent was ADOPTED to accompany the bill. The bill was then HELD in committee for amendment by Senator Rieger. SB 46 - Act authorizing moose farming. Testimony was presented by Darsie Beck. CSSB 46 (Fin) was then REPORTED OUT of committee with zero fiscal notes from the departments of Natural Resources, Fish and Game, and Environmental Conservation. SB 106 - Act authorizing power transmission interties between Anchorage and the Kenai Peninsula, between Healy and Fairbanks, and between the Swan Lake and Tyee Lake hydroelectric projects, and approving the design and construction costs of the interties; and providing for an effective date. Testimony was presented by Sen. Lincoln, Sen. Taylor, Rep. Olberg, Ron Garzini, Dave Hutchens, and Jim Kohler. A draft CSSB 106 (Fin) was ADOPTED. The bill was subsequently HELD in a committee of the whole for subsequent discussion. SB 126 - Act making special appropriations for design and construction of power transmission interties between Anchorage and the Kenai Peninsula, between Healy and Fairbanks, and between the Swan Lake and Tyee Lake hydroelectric projects; and providing for an effective date. Discussion was had in conjunction with SB 106 (above). A draft CSSB 126 (Fin) was ADOPTED. The bill was subsequently HELD in a committee of the whole for subsequent discussion. SENATE BILL NO. 19 An Act relating to the crime of conspiracy. Upon convening the meeting, Co-chair Pearce directed that SB 19 be again brought on for hearing and announced her intent to move the bill from committee. She then referenced the following letter of intent from Senator Halford and advised of his request that it be adopted: It is the intent of the Senate Finance Committee that law enforcement techniques employed in investigations of criminal conspiracy as defined in Senate Bill 19 should be consistent with the protections against police entrapment under AS 11.81.450. JOHN SHEPHERD, aide to Senator Halford, came before committee. He explained that the above language is intended to address concerns raised by Senators Kelly and Kerttula when the bill was previously before committee. The Dept. of Law reviewed existing statutes relating to entrapment and cited the pertinent section in the letter of intent. Co-chair Pearce directed attention to new fiscal notes for the legislation and explained that SFC notes reduce numbers for the Dept. of Corrections, Alaska Court System, Office of Public Advocacy, and Public Defender Agency to match numbers provided by the Dept. of Law in terms of anticipated cases that might be brought under conspiracy law. She referenced information in the Dept. of Law fiscal note indicating that conspiracy would be included as an additional count in cases that would be prosecuted anyway. The major effect of conspiracy statutes would be to permit introduction of additional evidence at trial. Senator Kelly MOVED for adoption of intent language as a Senate Finance letter of intent. No objection having been raised, the Senate Finance letter of intent was ADOPTED. Senator Rieger directed attention to CSSB 19 (Jud), page 2, lines 2-13, and raised questions regarding application to juveniles and mentally incompetent individuals. DEAN GUANELI, Chief, Assistant Attorney General, Criminal Division, Dept. of Law, came before committee. He explained that to be convicted of a crime under Alaska law, one must be "acting with a certain mental state" (acting either intentionally or recklessly) when the crime is committed. Certain factors, however, preclude a jury from finding that a perpetrator so acted. As an example, Mr. Guaneli noted that if the perpetrator was intoxicated, the jury would be justified in finding that he or she did not act intentionally. Questioned language says that if one conspires with someone who is intoxicated, and the jury finds that the intoxicated individual does not fall under legally required intent provisions, the conspirator can still be convicted of conspiracy. Intoxication of one of the conspirators does not excuse a co-conspirator. Senator Rieger then asked if an individual could be excused from being charged with a crime because of his or her mental state but might not be excused from conspiring. Mr. Guaneli reiterated that an individual may be excused if peculiar circumstances surround the person's mental state, i.e. intoxication or incapacity. Co-conspirators, however, would not be similarly excused. Application of the mental state test is individually based. One cannot rely upon another's mental deficiencies to escape a charge. Senator Rieger next asked how the foregoing examples would apply to those who are judged "legally incapable in an individual capacity of committing a crime." Mr. Guaneli referred to existing statutory defenses based on age. Language in the proposed bill says that the fact that an individual conspires with a juvenile who is, by legal definition, incapable of committing the crime does not excuse the conspirator. An individual is not excused because he or she hires a juvenile to commit a crime. Senator Rieger then asked if the language would work in reverse. If a juvenile conspires with an older person does