Legislature(2007 - 2008)

03/12/2008 02:57 PM FIN

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                  SENATE FINANCE COMMITTEE                                                                                      
                       March 12, 2008                                                                                           
                         2:57 p.m.                                                                                              
CALL TO ORDER                                                                                                                 
Co-Chair Stedman called the Senate  Finance Committee meeting                                                                   
to order at 2:57:17 PM.                                                                                                       
MEMBERS PRESENT                                                                                                               
Senator Lyman Hoffman, Co-Chair                                                                                                 
Senator Bert Stedman, Co-Chair                                                                                                  
Senator Charlie Huggins, Vice-Chair                                                                                             
Senator Kim Elton                                                                                                               
Senator Donny Olson                                                                                                             
Senator Joe Thomas                                                                                                              
Senator Fred Dyson                                                                                                              
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
John  Weise,  Staff,  Senator   Lyman  Hoffman;  Dan  Fauske,                                                                   
CEO/Executive Director,  Alaska Housing Finance  Corporation,                                                                   
Department  of  Revenue;  Kate   Troll,  Executive  Director,                                                                   
Alaska   Conservation  Alliance;   Megan  Waggoner,   Juneau;                                                                   
Madelin Siedler, Juneau; Representative  Mike Doogan; Senator                                                                   
Johnny  Ellis; Dana Owen,  Staff, Senator  Johnny Ellis;  Tom                                                                   
Brice,  Agent,   Alaska  District  Council  of   Labors;  Don                                                                   
Etheridge, Alaska AFL-CIO                                                                                                       
PRESENT VIA TELECONFERENCE                                                                                                    
Scott Waterman,  Valdez; David  Ruiz, Member, Laborers  Union                                                                   
341;  Larry  Brink, Anchorage;  Elsa  Billingham,  Anchorage;                                                                   
Wayne Stevens,  President, Alaska State Chamber  of Commerce;                                                                   
Steve   Haagenson,   Executive    Director,   Alaska   Energy                                                                   
Authority;   Jerry   McCutcheon,  Anchorage;   Phil   Steyer,                                                                   
Director, Chugach Electric Association                                                                                          
SB 289    "An  Act relating to  home energy conservation  and                                                                   
          weatherization for purposes of certain programs of                                                                    
          the Alaska Housing and Finance Corporation."                                                                          
          SB 289 was heard and HELD in Committee for further                                                                    
CSHB 260(STA)                                                                                                                   
          "An Act  relating to a State  Officers Compensation                                                                   
          Commission  and establishing  how legislators,  the                                                                   
          governor,  the lieutenant  governor, and  executive                                                                   
          department  heads shall  be compensated;  providing                                                                   
          for  an effective date  by repealing the  effective                                                                   
          dates  of certain  sections of  ch. 124, SLA  1986;                                                                   
          and providing for an effective date."                                                                                 
          CSHB 260(STA)  was heard and HELD in  Committee for                                                                   
          further consideration.                                                                                                
SB 120    "An Act relating to  the calculation and payment of                                                                   
          unemployment  compensation benefits;  and providing                                                                   
          for an effective date."                                                                                               
          SB 120 was heard and  HELD in Committee for further                                                                   
SB 246    "An  Act establishing  a working  group to  analyze                                                                   
          the potential  of a hydroelectric power  project on                                                                   
          the Susitna  River; and providing for  an effective                                                                   
          SB 246 was heard and  HELD in Committee for further                                                                   
2:57:27 PM                                                                                                                    
SENATE BILL NO. 289                                                                                                           
     "An Act relating to home energy conservation and                                                                           
     weatherization for purposes of certain programs of the                                                                     
     Alaska Housing and Finance Corporation."                                                                                   
Co-Chair  Hoffman,   sponsor,  announced  that   SB  289  was                                                                   
introduced to address energy needs throughout the state.                                                                        
