Legislature(1993 - 1994)
03/18/1993 01:50 PM Senate L&C
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* first hearing in first committee of referral
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SENATE LABOR AND COMMERCE COMMITTEE
March 18, 1993
1:50 p.m.
MEMBERS PRESENT
Senator Tim Kelly, Chairman
Senator Steve Rieger, Vice Chairman
Senator Bert Sharp
Senator Judy Salo
MEMBERS ABSENT
Senator Georgianna Lincoln
COMMITTEE CALENDAR
SENATE BILL NO. 154
"An Act relating to the economic development grant program;
and providing for an effective date."
SENATE BILL NO. 163
"An Act relating to power cost equalization; and providing
for an effective date."
SENATE BILL NO. 124
"An Act relating to the powers and finances of the Alaska
Energy Authority; and providing for an effective date."
SENATE BILL NO. 125
"An Act making appropriations to the energy authority
revolving fund; and providing for an effective date."
PREVIOUS SENATE COMMITTEE ACTION
SB 154 - See Labor and Commerce minutes dated 3/16/93.
SB 163 - No previous action to record.
SB 124 - No previous action to record.
SB 125 - No previous action to record.
WITNESS REGISTER
Joshua Fink, Legislative Aide
% Senator Kelly
State Capitol
Juneau, Alaska 99811-1132
POSITION STATEMENT: Commented on SB 154.
Dave Hutchins, Executive Director
Alaska Rural Electric Co-op Association
203 W. Tudor, #200
Anchorage, Alaska 99503
POSITION STATEMENT: Supported SB 124 and SB 125.
Ron Garzini, Executive Director
Alaska Energy Authority (AEA)
P.O. Box 190869
Anchorage, Alaska 99519
POSITION STATEMENT: Supported SB 124 and SB 125.
Brent Petrie, Director of Planning
Alaska Energy Authority
P.O. Box 190869
Anchorage, Alaska 99503
POSITION STATEMENT: Supported SB 124 and 125.
Clayton Hurless, General Manager
Copper Valley Electric Association
P.O. box 45
Glennallen, Alaska
POSITION STATEMENT: Supported SB 124 and SB 125.
Eric Wholforth
Alaska Energy Authority
P.O. Box 190869
Anchorage, Alaska 99519
POSITION STATEMENT: Supported SB 124 and SB 125.
Jim Gifford
Copper Valley Electric Association
P.O. Box 1253
Valdez, Alaska 99686
POSITION STATEMENT: Supported SB 124 and SB 125.
Donna Tollman
Copper Valley Economic Development Council
P.O. Box 9
Glennallen, Alaska 99588
POSITION STATEMENT: Supported SB 124 and SB 125.
Ken Richey, General Manager
Matanuska Electric Association
951 Balsam
Wasilla, Alaska 99654
POSITION STATEMENT: Supported SB 124 and SB 125.
ACTION NARRATIVE
TAPE 93-20, SIDE A
Number 001
SENATOR KELLY called the Senate Labor and Commerce meeting
to order at 1:50 p.m. and announced SB 154 Economic
Development Grant Fund to be up for consideration.
JOSHUA FINK, Legislative Aide to Senator Kelly, explained
the CS.
SENATOR RIEGER moved to adopt the CS to SB 154. There were
no objections and it was so ordered.
SENATOR RIEGER moved to pass CSSB 154 from committee with
individual recommendations. There were no objections and it
was so ordered.
Number 50
SENATOR KELLY announced SB 163 POWER COST EQUALIZATION to be
up for consideration.
SENATOR PEARCE said that approximately $600,000 more would
be needed in the fiscal year '94 budget for power cost
equalization.
SENATOR RIEGER asked why federal facilities are exempted
from the PCE. SENATOR PEARCE replied that at the moment
federal facilities receive PCE. Now federal and state
facilities with the exception of public schools will not get
subsidized power.
Number 132
DAVE HUTCHINS, Executive Director, Alaska Rural Electric
Coop Association, said many of their members are
participants in the PCE program and they do not oppose SB
163. They think the change is appropriate as a defensive
measure for the program.
MR. HUTCHINS remarked on page 2, line 9 the phrase,
"considering the rate of fuel cost and power demand" is
nonsensical and needs to be rationalized.
SENATOR PEARCE said this was the first time she has heard
that issue mentioned and she thought it could be dealt with
in Finance Committee.
Number 176
SENATOR SHARP asked if there were guidelines somewhere in
statute about adjusting individual utilities. MR. HUTCHINS
answered yes.
SENATOR SHARP moved to pass SB 163 and fiscal note from
committee with individual recommendations. There were no
objections and it was so ordered.
SENATOR KELLY announced SB 124 ALASKA ENERGY AUTH POWERS &
FINANCES and SB 125 APPROP: ENERGY AUTHORITY REVOLVING FUND
to be up for consideration.
RON GARZINI, Alaska Energy Authority (AEA), said one of the
key provisions of SB 124 was that they could do something
more than just build interties. SB 124 and SB 125
anticipate the urban part of the state being developed on an
intertie basis with 0% interest loans. This has been the
standard for intertie developments in the lower 48. The
consumer impact is very low in the railbelt. Their proposal
costs $5 per consumer more than the $90 million direct
grant. That would allow them to create a revolving fund and
to do other things down the road outside the plan. Another
component of their plan is where they take power cost
equalization out of the general fund and annualize it over a
20 year period.