the juvenile lose that defense? Mr. Guaneli responded negatively. He explained that the defense is personal to the juvenile. Since the juvenile is of an age that cannot legally commit the crime, he or she would not be guilty of conspiracy. Senator Rieger suggested that language within subsection (c) (page 2, line 2) states that "It is not a defense that the defendant belongs to a class of persons who are legally incapable of committing the crime." Mr. Guaneli acknowledged need to review the language in relation to existing law. Co-chair Pearce asked if Senator Rieger wished to hold the bill for future amendment. Senator Rieger answered affirmatively. He advised that his first reading of the bill highlighted potential for inadvertent inclusion of juveniles who conspire with adults. The Co-chair directed that SB 19 be HELD in committee. She further asked that Senator Rieger prepare his amendment for presentation at the Friday committee meeting. Senator Rieger said he would do so. He voiced support for the legislation and said it was not his intent to hold it. The apparent loophole, however, should be closed. SENATE BILL NO. 46 An Act authorizing moose farming. Co-chair Pearce directed that SB 46 be brought on for discussion; referenced a draft CSSB 46 (Fin) (8-LS037\J, Utermohle, 3/1/93); and explained that it incorporates Amendments Nos. 1 and 2, adopted at a previous meeting. She also noted a new, zero fiscal note from the Dept. of Fish and Game. DARSIE BECK, Alaska Environmental Lobby, came before committee in opposition to SB 46. He said that the bill would be both detrimental to Alaska wildlife and a waste of taxpayers' money. Concerns relating to biological issues have been well documented. Moose farming will increase the spread of disease in both domestic and wild populations. Negative impact on predator populations will occur under game farmer control. SB 46 also creates incentive for illegal harvest of wild moose by poachers. The fact that fiscal notes accompanying the bill show no cost to the state is suspect. The Dept. of Environmental Conservation would incur the cost of monitoring and treating diseased livestock. The Dept. of Fish and Game would be responsible for responding to complaints from tourists and other parties concerning the treatment of captive moose. The department would also bear the cost of ensuring that disease is not transmitted by domestic moose to wild stocks. The Dept. of Public Safety would incur increased costs to control poaching. While the above-mentioned costs are not shown on department fiscal notes, they would be incurred by department budgets. The magnitude of these costs may not be realized until a tragedy occurs. In Alberta, Canada, $10 million was spent and 2,000 domestic elk were eradicated in an unsuccessful effort to control tuberculosis. Costs and the biological risk associated with moose farming far outweigh possible benefits. Senator Sharp requested that Mr. Beck present documented facts associated with the situation in Alberta. Mr. Beck agreed to do so. Co-chair Pearce queried members concerning disposition of the bill. Senator Kelly MOVED for passage of CSSB 46 (Fin) with individual recommendations and the accompanying zero fiscal notes. No objection having been raised, CSSB 46 (Fin) was REPORTED OUT of committee with zero fiscal notes from the departments of Natural Resources, Fish and Game, and Environmental Conservation. Co-chairs Pearce and Frank and Senators Kelly, Rieger, and Sharp signed the committee report with a "do pass" recommendation. Senator Kerttula signed "Do not pass." SENATE BILL NO. 106 An Act authorizing power transmission interties between Anchorage and the Kenai Peninsula, between Healy and Fairbanks, and between the Swan Lake and Tyee Lake hydroelectric projects, and approving the design and construction costs of the interties; and providing for an effective date. SENATE BILL NO. 126 An Act making special appropriations for design and construction of power transmission interties between Anchorage and the Kenai Peninsula, between Healy and Fairbanks, and between the Swan Lake and Tyee Lake hydroelectric projects; and providing for an effective date. Co-chair Pearce directed that SB 106 and 126 be simultaneously brought on for discussion and noted proposed committee substitutes for both bills. Senator Sharp MOVED for adoption of draft CSSB 106 (8-LS0594\R, Cramer, 3/2/93) as a working document. No objection having been raised, CSSB 106 (Fin) was ADOPTED. Senator Sharp next MOVED for adoption of CSSB 126 (8-LS0649\K, Cramer, 3/2/93) as a working document. No objection having been raised, CSSB 126 (Fin) was ADOPTED. As background information, Senator Sharp told members that in the early 1980s the state committed major amounts of general funds to construct four hydroelectric projects: two in Southeast, one at Kodiak, and one at Valdez. During the same time period, the legislature set aside $200 million in the railbelt energy fund to provide similar long-term energy projects for Southcentral and Interior Alaska. Legislation proposed in CSSB 106 (Fin) and CSSB 126 (Fin) will carry out that legislative intent via construction of a power grid connecting the major population centers of Alaska. That intertie system will provide long-term benefits to over 70% of Alaska's population. Major benefits to be offered by the interties include: 1. Reliability of service. 