Legislature(1997 - 1998)

02/04/1998 08:03 AM CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 336 - ELIGIBILITY FOR POWER COST EQUALIZATION                               
HB 337 - POWER CREEK HYDRO PROJECT IN CORDOVA                                  
Number 0062                                                                    
CHAIRMAN IVAN said the committee would hear HB 336, "An Act                    
relating to eligibility for power cost equalization," and HB 337,              
"An Act making a special appropriation for the Power Creek                     
hydroelectric facility; and providing for an effective date."  He              
noted in the committee members' files there is a blank committee               
substitute (CS), 0-LS1132\E, for HB 336.  He said he would                     
entertain a motion for the adoption of the proposed CS.                        
Number 0094                                                                    
REPRESENTATIVE JERRY SANDERS moved to adopt the proposed CS for HB
336, 0-LS1132\E.  There being no objection, it was so ordered.                 
Number 0121                                                                    
CHAIRMAN IVAN said there also is a proposed CS for HB 337, 0-                  
LS1133\B.  He said he would entertain a motion for the adoption of             
the proposed CS.                                                               
Number 0168                                                                    
REPRESENTATIVE REGGIE JOULE moved to adopt the proposed CS for HB
337, 0-LS1133\B.  There being no objection, it was so ordered.                 
Number 0185                                                                    
REPRESENTATIVE GENE KUBINA, sponsor of HB 336 and HB 337, came                 
before the committee.  He informed the committee that before he                
became a legislator, he served five years on the board of directors            
for Copper Valley Electric.  Representative Kubina noted the first             
piece of legislation that became law which he had introduced                   
related to the Power Line Extension Grant Program that helped hook             
up a lot of people to electricity.  He explained that over the last            
couple of years, that program hasn't been funded so it doesn't do              
much good.                                                                     
REPRESENTATIVE KUBINA informed the committee that a lot of                     
communities throughout the state receive power cost equalization               
(PCE).  He said he has always believed that the PCE Program is very            
helpful to  communities, but it is not always efficient.  If we                
could take some of the cooperatives and electric utilities that are            
in  the program and give them the resources to get some kind of                
alternate energy, they'd be able to come off the program.                      
Representative Kubina pointed out the PCE only works for a certain             
amount of kilowatt hours.  He noted he doesn't remember the top                
rate, but it isn't very much.  It is good for the residential                  
people, but doesn't really help businesses at all.                             
REPRESENTATIVE KUBINA indicated that if a community applies for                
and receives a grant to put in a hydroelectric facility, they would            
go off the PCE once the facility was running.  Representative                  
Kubina said, "In essence, it takes the state of Alaska to say,                 
'Alright, I'm going to put up some up-front money.'  In this case,             
Cordova would be ten years worth of PCE.  They get $750,000 a year.            
They're one of the biggest actually users of PCE because they're               
one of the biggest communities that receive it.  So it would take              
ten years worth of that or $7.5 million, use that to match money               
that they have been getting from the federal government.  And Ted              
Stevens has been helping them work on this program.  For a total               
they would get $15 million.  They would build a hydro project for              
it with that money, and then once that hydro project gets up and               
running, they would no longer get PCE.  So in essence, it would be             
a program that whereby the state of Alaska would give them their               
PCE up-front for ten years in exchange for not having PCE                      
REPRESENTATIVE KUBINA said this project would be beneficial to the             
business community where just receiving PCE is not beneficial to               
the business community.  He informed the committee members that he             
changed the bill because the way the bill was originally written               
some of the smaller utilities who were receiving such a small                  
amount of PCE might be hurt by the way it was originally worded.               
The last thing he wants to do is put any utilities in jeopardy of              
their PCE.                                                                     
Number 0481                                                                    
REPRESENTATIVE FRED DYSON asked what would happen if PCE was phased            
out over the next few years.                                                   
Number 0503                                                                    
REPRESENTATIVE KUBINA stated he isn't sure.  He said if we didn't              
have PCE, there would be incentive for the legislature to fund any             
other utilities like this one.  He pointed out that there are a lot            
of arguments to keep PCE for the small communities.  Representative            
Kubina said he believes that any Administration and legislature                
would really fight to find ways to keep PCE because there is no                
alternative for a lot of the places.                                           
Number 0579                                                                    
REPRESENTATIVE DYSON asked if there is a specific reason that the              
bill only applies to hydroelectric as opposed to other new                     
REPRESENTATIVE KUBINA pointed out his original language specified              
only hydroelectric.  He said he can see that there may be a                    
geothermal plant.  He noted that up by Shishmaref there are hot                
springs.  Representative Kubina explained that during rewrite of               
the bill, he wanted it to be written so that it wouldn't hurt any              
of the small utilities.  Representative Kubina said, "Let me tell              
you that this rewrite of the bill happened actually yesterday -                
late last night.  I've been trying to get it so that it wasn't                 
going to hurt any of the small utilities and we're very much open              
to a way to make it any other thing like that.  I think anything we            
can do as a state to help them -- give them the capital costs to               
bring them their electric rate so they don't need to subsidize.                