JOHN WEISE,  STAFF, CO-CHAIR HOFFMAN,  referred to  a handout                                                                   
entitled "SB 289  Home Energy" (copy on file.)   He explained                                                                   
page  1,  the  Housing  Assessment   Survey  2005.    It  was                                                                   
estimated  that  in 2005  there  were about  277,000  housing                                                                   
units  in  Alaska.   The  percentage  of  older  housing  was                                                                   
increasing   and  the   percentage  of   newer  housing   was                                                                   
decreasing.   Households  eligible  for  weatherization -  60                                                                   
percent  of  median income  -  numbered  about 45,000.    The                                                                   
number of households that reported  being drafty was about 45                                                                   
percent or about half of all houses in Alaska.                                                                                  
Mr. Weise  explained on page  2 that  SB 289 would  work with                                                                   
the  Alaska Housing  Finance Corporation  (AHFC)  to be  more                                                                   
responsive to Alaskan's being  impacted by high energy costs.                                                                   
The bill updates  and expands the home energy  efficiency and                                                                   
weatherization programs within AHFC.                                                                                            
Mr. Weise turned to page 3, weatherization.   The focus is on                                                                   
energy efficient  improvements and directs  available funding                                                                   
to  items   that  will  save   the  most  energy.     Typical                                                                   
improvements include  air sealing, insulating,  and improving                                                                   
heating efficiencies.                                                                                                           
Mr.  Weise  commented  on  page   4,  Energy  Efficiency  and                                                                   
Weatherization Program.   He related that after  meeting with                                                                   
AHFC, a two-pronged  approach was decided.  The  first was to                                                                   
focus on  the weatherization program  already in effect.   It                                                                   
is a grant  program available  to Alaskans at the  60 percent                                                                   
median income level.  This bill  would raise the level to 100                                                                   
percent median  income.  Low  income Alaskans  would continue                                                                   
to receive priority.                                                                                                            
Mr.  Weise  reviewed  a  graph   on  page  5,  Median  Income                                                                   
3:02:33 PM                                                                                                                    
Mr. Weise pointed  out the impact of SB 289 as  shown on page                                                                   
6.  In past  years roughly $4.8 million was spent  a year and                                                                   
600 households were helped.  Funding  at the 60 percent level                                                                   
would not meet  Alaska's needs.  The expanded  program, which                                                                   
would  request  $200  million,  adjusts  the  median  to  100                                                                   
percent and would serve 17,400 households.                                                                                      
Mr. Weise  turned to the second  program as describe  on page                                                                   
7, Home Energy Rating Rebate Program.   Homeowners would need                                                                   
to self finance  or get a loan  and an energy audit  would be                                                                   
required.  The rebate would be  based on improved energy star                                                                   
Mr. Weise detailed  the Energy Star Ratings on page  8.  Each                                                                   
step  would equal  an  increase  in the  rebate.   He  shared                                                                   
expectations based on past research  listed on page 9.  There                                                                   
is an expected 30 percent reduction in home energy costs.                                                                       
Mr.  Weise  summarized  SB  289  by saying  it  would  be  an                                                                   
improved and  more flexible  process for  AHFC to respond  to                                                                   
rising  fuel costs.    Existing AHFC  programs  will be  more                                                                   
responsive and more Alaskans will be helped.                                                                                    
3:06:33 PM                                                                                                                    
Mr. Weise  summarized that the  bill removes two  programs no                                                                   
longer in existence.  It adds  energy efficiency, as shown on                                                                   
page 3, line 6  of the bill, and moves to  100 percent median                                                                   
Co-Chair  Stedman  requested  a  synopsis  of  the  program's                                                                   
beginnings and successes.                                                                                                       
3:07:47 PM                                                                                                                    
DAN FAUSKE,  CEO/EXECUTIVE DIRECTOR,  ALASKA HOUSING  FINANCE                                                                   
CORPORATION,   DEPARTMENT  OF   REVENUE,  thought   that  the                                                                   
weatherization program has been around for about 20 years.                                                                      
SCOTT  WATERMAN,  VALDEZ, reported  that  the  weatherization                                                                   
program has been  around since 1978.  The home  energy rebate                                                                   