2. Economy of size. 3. Mix of generating sources including hydroelectric, natural gas, coal, and petroleum fuel. 4. Unified load dispatching by all utilities along the system. Senator Sharp next provided a brief sectional analysis of CSSB 106 (Fin): Sec. 1 - Requires contracts between the Alaska Energy Authority (AEA) and public utilities involved in the intertie. Projects can only proceed if utilities have agreed to pay any cost overruns and future operation and maintenance costs. This section was modified in CSSB 106 (Fin) to accommodate comments set forth on a position paper from the administration. Sec. 2 - Authorizes construction of a 138 kilovolt power transmission line between Kenai and Anchorage. The line will increase ability to deliver major blocks of energy from the Bradley Lake hydroelectric project to the Anchorage load center. Sec. 3 - Authorizes construction of a 138 kilovolt line from Healy to Fairbanks. Power presently flows into Healy from the south through a 10-inch, 230 kilovolt line and continues to Fairbanks through a 6-inch line. That creates a bottleneck at Healy. The new line will allow maximum utilization of transmission capacity from Anchorage. It will also allow Golden Valley Electric to deliver its share of Bradley Lake Power to the interior and purchase surplus power from Anchorage utilities to meet peak demands. Sec. 4 - Authorizes an intertie between Swan Lake and Tyee Lake hydroelectric sites. Sec. 5 - Requires that Anchorage, Kenai, and the Healy/Fairbanks intertie construction only proceed if an agreement between AEA and the utilities is in place stating that the utilities will pay all construction costs over the $99,250.0 (the state's 50% share) as well as furture operating and maintenance costs. This requirement is a "stop loss on cost overruns for state liability." Sec. 6 - Provides that the act take immediate effect. Senator Sharp explained that CSSB 126 (Fin) contains the $99,250.0 appropriation for the railbelt interties and the $9 million for the Swan Lake/Tyee Lake intertie. Senator Kerttula termed the legislation "a flat Christmas tree." He then questioned the use of funding proposed in Sec. 2 of CSSB 126 (Fin), advising that railbelt funds result from an agreement to provide the four dam pool with its arrangement while reserving funding for the railbelt energy program from Bradley Lake to Fairbanks and Fairbanks to Copper Center and Valdez, in a continuing circular grid. End, SFC-93, #33, Side 1 Begin, SFC-93, #33, Side 2 Senator Kerttula further attested to the approximate $18 million in subsidy for bush energy as part of the foregoing arrangement. Use of the funds for Swan Lake/Tyee does not meet the original intent. If that is to occur, some of the funding should flow to bush Alaska as well. Senator Kelly voiced recollection of use of railbelt moneys for interties from Bradley Lake to Fairbanks but not "back around the highway." Senator Kerttula noted that the state acquired right of way from Glennallen to Sheep Mountain as part of the eventual intertie. In his concluding remarks, Senator Kerttula attested to need for the Swan Lake/Tyee intertie to stand with other projects for appropriation from the general fund. He voiced reluctance to utilize the proposed $9 million for "something we've already paid for several times in the four- dam-pool concept." Senator Kelly observed that the $9 million would not flow from the railbelt energy fund but from the power development revolving fund. Senator Sharp concurred. REPRESENTATIVE HARLEY OLBERG came before committee asking that members consider strengthening the railbelt energy system through construction of an intertie from Sutton to Glennallen. The Copper Valley Electric Association, located in Glennallen, would then become a major purchaser of electricity from railbelt producers. Purchases would initially approximate $1 million per year. As growth in the Copper Valley/Valdez/Glennallen area continues, that figure could increase to as much as $2 million in annual purchases of what is now excess electricity. The 3,000 customers in the Copper Valley System currently pay the highest non-subsidized rates in the state. Problems with the existing system reflect the fact that it traverses difficult terrain, including Thompson Pass. Overall strengthening of the system is important. Economic development is stymied in the eastern interior and Valdez because of power costs. It is critical that the state have a strong, centralized power grid from which extension can be made to areas with development potential. Co-chair Pearce inquired regarding the cost of the extension from Sutton to Glennallen. Representative Olberg responded that, while estimates are not precise, the most commonly used number is $42 million. The present request is for half of that amount. The Representative added that if the requested intertie were funded, the cost of power on 20 million