That's the goal."                                                              
Number 0650                                                                    
REPRESENTATIVE DYSON said he would add the more we can get away                
from the dependence on hydrocarbons, particularly diesel, it  would            
be worthy.                                                                     
Number 0667                                                                    
REPRESENTATIVE SCOTT OGAN informed the committee that his concern              
with the legislation is that it kind of puts Cordova in a position             
of getting up-front money when the future of PCE is debatable.  He             
noted there are a lot of arguments for it, but there is not a lot              
of money.  He said if he understands the bill correctly, it gives              
Cordova ten years of PCE up-front.  Representative Ogan said it                
seems to him that it would be unfair if PCE isn't funded.                      
Number 0728                                                                    
REPRESENTATIVE KUBINA responded, "(Indisc.) nothing that we can do             
is going to determine for sure what we're going to fund next year              
or the year after that or the year after that, but this debate                 
about PCE has been here a long time.  There has been a whole lot               
money spent in railbelt communities.  Of course the rural areas                
that depend on PCE think that this is just their fair share.  If               
you add up how much money has been spent on Susitna hydro projects,            
interties, et cetera, et cetera, there is hundreds of millions of              
dollars in there and PCE's costs is nowhere near -- come close to              
making up for what's already been put in those areas.  But I agree             
with you, Representative Ogan, that you know there is no guarantee             
it's going to be here next year, but I don't think that that means             
we close our eyes on not trying to find ways to make -- to bring               
these people into self-sufficiency.  And just as Anchorage and                 
Fairbanks couldn't fund interties in between themselves themself --            
they may have been able to, but when the state would have had the              
ability to help, that's what they did.  We should do our best to               
help these people become self-sufficiency.  You know the economy of            
smaller towns -- if they were all very healthy, why it certainly               
would make our railbelt area just as healthy or even healthier."               
Number 0855                                                                    
REPRESENTATIVE OGAN asked if there is a fiscal note available.                 
Number 0860                                                                    
REPRESENTATIVE KUBINA explained the fiscal note would be the HB
Number 0872                                                                    
TOM WRIGHT, Legislative Assistant to Representative Ivan Ivan,                 
Alaska State Legislature, informed the committee members that                  
fiscal notes have been requested from the Administration.  He                  
indicated he has not received a fiscal note for HB 336.  A fiscal              
note is required for that particular bill.  Mr. Wright referred to             
HB 337 and stated a fiscal note is not required as it is an                    
appropriation bill.                                                            
Number 0893                                                                    
REPRESENTATIVE ALBERT KOOKESH stated he believes the legislation is            
a step in the right direction.  He said, "I really think, like                 
everybody else, I don't know what the future of PCE is going to be,            
but one of the things that we have to do as legislators, and people            
who are considered at least by some of us, leaders in the state as             
far as policy for the state goes, is that we need to start looking             
at some way to end PCE ourselves.  And maybe one of the ways to end            
it is to make sure everybody else has some self sufficiency down               
the road, whether it be hydroelectric or anything else.  So I                  
really think that we have to take the first step and maybe this is             
the first step."  Representative Kookesh informed the committee he             
would really appreciate continued consideration of similar bills so            
there are options on the table for everyone to consider.                       
Number 0953                                                                    
REPRESENTATIVE JOULE indicated he is relieved to see the proposed              
CS for HB 336.  He referred to the original version and said, "I               
had concerns that if something were to happen or just normal wear              
and tear to regular power units in some of the smaller communities,            
if a purchase of a generator and replacement of some of those                  
equipment, I was going to ask the question of whether or not that              
would end that kind of capital investment would end power cost                 
assistance to those communities if that were to occur when it                  
wasn't really an effort to find alternative power other than to                
just replace the aging systems.  And then the other part of this               
is, you know, there is a task force out there looking at power cost            
equalization to try and find potentially I guess some revenue                  
streams and also I imagine some alternatives for development.  And             
I wonder whether or not something like this would be able to fall              
within that purview."                                                          
Number 1039                                                                    
REPRESENTATIVE OGAN said HB 337 is the funding mechanism and it is             
basically a general fund grant.  He asked if it would be a general             
fund grant and it wouldn't come out of power cost equalization.                
REPRESENTATIVE KUBINA indicated that is correct.  Representative               
Kubina stated that he knows to request $7.5 million is a hard                  
question to ask.  He urged that the legislation move to the House              
Finance Committee so they can consider it within the budget.                   
