Legislature(2011 - 2012)BARNES 124
02/14/2012 03:00 PM House ENERGY
| Audio | Topic |
|---|---|
| Start | |
| HB294 | |
| Presentation: Overview by Cold Climate Housing Research Center | |
| Presentation: Progress Report on Lake Chikuminuk Hydropower Project | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 294 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED | ||
HB 294-POWER COST EQUALIZATION
3:12:46 PM
CO-CHAIR FOSTER announced that the first order of business would
be HOUSE BILL NO. 294, "An Act relating to the power cost
equalization program."
3:13:48 PM
REPRESENTATIVE LYNN moved to adopt HB 294 as the working
document. There being no objection, HB 294 was before the
committee.
3:14:31 PM
REPRESENTATIVE LYNN moved to adopt the two fiscal notes attached
to HB 294, one of which was identified as HB294-DCCED-AIDEA-02-
10-12. There being no objection, the fiscal notes were adopted.
3:15:12 PM
REPRESENTATIVE BRYCE EDGMON, Alaska State Legislature, prime
sponsor of HB 294, introduced the bill, saying that HB 294
proposes to return the power cost equalization (PCE) program to
its pre-1999 form. At that time, the program offered subsidies
to all users in rural communities with the exception of federal
facilities. Today, the PCE program provides subsidies to
consumers up to the level of 500 kilowatt (kW) hours of use per
month, and is largely limited to residential users in eligible
communities. The bill will expand the monthly cap to 700 kW
hours and will also return more non-residential users back into
the program. Although discussion about HB 294 will focus on the
PCE program, Representative Edgmon expressed his intent to also
discuss the immediate issue of the high cost of energy in rural
communities that rely on diesel fuel for almost any activity.
Representative Edgmon observed that the PCE program is already
in place and, with expansion, could provide immediate relief
from the high cost of energy to rural Alaska. He acknowledged
that the bill has supporters and detractors and testimony will
cover the fiscal impact and weaknesses of the program - he
welcomed the debate. The legislature has taken a lot of action
regarding energy issues recently because of the increase in oil
prices; in fact, the state has spent a considerable amount of
money for weatherization, home energy rebate, low-income home
heating assistance, and community revenue sharing programs, and
$400 million has been directed to the PCE endowment, yet it has
not had much effect on the utility bills in rural areas.
Representative Edgmon urged for a vigorous discussion of the
bill, and a focus on the rising costs of energy in rural Alaska.
3:20:01 PM
REPRESENTATIVE PETERSEN asked whether grocery stores would
qualify for PCE with the changes to the program authorized by HB
294.
REPRESENTATIVE EDGMON indicated yes, and pointed out that the
increase from 500 kW hours to 700 kW hours would not make a
difference in Dillingham or Bethel, but would make a difference
in the energy costs of a business in a small village, and
thereby in the overall cost structure of rural Alaska.
3:22:06 PM
SARA FISHER-GOAD, Executive Director, Alaska Energy Authority
(AEA), discussed the fiscal impact of the legislation. She
directed attention to the fiscal note identified as HB294-DCCED-
AEA-02-10-12, and said the estimated increase in the cost of the
program is approximately $33,126,000. On page 2 of the fiscal
note the estimate is divided into three sections: $15,140,000
represents the 40 percent increase in customers' reimbursement
from 500 to 700 kW hours per month - this estimate is based on
the assumption that all customers will use 700 kW hours for 12
months, although this may not be true; $17,900,000 represents
the annual cost to include commercial and public school
customers as eligible customers - this estimate was based on
1999 statistics for commercial customers and two public school
buildings per community; and $86,000 represents an annual
increase of one additional PCE clerk to manage the program and
verify eligibility. Ms. Fisher-Goad said page 3 indicated out-
year estimates broken down to the PCE endowment fund and the
$400,000,000 coming to the program in future years. The PCE
endowment is based on a three-year average market value so AEA's
projections are for earnings to 7 percent of the market value.
