Legislature(2015 - 2016)HOUSE FINANCE 519
03/31/2015 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB68 | |
| HB143 | |
| HB135 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 81 | TELECONFERENCED | |
| *+ | HB 143 | TELECONFERENCED | |
| + | HB 135 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 68 | TELECONFERENCED | |
HOUSE BILL NO. 143
"An Act authorizing the Alaska Industrial Development
and Export Authority to issue bonds to finance the
infrastructure and construction costs of the
Sweetheart Lake hydroelectric project; and relating to
legislative approval for a loan from the power project
fund to the Lynn Canal Transmission Corporation."
Co-Chair Neuman MOVED to ADOPT the proposed committee
substitute for HB 143, Work Draft 29-LS0599\E (Wallace,
03/26/15).
There being NO OBJECTION, it was so ordered.
2:57:57 PM
CRYSTAL KOENEMAN, STAFF, REPRESENTATIVE CATHY MUNOZ,
discussed the legislation. She explained that the bill
provided legislative authority for the Alaska Industrial
Development and Export Authority (AIDEA) to issue bonds to
finance the infrastructure and construction costs of the
Sweetheart Lake Hydroelectric project. In addition, the
bill authorized Alaska Energy Authority (AEA) to provide
loans from the Power Project Fund (PPF) for both the Lynn
Canal Transmission Corporation and the King Cove Waterfall
Creek Hydroelectric Project. She detailed that the Federal
Regulatory Agency had accepted the Sweetheart Creek
hydropower license application and was currently processing
the Environmental Impact Statement (EIS). The Sweetheart
Creek project would provide Juneau with an additional 116
thousand megawatt hours; an increase in Juneau's energy
capacity of 25 percent. The project would also provide 85
new jobs, new recreational infrastructure, and fishery
enhancements. The Lynn Canal transmission project would add
approximately 35 miles of transmission line from the
existing Lena substation to the Kensington Mine. She noted
support from the City and Borough of Juneau (CBJ), and the
Southeast Conference.
ADAM BERG, STAFF, REPRESENTATIVE BRYCE EDGMON, reviewed the
King Cove Waterfall Creek Project. He communicated that a
statutory requirement for a loan from the Power Project
Fund (PPF) was legislative approval of loans exceeding $5
million. The Waterfall Creek project immediately required a
loan of $1.2 million, and to advance to construction a loan
totaling $6 million was necessary. He highlighted that the
project was fully designed, permitted, and construction bid
ready. The completed project would provide King Cove the
capability to produce 75 percent of its energy needs with
hydroelectricity.
Ms. Koeneman revealed that passage of the legislation did
not guarantee project completion. The projects were
required to pass financial, economic, and technical
feasibility studies and due diligence analysis as well as
board approval to move forward.
3:02:15 PM
Co-Chair Neuman referred to the new Department of Commerce,
Community and Economic Development (DCCED) fiscal note for
AEA. He read from the analysis:
Although HB 143 provides AEA with required
authorization for a loan, the PPF does not have a
balance sufficient to fund a $22,000,000 loan. The PPF
currently has approximately $13,000,000 in uncommitted
funds. Without additional funds AEA would be able to
provide a loan of approximately $9,000,000.
Co-Chair Neuman asked where the additional loan funds would
come from. Ms. Koeneman offered that the PPF was
replenished as loans were repaid. She stated that
sufficient funds would be available for the loans in HB
143.
Co-Chair Neuman suggested that if the PPF did not currently
have sufficient funds there would not be enough to provide
loans for the bill's projects as well as other worthy
projects around the state. He voiced that the bill asked
for future financing from an account with insufficient
funds. He thought that the state would be financing the
projects in HB 143 at the expense of other communities with
higher energy costs and greater need. He wondered how the
issue should be dealt with.
Ms. Koeneman responded that there were additional private
investment funds that would potentially be available and
the loan amount was "up to $22 million." She elaborated
that the bill granted AEA the authority to provide the
loans if the fund became solvent within the next few years.
She understood Co-Chair Neuman's concerns.
3:05:27 PM
SARAH FISHER-GOAD, EXECUTIVE DIRECTOR, ALASKA ENERGY
AUTHORITY, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC
DEVELOPMENT, explained that the way AEA handled the loans
in the past; when the legislation authorized a greater
amount than existed in the PPF, AEA worked with the
applicant to accept a smaller loan amount. She indicated
that AEA ensured that a proper financing plan was in place
for construction in order to move forward with the project.