Number 1101                                                                    
CHAIRMAN IVAN said he also had reservations regarding the original             
versions of the legislation.  He said he appreciates the                       
Representative Kubina's interest in the preservation of power cost             
equalization to the state as a whole.  Chairman Ivan said, "If we              
could look back and maybe have encouraged other forms to be looked             
at - hydro projects, natural gas, (indisc.), we wouldn't have to               
continue to (indisc.) and fund.  Probably some of our communities              
would have been off PCE and make that -- I encourage that - getting            
off.  And I see the bill doing this.  I understand it will not harm            
the rest of the rural communities power projects that are so                   
dependent on PCE at this time."  Chairman Ivan said some of the                
communities he represents are trying to find ways to get off of PCE            
if at all possible.  They are in situations where they need help to            
get off PCE.  He indicated Representative Kubina's legislation is              
a beginning.                                                                   
Number 1210                                                                    
REPRESENTATIVE OGAN referred to a resolution in his committee file             
from Cordova Electric Cooperative, Incorporated, and said the                  
letter says that they are constructing the Power Creek                         
hydroelectric facility.  He asked if it is safe to assume that the             
facility is currently being funded.                                            
REPRESENTATIVE KUBINA said he understands that they have received              
$5 million from federal appropriations over the last couple of                 
years.  He noted this happened with the help of Senator Stevens.               
Representative Kubina pointed out that Senator Stevens has                     
encouraged Cordova Electric Cooperative, Incorporated, to also                 
continue to ask the state for help in funding.  Senator Stevens                
believes it should be a joint state/federal program.                           
Representative Kubina said if the small communities had to pay for             
the whole thing, they'd still be on PCE and the rates probably                 
wouldn't decrease.  He asked how does the smaller communities get              
the capital costs to get something going so they can become self-              
Number 1288                                                                    
REPRESENTATIVE OGAN asked what the total cost is of the project.               
REPRESENTATIVE KUBINA responded that it is $15 million                         
REPRESENTATIVE OGAN asked if there was a state match for the $5                
REPRESENTATIVE KUBINA indicated there wasn't.                                  
REPRESENTATIVE OGAN asked if it was an outright grant from the                 
federal government.                                                            
REPRESENTATIVE KUBINA answered in the affirmative.                             
REPRESENTATIVE OGAN asked if there would be any additional federal             
funds available if the state kicked in a smaller amount.                       
REPRESENTATIVE KUBINA responded that Cordova Electric Cooperative,             
Incorporated, is going to do everything they can to get funding for            
as much of this project as possible.  He said what they're trying              
to do is if they can fund half of the project from the state and               
half from the federal government so the capital costs will be paid             
for.  They would give up $750,000 a year.  That is a savings to the            
state.  They would then be able to charge enough to pay all the                
operating costs.  Representative Kubina added that they would not              
be able to generate all their electricity with this project as it's            
not big enough.  They would still have diesel generation, but the              
blended part of it between diesel and hydroelectric would bring                
their costs down low enough that they could give up the PCE.                   
Number 1317                                                                    
REPRESENTATIVE JOULE referred to his earlier comment about the task            
force and said maybe the timing of this couldn't be "more better."             
He said as technology is changing how we do things.  He suggested              
that the task force might want to work closely to monitor the                  
plant, as it is being built, to see whether other things can be                
tied into it.  Representative Joule said it could be used as a                 
model as we look towards self-sufficiency.                                     
REPRESENTATIVE KUBINA explained that the task force has reviewed               
the original piece of legislation.  He said the task force will be             
reviewing the new version of the legislation.  Representative                  
Kubina informed the committee that the task force is looking at how            
they can help communities be self-sustaining.                                  
Number 1466                                                                    
JIM ROBERTS, General Manager, Cordova Electric Cooperative,                    
Incorporated, came before the committee to give a brief history of             
his organization.  He informed the committee that the cooperative              
did not become a cooperative until 1978.  Consequently, they could             
not take advantage of the low interest rates from the federal                  
government through the Rural Utility Service (RUS) Program.  He                
said they have the highest blended interest rate for capital of any            
cooperative utility in the state of Alaska and that's one of their             
big problems.                                                                  
MR. ROBERTS informed the committee that the cooperative's average              
cost of power as of 1997 was over 20 cents per kilowatt-hour.  He              
said what is being proposed regarding the Power Creek project is if            
they can get the funding that they want to build the project, it               
will drop their costs over 5 cents a kilowatt-hour.  That will help            
not only residential, but the industry.  He said the PCE does help             
residential, but it doesn't help their industry.  The basic                    
industry is fish processing.  He noted the fish processing industry            
can't really compete with other communities.  Cordova has lost a               
couple of fish processors over the past five or six years.  It                 
hurts the economy.                                                             
MR. ROBERTS explained their thrust has been that they are willing              
to give up PCE if they can get the funding they need.  Considering             
that Cordova is basically the largest single community in the state            
that receives funding from PCE, the project would allow more money             
to be put back into the pot for other small communities.  Mr.                  
Roberts said he believes the project makes sense and the PCE task              
force is going to look at that and maybe use it as a model for                 
other communities throughout the state.                                        
MR. ROBERTS informed the committee that they received the Federal              
Regulatory Energy Commission (FREC)  license on December 24, 1997.             
