Legislature(2001 - 2002)
03/15/2002 09:10 AM Senate FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 185
"An Act relating to the basis for determining eligibility for
and the amount of power cost equalization payments; and
providing for an effective date."
This was the second hearing for this bill in the Senate Finance
Committee.
ERIC YOULD, Executive Director, Trade Association for the Electric
Utility Industry in Alaska (ARECA), testified that ARECA is a
"strong supporter of the Power Cost Equalization (PCE) program" as
it provides a strong economic stimulus to rural Alaska where the
cost of electricity is "four times higher" than the cost of
electricity in urban areas, "yet disposable income is so low." He
stated the ARECA Board of Directors is presenting a resolution
[copy on file] dated Feb 22, 2002 to the Committee that "strongly
opposes" SB 185. He stated if SB 185 were passed, it would
significantly curtail the PCE program and hurt the economy of rural
Alaska.
Mr. Yould continued that legislation being discussed in the United
States Congress might financially assist the PCE Endowment Fund and
passage of SB 185 "would shut the gate and curtail the amount of
funding" that might be forthcoming. On behalf of ARECA, he
"strongly recommended" that the Alaska Legislature not change the
PCE funding formula.
MEERA KOHLER, President and CEO, Alaska Village Electric Co-op
(AVEC), testified in opposition to SB 185. She stated that the
Legislature has reduced funding for the PCE program numerous times
since its inception in 1984, and currently rural electric consumers
collectively pay approximately 80 percent of the "extremely high
cost of electricity" with the PCE program paying the balance of 20
percent. Ms. Kohler stated "the much needed construction of basic
infrastructure such as water and sewer facilities and health
clinics" has increased the demand for power in the rural areas. She
informed the Committee these improvements have been almost
exclusively funded with federal grants and other sources. She
stressed that the State's creation of the PCE Endowment Fund two
years ago has provided rural residents a "powerful tool to take to
Washington D.C." to persuade the United States Congress to allocate
additional funds to enable the Endowment Fund to be self-
sufficient. She urged the Committee to not amend the PCE formula at
this time.
BOB POE, Executive Director of Alaska Industrial Development &
Export Authority (AIDEA) and Alaska Energy Authority (AEA)
commented his Department has been conducting an analysis of
different options for the PCE program. He referenced legislative
"findings stating the purpose of PCE is to provide affordable
energy as essential for the economic and social well being of
Alaska." He continued that the high "cost of power is a significant
detriment to economic development in Rural Alaska."
SFC 02 # 34, Side A 10:51 AM
Mr. Poe commented the economic health of Rural Alaska has an affect
on the commerce of other parts of the State. He detailed some of
the effects on Anchorage: Rural Alaska accounts for 20 percent of
all goods and services sold; accounts for one in eight jobs; 50
percent of all construction work by Anchorage and Mat-Su companies;
and 100 percent of resource extraction. He stressed there is a huge
economic connection between rural and urban Alaska.
Mr. Poe stated there is " a self-interest" factor in the urban
support of the PCE program.
Mr. Poe contended that if both economies benefit from this
connection, then modifications to provide incentives to reduce the
cost of power in rural Alaska should be considered. He encouraged
the Committee to give the PCE program more time to be further
analyzed.
Mr. Poe stated if Anchorage, Juneau, and Fairbanks were removed
from the cost of power in Alaska analysis, then the comparative
base would not accurately represent what the cost of power is
throughout the State.
Senator Hoffman summarized if the cost of power in Anchorage,
Juneau, and Fairbanks were removed from the PCE analysis, what
would remain would be the highest costs of power in the state and
therefore would not result in a PCE program.
Co-Chair Donley clarified it would be "the highest costs" of those
places that are not included in the PCE program, and this would be
"much fairer," as currently the PCE program "subsidizes below what
some people have to pay who aren't eligible for PCE."
Senator Leman voiced three concerns: a cash flow stream that did
not materialize as promised when the program was restructured in
1999; the fact that communities not eligible for the PCE program
are paying more than the subsidized PCE rate; and the question of
how to provide incentives to reduce the costs of generating and
delivering power in the rural areas.
Senator Leman stated the Legislature is attempting "to fit all this
together in a policy statement and have it make sense."
Mr. Poe commented that the endowment fund losses were a result of
the stock market.
Mr. Poe informed the Committee that 79 percent of all rural
ratepayers are eligible for the PCE program and the remaining 21
percent are businesses or other non-eligible entities. He stated
that the eligible group uses only 29 percent of the eligible
kilowatt-hours.
Senator Leman clarified that his cash flow concern involved the
National Petroleum Reserve Alaska (NPR-A) funding, that "was
offered in good faith, received in good faith and did not
materialize," as a contribution to the endowment fund. He stated
this resulted in a shortfall in funding revenues.
RECESS 11:00 AM / 3:03 PM
DENNIS WATSON, Mayor of Craig, testified offnet from Craig and
urged the Committee to make no changes to the PCE program. He
stated, "Rural Alaska has always considered that our part of the
pie of the oil revenues, was the PCE" and the endowment fund is
what they hoped would support the PCE "in perpetuity."
ALAN JOSEPH, Vice President, Association of Village Council
Presidents, testified offnet from Bethel in opposition to SB 185.
He stated the downturn in the fishing industry has affected the
economy in the region and any reduction in the PCE assistance the
Yukon Kuskoquim Delta region would contribute negatively to the
situation.
MARLENE MOTO, testified offnet from Deerling, in opposition to SB
185. She stated that reductions to the PCE program would make
electricity too expensive and people in rural regions are "having a
hard time paying bills" now.
ERIC HANNEN, General Manager, Alaska Power & Telephone (AP&T),
testified via teleconference from Tok on behalf of Don Mayhan, Vice
President of Operations of AP&T. Mr. Hannen stated that AP&T serves
approximately 6,000 customers in 20 rural communities, and the
current cost of power in rural Alaska is approximately four times
more expensive than power in urban Alaska. He contended that rural
area incomes are half of the income level of urban areas and there
are very few job opportunities. He stated that the residents' fixed
incomes could not absorb a 25 percent increase in the cost of
power. Rural communities "have been encouraged to raise their
standards of living" and such things as water and sewer treatment
plants have been constructed and all require power to operate,
especially in the winter months. He voiced opposition to SB 185 and
stated it would decrease the standard of living in Rural Alaska,
reduce power consumption, and decrease business margins resulting
in an increase of rates with the overall result of a "downward
spiral."
CHARLIE WALLS, Manager of Nushagak Cooperative testified via
teleconference from Dillingham in opposition to SB 185. He stated
if SB 185 were passed, the result "would essentially drop
Dillingham off the rolls of the PCE," and would cause real hardship
to the residents who "are at the mercy of oil prices" and have no
other power supply options such as access to hydropower. He
stressed that "now is not the time to change the formula."
ALAN JOSEPH, testified offnet from Bethel on behalf for Arthur J.
Lake, President of the Association of Village Council. He read Mr.
Lake's prepared testimony [copy on file] in opposition to SB 185.
The bill was HELD in Committee.
RECESS 3:20 PM / 3:27 PM
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