She advised that the second fiscal note reflects the new clerk
position at the Alaska Industrial Development and Export Agency
(AIDEA), because AIDEA has the positions that carry out AEA
programs.
3:26:27 PM
MEERA KOHLER, President and Chief Executive Officer, Alaska
Village Electric Cooperative (AVEC), said AVEC is a nonprofit
member-owned utility serving 54 villages. She advised AVEC is
showing a decline in population for the first time since 1968,
which is a reflection of the exodus from the villages that began
in 2008. She expressed AVEC's support of HB 294, and recalled
that PCE was established in 1984 to bring the cost of
electricity in rural Alaska to a level equal to that of urban
Alaskans. At the time of inception, the benefit of up to 700 kW
hours was extended to all nongovernment consumers. The program
has been trimmed back several times in different ways and the
result is that eligible kW hours have been reduced by about one-
half. The bill seeks to restore additional eligible hours and
eligibility to commercial customers. Ms. Kohler opined the
restoration of eligibility is a meaningful benefit for the
thousands of Alaskans who are commercial customers. The members
of AVEC account for about one-third of the state's PCE benefits
- $11.3 million - and restoring the benefits as directed by HB
294 will result in an additional $4,280,000 in PCE credits to
its members. Further, adding school facilities in AVEC's
villages adds $227,000, and brings the total to a 40 percent
increase. Ms. Kohler acknowledged these numbers are different
than what was presented by AEA, because AEA assumed customers
would claim 700 kW hours for 12 months. Also, the actual
average consumption of PCE-eligible electricity by residential
consumers is currently 284 - not - 500, kW hours. Her
organization estimates that its customers' average consumption
would go up from 380 to about 600 kW hours, or less. According
to AEA's report, FY 10 total cost of electricity in PCE
communities was about $157,600,000, and PCE provided less than
20 percent. She concluded that restoring the benefits will
result in an increase of program cost to about 27 percent of the
cost of delivering electricity in rural Alaska, and she strongly
encouraged the committee to support the bill.
3:31:26 PM
BRAD REEVE, General Manager, Kotzebue Electric Association, said
his company is in favor of reexamining the program to seek a
reduction in the high cost of power in rural areas. The average
usage in Kotzebue is about 560 kW hours per month, and the
winter seasonal use is the most difficult for families to
manage. He acknowledged there has been past opposition to the
"government paying government for relief," as addressed by the
bill; however, the benefits to schools and businesses in small
villages could "make or break" them. Mr. Reeve suggested
continuing conservation and taking a close look at the details
of the program. He expressed his wish for a similar program for
heating fuel due to the very high prices for diesel in Kotzebue.
Mr. Reeve closed, saying any assistance is appreciated.
3:34:47 PM
JODI MITCHELL, Chief Executive Officer, Inside Passage Electric
Cooperative (IPEC), informed the committee IPEC is a regulated,
member-owned, nonprofit, electric cooperative that serves five
rural service areas in Southeast with primarily diesel-generated
power. She spoke in support of the bill, and opined that energy
costs are a quality-of-life issue. Ms. Mitchell cautioned that
the 500 kW hours limit in the winter causes the utility to have
a higher rate because of lesser economies of scale. Further,
she had heard from her members that businesses are failing in
the face of uncertain energy costs, and because customers are
devoid of disposable income. Members of her cooperative have
also seen out-migration, especially in Kake, and this is very
disturbing because of the potential loss of its culture.
3:39:13 PM
JOHN HANDELAND, General Manager, Nome Joint Utility System,
advised that the City of Nome has been interested in changes to
the program for a number of years. Nome is also experiencing
record-breaking cold and an increased cost of fuel, thus the
city council and utility board have made energy issues a higher
priority. He said the increase to 700 kW hours is beneficial
and the addition of businesses and commercial customers will
provide assistance to small businesses. Mr. Handeland pointed
out that the 70 kW per month eligible for community facilities
in each residential community is the limit at least since 1999,
but there have been changes...
3:41:43 PM
Due to technical difficulties, the committee took an at-ease
from 3:41 p.m. to 3:46 p.m.