They have some grant funding from the federal government and they              
are back in for another $3.5 million to try and get the 50 percent             
on each side.  He said he belives they have a good chance of                   
receiving the money as Senators  Stevens and Murkowski and                     
Representative Young are in a good position to help get the rest of            
the funding for the project.                                                   
Number 1621                                                                    
MR. ROBERTS explained they are looking at construction to begin in             
the spring depending on the funding.  He said he does have bridge              
interim financing set up, but it is contingent on what happens with            
the state as to whether or not they can proceed with the project.              
The Alaska Energy Authority (AEA) did a feasibility study in 1992              
on the project.  Mr. Roberts said, "We went out looking to see if              
there was something else out there RFP - internationally, we had               
like 70 different outfits from all over the world, not just the                
United States.  And this was a single project that people came up              
with that was the most benefit to a community."  He indicated the              
Power Creek project is something that the community very badly                 
needs and, in the long term, it will lower the cost the state on               
PCE.  It will help the smaller communities.  Mr. Roberts stated                
$750,000 a year is a big bite out of the PCE.                                  
Number 1686                                                                    
REPRESENTATIVE DYSON questioned how many killowats the project will            
MR. ROBERTS responded that it is a six megawat project.                        
Number 1686                                                                    
REPERESENTATIVE DYSON asked if there are low-flow problems during              
different times of the year that would be a problem.                           
MR. ROBERTS answered in the affirmative and said that is why it'll             
be suppmented with diesel.  He said they have a small 1 1/4 meg                
hydro project that went on-line in 1991.  Depending on the year and            
the run of the river, that provides about 10 percent to 15 percent.            
He noted that is during the summer when they get a lot of melt-off             
and rain.  Power Creek is the same way.  In the summer, Power Creek            
would provide 100 percent of what is needed.  During the winter                
when the flow is down, they would have to supplement with deisel.              
Number 1731                                                                    
REPRESENTATIVE DYSON referred to the winter during the low-flow                
conditions and asked what percentage of the power will the plant               
MR. ROBERTS stated it depends on the winter.  He pointed out the               
current winter is very mild and they're still getting a lot of                 
water.  It would probably 40 percent to 50 percent of what is                  
Number 1749                                                                    
REPRESENTATIVE DYSON asked what the distance is from the project to            
where the consumers are.                                                       
MR. ROBERTS informed the committee that there is a road going right            
to the project.  It is seven miles from one of the generation                  
REPRESENTATIVE DYSON questioned what the transmission voltage will             
MR. ROBERTS responded, "12-4-70 distribution voltage.   The                    
engineers are looking at maybe stepping up to 25 KB for                        
transmission, but everything else we have is 12-4-70 even out to               
the airport.  That's 13 miles away and we don't have any voltage               
Number 1779                                                                    
REPRESENTATIVE OGAN referred to the bridge interim financing and               
asked what form of financing is it.                                            
MR. ROBERTS explained cooperatives have access to funding through              
cooperative banks.  Co Bank is one of the lenders that they use.               
He said it went to their loan committee for approval.  He noted the            
approval is contingent on the rest of the financing.                           
REPRESENTATIVE OGAN asked if the rest of the financing is the $7.5             
MR. ROBERTS responded in the affirmative.                                      
REPRESENTATIVE OGAN said if they don't get $7.5 million, they don't            
have a project.                                                                
MR. ROBERTS said they could do it, but whether or not they can                 
afford to do it is a different question.  It really isn't really               
worthwhile to build the project if they can't keep the same cost or            
lower the cost.                                                                
Number 1824                                                                    
REPRESENTATIVE OGAN said if the recalls correctly, the project cost            
is $15 million.                                                                
MR. ROBERTS indicated that is correct.                                         
Number 1837                                                                    
REPRESENTATIVE OGAN asked if they didn't get the funding, what                 
would their payments be.  He also asked if the loan would be a low             
interest loan.                                                                 
MR. ROBERTS informed the committee it is not a low interest loan.              
The rate would be the market rate through the cooperative bank.  He            
noted their rate is slightly lower than the normal market rate.                
REPRESENTATIVE OGAN asked if they issue municipal bonds.                       
MR. ROBERTS said there has been discussion with the city and there             
is a possiblity of doing it.  He informed the committee that they              
haven't really explored the possibility because if push came to                
shove, they'd probably be better off to try and go through RUS for             
funding.  Mr. Roberts said they probably could qualify for a                   
hardship loan of 5 percent.  The funding would be quite a bit down             
the line as there is a lot of demand for that money.                           
Number 1878                                                                    
REPRESENTATIVE DYSON questioned when the project would pay for                 
itself if they don't receive a grant.                                          
MR. ROBERTS said if they had to go out and borrow the rest of the              
money they need, he would say the break even point would be in the             
range of 10 to 15 years.                                                       
Number 1918                                                                    
LAMAR COTTEN, Deputy Commissioner, Office of the Commissioner,                 
Department of Community and Regional Affairs, came before the                  
committee.  He pointed out that the department, through the Power              
Project Fund Program, has loaned this project $1 million at a zero             
interest rate.  It is contingent upon the financing.  He informed              
the committee that the Power Project Fund Program has loaned money             
to a number of energy related projects throughout the state.  Mr.              