kilowatt hours per year to Copper Valley would be reduced by two thirds. The present cost is approximately 15 cents for diesel generation of a kilowatt hour. Railbelt producers have offered power in Sutton at 4 to 5 cents. That would save $2 to $3 million a year, portions of which could be used for debt service and rate mitigation. Senator Kerttula voiced support for the concept. He then inquired regarding Copper Center obligations to the intertie from Valdez. Representative Olberg advised that he could not speak to the overall monetary obligation. He acknowledged the four-dam-pool obligation out of Solomon Gulch, and noted that Solomon Gulch is producing at 100% capacity. Senator Kerttula suggested that a $40 to $50 million question would be raised by the Sutton to Glennallen proposal. Representative Olberg further advised that Ahtna Corporation has indicated a willingness to consider no-cost right of ways within corporation lands for extension of electrical services. The corporation is very supportive of the project. Senator Kelly asked if a portion of the estimated cost of the extension would purchase land for right of way. Representative Olberg answered negatively. He subsequently expressed reluctance to make commitments on Ahtna's behalf. Co-chair Pearce asked that Representative Olberg obtain written evidence of Ahtna's interest. SENATOR GEORGIANNA LINCOLN next came before committee. She concurred in Representative Olberg's request for consideration of an intertie between Sutton and Glennallen. She reiterated that residents in the Copper Basin and Valdez pay the highest unsubsidized electric rates in the state--an average of 20 cents per kilowatt. Economic development in the region is directly tied to electrical rates. An intertie between the region and the railbelt would reduce power costs and open the area to economic development. The Copper Basin is currently connected to the state-owned Solomon Gulch hydroelectric project by a 138 kilowatt transmission line. The Sutton to Glennallen intertie would bring a large area of Alaska into the railbelt electrical system. Projects such as the Petrostar Refinery in Valdez and economic development of the Copper River area, through development of the Wrangell St. Elias National Park, are directly tied to cheaper electric rates. The intertie would reduce Copper Valley Electric Association's consumption of diesel fuel and subsequently reduce exhaust emissions resulting from the mothballing of two diesel generators used during the winter. The population to be impacted by the proposed intertie totals 8,000 residents. Senator Lincoln next read from correspondence in support of the project from Ken Johns, Executive Director, Copper River Native Association: I have met with members of the board and staff at CVEA to discuss alternatives to these high rates. Most alternatives seem to be band-aid type remedies with no long-term solution. The one option that almost guarantees a long-term solution to our high electric rate is the proposed intertie from Sutton to Glennallen. This intertie would connect CVEA to a railbelt grid, would provide reduced-cost power to the CVEA service territory, and it would eliminate the CEVA's need to operate the high-cost diesel generation plant. Senator Lincoln further read the following comments from a feasibility report on the Sutton/Glennallen line, prepared for the Copper Valley Electric Association: The CVEA's member/owners pay some of the highest unsubsidized retail rates in the United States. The major part of the rate differential between CVEA and the railbelt utilities is attributed to the cost of power generation. It has been recognized for a number of years that the interconnection of CVEA's system to the railbelt transmission grid is the only certain way to open the door to a long-term power supply and to the opportunity to initiate a significant and meaningful rate reduction program. In addition to concern regarding absence of the Sutton/Glennallen intertie from the bill, Senator Lincoln noted omission of rural PCE needs, expressing fear that as other projects are included within the bill, it may be impossible to add PCE projects at a later time. Senator Lincoln observed that SB 124 (Alaska Energy Authority Powers and Finances), sponsored by the Governor, relates to interties and includes PCE. That is not part of the present discussion before committee. She reiterated concern that should SB 106 and 126 go forward, bush Alaska will not have an opportunity to discuss rural needs. The Senator next referenced a recent article in the Anchorage Times, relating to Lime Village. That community of approximately 30 people has no electricity. The article further states that an informal survey conducted in 1991 found 15 year-round settlements without electrical systems. Senator Lincoln then read a list of the communities. She reiterated need to review the statewide picture in terms of electrification and provision of "as cheap a power as possible." The legislature is not presently doing that. She stressed need for Alaska Energy Authority participation in discussions and noted that Alaska should have an overall plan