program was  in existence  from 1992 to  about 1995  when the                                                                   
funding ran out.  It has not been  reauthorized for refunding                                                                   
since then.                                                                                                                     
Co-Chair   Stedman  asked   how  many   years  it  has   been                                                                   
underfunded.   Mr. Fauske replied  that there is a  line item                                                                   
in the capital  budget for weatherization.   It was generally                                                                   
funded  between $3.5  million and  $6 million.   He  reported                                                                   
that  the weatherization  is  especially  effective now  with                                                                   
high oil prices.   He detailed how weatherization  results in                                                                   
savings to a homeowner.                                                                                                         
Co-Chair  Hoffman pointed  out that  housing construction  is                                                                   
down at  this time.  Mr.  Fauske explained that prior  to the                                                                   
bill   there  was   interest   by  home   builders  in   home                                                                   
weatherization under the existing  program.  There is a great                                                                   
deal of excitement by home builders  to implement an expanded                                                                   
3:13:26 PM                                                                                                                    
KATE TROLL, EXECUTIVE DIRECTOR,  ALASKA CONSERVATION ALLIANCE                                                                   
(ACA),  testified in  support of  SB 289.   She related  that                                                                   
energy issues  are a priority  in ACA's goals,  especially in                                                                   
light  of the energy  crisis in  rural Alaska.   Many  states                                                                   
have  implemented  such  energy programs  and  have  provided                                                                   
savings to home owners.  She shared  statistics about savings                                                                   
from  such  programs  and about  the  possible  reduction  of                                                                   
carbon  emissions.   She emphasized  that  the bill  provides                                                                   
short-term assistance  and she encouraged support,  also, for                                                                   
HB 252, which deals with investing  in renewable energy.  She                                                                   
added that SB 289 would create more jobs.                                                                                       
3:18:19 PM                                                                                                                    
MEGAN WAGGONER, JUNEAU, testified  in support of SB 289.  She                                                                   
thought it  was increasingly important  for homes to  be more                                                                   
energy  efficient.    She termed  the  subsidy  an  excellent                                                                   
incentive  for  people  to  start  looking  at  their  energy                                                                   
habits.  She  noted that rural communities would  benefit the                                                                   
most from  this legislation, but  that all communities  would                                                                   
be grateful.                                                                                                                    
MADELIN SIEDLER,  JUNEAU, spoke  in support  of SB 289.   She                                                                   
related that  she belongs to  a generation that  is beginning                                                                   
to value  responsible resource  consumption, and  home energy                                                                   
efficiency  is  a  keystone  issue in  this  movement.    She                                                                   
maintained  that we  have  a duty  to  ourselves  and to  the                                                                   
future to  conserve resources.   She mentioned  the financial                                                                   
benefits  from  this  legislation.    She  called  SB  289  a                                                                   
tremendous step in the right direction  to a more sustainable                                                                   
energy future.                                                                                                                  
SB  289  was   heard  and  HELD  in  Committee   for  further                                                                   
AT-EASE:       3:21:06 PM                                                                                                     
RECONVENE:     4:01:20 PM                                                                                                     
CS FOR HOUSE BILL NO. 260(STA)                                                                                                
     "An  Act  relating  to  a  State  Officers  Compensation                                                                   
     Commission   and  establishing   how  legislators,   the                                                                   
     governor,   the  lieutenant   governor,  and   executive                                                                   
     department heads shall be  compensated; providing for an                                                                   
     effective  date  by  repealing the  effective  dates  of                                                                   
     certain  sections of  ch. 124, SLA  1986; and  providing                                                                   
     for an effective date."                                                                                                    
REPRESENTATIVE MIKE  DOOGAN, sponsor, reported  that the bill                                                                   
is an  attempt to restore  a compensation commission  modeled                                                                   
after  a  compensation  commission  in  Alaska  in  the  late                                                                   
1970's, the last compensation  system that worked.  There are                                                                   
several  repealers  in the  bill  that  would take  out  some                                                                   