Cotten said it has been mentioned that there is a "Blue Ribbon                 
Panel," which is currently composed of ten people including two                
legislators.  He said the program has been looking at PCE since PCE            
runs out in the summer of 1999.  He said the Administration belives            
that the panel approach is to look at the issue in a very                      
comprehensive way.  Mr. Cotten said, "It plans to report back to               
the legislature in 1999.  It's going to look at about five broad               
areas, that is looking at funding and endowment or somehow finding             
capital.  Looking at the impact if you did in fact terminate PCE,              
not only in rural Alaska, but in turn the effects you would have on            
urban Alaska.  Looking at the history of the -- where the money has            
gone for energy projects, both urban and rural Alaska.  Looking at             
long-term options to reduce rural electric utility costs.  And then            
lastly, to look at the program -- the formula that's in place now              
to look whether there should be changes."                                      
MR. COTTEN said even though the department has supported the Power             
Creek project in the past, at this point they would certainly                  
perfer to look at the Blue Ribbon Panel appropriate approach as                
probably the more appropriate approach.  He said the department                
believes that is a better approach because it is not "piecemeal."              
He said, "It certainly doesn't stop the panel from looking at some             
of the proposals that are included in these two bills.  In fact, if            
anything, we want to look at them very carefully.  And it would not            
suggest that the Administration doesn't support this project.  In              
fact, if it does come down to where Cordova Electric has to look at            
other loans, I know that we are in a position perhaps to help,                 
again, if it's the right combination of grants and loans."                     
Number 2026                                                                    
REPRESENTATIVE KOOKESH said PCE, as it currently stands, whether or            
not it has a future, is a state benefit.  He asked how the decision            
is made in Cordova to take it away for a different alternative.                
Representative Kookesh pointed out his community receives PCE and              
if somebody tried to take it away for a different alternative,                 
whether or not that alternative was good or bad, that it is a state            
benefit.  He asked how the people in Cordova makes that decision or            
do they.                                                                       
Number 2055                                                                    
MR. COTTEN indicated he doesn't know the answer.                               
REPRESENTATIVE KOOKESH informed Mr. Cotten that he doesn't really              
expect an answer.  He said somebody ought to look at that because              
if somebody in Cordova says, "Wait a minute, I want PCE and I don't            
want you guys to do these other things," how would they get around             
the question.                                                                  
CHAIRMAN IVAN said he would leave that decision up to the                      
Number 2075                                                                    
REPRESENTATIVE KOOKESH said currently, the community is not making             
that decision and the cooperative is.                                          
Number 2095                                                                    
MR. ROBERTS came back before the committee.  He referred to                    
Representative Kookesh's question and said it is a decision of the             
cooperative, but the reason there is the backing of the community              
is that the only way this can be done is if the cost of power goes             
down and it will not impact residential growth.                                
REPRESENTATIVE KOOKESH pointed out that he wasn't speaking so much             
to the Cordova question, but was speaking to the statewide question            
of whether PCE has a future or not, it is a state benefit.                     
Number 2127                                                                    
REPRESENTATIVE JERRY SANDERS said when Mr. Roberts referred to the             
break even point being somewhere between 10 and 15 years, was he               
talking about current prices or anticipated savings prices.                    
MR. ROBERTS said they are looking at the savings price.  He said               
what they are looking at for a rate, depending on the financing, it            
would change them quite a bit one way or another.                              
REPRESENTATIVE SANDERS questioned whether the price would decrease             
when the electric comes on or will the price remain the same for 10            
or 15 years.                                                                   
MR. ROBERTS said the cooperative would look at having to try to                
lower the cost.  He said he doesn't see how they can, in good                  
faith, build the project by giving up PCE if they don't get the                
needed funding.  Mr. Roberts explained they can't ask the people to            
pay what they are currently paying without the PCE offset of the               
cost.  He referred to the residental people who are receiving a                
credit from the state on their monthly bill and said the promise               
the cooperative has made to them is that the cooperative will not              
increase what they are currently paying out of their pocket by                 
building the project.  Mr. Roberts stated that if they can't get               
the funding, then they won't build the project.                                
Number 2218                                                                    
ERIC YOULD, Executive Director, Alaska Rural Electric Cooperative              
Association (ARECA), testified via teleconference from Anchorage.              
