Legislature(1999 - 2000)
05/18/1999 03:05 PM House FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| = | SB 157 | ||
CS FOR SENATE BILL NO. 157(FIN) am
"An Act relating to power cost equalization; relating
to appropriations from the National Petroleum Reserve -
Alaska special revenue fund to the power cost
equalization and rural electric capitalization fund;
relating to the power cost equalization and rural
electric capitalization fund and the four dam pool
transfer fund; and providing for an effective date."
Co-Chair Mulder MOVED to adopt proposed committee
substitute, work draft #1-LS0835\V, Cramer dated 5/18/99.
Representative Grussendorf OBJECTED. He observed that the
proposed substitute removes section 4(d).
(d) In recognition of the significant contribution that
rural Alaska projects have made to the income of the
Alaska Industrial Development and Export Authority and
subject to appropriation by the legislature, 40 percent
of the amount made available by the Alaska Industrial
Development and Export Authority under AS 44.88.088 or
$8,000,000 of the amount made available, whichever is
greater, shall be transferred to the fund when made
available.
Representative Grussendorf argued that without section 4 (d)
every legislative body would need to appropriate an
additional $5 - $6 million dollars to make the fund whole.
He noted that the Alaska Industrial Development and Export
Authority (AIDEA) suggested the language in section 4(d).
Section 4(d) would be used by AIDEA to stimulate economic
development in rural areas. He maintained that stability
would be lost if the subsection were deleted.
In response to a question by Representative G. Davis, Co-
Chair Mulder explained that there would not be a guaranteed
revenue stream if section 4(d) were removed. He pointed out
that the AIDEA dividend is not going to be used in the
current year. He stressed that the AIDEA dividend remains as
a possible funding mechanism and that nothing would be taken
off the table. He acknowledged that the legislation would
not provide a long-term use of the AIDEA dividend for Power
Cost Equalization (PCE). Representative Grussendorf WITHDREW
his objection.
Vice-Chair Bunde acknowledged the goal for stability, but
pointed out that future legislatures cannot be bound.
Representative Grussendorf stressed that the intent is to
create something that will work for Power Cost Equalization
(PCE). He estimated that there would be pressure to reduce
the funding amount. He emphasized that the work of the
legislation is to leave a good thread for future
legislatures.
Representative Williams noted the difficulty of providing a
good economic base in order to provide stability in rural
communities. He gave examples in Ketchikan and stressed the
importance of creating a stable base.
Representative Grussendorf stressed that the House Community
and Regional Affairs version of the legislation seeks parity
between those that can pay more and those that cannot.
Representative Williams OBJECTED to the adoption of the
proposed committee substitute.
MIKE TIBBLES, STAFF, REPRESET THERRRIUALT provided
information on the legislation. He reviewed the proposed
committee substitute.
Section 1 ties PCE to revenue from the National
Petroleum Reserve Alaska (NPRA). "The amounts remaining
after the deposits to the Alaska permanent fund and the
public school trust fund may be appropriated to the
power cost equalization and rural electric
capitalization fund."
Section 2 changes the amount transferred from the Four
Dam Pool Transfer Fund from 40 to 60%.
Section 3(2) is a technical change to conform to
section 1. It allows the NPRA funds to be transferred
into the fund. Subsection (3) was added by the Senate
and allows gifts to be deposited into the fund.
Section 4 limits the benefit to residential customers
and reduces the cap from 700 to 500 kilowatt-hours. The
Senate version of the bill had 350 kilowatt-hours and
the House Community and Regional Affairs version had
700 kilowatt-hours.
Section 5 raises the floor from 9.5 to 12 cents per
kilowatt-hour. The House Community and Regional Affairs
version was 12.5 cents. The cap is raised by the floor
is reduced.
Section 6 conforms to section 4.
Section 7 is pro rate language. Previously deleted
language deleted from the Senate version was added: "In
making the pro rata reductions required by this
subsection, the department may not consider any
potential supplemental appropriation until the
appropriation has been enacted." This clarifies that
there will be pro rata without the inclusion of the
supplemental amount.
Sections 8 and 9 were not changed.
Representative Grussendorf referred to section 2. He noted
that the Four Dam Pool Transfer Fund is not a guaranteed or
reliable fund source. He discussed the pro rata section. He
estimated that the fund would not remain healthy.
Co-Chair Therriault observed that there is pro rata language
in current statute. The language on page 3 clarifies that
the department should pro rate PCE until the legislature
makes an additional appropriation.
Representative J. Davies spoke in support of a stable-
funding source, such as the AIDEA dividend. Co-Chair
Therriault and Representative J. Davies discussed the use of
AIDEA funds as a funding source. Co-Chair Therriault
stressed that AIDE funds could be diverted. Representative
J. Davies argued that legislatures would honor the intent of
statutory designated program funds.