aspects  of  current  law.     The  bill  would  establish  a                                                                   
commission  of  five citizen  members  all appointed  by  the                                                                   
Governor.   One would  be appointed from  a list  prepared by                                                                   
the Speaker  of the House,  one from  a list provided  by the                                                                   
President  of the  Senate, and  the other three  would  be at                                                                   
large members.   None  of the  members can  have served  in a                                                                   
position  over which the  commission has  authority,  for the                                                                   
previous four years.                                                                                                            
Representative  Doogan  explained that  the  bill covers  the                                                                   
Governor,  the  lieutenant  governor,   executive  department                                                                   
heads, and legislators.   It is staffed by  the Department of                                                                   
Administration.  There is a fiscal  note for $7,500.  The law                                                                   
requires the commission  to report at least  every two years.                                                                   
It  does not  require that  the  report change  compensation.                                                                   
The  recommendations of  the  commission  take affect  unless                                                                   
they  are specifically  rejected  by  the legislature.    The                                                                   
legislature   retains   authority   over  what   happens   to                                                                   
compensation   because    it   does   require    a   specific                                                                   
appropriation  to  fund  it.   This  is  not  an  arrangement                                                                   
peculiar  to Alaska.   He referred  to a  report in  members'                                                                   
packets from the National Council of State Legislators.                                                                         
4:05:31 PM                                                                                                                    
Senator  Thomas asked  about the  legal services  memorandum.                                                                   
Representative  Doogan  recalled  that  in  the  House  State                                                                   
Affairs Committee, a question  was raised whether or not this                                                                   
legislation should  be a resolution.   The letter is  a legal                                                                   
opinion that it should be a bill.                                                                                               
Co-Chair  Stedman  asked if  a  sunset provision  is  needed.                                                                   
Representative Doogan hoped it  would continue into infinity,                                                                   
if it works.   If there are problems, it can  be removed from                                                                   
Co-Chair    Hoffman    noted    that    the    commissioner's                                                                   
recommendations  would  take effect  unless  rejected by  the                                                                   
legislature.   He wondered  if that  would include  the first                                                                   
recommendation.  Representative Doogan said it would.                                                                           
Senator Elton asked if "executive  department head" refers to                                                                   
commissioners.   Representative Doogan  thought that  was the                                                                   
language needed to refer to commissioners.                                                                                      
Co-Chair Stedman  noted the  small fiscal note.   He  said he                                                                   
would refer  the bill  to a finance  subcommittee made  up of                                                                   
Senator  Elton -  Chair, Senator  Olson,  and Senator  Dyson.                                                                   
He  felt  there   was  a  relationship  between   the  salary                                                                   
structure and some of the recent improprieties.                                                                                 
CSHB 260(STA)  was heard  and HELD  in Committee for  further                                                                   
4:10:22 PM                                                                                                                    
SENATE BILL NO. 120                                                                                                           
     "An Act relating to the calculation and payment of                                                                         
     unemployment compensation benefits; and providing for                                                                      
     an effective date."                                                                                                        
SENATOR JOHNNY  ELLIS, sponsor,  explained the intent  of the                                                                   
bill.  He reported  that the bill is a result  of a year-long                                                                   
stakeholders  process   conducted  in  the  Senate   Labor  &                                                                   
Commerce Committee.   There were numerous work  sessions with                                                                   
business  groups,   labor  advocates,  Department   of  Labor                                                                   
experts, staff, and committee members.                                                                                          
Senator  Ellis  pointed  out   that  a  healthy  unemployment                                                                   
insurance system benefits all  Alaskans.  It provides a shock                                                                   
absorber  for businesses,  individuals  and  families hit  by                                                                   
economic  change.   It  helps  both businesses  and  workers.                                                                   
Alaskan workers stay in Alaska,  ready for jobs when business                                                                   