for energy throughout the state rather than a hit and miss approach. Co-chair Pearce advised that representatives of AEA were present to testify. She added that while the Governor introduced a complete restructuring plan for the authority, and a portion of the plan deals with continuation of power cost equalization, review of the plan indicates that additional dollars needed for capitalization (primarily for power cost equalization) are "just not on the table . . . ." That bill is somewhere in the system. Senator Kelly referenced Senator Lincoln's request for inclusion of a portion of the Sutton to Glennallen project. He then asked if she would support the bill on the floor of the Senate if her request is accommodated. Senator Lincoln reiterated need for a statewide energy plan that ensures that bush Alaska is not left out of the loop. Senator Kelly observed that the state has spent considerable amounts on PCE with the understanding that railbelt moneys remain in railbelt areas. PCE is a separate issue. Senator Kelly then said that if Senator Lincoln (who is asking that a portion of the railbelt moneys go to her district) is not going to support the bill on the floor of the Senate, he would not support inclusion of her request. Senator Kerttula reiterated support for the intertie from Sutton to Glennallen but again questioned who would be responsible for the existing line from Valdez to Glennallen. Electricity generated in Valdez now ends up in Copper Center. If, following construction of the requested intertie, Copper Center would no longer utilize the power and Valdez cannot absorb it, there will be a financial loss on the existing line. Who is responsible for that? If residents of Copper Center are expected to pay for that line no matter what, providing them power from an alternate source will not decrease the cost of their power. Senator Kerttula again referred to Sec. 2 of CSSB 126 (Fin) and suggested that the appropriation from the power development revolving loan fund for Swan Lake/Tyee would drain the fund and preclude ongoing reconstruction in bush areas. SENATOR ROBIN TAYLOR next came before committee. He explained that he had little time to review the significant changes embodied in the newly adopted drafts of both bills. He said he wished to speak first to utilization of railbelt energy funds and then to utilization of the income stream from the four dam pool. As background information, Senator Taylor said he had fought for the past four years to maintain the commitment to the railbelt energy fund. He then voiced his belief that use of railbelt energy funds was at the discretion of legislators from the railbelt area. Other areas of the state should not be tapping into those moneys. Senator Taylor then explained that his request throughout the years was that upon final distribution of railbelt funds, Alaska residents who presently pay a minimum of 5.5 cents per kilowatt, as a result of poorly engineered and overbuilt AEA projects, would be able to use a portion of daily payments to pay for "our own interties." In past years there was no resistance to that request. Senator Taylor voiced his belief that intertie needs relating to Solomon Gulch should not be funded from railbelt moneys. He suggested that they instead be considered "as part of the overall plan." He further voiced his opinion that income from four-dam-pool repayments should not accrue to the general fund or to the support of the Alaska Energy Authority and its activities. At the least, revolving loan funds "should be available to us to come back as revenue to pay off bonds that would finance this construction." Senator Taylor next voiced his understanding that the administration has decided that "each of your projects should have to pay 50%" and that railbelt legislators have agreed that that is a fair leveraging of the funds. He then asked where his 50% would begin. Referencing the February 24, 1993, position paper (copy on file in the original SFC bill file for SB 106) from the Dept. of Commerce and Economic Development, Senator Taylor noted the following: AEA would oppose the idea of financing 100 percent of the Tyee-Swan construction cost from the existing power sales revenue stream because it would mean no contribution from the affected communities toward the payment of intertie construction costs beyond what they are already paying on existing debt. The Senator suggested that the foregoing indicates that Ketchikan residents would pay an additional 5-cent surcharge beyond the current 5-cent charge if the requested intertie was constructed. That would equate to a total of 16 cents. The Anchorage bowl area pays approximately 6 cents. Four- dam-pool communities were told when they signed power sales agreements with the Alaska Energy Authority that the authority would be responsible for maintaining power lines and dams owned by the state. AEA is now saying that the communities should pay this cost. Senator Taylor stressed that moneys from the $9.2 million paid annually by the communities should be used for that maintenance rather than accrue to a revolving loan fund for other projects. The Alaska Energy