Co-Chair Mulder emphasized that most of the long-range plans
to close the fiscal gap utilize AIDEA dividends. He
maintained that the long-term solution is to find a new
revenue stream.
Representative Williams argued that infrastructure is needed
in rural communities if PCE is not going to be continued as
part of a long-term plan.
Representative J. Davies suggested that $2 million dollars
could be appropriated from Constitutional Budget Reserve
into a fund to generate income to support PCE.
Representative G. Davis spoke in support the proposed
committee substitute. Vice-Chair Bunde observed that his
constituents believe that PCE should be discontinued.
A roll call vote was taken on the motion.
IN FAVOR: Bunde, G. Davis, Foster, Kohring, Therriault,
Mulder
OPPOSED: Moses, Williams, Austerman, J. Davies, Grussendorf
The MOTION PASSED (6-5).
In response to a question by Co-Chair Therriault, Mr.
Tibbles estimated that the cost to the state for PCE would
be $16 million dollars. The operating and capital budgets
contain $15.7 million dollars for PCE.
LAMAR COTTEN, DEPUTY COMMISSIONER, DEPARTMENT OF COMMUNITY
AND REGIONAL AFFAIRS spoke in support of the House Community
and Regional Affairs version of the bill. He acknowledged
that the increase from 40 to 60 percent of the Four Dam Pool
Transfer Fund would be a good step. He noted that the self-
help clause in the Four Dam Pool Fund could drive down the
funds. The funds would go away if the assets were sold. He
spoke in favor of the addition of gifts, but added that a
long-term program is needed. He noted that there would be a
6% reduction in the actual amount of assistance to
residential users in rural Alaska. There are 175 communities
and 75,000 people that benefit from PCE.
Mr. Cotten acknowledged that the change to a .12 cent floor
is a way to affect people equally. He noted that some rural
users consume over 700 kilowatt-hours in a month. Lowering
the ceiling to 500 kilowatt-hours would have an impact on
the benefit in winter months.
Mr. Cotten emphasized the desire of the Governor for long-
term financing. He stressed that PCE is an Alaskan issue and
federal help is unlikely.
Co-Chair Therriault observed that the Governor's Blue Ribbon
Commission on Power Cost Equalization suggested a surcharge.
Mr. Cotten replied about the Blue Ribbon Commission
recognized that the suggestion was not politically viable.
There is a similar program for telephones in Alaska. Some
districts receive telephone subsidies from other districts.
Representative Grussendorf asked the impact of reducing the
kilowatt-hours per month from 700 to 500. Mr. Cotten stated
that the program is roughly 1.5 million dollars. He noted
that families that go over 500 kilowatt-hours will be
affected. Representative Grussendorf questioned if 700
kilowatt-hours are a reasonable amount. Mr. Cotten felt that
700 kilowatt-hours would be a reasonable amount. He
emphasized that a raised floor is a more equitable way to
cut the program.
Co-Chair Therriault observed that 700 kilowatt-hours would
mean another $1.5 million dollars. Mr. Cotten observed that
the floor could be raised by another cent. This would save
$1.3 million dollars. Not every community would be affected
the same. Everyone receives one less cent for every cent
that the floor is raised. Co-Chair Therriault questioned
how many communities would drop out of participation if the
floor is raised by one-cent. Mr. Cotten noted that
Kaktovik, Point Hope, Wainwright, Pelican, Thorne Bay, and
Skagway would not receive PCE if the floor were raised by a
cent. He acknowledged that there would be affected
communities but argued that smaller rural communities are
hit harder by reductions.
Co-Chair Therriault questioned if the Blue Ribbon Commission
discussed which communities should be self-supporting. Mr.
Cotten noted that the Commission concluded that in order to
convince the legislature to fund the program over the long-
term that there would have to be commitments and sacrifices.
(Tape Change, HFC 99 - 149, Side 2)
Representative Grussendorf observed that there is
authorization for $15.7 million dollars. He questioned if
this amount would fund the program under the proposed
committee substitute. Mr. Cotten observed that between
$15.7 and $15.9 million dollars would be needed.
Co-Chair Therriault referred to the Senate version. The
Senate version set the floor at 350 kilowatt-hours, but
allowed higher months that did not exceed 500 kilowatt-
hours. Mr. Cotten observed that the intent was to lower the
use to 350 kilowatt-hours, but accommodate the winter
months.
Representative Grussendorf reiterated that six comminutes
would be dropped out if the floor were raised to .13 cents.
Mr. Cotten added that the House Community and Regional
Affairs version provided that if there were a sale of the
Four Dam Pool assets, that 60 percent of the sales would go
toward the PCE program. He recommended that this provision
be reinstated.