picks  up.    Employers  maintain a  stable,  ready  pool  of                                                                   
experienced workers.                                                                                                            
Senator Ellis  reported that Alaska's unemployment  insurance                                                                   
system has been  soundly managed.  It has never  depleted its                                                                   
trust fund.   Other  states have  depleted their trust  funds                                                                   
during time of  economic stress.  Alaska's system  has always                                                                   
been able to  maintain payments, even during  the severe 1986                                                                   
oil price crisis.                                                                                                               
Senator Ellis  emphasized another  important consideration  -                                                                   
wage replacement.   The  unemployment insurance  system seeks                                                                   
to  replace  roughly  50  percent   of  lost  wages,  a  goal                                                                   
repeatedly confirmed by presidents  and commissions over many                                                                   
decades  in the  United States.    Alaska's wage  replacement                                                                   
rate is dead last  among all states.  It was  25.8 percent in                                                                   
2005 and is likely to be even lower today.                                                                                      
Senator Ellis  pointed out that  Alaska's benefit  amount has                                                                   
fallen far behind  wages.  The maximum weekly  benefit amount                                                                   
of  $248  is the  fourth  lowest  in  the nation.    Alaska's                                                                   
maximum  weekly benefit  amount has not  been adjusted  since                                                                   
1997.  Eligible  wages are capped  at $26,500.  One  third of                                                                   
Alaskan wage earners earn that  much or more, but are limited                                                                   
to $248 in weekly benefits.                                                                                                     
Senator Ellis  reported that tax rates  are low.  Now  is the                                                                   
time   to  raise   the  benefit   amount.     Alaska's   2008                                                                   
unemployment  insurance  tax  rates  for  employers  are  the                                                                   
lowest in  28 years.   There is room  to raise the  benefit -                                                                   
the $370, which  represents a restrained,  compromised weekly                                                                   
benefit  amount.   CSSB  120 (L&C)  would  raise the  average                                                                   
employer  cost $25  per employee  from the  2008 level.   The                                                                   
total out-of-pocket cost to employers  would remain $89 below                                                                   
2007 level.   The employee cost  will rise $37 per  year over                                                                   
the 2008 amount.                                                                                                                
4:16:09 PM                                                                                                                    
Senator  Ellis  said  the Senate  Labor  &  Commerce  version                                                                   
represents  a  compromise.    Benefits  need  to  be  raised.                                                                   
Employers view  the system  as too costly.   The  bill shifts                                                                   
costs from the  employers to employees.   Currently employers                                                                   
pay  80 percent,  employees  27  percent.   Under  the  bill,                                                                   
employers  would pay 73  percent and  employees would  pay 27                                                                   
percent.   Alaska  is one of  only two  states that  actively                                                                   
mandate  employee contributions.    New Jersey  is the  other                                                                   
one.  New  Jersey's maximum weekly benefit is  $536; Alaska's                                                                   
is $248.  The bill would raise it to $370.                                                                                      
Senator Ellis  explained that the bill includes  an automatic                                                                   
inflation proofing  mechanism.  It will help  to avoid having                                                                   
to address the issue every year.                                                                                                
4:19:17 PM                                                                                                                    
Senator   Ellis  stressed   that   Alaska   must  enact   the                                                                   
confidentiality  statutes.  The  first eight sections  of the                                                                   
bill are confidentiality  related.  Federal  law requires all                                                                   
states  to protect  unemployment  insurance  data by  October                                                                   
2008.   Failure  would  mean the  loss  of  $19.1 million  in                                                                   
federal funds to  the state.  Alaska businesses  would pay an                                                                   
additional  $87 million  in  taxes if  the  statutes are  not                                                                   
updated in regards to confidentiality.                                                                                          
4:20:55 PM                                                                                                                    
DANA OWEN, STAFF,  SENATOR JOHNNY ELLIS, explained  a handout                                                                   
entitled "The Case for Raising  Alaska's Unemployment Benefit                                                                   
Amount"   (copy   on  file.)      He  highlighted   page   1,                                                                   
"Unemployment  Insurance  Maximum  Weekly Benefit  Amount  by                                                                   
