Legislature(2011 - 2012)HOUSE FINANCE 519
04/04/2012 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB190 | |
| HB365 | |
| HB212 | |
| HB294 | |
| HB255 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 289 | TELECONFERENCED | |
| + | HB 255 | TELECONFERENCED | |
| + | HB 294 | TELECONFERENCED | |
| + | HB 365 | TELECONFERENCED | |
| + | HB 212 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 190 | TELECONFERENCED | |
HOUSE BILL NO. 294
"An Act relating to the power cost equalization program."
Vice-chair Fairclough MOVED to ADOPT the CSHB 294 (FIN) 27-
LS1108\D Work Draft as a working document before the
committee.
Co-Chair Stoltze OBJECTED for purpose of discussion.
JOE MICHEL, STAFF, CO-CHAIR STOLTZE explained the changes
in version D. He stated that version D added section 3 to
the legislation. Section 3 added conditional language; if
the billed passed it would not take effect unless there was
an appropriation of $150 million, or more, into the Power
Cost Equalization fund (PCE). The appropriation would need
to occur during the 27th legislature.
Co-Chair Stoltze WITHDREW his objection. There being NO
further OBJECTION it was so ordered.
REPRESENTATIVE EDGMON, SPONSOR, explained that PCE was
established in 1984 and provided financial relief for rural
consumers, up to 500 kilowatt hours per month for those who
were eligible. He related that the formula was based on
fuel and non-fuel cost, and eligible communities were
determined by the Regulatory Commission of Alaska. He said
that the program was monitored by monthly reports to the
Alaska Energy Authority (AEA). The $400 million
appropriation granted in July of 2011 raised the PCE
endowment to $700 million. He admitted that the legislation
was major and had a large fiscal note attached. He strongly
believed that it was the best way to assist rural consumer
with escalating fuel prices.
Representative Edgmon detailed that the bill expanded the
monthly cap form 500 kilowatt hours to 600, and allowed for
commercial uses to be brought back into the program with
the limitation of 600 kilowatt hours, with an overall use
per month of 2400 kilowatt hours. He added that the bill
would exempt state and federal facilities and non-
residential consumers.
Co-Chair Stoltze understood that the bill included small
businesses.
Representative Edgmon replied in the affirmative. He
explained that barber shops, coffee shops, "mom and pop"
type businesses would benefit. He shared that most
communities never reached the 60 percent mark of reaching
the 500 kilowatt cap. He stated that the bill was designed
to allow for commercial entities in smaller communities to
have some relief when providing electricity in an era of
very high cost.
Co-Chair Stoltze noted that the introduction of the
legislation offered an opportunity to educate the general
public on traditional kilowatt per hour usage in the
average home.
3:35:32 PM
Representative Edgmon described having to barge in diesel
fuel to rural communities; communities with fixed utility
costs spread over a small consumer base. He relayed that
these small communities paid electricity rates 3 to 4 times
the average rate in Anchorage, Fairbanks and Juneau.
Representative Edgmon spoke of a study done by the
Institute of Social and Economic Research which had
revealed that the program was in limited use in rural
areas, and that the communities could utilize it more if
they could keep on top of the required paperwork. He said
the larger users of the program were in the northern and
southeastern parts of the state. He noted that the fiscal
note was for approximately $20 million. He estimated that
this was on the high-end of the price range.
3:39:41 PM
Representative Gara spoke in support of the bill. He noted
that the PCE program was necessary, but stressed the
importance of encouraging energy efficiency in the state.
He hoped that in the future a cost savings component could
be added to the program.
Representative Edgmon pointed out to the committee that the
state had invested substantially in weatherization
programs. The program was designed in such a way that if
fuel costs went down, so did the PCE benefit. He said that
in 2011, the Renewable Energy Grant Fund Program provided
approximately $6 million in energy savings; most of which
could be attributed to two projects: the Gustavus False
Creek Hydroelectric Project and the Pillar Mountain Wind
Project in Kodiak. He added that there had been other
turbine systems in Western Alaska that had contributed to
the overall reduction of PCE costs. He stressed that the
report requirements were very stringent.
3:43:32 PM
Representative Wilson queried the average savings per
household using the 500 kilowatt formula.
Representative Edgmon replied that the PCE program saved
participating utilities approximately 30 percent.
Co-Chair Stoltze OPENED public testimony.
3:44:42 PM
VAL ANGASAN, BRISTOL BAY HOUSING AUTHORITY, DILLINGHAM,
(via teleconference), testified in support of the
legislation. He shared that the high cost of fuel had
hindered grow the opportunity in rural Alaska. He revealed
that in the area milk was $10 per gallon, $6 for gas. He
said that surplus income in the area was non-existent. He
felt that the PCE program was critical in rural areas.
Representative Edgmon interjected that he had heard reports
of gas being as high as $7.23 per gallon in Dillingham.
ROBBIE GARRETT, SELF, KAKE, (via teleconference), voiced
support for the legislation. He shared that in rural areas
the rates were high, especially when the rate fell under
the non-commercial rate; nearly $.85 per kilowatt. He
stated that as a business owner he did not view PCE as a
subsidy in perpetuity, but rather temporary assistance to
help stabilize cost.