He said ARECA represents virtually all of the electric utilities of            
the state.  He said he would like to go on record, on behalf of the            
association, in favor of HB 336, as amendmend, and also HB 337.  He            
said the amended version is much more in consonance with what the              
electric utility industry could support.  He said he believes that             
using renewable resource projects as a solution for electrical                 
needs throughout the state is the way to go.  Mr. Yould said he                
believes some of the original problems associated with communities             
that have no choice but to remain on diesel power would have been              
hurt by the earlier version of the legislation.  The Power Creek               
project is an excellent project.  He noted that back in the 1940s,             
the federal government looked at developing the project.  Later,               
the state of Alaska also looked at developing the project, but it              
got caught in a time warp because other projects were also being               
looked at and the Power Creek project didn't go forward.  Mr. Yould            
commended Cordova Electric Cooperative for their efforts to bring              
it forward.                                                                    
MR. YOULD said he is also a member of the Blue Ribbon Committee                
task force.  He pointed out they have just began to meet and he is             
very impressed with the integrity of the members and the                       
seriousness with what they're deliberating on this very difficult              
issue.  Mr. Yould said, "Obviously, power cost equalization is a               
program that is somewhat the underpinning of a sound economic                  
structure in rural Alaska and it's certainly not our place to                  
establish policy for where the state should go in terms of rural               
Alaska, but it is our position that if you are going to have a                 
sound economy in rural Alaska that power cost equalization is a                
very important element of that overall mix.  As a matter of fact               
it's virtually the keystone of whether or not we'll have some form             
of business in rural Alaska."                                                  
MR. YOULD said in speaking for himself, he believes that the                   
committee will find that the Blue Ribbon Committee task force would            
view the legislation in consonance with the overall policy that                
they will probably be reporting out roughly a year from now.  Mr.              
Yould said, "We do strongly support, that is the electric utility              
industry, these two bills and the second one as amended."                      
MR. YOULD referred to Representative Kookesh's question of how does            
a community decide whether or not they want to forego their power              
cost equalization and said, "At least in the case of Cordova, and              
as a matter of fact this is the case in most of the -- or many of              
the rural communities, Cordova Electric Co-op is in fact a co-op               
and that means that it is owned by everybody in that community.                
They all have a voice in what that co-op does because they all own             
shares in that co-op.  So I guess I'd have to say that by virtue of            
its governing body adopting a resolution in support of this                    
particular position, you've pretty well heard from the community               
itself that they agree that this approach to weaning themselves off            
power cost equalization in favor of a long-term solution is what               
they'd like to do."  Mr. Yould said he would answer any questions              
the committee may have.                                                        
Number 2396                                                                    
REPRESENTATIVE OGAN said, "You are on the power cost equalization              
task force.  I'm always (indisc.) that all the task forces are                 
'blue ribbon,' but anyway -- and I'm sure that people on there are             
of the highest caliber, but I'd just like to see a white ribbon                
panel some time.  But anyway, what is the -- do you think this is              
a little bit of the cart before the horse.  I mean we have this                
question where this funding goes away in 1999.  You know we're                 
being offered a deal that they'll back out of power cost                       
equalization if we fund this out of our capital budget.  But it                
seems to me that we need to determine the future of power cost                 
equalization both as a -- your task force that you serve on as well            
as the legislature before we make any major decisions on deals on              
something that might not be around.  Do you care to comment on                 
MR. YOULD said, "Unfortunately, this is project that its time has              
come.  Whether PCE is out there or not, it's a project that very               
much should go forward based on its own economic merits.                       
Unfortunately, with a capital intensive project like this one, even            
through it's economically feasible it's very difficult for small               
communities to be able to absorb the high front-end cost associated            
with a project until it's ten years out, then all of a sudden the              
line crosses below the cost of diesel power.  Mr. Yould pointed out            
that it is kind of like buying a capital intensive house or renting            
forever.  Over the long haul, the house that you're renting is                 
going to cost you more money than if you were to buy it outright.              
However, in the early years that rent is relative low.  He said                
that is kind of what Cordova is dealing with.  In this particular              
instance, we're really talking about single project...."                       
TAPE 98-8, SIDE B                                                              
Number 0001                                                                    
MR. YOULD continued "...he'll be given a permit from the  Federal              
Energy Regulatory Commission that will give him a specific window              
in which to construct his project.  If he doesn't construct in a               
timely fashion, he could have his permit revoked.  All be it, I                
think that that is improbable.  I think you could go back to the               
Federal Energy Regulatory Commission and get them to extend that.              
We certainly had to do that when we were building the hydropower               
projects in the earlier part of the 1980s from time to time.  But              
I appreciate your concern.  I don't think that this particular                 
project is precedence setting.  I don't think that it necessarily              
puts the cart before the horse."                                               
Number 0032                                                                    
PATRICIA L. JONES testified via teleconference from Cordova.  Ms.              