State,"  which  illustrates  where  Alaska's  weekly  benefit                                                                   
falls  in relation  to other  states.   Alaska is  48.    New                                                                   
Jersey,  a state  that has  an employee  contribution to  the                                                                   
unemployment insurance tax system, is third from the top.                                                                       
Mr. Owen discussed  page 2, "Alaska's Maximum  Weekly Benefit                                                                   
-  Unemployment Insurance  1966  - 2006."    This stair  step                                                                   
chart illustrates  the history of raises in  the unemployment                                                                   
insurance benefit  amount.  The rate of $248  was achieved in                                                                   
1997.   This  is  the longest  stretch,  since  1966, of  not                                                                   
raising rates.                                                                                                                  
Mr.  Owen  interpreted   the  table  on  page   3,  "Alaska's                                                                   
Unemployment  Insurance -  Weekly  Benefit Amount  Schedule."                                                                   
This chart  shows the  effect of the  1997 amendment  and the                                                                   
range  of amounts  earned  under the  unemployment  insurance                                                                   
Mr.  Owen   reported  that   page  4,  "Alaska   Unemployment                                                                   
Insurance - Recipients  by Weekly Benefit Amount,  2000."  It                                                                   
illustrates   that  the  largest   portion  of   unemployment                                                                   
insurance recipients are maxed out at $248 weekly benefit.                                                                      
Mr.  Owen  explained  the  graph on  page  5,  "Average  Wage                                                                   
Replacement  Rates  - By  State,  2005".   Alaska  is at  the                                                                   
bottom of the list.                                                                                                             
4:23:05 PM                                                                                                                    
Mr. Owen depicted "Replacement  Rates - Western States, 2005"                                                                   
on page 6.  He pointed out that  Alaska is the lowest at 25.8                                                                   
Mr. Owen showed  on page 7 how "The Target  Gets Farther Away                                                                   
- Alaska,  1987 to 2007."   The amount of benefit  diminishes                                                                   
in relation to the amount of wage it replaces.                                                                                  
Mr.  Owen  discussed  the  "Average  Weekly  Benefits  Amount                                                                   
(AWBA) as a Percentage of Average Weekly Earnings - 2006."                                                                      
Mr.  Owen noted  that the  chart  on page  9, the  "Estimated                                                                   
Annual Unemployment Insurance  Employee Tax Cost with Maximum                                                                   
Weekly  Benefit Amount  Increased, Tax  Share Ratio  Changed,                                                                   
and Minimum Qualifying Wage Raised,  Effective January 2009,"                                                                   
is what  is presented  in the Labor  and Commerce  version of                                                                   
the bill.   The  employee rate  would increase  from $157  to                                                                   
$194 by the time the rate phases  in, in 2013.  This is a $37                                                                   
increase  in the  employee payment.    The graph  on page  10                                                                   
depicts  "Estimated  Annual  Cost   per  Worker  for  Average                                                                   
Employer with Unemployment Insurance  Maximum Qualifying Wage                                                                   
Raised,  effective  January  2009.   In  2007  the  estimated                                                                   
annual cost  per worker  for the  average employer  was $584.                                                                   
In  2008  that  number  drops   dramatically  to  $470.    It                                                                   
continues to  decline until  2010 when the  effect of  SB 120                                                                   
comes into  play.  When  it is fully  in effect in  2013, the                                                                   
cost of $495  is still below what employers  were paying last                                                                   
4:25:49 PM                                                                                                                    
Senator  Ellis pointed  out  that business  groups  requested                                                                   
that this bill be phased in.   He summarized that the bill is                                                                   
long overdue,  is a reasonable  well-crafted compromise,  and                                                                   
is nearly  cost neutral.  This  is the right time;  the rates                                                                   
are the lowest in 28 years.  It is a reasonable compromise.                                                                     
4:27:22 PM                                                                                                                    
DAVID RUIZ, MEMBER, LABORERS UNION  341, Anchorage, testified                                                                   
in support of SB 120.                                                                                                           
LARRY BRINK, ANCHORAGE, testified in support of SB 120.                                                                         
ELSA BILLINGHAM, ANCHORAGE, testified in support of SB 120.                                                                     
She shared a personal story regarding  unemployment benefits.                                                                   
WAYNE STEVENS,  PRESIDENT, ALASKA STATE CHAMBER  OF COMMERCE,                                                                   
testified  in support of  SB 120.   He  included a letter  of                                                                   
support in the members' packets (copy on file.)                                                                                 