ERIC YOULE, EXECUTIVE DIRECTOR, ALASKA RURAL ELECTRIC
COOPERATIVE ASSOCIATION, ARECA, spoke in of the House
Community and Regional Affairs version of the bill. He
emphasized the need for a stable funding source. He spoke in
support of a program that would fund PCE at $15.5 to $16
million dollars. He expressed concern that there be a long-
term funding source and pointed out the affect of a stable
funding source on future economic development. He stressed
that before PCE was created in 1980, rural electric
utilities were in dismal shape because they had no financial
solvency. Power Cost Equalization gave rural electric
utilities solvency. He maintained that the Governor's
recommendation that PCE receive 40% of the AIDEA dividend is
the best plan.
Co-Chair Therriault observed that AIDEA funding was used to
pay municipal matching grants this year. He questioned if
the AIDEA dividend would be a stable funding source.
Representative Grussendorf MOVED to ADOPT an amendment to
insert section 4(d) of the House Community and Regional
Affairs version into the work draft. He spoke in support of
the amendment. Co-Chair Mulder OBJECTED. Co-Chair Mulder
spoke against the use of AIDEA funds at this time.
Representative Austerman agreed that AIDEA funding is not a
stable funding source. He emphasized the need to have an
endowment that spins off the interest.
Representative Grussendorf WITHDREW the amendment.
Representative Grussendorf MOVED to raise the kilowatt-hours
per month to 650. In response to a question by Co-Chair
Therriault, Mr. Tibbles stated that the difference in the
funding level between 500 and 700-kilowatt hours per month
would be $1.5 million dollars. Co-Chair Mulder estimated
that the net impact of the amendment would be a raise from
$15.7 to $17 million dollars.
Representative Grussendorf expressed concern with service to
rural residents. Representative J. Davies clarified that
the amendment would raise the amount by $1.9 million
dollars.
Representative Austerman asked for information regarding the
Senate version.
MARY JACKSON, STAFF, SENATOR TORGERSON provided information
on the Senate version. She explained that the Senate allowed
the department to average the annual kilowatt rate to allow
a higher winter rate. The amount was capped at 500-kilowatt
hours based on a recommendation by the Governor's Blue
Ribbon Commission. Co-Chair Mulder observed that the minimum
was raised to 13 cents.
In response to a question by Co-Chair Therriault, Ms.
Jackson observed that the first proposed committee
substitute by the Senate only increased the floor.
Communities would have been dropped off the table. Smaller
communities with a higher rate are helped more than larger
comminutes with a lesser rate. The Senate Finance Committee
attempted a mix by raising the floor, dropping the ceiling
and added a pro rata reduction spread across the board. The
pro rata reduction levels the field. She observed that
there are three ways to approach a reduction.
Mr. Cotten discussed the difficulty of formulating the
reduction.
Representative Kohring stated that he is not opposed to
putting money into PCE. He suggested that an endowment be
considered and stressed that infrastructure needs to be
built.
Representative Austerman spoke against the amendment. Co-
Chair Mulder argued against the amendment.
Representative Williams spoke in support of the amendment.
A roll call vote was taken on the motion.
IN FAVOR: J. Davies, Foster, Grussendorf, Moses, Williams
OPPOSED: Kohring, Austerman, Bunde, G. Davis, Kohring,
Mulder, Therriault
The MOTION FAILED (5-6).
Representative J. Davies MOVED to ADOPT an amendment on page
1, Line 10: change "50" to "25". Co-Chair Therriault
OBJECTED.
Representative J. Davies explained the change would allow
more money to be available to PCE. Co-Chair Therriault
WITHDREW the OBJECTION.
Section 1(g) was amended to read:
Amounts received by the state under 42 U.S.C. 6508 and
not appropriated for grants to municipalities under (d)
of this section shall be deposited [LAPSE] at the end
of each fiscal year as follows: (1) 50 percent to the
principal of the Alaska permanent fund; and (2) 5
percent to the public school trust fund (AS 37.14.110).
The amounts remaining after the deposits to the Alaska
permanent fund and the public school trust fund may be
appropriated to the power cost equalization and rural
electric capitalization fund.
Ms. Jackson noted that Senator Parnell offered the amendment
to the Senate Finance Committee.
Representative Williams MOVED to report HCS CSSB 157 (FIN)
out of Committee.
Representative G. Davis OBJECTED for comment. He maintained
that the legislation does not provided a good long term
funding source and felt that the program could be simpler.
Representative Moses expressed concern with the health of
PCE. He felt that a surcharge should have been charged a
number of years ago. He stressed that the resource belongs
to all the people of the State.
Representative Grussendorf observed that the legislation
removes the commercial aspect of PCE. He felt that the
funding level was driven by the amount of available money,
not need.
Representative Foster observed that only eight districts are
effected by PCE. He thanked the Committee for their support.
HCS CSSB 157 (FIN) was REPORTED out of Committee with a "do
pass" recommendation.
HCS CSSB 157 (FIN) was REPORTED out of Committee with a "do
pass" recommendation.
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