Number 283
MR. GARZINI said that PCE annuity is essential if they are
going to do anything with the problems with the rural
utilities in Alaska. He said no one is interested in
acquiring these rural utilities until there is a
forecastable future. They hope to do this through utility
consolidation.
Further, they think the PCE annuity would give them the
leverage to deal in the private sector with problems like
tank farms by giving them a cash flow to pledge.
Setting up a PCE annuity would help in persuading the
federal government to provide a mainframe REA type intertie
system with the rural communities.
MR. GARZINI stated the AEA is not attempting to avoid the
legislative right to appropriate because in SB 124 and SB
125 every year the legislature would appropriate the PCE.
They further only ask for statutory authorization to move
forward on the northern, southern, and Tyee-Swann intertie,
because they have been studied. They do not ask to move
forward on Copper Valley, because statutory requirements
have not been complied with, yet.
Number 338
SENATOR SALO asked him to explain more about the Copper
Valley intertie. MR. GARZINI said they have requested the
money to make the Valdez/Copper Valley intertie, but they
haven't finished the feasibility studies and planning.
SENATOR RIEGER asked about the $5 per customer computation,
because he didn't come up with that figure at all. MR.
GARZINI said a three page memo dated March 1, 1993 details
how they carefully came up with that computation.
Number 390
BRENT PETRIE, Director of Planning, AEA, explained the $10.4
million includes the 0% interest loan as well as revenue
bonds for other loans that would be required to finance the
railbelt interties. He said more than just the railbelt
funds were involved. They propose to eliminate a number of
the existing loan funds, adding surplus monies left from the
Bradley Lake Project, adding a revenue stream from the
Fordham Coal Project, approximately $10 million per year,
and the annual revenue stream from loans.
Number 453
SENATOR SALO asked him why he needed an exemption from the
procurement code. MR. PETRIE replied that normally they
would put the projects out to bid, but in the case of the
two interties they feel the utilities have sufficient
engineering staff and construction management to do the
interties with their own forces. The present procurement
code doesn't allow AEA, as a state agency, to contract with
the cooperatives. He said they would use the Department of
Revenue to manage the funds they have.
SENATOR SALO asked what the name of the fund would be. MR.
PETRIE said it would be called the Energy Authority
Revolving Fund.
TAPE 20, SIDE B
Number 580
MR. PETRIE said the fund could be managed so that a certain
amount is available in each fiscal year for the PCE program
or other programs the legislature might decide upon. The
legislature would still have to appropriate monies out of
that revolving fund to the power cost equalization program.
Number 525
SENATOR RIEGER asked if AEA owns any projects? MR. PETRIE
answered that they own about $1 billion worth of projects -
the Anchorage/Fairbanks Intertie, all of the Fordham Coal
projects, and the Bradley Lake project.
SENATOR SALO asked if the major intertie projects are hoping
for more than an interest free loan in building their
projects? MR. PETRIE said the railbelt utilities and the
energy authority have signed a memorandum of understanding
that supports this approach. A grant would be preferred.
Number 472
SENATOR SALO asked how the rural areas would access the
money. MR. PETRIE explained there were a number of electric
cooperatives they would loan to for those types of projects.
There are over 70 independent utilities that have less than
200 customers each. They would like them to come under the
umbrella of some of the large utilities that have proven
track records.
MR. PETRIE said there were a number of technical amendments
that dealt with their feasibility analysis. He said if the
utilities have agreed to bear all the costs of completing
that project, they didn't see the harm in the provision
saying a project can go forward if it exceeded the
construction cost approved by the legislature provided that
no additional costs were payable by the state. Here the
anticipation is that one of the interties might cost more
than $90 million. Since the utilities agreed to bear all
the costs of completing the project, they didn't see harm
with this provision. They did not want to see a project
come to a halt if only $5 million was needed to complete it.
SENATOR KELLY commented that meant that they could commit to
unlimited projects if they didn't use general fund
appropriations.
Number 304
CLAYTON HURLESS, General Manager, Copper Valley Electric
Association, supported funding to the maximum extent
possible, this year, the proposed intertie system. A good
energy infrastructure is probably the single most important
factor in the future of this state. He said the cost of
energy is going up and the more money they can find that
does not have debt service attached to it, the better they
can do for their customers.
SENATOR KELLY asked what was the downside to putting a
turbine in the pipeline? MR. HURLESS said he couldn't speak
authoritatively on that issue, but he knew there was some
concern on the part of Alyeska that they might be classed as
a public utility.
Number 165
ERIC WHOLFORTH, AEA, said Mr. Petrie has covered all the
points he was interested in.
Number 144
JIM GIFFORD, Valdez, Copper Valley Electric Association
Board member, asked for their support in construction of
electric transmission line #OPS11 between Sutton and
Glennallen. It would provide rate stabilization and
economic growth for the communities of the Copper Basin and
Valdez.
DONNA TOLLMAN, Copper Valley Economic Development Council,
said one of the major impediments to economic development in
their region is the cost of power.
KEN RICHEY, General Manager, Matanuska Electric Association,
supported these bills because they are one way to get the
northern and southern intertie constructed. He said it
would help to get better economic use of Bradley Lake power.
BECKI GRAY, Golden Valley Electric Association, supported SB
124.
DAVID HUTCHINS again said his members all support this
approach to do some of the jobs that need to be done.
TAPE 21, SIDE A
Number 001
MR. HUTCHINS said that it is important to not put off this
decision.
SENATOR KELLY thanked everyone for their participation and
adjourned the meeting at 3:28 p.m.
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