Legislature(2015 - 2016)SENATE FINANCE 532
03/16/2016 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB69 | |
| SB124 | |
| SB196 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 69 | TELECONFERENCED | |
| + | SB 124 | TELECONFERENCED | |
| *+ | SB 196 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE BILL NO. 196
"An Act relating to the use of certain unexpended
earnings from the power cost equalization endowment
fund."
10:01:06 AM
Senator Hoffman related that the Power Cost Equalization
program (PCE) had been in existence for 36 years with the
primary purpose of assisting with the high cost of
electrical energy throughout rural Alaska. He said that
many communities participate and that there had been
discussion related to the program's high earnings that had
transpired in FY 13 and FY 14. He stated that the bill
would ensure that during the high earning years of the
fund, the fund should only pay for its intended purpose and
any excess earnings would be distributed to two other
programs.
10:02:18 AM
TIM GRUSSENDORF, STAFF, SENATOR LYMAN HOFFMAN, pointed out
to the committee that the bill was available in their
packets, as well as a document that illustrated the
earnings of the program at 4.3 percent, and a sectional
analysis. He discussed the sectional analysis (copy on
file):
Section 1 adds a new sentence to AS 54.4.0820(c)
requiring that the commissioner of revenue determine
the earnings on the power cost equalization endowment
fund (PCE fund) for the fiscal year on June 30 each
year.
Section 2 adds a new subsection to AS 42.45.085 that
allows the legislature to appropriate the part of the
annual fiscal year earnings of the PCE fund in excess
of the expenditures necessary to achieve the purposes
under AS 42.45.085(a) to the general fund and the
renewable energy grant fund, and to appropriate some
funds back to the PCE fund.
10:04:37 AM
SARAH FISHER-GOAD, EXECUTIVE DIRECTOR, ALASKA ENERGY
AUTHORITY, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC
DEVELOPMENT, testified in support of the legislation. She
stated that the authority supported the concept of being
able to use the excess earnings for the general and
renewable energy funds listed in the legislation. She said
that the earnings in FY 16 were difficult to predict, and
that she would work with the bill sponsor to clarify which
fiscal year to use and how much funds would be available
for extra purposes.
10:05:38 AM
Senator Hoffman announced there was a section in the bill
that would require an amendment that would create a single
mechanism for dispensing excess earnings.
10:06:06 AM
Co-Chair MacKinnon stated that she had researched the issue
and had proposed that projects that were currently being
funded at the Alaska Energy Authority should have some
nexus with the PCE fund.
10:06:54 AM
Co-Chair MacKinnon remarked that as revenue opportunities
in the state shrank, rural Alaska remained in need of many
dollars for investment in energy to keep families warm. She
contended that it the state had an energy project that had
cost millions from in communities, she wondered why PCE
would need to continue.
Ms. Fisher-Goad appreciated the conversation. She assured
that committee that AEA was eager to participate in
discussions concerning to how programs related to each
other. She mentioned that the PCE program, for electrical
projects, hit approximately 30 percent of the kilowatt
hours generated in rural Alaska communities; approximately
193 communities benefitted from the PCE program. She
furthered that the remaining 70 percent of the kilowatt
hours were not eligible for cost under the program. She
said that the Renewable Energy Fund complimented the PCE by
participating in reducing costs for communities, across all
kilowatt hours. She pointed out to the committee that
schools benefitted greatly from the partnership; they were
not eligible for PCE, but if a utility that serviced a
school had a renewable energy project that reduce costs,
the school would receive the benefit. She stressed that the
issue was not limited to electricity, but included heating
projects that benefitted community facilities and other
programs. She assured the committee that the authority
would work with committee on their continued investment in
the PCE and renewable energy programs.
10:10:35 AM
Co-Chair MacKinnon remarked that Senator Hoffman had
advocated for heating projects under the statute. She
remarked that electricity consumption was a big issue, but
that heating homes was the top priority. She said that as
the state moved into an uncertain fiscal climate, there
would be tension between electricity versus heating.
10:13:13 AM
Co-Chair Kelly noted that there was a letter of support
that made reference to the 2000 capitalization of the PCE
fund (copy on file). He said that when the state
capitalized the fund, the $100 million had counted against
the state. He stated that Fairbanks would receive subsidies
on the gas project thorough loans.
10:14:41 AM
Senator Hoffman commented that the state formerly had
appropriations to fund the PCE with the intent to set up
the endowment. He stated that the anticipation had been
that the program would require additional General Fund
appropriations for several years, but because of earnings
on the fund those appropriations were reduced; in 2015, the
fund was self-functioning and did not require a general
fund appropriation. He believed that energy continued to be
a major issue throughout the state and the legislature
should strive to make Alaska a more affordable place to
live for all Alaskans.
10:16:26 AM
CRYSTAL ENKVIST, EXECUTIVE DIRECTOR, ALASKA POWER
ASSOCIATION, ANCHORAGE (via teleconference), spoke in
support of the legislation. She read from prepared
testimony (copy on file):
Alaska Power Association (APA), the statewide electric
utility trade association, supports Senate Bill 196,
which would protect funding for the Power Cost
Equalization Program (PCE) while allowing
appropriation of funds from the PCE Endowment for
other valuable purposes.