Jones informed the committee she has been a resident of Cordova for            
over 40 years.  She said she has voted in every state election                 
since statehood.  Ms. Jones said she represents many people in                 
Cordova who believes that the cost of electricity in their area is             
much too high, running over 20 cents per kilowatt-hour.  She said,             
"With the grant fund financing, we would be able to lower the                  
average cost  of power about 5 cents per kilowatt-hour.  This is a             
top priority for all Cordovans.  The state of Alaska and the                   
legislature have given $300 million in grants to the Four Dam Pool             
hydro project and $15 million in grants to Seward for an intertie              
to the railbelt power grid.  The Federal Energy Regulatory                     
Commission or FERC issued the license for the Power Creek                      
hydroelectric project on December 24th of 1997, just last year.  So            
all of the environmental studies have been done.  Cordova has                  
received $4 million in grants from the federal government and we               
are in line to receive $3.5 million this year thanks to Senator                
Stevens and to the congressional delegation.  We are urging this               
committee and the Twentith Legislature to vote to match this amount            
of money from the federal government for the special appropriation             
under House Bill number 337 for $7.5 million for the Power Creek               
hydroelectric facility.  Please help us on this hydroelectric                  
project.  Thank you."                                                          
Number 0116                                                                    
SCOTT JANKE, City Manager, City of Cordova, was next to testify via            
teleconference from Cordova.  He explained the City of Cordova has             
been a major supporter of this project.  During the last four                  
years, the city council has made it one of their top priorities and            
has authorized him to help the Cordova Electric Cooperative board              
of directors and Jim Roberts in fundraising efforts and lobbying               
the legislature.  Mr. Janke said he believes that Mr. Roberts and              
other speakers have done a good job of discussion on the economies             
that are prevelant in Cordova and how they will be affected by                 
either having the project go forward or not allowed to go forward              
by not granting these monies.  Mr. Janke said a member of the                  
committee asked the question of whether or not the community could             
do a bond for this project.  He explained that is extremely                    
unlikely.  On March 3, 1998, Cordova voters are going to be voting             
on $4.3 million in bonds for a water system improvement and a land             
fill improvement.  These are projects that are becoming necessary              
due to federal and state regulatory requirements.  That, by itself,            
is over $1,400 per capita of debt.  They simply can't afford to pay            
for a hydroelectric project and they need state assistance.  Mr.               
Janke said, "Our fish processing industry is teetering on the edge             
because of the high cost of energy and obviously to keep that                  
industry healthy, which is one of the most important industries in             
Alaska, they need a better energy cost equation so they can compete            
in the world marketplace.  But again, the city council has made                
this a top priority for at least four years that I've been here -              
possibly longer.  And I would ask and urge you to support this --              
Mr. Kubina's bill to allow funding for this extremely important                
project for Cordovans."                                                        
Number 0217                                                                    
HAP SYMMONDS, Plant Manager, Ocean Beauty Seafoods; Vice President,            
Board of Directors, Cordova Electric Cooperative, Incorporated, was            
next to testify via teleconference from Cordova.  He said he would             
like to make some points in reference to HB 337.  Mr. Symmonds                 
said, "We seem to be hung up partially on the giving up of PCE as              
a tradeoff for funding.  In the business world, the $54 of PCE                 
credit is meaningless.  The nickel a kilowatt-hour lowering of the             
electric rate is what the business community in this town is                   
looking at.  And as Scott Janke (indisc.) said the seafood                     
processing industry, as a whole, and especially in Cordova, is on              
the brink of going under so anything that can be done to lower the             
cost overall and especially major factors such as electricity is               
something that is very much needed.  Of course, we all look at - as            
Pat said - the funding that has gone into the Four Dam Pool and the            
intertie and I think we tend to seat up against them.  And I have              
spoken at other gatherings and I think that the committee needs to             
remember that, you know, urban and rural Alaska are all still one              
state of Alaska, and just because something benefits one group and             
maybe doesn't have a direct benefit with the other group is                    
something that we need to look at as Alaskans.  Thank you."                    
Number 0318                                                                    
REPRESENTATIVE DYSON confessed that he had not done his homework on            
the issue and he isn't prepared to vote the legislation out of                 
committee.  He said that he would appreciate not moving the                    
legislation out until the next meeting so he can do his homework.              
Number 0339                                                                    
CHAIRMAN IVAN said that he feels the legislation is so important               
that the committee needs to do a good job with the information that            
is coming to the members.  He asked Representative Dyson if he                 
would have enough time to review the legislation if he holds the               
bill until Friday.                                                             
REPRESENTATIVE DYSON indicated Friday would be fine.                           
CHAIRMAN IVAN stated that he would like to take some action on the             
CS.  He referred to page 1 of the proposed CS for HB 336, lines 9              
and 10, "An electric utility loses its eligibility under AS                    
42.45.100 - 42.45.150 if, on or after January 1, 1998, it                      
constructs a hydroelectric generation facility..."  He referred to             
"hydroelectric generation facility" and said he would like to                  
expand the language to include other projects that may be available            
for renewable resources.  It would include other projects that may             
be available besides hydroelectric generation projects.  Chairman              
Ivan said he would entertain a motion for the adoption of the                  
language change.                                                               
Number 0434                                                                    
REPRESENTATIVE JOULE questioned where the change would be made.                
CHAIRMAN IVAN responded the change would be on page 1, line 10,                
after "hydroelectric generation facility."  The amendment would                
include "other projects using renewable resources."                            
Number 0455                                                                    
REPRESENTATIVE SANDERS asked if it would have the same effect by               
deleting "hydro" and say "electric generation facilities."                     