4:36:18 PM                                                                                                                    
Senator Elton referred to the  chart that looks at past costs                                                                   
of  the  employee to  the  employer.    The bill  reflects  a                                                                   
savings to  the employer.   He wondered  if the figures  were                                                                   
inflation adjusted.  Mr. Stevens said he did not know.                                                                          
Mr.  Owen  thought they  were  nominal  dollars and  did  not                                                                   
include adjustment  for inflation.   Senator Elton  concluded                                                                   
that the savings to the employer are even greater.                                                                              
4:38:34 PM                                                                                                                    
TOM  BRICE,   AGENT,  ALASKA  DISTRICT  COUNCIL   OF  LABORS,                                                                   
testified  in support  of SB  120.   He  mentioned a  concern                                                                   
about the perception  that the employee will have  to buy the                                                                   
increase, going from 20 percent to 27 percent.                                                                                  
DON ETHERIDGE,  ALASKA  AFL-CIO, testified  in support  of SB
4:40:38 PM                                                                                                                    
Co-Chair Stedman asked if anyone opposed the bill.                                                                              
Senator  Ellis  reported  that  the  National  Federation  of                                                                   
Independent  Businesses  included a  letter  in the  members'                                                                   
packets  which stated  opposition  to the  bill.   There  are                                                                   
others that don't  believe in unemployment insurance  or that                                                                   
it should  be paid 100  percent by the  employer.   He shared                                                                   
discussions regarding the phase-in aspect of the bill.                                                                          
Co-Chair  Stedman asked  how long  the groups  worked on  the                                                                   
bill.  Mr. Owen said about a year.   Senator Ellis added that                                                                   
he has  received a letter from  AGC stating some  support for                                                                   
the bill.                                                                                                                       
SB  120  was   heard  and  HELD  in  Committee   for  further                                                                   
AT-EASE:       4:44:40 PM                                                                                                     
RECONVENE:     4:47:56 PM                                                                                                     
SENATE BILL NO. 246                                                                                                           
     "An Act establishing a working group to analyze the                                                                        
     potential of a hydroelectric power project on the                                                                          
     Susitna River; and providing for an effective date."                                                                       
Co-Chair Stedman  reported that the bill deals  with an issue                                                                   
the committee has been struggling with for several years.                                                                       
Senator  Joe Thomas, sponsor,  explained  the purpose  of the                                                                   
bill.   SB 246 will  direct the Governor  to have  the Alaska                                                                   
Energy Authority  (AEA) analyze  the hydroelectric  potential                                                                   
of  the  Susitna River.    The  AEA will  review  and  update                                                                   
studies done in  the past, evaluate cost  analysis, financing                                                                   
options,  current  and  future  demand,  and  other  critical                                                                   
issues  to determine  the feasibility  of the  project.   The                                                                   
Governor will  submit a final  report to the  legislature not                                                                   
later than July 1, 2010.                                                                                                        
In  recent  years,  Alaskans have  seen  their  energy  costs                                                                   
skyrocket.   These ever-rising  costs and uncertain  supplies                                                                   
not only make  it difficult for Alaskans across  the state to                                                                   
make ends meet,  but also have an adverse impact  on economic                                                                   
The   energy  produced   by  a   hydroelectric  facility   is                                                                   
predictable,  stable, clean  and  low cost.   Currently,  the                                                                   
Bradley  Lake  hydroelectric  dam  produces  energy  for  the                                                                   
Railbelt at  just $.05 per kWh,  far below the $.176  per kWh                                                                   
that the Interior is currently paying.                                                                                          
In addition to these factors,  the majority of our combustion                                                                   
turbine power  plants along  the Railbelt  are over  30 years                                                                   
old and all will need retrofitting  and replacement that will                                                                   
cost between  $1 billion and $2.5  billion over the  next ten                                                                   
years.  Once these replacements  begin, we will continue with                                                                   
the   same  rising   energy  costs,   fluctuating   operating                                                                   
expenses, and high polluting facilities  that the citizens of                                                                   