APA members believe this legislation will allow the
PCE program to continue providing a vital measure of
relief to ratepayers in communities throughout our
State where electric rates are the highest, while
sharing benefits with the General Fund, the Renewable
Energy Grant Fund and the PCE Endowment. This
distribution of benefits is especially important in
these difficult financial times.
Many APA members throughout the state have integrated
wind and hydroelectric power into their systems
through funding from the Renewable Energy Grant Fund,
and their customers see the results in lower or
stabilized bills. Through SB 196, work could continue
on renewable energy systems that will positively
impact Alaskans for generations to come.
APA member utilities serve communities from Barrow to
Unalaska, through the Interior and Southcentral and
down the Inside Passage. We appreciate your decades-
long leadership in assisting our home grown industry
in striving to provide affordable and reliable
electric power to Alaskans. Your sponsorship of SB 196
continues these collaborative efforts, and we urge
passage of this legislation.
10:18:43 AM
INGEMAR MATHIASSON, ENERGY MANAGER, NORTHWEST ARCTIC
BOROUGH, KOTZEBUE (via teleconference), spoke in support of
the legislation. He stated that the borough had recently
complete a large wind/diesel project that would benefit
several communities. He said that funding for the project
had been granted through the Alaska Renewable Energy Fund,
and had hedged against the rising cost of diesel fuel,
which had threatened the existence of remote communities.
He stressed the importance that the PCE fund had been
established to assist rural Alaska communities with the
rising cost of diesel fuel for their electric utilities. He
said that communities had embraced energy efficient
alternatives, which would lessen the need for the PCE fund
in the future. He stressed that allowing as much of the
excess PCE funds as possible to be transferred into the
renewable energy fund would provide the state a path
forward to eventually build itself out of the need for PCE.
He concluded that the future for rural Alaska's energy
structure was to utilize locally available resources as
much as possible.
10:20:31 AM
PETER CRIMP, SELF, ANCHORAGE (via teleconference),
testified in support of the legislation. He stated that
reliable and reasonable priced energy needed to be
maintained on order to support the state's investments and
to provide fairness in the funding for rural and non-rural
energy projects. He noted that the rural energy fund had
proven to be a successful vehicle for stimulation
technically and economically viable projects since it was
established by the legislature in 2008. He noted that AEAs
annual report indicated that 54 projects were in operation,
and that every dollar invested in the projects would have a
$2.50 return. He believed that the state should maintain
its investment in maintaining clean, renewable energy.
10:22:32 AM
DAVID MESSIER, RURAL ENERGY COORDINATOR, TANANA CHIEFS
CONFERENCE, FAIRBANKS (via teleconference), spoke in strong
support of the legislation. He lamented that rural Alaska
experience electricity costs that ranged upward of $1 per
kilowatt hour, due not only to the cost of oil, but also
the administrative costs of managing a small, rural
electric utility. He said that the PCE endowment supported
the PCE program, which reduced the cost per kilowatt for
80,000 rural Alaskans across the state. He lauded the
benefits of the PCE program. He noted that the renewable
energy fund had a proven track record of bringing money
into the state and reducing the long-term cost to the PCE
program. He asked legislators to consider adding language
to the bill that would allow some portion of the 30 percent
allocated to the Alaska Renewable Energy Grant fund to
support the Village Energy Efficiency Program (VEEP), which
had an even stronger track record of reducing the long-term
costs of the PCE program. He said that he would be
submitting a letter with over 100 signatures, from across
the Interior, showing individual support for SB 196.
10:25:01 AM
PIPER FOSTER-WILDER, DEPUTY DIRECTOR, RENEWABLE ENERGY
ALASKA PROJECT, ANCHORAGE (via teleconference), spoke in
support of the legislation. She asserted that SB 196 would
provide an opportunity to provide secure and predicable
funding for renewable energy projects across the state. She
recounted a brief history of the successes of the PCE fund.
She stressed that the renewable energy fund provided
significant savings, which would continue to occur
regardless of the price of oil. She relayed that the funds
that SB 196 would provide to renewable energy projects
across the state was significant enough to continue to
leverage private capital to build projects. She furthered
that such public/private partnerships were crucial to
Alaska's future. She urges the committee to pass SB 196,
with the provision to use excess earnings to fund the
renewable energy fund beginning 2016.
Co-Chair MacKinnon CLOSED public testimony.
10:28:19 AM
AT EASE
10:28:56 AM
RECONVENED
10:29:00 AM
Co-Chair MacKinnon looked at the fiscal note, which
reflected a loss in 2015. She thought that further
discussion of the fiscal note should occur after the bill
was amended.
10:29:48 AM
Vice-Chair Micciche asked whether the bill would take
affect after the return reached 7 percent.
Senator Hoffman replied that for several years he had
advocated that the 7 percent was too high, and had
recommended that the rate of return for investment should
be 4.5 percent because investment decisions would have to
be riskier at a 7 percent return. He believed that the
prudent investment rule needed to be addressed as it
related to the 7 percent investment.
10:31:21 AM
Co-Chair MacKinnon said that the 7 percent was a cap that
would ensure that no more than that was withdrawn.
Senator Hoffman agreed, but felt that it should be
clarified further that the number was not a "hard" number.
He reiterated that it was important to be clear about the
bill's intent, as well as what funds would be available.
SB 196 was HEARD and HELD in committee for further
consideration.
Co-Chair MacKinnon discussed housekeeping.