Authority study of the intertie between Swan Lake and Tyee found the project to be feasible. Increased revenues generated by power sales of Tyee power that is now being "spilled" would pay for 80% of the line. Under the worst case scenario, the state would have to "put in $20 million out of the $55 million to build this line." Senator Taylor reiterated that what he seeks from the legislation is authority to use four-dam-pool revenue stream moneys to pay off the intertie. Referring to the 15 remote villages mentioned by Senator Lincoln, Senator Taylor said that 5 are within 50 miles of the Swan Lake/Tyee intertie. Senator Kerttula commented on earlier proposals relating to Susitna as well as return of loan payments to the general fund. Senator Taylor suggested that the "eventual gridding" of the state is better done and controlled by the people who are paying for it rather than by a state agency. He further commented on future uses of revolving power development moneys. RON GARZINI, Executive Director, Alaska Energy Authority, next came before committee. He advised of his willingness to work with both Senator Sharp and Senator Taylor on the legislation and acknowledged that, with amendments, the bills could become a major step for economic development. He further acknowledged that the original AEA plan proposed a Southeast intertie with more favorable terms than those included within the adopted committee substitutes for the legislation. Mr. Garzini directed attention to nine amendments which he said the authority views as "appropriate for SB 106." He voiced his belief that the amendments are consistent with the wishes of the legislature and merit considerations. He then requested a hearing devoted to energy issues. Mr. Garzini voiced support for the interties and stressed need for a statewide energy plan incorporating the interties and other issues. Mr. Garzini spoke to need for legislative awareness of activities beyond the instant bills and Power Cost Equalization (PCE). As an example, he relayed AEA belief that Eklutna and Snettisham acquisitions would be included within President Clinton's energy package. The state must have the ability to conclude those arrangements. Speaking to the Glennallen to Valdez line, Mr. Garzini suggested that AEA first conclude feasibility issues relating to the Sutton to Glennallen intertie. AEA has asked that funds be reserved for that purpose. The construction cost of the Sutton to Glennallen line is estimated at $40 to $60 million. AEA thus seeks authority to proceed on the project, subject to certain constraints. Once Glennallen is reached, AEA anticipates serving the needs of Valdez on a more economic basis by combining Solomon Gulch hydroelectricity and low-cost gas and power from the railgrid. Under that arrangement, Valdez could perhaps sell power to the grid during the summer when Solomon has "a lot of water." During the winter months, Valdez would then be able to "shop for low-cost electricity." Addressing needs in Southeast, Mr. Garzini said that "The standard is the Tyee to Swan." It appears there is a strong marketable source of power from Tyee. The logical location to ship to is Swan Lake. AEA has conducted the necessary studies and has no objection to the project. Referring to the Tyee line and state obligations to four- dam-pool communities, Mr. Garzini concurred that the Tyee line was not well built. Development mistakes were made. Mr. Garzini agreed that AEA has an obligation to fix it. He then advised of significant amounts within four-dam-pool major maintenance accounts to deal with the problem. If those amounts are not sufficient for the rebuild, other arrangements will have to be made. Mr. Garzini stressed that repair is not an obligation of four-dam-pool communities or the power revolving loan fund. In his concluding remarks, Mr. Garzini reiterated need for both a hearing dealing specific with energy issues as well as a statewide energy plan. He acknowledged discussion of creation of an energy authority "that's more like a railroad" and said that he had not proposed that approach. He stressed that key components of AEA concern are: 1. The four interties 2. Some solution for rural Alaska Co-chair Pearce referenced concern raised by Senator Kerttula regarding responsibility for the present Valdez to Glennallen line should the Sutton/Glennallen intertie be built. Mr. Garzini explained that the existing line is an essential piece of the Copper Valley system. The proposed line from Sutton to Glennallen would bring Cook Inlet gas, Bradley Lake power and Healy power into the Copper Valley grid. That would primarily be a fall, winter, and spring flow. During the summer, AEA expects that Solomon power will flow from Valdez to Glennallen and on to Sutton for sale into the grid. Senator Kerttula asked if the summer flow would pay overhead costs on the line. Mr. Garzini said that AEA currently has a contract with Copper Valley to look "at all of those economic issues." Mr. Garzini also noted issues relating to construction of the coal plant at Glennallen. AEA is looking at options for providing affordable power in Valdez. End, SFC-93, #33, Side 