Co-Chair Neuman restated his question. He was concerned
that with limited funding for other areas in the state with
greater need and higher energy costs including interior
Alaska, which would not have access to the PPF and their
projects would be in jeopardy. Ms. Sarah Fisher-Goad
replied that AEA attempted to anticipate other needs and
limited the loan to $9 million. She qualified that the
fiscal note was written before the King Cove project was
added. She reiterated that AEA worked with applicants to
provide smaller loans in order not to drain the fund for
smaller communities and utilities that also applied for
loans. She shared that AEA was very aware that the fund was
needed for other projects. She announced that AEA recently
provided a small loan to Pilot Point for diesel generator
repairs. She assured that AEA always kept loan funds
available in order to finance loans for smaller
communities.
Representative Wilson asked about the King Cove project.
She asked whether the community already received Power Cost
Equalization (PCE) and if so, would the project have a
positive impact to substantially lower energy bills. Mr.
Berg deferred to Ms. Sarah Fisher-Goad.
Ms. Sarah Fisher-Goad responded that King Cove did receive
Power Cost Equalization (PCE) but was uncertain what impact
the project would have to lower energy costs. She furthered
that the community of King Cove was very proactive with the
development of hydropower and lowering costs. King Cove had
lower power costs than many other communities due to the
development of hydropower and just barely qualified for
loans from the Renewable Energy Fund due to AEA's emphasis
on higher cost areas. She conveyed that she did not have
the communities PCE figures available but expected that the
project would be "beneficial" to the rate payers.
Representative Wilson requested the information. She wanted
to see communities become more self-sufficient and wanted
AEA to determine whether the project would also lower rates
and therefore, lower PCE payouts and base loan criteria on
those outcomes.
3:11:27 PM
Representative Kawasaki cited the fiscal note and
referenced the PPF balance of $13 million in "uncommitted
funds." He asked whether that meant there were no other
projects under consideration by AEA. Ms. Sarah Fisher-Goad
responded that there were two projects that were pending as
part of the available balance. She reported that AEA
currently had projects, working their way through other
requirements, with committed loan funds not yet distributed
that were still in the fund but not loanable. The cash
balance of the PPF was higher than $13 million considering
the committed funds. She provided the example of the
Reynolds Creek Hydroelectric project which had a $20
million committed loan from the PPF.
Representative Kawasaki asked for instances when AEA would
not authorize the entire loan amount and under what
reasoning. Ms. Sarah Fisher-Goad related a similar
situation for a project in Sitka that received an
authorization for $18 million but the PPF balance was
lower. The City of Sitka was able to find a better loan
with lower interest through the municipal bond bank and
financed the project through the bond bank. She added that
in the past AEA received alternative appropriations for the
loan fund. In 2010, AEA sold the loan portfolio to AIDEA
for a cash infusion into the fund and received a $10
million appropriation directly into the fund. She noted
that another alternative for a project to receive funding
through PPF was through a direct appropriation into the
fund similar to the Humpback Creek project in Cordova.
Representative Munoz requested time to allow Mr. Ziglick
to testify. Co-Chair Thompson agreed.
3:15:45 PM
Representative Guttenberg declared that the Interior Energy
Project (IEP) only needed authorization to change the way
appropriated funds would be used. He claimed that the
interior communities paid some of the highest utility rates
in the nation on a road system. He asked what the kilowatt
costs were currently for the rate payers in the communities
the projects in HB 143 would serve. He wondered what the
savings for the rate payers would be. Ms. Sarah Fisher-Goad
reported that the City of King Cove paid 23 cents per
kilowatt hour after a PCE rate of 8 cents per kilowatt
hour. She would provide additional information with respect
to what the rates would be after the King Cove project was
operational. She informed the committee that AEA did not
have an application from the Lynn Canal transmission
project and deferred to a project spokesman for an answer.
Representative Guttenberg asked whether the transmission
project was "advanced enough." Ms. Sarah Fisher-Goad
responded that without an application she had not done any
analysis. She knew that the project was "closely linked"
with the Sweetheart Lake project.