3:46:30 PM
MR. HANDELAND continued to say that the number of kilowatts that
are available for local community facilities is an area that
should be reviewed as the legislature works on the bill. He
disagreed that the change in the PCE eligibility rate impacts
residents' efforts toward conservation; in fact, customers are
fully aware of the level at which PCE is available and use
electricity out of necessity, not out of luxury. Regarding
AEA's assumption on the use of electricity to compute the cost
of the program, he pointed out that people need assistance
during the winter, and suggested kilowatts could be banked like
"roll-over minutes," against the need for higher use in the
winter for supplemental heat. This would not be difficult to
monitor using modern day accounting systems. Finally, Mr.
Handeland stated that the City of Nome, because of the extreme
cold, is seeing a substantial increase in its accounts
receivable, and is recommending that the effective date of HB
294 be retroactive to the start of the current state fiscal year
- 7/1/11 - for the benefit of consumers who need help.
3:53:03 PM
GENE STRONG, Board Member, IPEC, said he supports the increase
to 700 kW hours as this will help rural communities and stop
out-migration to urban areas. He also encouraged seasonal
billing, instead of monthly billing, because by the time PCE
papers arrive the oil bills are past due. Mr. Strong noted that
the economies of the small communities are tight, and
nonexistent in winter. His utility covers a large area of five
communities that are not connected, although there are some
hydroelectric projects that will be underway in the future with
legislative support.
3:56:18 PM
PETER ANDREW, President of the Board of Directors, Nushagak
Electric & Telephone Cooperative, Inc., expressed his support of
HB 294. Nushagak is in the Bristol Bay region and provides
electricity, telephone, cable TV, and internet service. Mr.
Andrew explained that like Nome, Dillingham serves as a hub to
provide for many smaller communities, and restoring the increase
in kW hours will enhance economic growth and will help Alaskans.
His area has also suffered from record cold and he urged support
for the bill.
3:57:46 PM
REPRESENTATIVE EDGMON asked how the aftermath from the cold
winter will impact the Bristol Bay region and IPEC utility
customers.
3:58:28 PM
MR. ANDREW said he has seen Alaskans buying heating oil five
gallons at a time. This bill "frees them up a little bit more
to buy a little more fuel." In addition, Dillingham residents
have been using wood for heat and the weatherization program has
helped rural Alaskans stretch their dollars.
4:00:01 PM
ANDREW GUY, President and Chief Executive Officer, Calista
Corporation, spoke in support of HB 294, specifically for the
provision to include commercial businesses. The Alaska Native
Claims Settlement Act (ANCSA) corporations were formed 40 years
ago to benefit shareholders and descendants, and to improve
socioeconomic standards. One of the best ways to do that is to
start new businesses that provide jobs; however, it is very hard
to start and operate a business in rural Alaska because of the
cost of electricity. In his travels around his region, he sees
people going to Bethel and Anchorage to shop, due to the higher
cost of local goods. Mr. Guy said this is wrong and stops
growth in the local economy. He urged consideration of HB 294
as it will help village corporations grow by lowering the cost
of doing business. He expressed his belief that urban
businesses have benefited from energy programs in the Railbelt,
and rural Alaska deserves parity.
4:03:46 PM
HENRICH KADAKE SR, Mayor, City of Kake, said he whole-heartedly
supports the bill because the population in Kake has decreased
almost 45 percent - from over 900 residents to 510. The
decrease in population is due to the small businesses in Kake
that cannot operate because they cannot afford energy, and
because houses are not kept warm. Ninety percent of the
population lives on a fixed income, and even the tribal
corporations cannot stay in business. Mr. Kadake urged the
committee to support the bill saying, "it's a good thing for the
people in the rural communities and Southeast too."