2 Begin, SFC-93, #35, Side 1 Senator Kerttula stressed need for focus on power cost equalization. He noted that some rural areas now utilizing fossil fuel have the potential for local generation of power. The Senator also voiced need for review of the structure of the Alaska Energy Authority. Mr. Garzini concurred. AEA board meetings and meetings with utilities determined that reorganization should be held in abeyance until after the session. In the interim, changes will be formulated for next year. One of the plans under consideration is "a major elimination of the AEA as a state agency and something dominated by the utilities." That is not now on the table because the current focus is the interties and concern regarding the future of PCE. Senator Kerttula suggested the legislature be involved in the decision making process rather than presented with materials for consideration after the fact. Senator Kelly noted the above-mentioned focus on PCE and the interties and asked if that meant other legislation relating to a business venture by AEA, introduced by the administration, was no longer viable. Mr. Garzini answered negatively. He then reiterated his request for a hearing dealing specifically with statewide energy. In further response to Senator Kelly, Mr. Garzini presented, as an example, a request from Kodiak for a hydroelectric work in conjunction with the Terror Lake project. The total cost for the small project is $6 to $7 million. AEA has no ability to go to the market to assist the community without coming to the legislature, even with total support by four- dam-pool members and the residents of Kodiak. There is thus need to strengthen AEA standards in some areas. Mr. Garzini again referenced ten amendments the administration would propose to Senator Sharp's legislation. Co-chair Pearce acknowledged that restructuring legislation for AEA had been introduced. She further advised that it is not presently before Senate Finance and voiced her intent that portions of it not be addressed in the context of authorizations and appropriations for the interties. Senator Taylor distributed information from Tom Stevenson, Ketchikan Public Utility manager. He then stressed that both the Swan Lake and Tyee projects are owned by the state. As a consequence, local communities cannot go to the bond market and borrow money for a power line the communities will not own. Utilities in the railbelt will own the interties. They thus have the ability to bond. Mr. Garzini explained that the utilities would use AEA as a conduit to borrow money for the interties. The ultimate goal would be that once the debt is retired, the utilities would own the lines. For the term of the debt, however, the state would hold title. The utilities would design and build the project. AEA would provide oversight. Mr. Garzini added that if there was a power purchaser in Southeast willing to enter into the same form of arrangement, AEA would be agreeable. He concurred that utilities could build the proposed interties, under AEA inspection, cheaper than the state. The appropriate role of AEA is to oversee development, protect the state's interest, and transfer the project to the utilities to operate when the debt is retired. When Bradley Lake is completed, AEA is committed to transfer it to the utilities to operate. DAVE HUTCHENS, Executive Director, Alaska Rural Electric Cooperative Association, next came before committee. He advised that membership in the coop extends from Kotzebue to Metlakatla and many points in between. Projects proposed for the railbelt and Copper Valley, all involve utilities that are consumer-owned members of the cooperative. As background information, Mr. Hutchens said that when the Susitna project was cancelled, funds therefrom were placed in the railbelt energy fund. The railbelt energy council was then created to determine "how these funds should best be used to benefit the region." The unanimous conclusion was completion of the Bradley Lake project and construction of interties connecting the railbelt. These projects have been well studied through the years. The conclusion is that they are feasible, highly desirable, and need to be built. Mr. Hutchens next spoke to the nature of interties. He explained that an intertie fills the gap between two utilities. It does not generally fall within the jurisdiction of any one utility but serves as a connection between utilities, much as a highway connects two cities. Mr. Hutchens voiced support for the Kenai to Anchorage and Healy to Fairbanks interties. He registered further support for addition of the Copper Valley line. While it is not as far along in terms of study as the two railbelt lines, it nevertheless appears to be "a very attractive line." In response to concerns raised by Senator Kerttula, Mr. Hutchens acknowledged that the existing line between Glennallen and Valdez is part of the Solomon Gulch project. Wholesale power Copper Valley buys from Solomon Gulch includes the capital cost of the transmission line. That cost would not be affected once the utility has an additional source of power. There would thus be no change in current