Legislature(1993 - 1994)
03/18/1993 01:50 PM Senate L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 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.