WAYNE ZIGARLICK, VICE PRESIDENT and GENERAL MANAGER, COEUR
ALASKA KENSINGTON GOLD MINE (via teleconference), stated
that the gold mine was located approximately 45 miles north
of Juneau. He delineated that the mine employed 320 direct
employees and approximately 40 contract employees. The
operation took approximately 8 megawatts of electrical
power to support all of the mining activities. The power
was currently supplied by 7 diesel generators. The cost of
power generation including fuel and maintenance amounted to
12 to 15 percent of the mine's operating cost. He noted
that the power costs were the second greatest operating
expense behind labor costs. He believed that hydroelectric
power would significantly reduce the mines power costs and
increase the mines sustainability. He reported that Coeur
Alaska entered into a "letter agreement" with Juneau
Hydropower. The essence of the agreement committed Coeur
Alaska to negotiate a power sales agreement with Juneau
Hydropower "once the terms of the agreement can be
identified." He relayed that he was the President of the
Lynn Canal Transmission Corporation, which was a "non-
profit entity designed to provide open and non-
discriminatory transmission line services to the northern
Lynn Canal at the lowest possible cost."
3:20:50 PM
Representative Gara did not have a problem with the bill.
He summarized that the loan would be provided to the Lynn
Canal Transmission Corporation to interconnect to the
Kennsington Mine and only applied to the northern Lynn
Canal region. He wanted to know whether other "major" users
aside from the mine would benefit from the transmission
line. Mr. Zigarlick replied that there were other
residential users and landowners that would benefit from
the transmission line.
Co-Chair Thompson requested that the bill's sponsor provide
the committee with more information on how many people the
projects would serve.
Vice-Chair Saddler referred to the letter from AEA (copy on
file) that stated AEA would engage in the "due diligence"
necessary for authorization of the loan regardless of
passage of the legislation. However the letter from AIDEA
(copy on file) stated that they would not proceed without
authorization. He asked for clarification regarding the
discrepancy and wondered how much AEA would expend on due
diligence in the absence of authorization. He read the
following from the AEA letter:
Independent of the legislative authorization and upon
receipt of a PPF loan application AEA will complete
project due diligence analysis of the financial,
economic, and technical feasibility of the project.
Ms. Sarah Fisher-Goad commented that her letter was not
phrased correctly and apologized. She clarified that her
use of the word "independent" meant that the due diligence
would be an effort independent of the authorization. She
explained that even with authorization of the loan, AEA
would still engage in a due diligence effort and emphasized
that the authorization for the loan did not mean the loan
would be approved.
Vice-Chair Saddler relayed that he was familiar with a
Southeast Alaska Regional future energy plan. He wondered
how the projects fit into the plan. Ms. Sarah Fisher-Goad
indicated that she would have to review the Southeast
Integrated Resource plan to determine whether the projects
were specifically addressed in the plan. She would provide
the information.
Representative Munoz indicated that the Integrated Resource
Plan was not accepted by the region because of its
recommendation to utilize woodstoves as a primary source of
generating the regions electricity. She cautioned that she
would not rely on the study's outcomes to draw any
conclusions about the bill's projects. She added that the
projects were supported by the Southeast Conference which
was a regional entity of Southeast communities and
businesses.
3:25:27 PM
Representative Pruitt remembered that the report
recommended that Southeast should turn to wood burning
stoves. He indicated that the projects would help mitigate
the issues created by wood burning in the Juneau area.
Representative Munoz offered that the project would
increase the city's hydroelectric capacity by 20 percent
and positively impact rate users.
Representative Edgmon surmised that both projects met the
objectives of the Alaska Energy Policy that was adopted in
2010. He recalled that the policy identified the PPF as the
primary source of funding for projects that benefitted rate
payers and for business development. He requested an
opportunity to further discuss the policy during the next
hearing on the bill.
Representative Guttenberg pointed out that many communities
around the state are moving towards using biomass fueled
energy. He stated that Southeast had an ample quantity of
biomass and cited a biomass project in Tok for heating
schools. He believed that biomass took the pressure off of
using transmission lines.
Representative Munoz stated that she had not intended to
diminish the use of biomass fuels and stated that there
were successful biomass projects in Southeast. She
commented that the integrated plan recommended a major
conversion of much of the region which did not fit the
model of a region rich in water resources. She believed
that biomass was part of the solution but not the entire
solution.
HB 143 was HEARD and HELD in committee for further
consideration.