Legislature(1993 - 1994)

03/18/1993 01:50 PM Senate L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
               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                 
  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 &                 
  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                 
  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                 
  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                 
  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
  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                 
  SENATOR KELLY  thanked everyone for their  participation and                 
  adjourned the meeting at 3:28 p.m.                                           

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