4:05:28 PM
ANDY VARNER, Executive Director, Southwest Alaska Municipal
Conference (SWAMC), said SWAMC is the Alaska Regional
Development Organization Region (ARDOR) representing Bristol Bay
Borough, Lake & Peninsula Borough, Kodiak Island Borough, and
the Aleutian and the Pribilof Islands. He expressed his
appreciation to Representative Edgmon for introducing the
legislation. One of the major objectives of SWAMC is to
increase economic and business development in its region;
however, rural Alaska is a challenging environment in which to
operate a business. The high costs of energy, infrastructure,
and long distances to markets combine to stifle economic
development, particularly when the full cost of energy is passed
on to consumers in a vicious cycle. Mr. Varner agreed that many
businesses are on the verge of closing because of fuel costs,
and observed that schools need to put their money into
curricula. In times of high oil prices, the state "rides on the
back of residents and businesses," and HB 294 is a good start to
a conversation on the goal of keeping people in business in
rural Alaska. He advised that PCE is critical to rural Alaskans
- as are the other programs supporting energy efficiency,
renewable energy, and weatherization - but HB 294 would directly
impact businesses.
4:09:32 PM
ROBERT VENABLES, Energy Coordinator, Southeast Conference,
stated that Southeast Conference is the state's regional
development organization for Southeast Alaska, and the federally
recognized economic district. He thanked the legislature for
its efforts to bring about the long-term improvements that are
needed to develop regional and renewable energy resources that
will diminish and displace the dependency on diesel fuel, as
well as the need for PCE. At this time, however, communities
have devastated economies and businesses are hurting in
communities like Hoonah, and disappearing in communities like
Angoon and Kake. In Southeast, the cost of operating schools
continues to increase although federal support has diminished.
The bill does not seek to establish a new program, but restores
the original intent of PCE, and gives rural businesses a future.
Mr. Venables said that HB 294 can help as everyone works for
better long-term solutions.
4:12:24 PM
TARA BOURDUKOFSY, Director, Human Services, Aleutian Pribilof
Islands Association, Inc. (APIA), said APIA represents 13 of the
federally recognized tribes in its region. Ms. Bourdukofsy
supervises the federal Head Start, Administration for Children
and Families, Department of Health and Human Services programs
in Sand Point, St. Paul, Unalaska, and King Cove, and she
introduced the Head Start coordinator. She said APIA is very
encouraged by the bill and urged that it be moved forward.
4:14:19 PM
MARK WASIERSKI, Coordinator, Head Start, APIA, informed the
committee of the importance of including Head Start programs as
part of the school system in Alaska so PCE can be available to
rural programs whether they are housed alone, within a school
district, or are in another facility, such as a tribal community
building. Rapidly increasing power costs have drastically
impacted the Head Start program's ability to provide the basic
program needs of health, safety oversight, and nutritional
services, as money is diverted to pay for power costs of up to
$2,000 per month. The inclusion of Head Start programs into PCE
will free money to more adequately provide for the basic
required services that Head Start provides to Alaska's most
needy children. Mr. Wasierski expressed his full support of the
bill and a return to the "1998 levels."
4:15:49 PM
ANGELA MORGAN, Executive Director, Middle River, Interior Rivers
Resource Conservation & Development Council, Inc. (Interior
Rivers RC&D), Natural Resource Conservation Service (NRCS), U.S.
Department of Agriculture, and a representative of the Aniak
Traditional Council, said Interior Rivers RC&D council
represents eleven villages on the middle Kuskokwim River and
four villages on the Yukon River. She said she was also
speaking on behalf of the Aniak Traditional Council. One of the
main goals of Interior Rivers RC&D council is to seek economic
development for the villages, therefore, she expressed her
support of HB 294, and the increase from 500 to 700 kW hours.
Her region has also suffered from extremely cold weather,
especially in the middle Yukon River and middle Kuskokwim River
areas, and residents are having broken pipes and difficulties
caring for their families and elders during power outages. Even
with the current level of PCE, residents are paying over $1,000
per month for fuel and electricity, and are worried about being
disconnected for nonpayment of their bills. Ms. Morgan stressed
that small businesses also need to be eligible for PCE, and
acknowledged the past work by legislators that has helped the
region.
4:20:39 PM
CO-CHAIR FOSTER said HB 294 would be held for further
consideration.