Number 0466                                                                    
REPRESENTATIVE DYSON stated that he would encourage Chairman Ivan              
not use the limiting word "renewable."  He noted he is thinking                
particularly of legislation by Representative Ogan which was passed            
about a year ago that had to do with shallow gas wells.                        
Representative Dyson said he believes the interest is with                     
nondiesel fired.  He said we're looking for alternatives to                    
expensive diesel generators on the bush.  Representative Dyson                 
said, "I would encourage us to not limit it."                                  
CHAIRMAN IVAN said that he is trying to make other options and                 
opportunities available.                                                       
Number 0510                                                                    
REPRESENTATIVE OGAN indicated that he understands the Chairman                 
Ivan's point.  He informed the committee he concurs with                       
Representative Dyson's analysis.  He said he knows, for a fact,                
that in Naknek they're looking at developing shallow gas resources             
that generate electricity.  He suggested making the language broad             
enough to include that.  Representative Ogan said he isn't sure how            
to do that.  If the bill isn't going to move, he would suggest the             
committee consider the appropriate language change and maybe adopt             
it at the next committee meeting.                                              
CHAIRMAN IVAN said Representative Ogan's point is well taken and he            
would consider the suggestion before the next committee meeting the            
following Friday.                                                              
Number 0559                                                                    
REPRESENTATIVE DYSON said, "If you have the votes to move it out of            
committee, my feelings won't be hurt, you know, if you go ahead and            
move it.  So you can do what you choose and I won't be upset.  Just            
for my sake, I probably can't vote for it to move as of yet.  If               
you have the votes, go for it."                                                
CHAIRMAN IVAN indicated it would be up to the committee members as             
to whether the bill moves.  He noted there is not a fiscal note for            
HB 336.  Following past procedures, the bill will have a zero                  
fiscal note to accompany the bill.  Chairman Ivan again stated he              
would like to make other options available.                                    
Number 0604                                                                    
REPRESENTATIVE OGAN said, "I would (indisc.) move a conceptual                 
amendment or at least an amendment that we delete the word                     
'hydroelectric' and put 'logical generation facility that is                   
financed in whole or part.'  I think that would probably [be] broad            
enough that it would include generation facility, financial gas or             
Number 0624                                                                    
REPRESENTATIVE KUBINA said he agrees with the Chairman's intent.               
He said his fear is that if it is not limited somewhat, it would be            
the same as his original version of the legislation.  The small                
utilities that may need help if they had a new diesel generator,               
would still have the high cost.  Since they received help they                 
would have jeopardized their PCE.  He suggested using the term                 
"alternative nondiesel generators."                                            
Number 0664                                                                    
CHAIRMAN IVAN said he would introduce a conceptual amendment to the            
CS before the committee.                                                       
Number 0669                                                                    
REPRESENTATIVE OGAN said he would withdraw his motion for the                  
CHAIRMAN IVAN asked Representative Kubina to repeat his suggested              
REPRESENTATIVE KUBINA said, "alternative nondiesel generation."                
CHAIRMAN IVAN said if there is no objection, the language would be             
Number 0696                                                                    
REPRESENTATIVE JOULE made a motion to move HB 336 out of committee             
with individual recommendations, a zero fiscal note and with the               
conceptual amendment.                                                          
REPRESENTATIVE DYSON objected to the motion.                                   
Number 0713                                                                    
A roll call vote was taken.  Representatives Kookesh, Joule and                
Ivan voted in favor of the motion.  Representatives Dyson, Sanders             
and Ogan voted against the motion.  So HB 336, as amended, failed              
to move out of the House Community and Regional Affairs Standing               
CHAIRMAN IVAN announced the legislation would be considered again              
at the meeting on Friday.                                                      
Number 0774                                                                    
REPRESENTATIVE OGAN said, "A point of procedural order here.  I'm              
not sure that we amended the bill.  Representative Joule had a                 
motion to move the bill with a conceptual amendment.  I don't think            
we ever had it -- I withdrew my motion for my amendment.  I don't              
think we ever had a motion to amend the language - a proper motion.            
So maybe we could bring that up at the next meeting.  We might want            
to check the record to make sure..."                                           
CHAIRMAN IVAN said if he isn't mistaken, he did introduce that                 
amendment as presented by Representative Kubina.                               
REPRESENTATIVE OGAN said, "That's correct, Sir.  With all due                  
respect, I don't believe there was a motion or we voted on the                 
amendment though so we might have missed a procedural thing there.             
I think you moved the motion, but there was never a vote on the                
motion or the amendment."                                                      
REPRESENTATIVE DYSON said he gave a thumbs up.                                 
CHAIRMAN IVAN said he didn't hear an objection to the motion.                  
REPRESENTATIVE OGAN said, "Okay, alright, I stand corrected."                  
CHAIRMAN IVAN indicated HB 336 and HB 337 would be addressed again             
at the meeting on Friday.                                                      

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