contractual and financial arrangements pertaining to the existing line. Further, although the way the line is used may change, the amount of use for the line would not. In fact, usage would, perhaps, increase over time. The reason is that the transmission line would allow power to be hauled in either direction. At this time power generally flows from Solomon Gulch to Glennallen. During the winter, flow is sometimes reversed, and diesel power from Glennallen is shipped to Valdez. The proposed line from Sutton to Glennallen would allow Copper Valley to "shut down the diesels" and purchase needed power more cheaply from the Anchorage area. This would greatly increase the efficiencies of the system. Mr. Hutchens also voiced support for the proposed Southeast intertie. He said he was generally familiar with the project but less knowledgeable about it since active members of the cooperative would not be served by the line. Senator Sharp acknowledged that a transmission line between two load centers might be hard to justify by one or the other utility. When it is viewed in terms of benefits to both utilities (or multiple utilities in the case of railbelt interties), it is easier to amortize. He further acknowledged that coordination among the utilities is vital. Senator Sharp further attested to benefits to be derived from the variety of power sources to be offered, citing hydroelectricity from Bradley Lake, natural gas from Cook Inlet, and coal from the coal fields. Future needs can be manipulated to "the best deal going at that particular time." This legacy should benefit future generations in the greatest population centers of the state. Senator Kerttula asked what obligations Copper Valley presently has to the Solomon Gulch project. Mr. Hutchens advised of a long-term contract. Senator Kerttula then suggested that the line from Sutton to Glennallen would not result in cheaper power to Glennallen because of the preexisting obligation to pay for the line from Valdez. Mr. Hutchens said that the Sutton to Glennallen intertie would not replace power from Solomon Gulch. The Copper Valley system is committed to purchase of that power from Valdez. He reiterated that the requested intertie from Sutton would replace diesel generated power now provided to both Valdez and Glennallen. The economic feasibility of the Sutton to Glennallen line "does not rest, at all, on replacing power now coming from Solomon Gulch, or shutting down that transmission line." Senator Kerttula then suggested that the requested intertie would either have to be 90% subsidized or of small capacity if it is slated to replace limited diesel generation. Mr. Hutchens said that economic development (the refinery) underway in Valdez would provide for economies of scale. JIM KOHLER, Director, Southeast Conference, next came before committee in support of the proposed Swan Lake/Tyee project. He concurred in comments by Senator Taylor and said the project would provide one segment of an envisioned connected electrical system that would eventually connect with British Columbia. Mr. Kohler further attested to need for access to a structure that will allow communities to utilize revenues they generate. The Southeast Conference has invited AEA to meet with conference members in Juneau, Wrangell, Ketchikan, and Sitka, over the next two weeks, to discuss energy issues. In his concluding comments, Mr. Kohler reiterated that the region can build toward "an entire connected electrical grid system" if given the structure that allows the region to do so. In response to a question from Co-chair Pearce regarding the line mileage between Swan Lake and Tyee, Senator Taylor advised of 57.5 miles. Co-chair Pearce asked if Canadian lines were financed by federal moneys. Senator Taylor explained that British Columbia Hydro is a separate, chartered, crown corporation owned by the government. It appears to work in joint venture with other government agencies, such as the Ministry of Mines, or with private entities, such as a mining company, to share the cost of power line construction. In response to comments by Senator Kerttula, Senator Taylor remarked that aside from mining, he did not foresee any large scale industrial development in the near future. Mineral development requires "huge amounts of power." Had the molybdenum mine once proposed for Ketchikan become a reality, it would have required "more power than all of the power currently being generated and used in Southeast Alaska just to operate that one mine." Should any of the large gold mines proposed for Juneau go forward, there would be good leverage to pay a substantial portion of the cost required to grid Southeast. Co-chair Pearce voiced reluctance to place CSSB 106 (Fin) and CSSB 126 (Fin) into subcommittee because of intense interest in the bills. She then directed that they be HELD in a committee of the whole for continued work, and she advised that they would again be brought on for discussion at a subsequent meeting. ANNOUNCEMENT Co-chair Pearce announced that SB 19, 43, and 111 would be heard at the Friday meeting. ADJOURNMENT The meeting was adjourned at approximately 10:50 a.m.