the state have experienced in the past.                                                                                         
Twenty-five  years ago, when  a dam  along the Susitna  River                                                                   
was last  looked at,  Cook Inlet  Gas cost  $.21 per  million                                                                   
cubic  feet,  the  population  and energy  demand  along  the                                                                   
Railbelt was substantially less  than today, and energy costs                                                                   
were nowhere near  what they are today.  He  said he believes                                                                   
all  these factors,  along with  environmental and  long-term                                                                   
energy  considerations,  merit  a reopening  of  the  Susitna                                                                   
Nothing  is  as  comprehensive  of an  approach  to  reducing                                                                   
costs,  emissions  and dependence  on  finite,  non-renewable                                                                   
energy production  for the Railbelt  and adjacent areas  as a                                                                   
Susitna Dam project.                                                                                                            
Senator Thomas referenced the  high price of oil and gas.  He                                                                   
noted that the fiscal note is  broken down according to tasks                                                                   
with  the objectives  clearly laid  out.   He encouraged  the                                                                   
committee to support the passage of SB 246.                                                                                     
4:52:25 PM                                                                                                                    
Co-Chair Stedman  asked if this is a broader  reaching energy                                                                   
analysis  scope,  farther  reaching  than  just  the  Susitna                                                                   
project.  Senator Thomas agreed  that it was not limited to a                                                                   
Susitna study.   Co-Chair Stedman asked what  the comparative                                                                   
energy supplies  are: a bullet  line, imported LNG,  gas line                                                                   
strikes  in Cook  Inlet,  coal, etc.    Senator Thomas  added                                                                   
other potential hydro in the Railbelt.                                                                                          
4:53:44 PM                                                                                                                    
Senator Elton wondered  if the Railbelt Energy  Fund was more                                                                   
appropriate  as the funding  source.   Senator Thomas  agreed                                                                   
that the fund  would be appropriate.  Co-Chair  Stedman noted                                                                   
that  it also  includes  a look  at the  transmission  lines.                                                                   
Senator  Thomas   agreed  that   it  did  look   at  updating                                                                   
bottlenecks.   Co-Chair Stedman thought the  committee should                                                                   
look further into the Railbelt Energy Fund.                                                                                     
Co-Chair Stedman noted the fiscal  note contains $2.7 million                                                                   
in FY 09 followed up by $1.5 million in FY 2010.                                                                                
4:55:17 PM                                                                                                                    
STEVE   HAAGENSON,   EXECUTIVE    DIRECTOR,   ALASKA   ENERGY                                                                   
AUTHORITY,  spoke of  the  benefits of  hydroelectric  energy                                                                   
projects.   He  suggested identifying  the potential  savings                                                                   
and benefits from  using hydroelectric energy.   He testified                                                                   
in favor of SB 246.                                                                                                             
Co-Chair Stedman  offered the numbers  of $10 billion  to $15                                                                   
billion for cost of the Susitna hydroelectric project.                                                                          
JERRY MCCUTCHEON, ANCHORAGE, testified against SB 120.                                                                          
5:03:52 PM                                                                                                                    
PHIL   STEYER,  DIRECTOR,   CHUGACH   ELECTRIC   ASSOCIATION,                                                                   
testified  in support  of SB 246.   The  Railbelt is  heavily                                                                   
dependent  on  natural  gas  from the  Cook  Inlet  Basin  to                                                                   
generate  electricity.   Electricity from  the three  current                                                                   
hydro  projects is  the least  expensive,  but it  is at  its                                                                   
limit.   As the price  of natural gas  has risen, so  has the                                                                   
cost  to  the public.    Chugach  is  looking for  a  Susitna                                                                   
hydroelectric project for the Railbelt.                                                                                         
Senator  Thomas concluded  by saying  that this  was a  much-                                                                   
needed project.   He  thought that future  gas should  not be                                                                   
used to  solve energy  needs, but rather  should be  sold and                                                                   
exported.   He suggested  that there is  a strong need  to go                                                                   
forward with this bill.                                                                                                         
SB  246  was   heard  and  HELD  in  Committee   for  further                                                                   
The meeting was adjourned at 5:07 PM.                                                                                           

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