3:50:42 PM
MEERA KOHLER, CEO, ALASKA VILLAGE ELECTRIC CO-OP (AVEC),
testified in favor of the bill. She stated that AVEC served
54 communities in Alaska with electricity. She stated that
the average residential consumption in Alaska's villages
was approximately 400 kilowatt hours year round. She said
the average varied widely between regions. She relayed that
averages were higher in the northwest because the water and
sewer systems in the region used electricity. She opined
that winter was a time of hardship in many communities;
using well above the 500 kilowatt cap. She said that homes
in the rural areas ranged from 600 to 1200 square feet. She
said that AVEC had approximately 2800 commercial customers,
half of which would be eligible under the bill. She
highlighted that AVEC represented one-third of all PCE
users in Alaska, and that consumption could be expected to
rise 35 to 40 percent were the legislation to pass. She
informed the committee that as of the end of March 2012,
the balance of the PCE Endowment fund was $780 million. She
qualified that the fund had not been that large for very
long; $400 million had recently been injected into the
fund.
Co-Chair Stoltze queried when the last big injection to the
fund had occurred.
Ms. Kohler explained that $100 million from the
constitutional budget reserve (CBR) had been injected upon
the adoption of the fund in 2000. She added that $85
million from the Fordham Coal sale was added several years
later; then in 2006, $187 million was added by Governor
Murkowski.
3:54:23 PM
AT EASE
3:55:07 PM
RECONVENED
Co-Chair Thomas asked if Ms. Kohler saw an end to the
problem of providing affordable electricity to rural
Alaska.
Ms. Kohler explained that the effective rate for
residential consumers for the first 500 kilowatt hours was
approximately $.21 per kilowatt hour. She said that until
the price of electricity was at a reasonable level, $.10 to
$.12 per kilowatt, there would never be enough additional
funding.
Co-Chair asked if, in the event that the state faced a
deficit due to declining oil production, the PCE fund could
be in danger.
Ms. Kohler replied that the fund was predicated on an
adequate revenue stream.
Co-Chair Thomas stressed that oil production needed to be
higher in order to fund future energy programs and projects
in the state.
Representative Edgmon agreed. He felt that the PCE was
expensive, but necessary for rural Alaska. He opined that
the communities in rural Alaska were shrinking. He said
that the legislature needed to consider what rural Alaska
should look like into the future, with the understanding
that the sustainability of communities was tied directly to
energy.
Co-Chair Stoltze noted that the larger urban areas had
voiced a majority of the support for PCE program.
3:59:01 PM
Representative Joule relayed that it was an anomaly when
oil went over $100 per barrel mark. He said that oil
maintaining above $100 per barrel was contributing the high
cost of energy. He agreed that a lot of money was being
spent on the issue, but believed that the money needed to
be spent in order to deliver energy to all parts of Alaska.
He thought that the structure of the PCE was a creative way
to corral funds for energy relief.
Representative Wilson asked if there were any energy
projects at work in rural Alaska that were lowing costs.
Ms. Kohler replied that the company owned more wind
turbines than any other company in the state. She asserted
that AVEC had been aggressive in the pursuit of affordable
energy. She said that the village with the lowest fuel cost
component in rural Alaska was Chevak at $.21 per kilowatt
hour, much lower than average fuel cost of $.32 per
kilowatt hour. Fifty percent of the kilowatt hour sales
were eligible for the PCE fund.
Representative Wilson asked if the $.21 cents was the total
cost or the fuel surcharge.
Mr. Kohler responded that it was only the fuel surcharge.
4:02:54 PM
Co-Chair Thomas wondered what would happen to the PCE costs
if the debt were retired.
Ms. Kohler said that it would have a substantial effect.
She revealed that AVEC had taken $12 million in additional
long-term debt in 2011. The money was invested in
communities and was the cash match brought to the Denali
Commission and the renewable energy fund grants. The total
debt burden for AVEC was currently approximately $48
million; the debt service was $1.5 million per year; if the
debt were to vanish a $.6 to $.7 drop in cost would be
observed.
Co-Chair Thomas wondered what would happen if the debt were
retired, and kept from growing again.
Ms. Kohler replied that the life of a utility plant was
finite. She said that continual investment was necessary.
She relayed that AVEC had been whittling away at the debt,
but that the cash match the company was responsible for had
risen in recent years.
Co-Chair Thomas asked how many representatives served the
areas under AVEC.
Ms. Kohler replied that between the house and the senate
there were 9 or 10.
Co-Chair Thomas hypothesized that if each of the 10
lawmakers put in $2 million for a capital budget request it
would greatly benefit AVEC.
Ms. Kohler agreed.
Representative Edgmon reiterated that AVEC served 54
communities. He turned attention to the fiscal note. He
said that the $700 million should pay for what the bill
proposed to do in a 3 to 4 year period.
Co-Chair Thomas CLOSED public testimony.
HB 294 was HEARD and HELD in committee for further
consideration.
4:08:11 PM