Legislature(2011 - 2012)BARNES 124

03/20/2012 03:00 PM House ENERGY


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03:07:53 PM Start
03:09:40 PM HB294
04:31:38 PM Presentation: Ruralcap Energy Wise Program
05:07:11 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 294 POWER COST EQUALIZATION TELECONFERENCED
Moved CSHB 294(ENE) Out of Committee
+ Presentation: RuralCAP Energy Wise Program TELECONFERENCED
+ Bills Previously Heard/Scheduled TELECONFERENCED
                 HB 294-POWER COST EQUALIZATION                                                                             
                                                                                                                                
CO-CHAIR PRUITT announced  that the first order  of business would                                                              
be  HOUSE  BILL NO.  294,  "An  Act  relating  to the  power  cost                                                              
equalization program."                                                                                                          
                                                                                                                                
3:09:45 PM                                                                                                                    
                                                                                                                                
ADAM  BERG, Staff  to Representative  Bryce  Edgmon, Alaska  State                                                              
Legislature, prime  sponsor, speaking on behalf  of Representative                                                              
Edgmon, reviewed  the changes  in the  committee substitute  (CS),                                                              
identified  as Version  27-LS1108\B, for  HB 294.   Mr. Berg  said                                                              
the  first change  increases the  residential  kilowatt hours,  to                                                              
which  power cost  equalization  (PCE) can  be  applied, from  500                                                              
hours to 600  hours.  The second  change allows PCE to  be applied                                                              
to small businesses  up to 600 kilowatt hours  per month, although                                                              
to qualify  as a small business,  the business may not  exceed the                                                              
ceiling of  2,400 kilowatt hours per  month.  The CS  also removes                                                              
schools  and  larger   commercial  consumers  from   the  list  of                                                              
eligible recipients.                                                                                                            
                                                                                                                                
3:10:58 PM                                                                                                                    
                                                                                                                                
CO-CHAIR PRUITT  agreed with the intent  of HB 294, but  asked for                                                              
clarification  about  the  endowment;  for  example,  whether  the                                                              
endowment  can withstand  the increases  in cost  to the  program,                                                              
and its effect on the $400 million appropriated last year.                                                                      
                                                                                                                                
3:11:49 PM                                                                                                                    
                                                                                                                                
MR.  BERG  deferred  questions  on the  endowment  to  the  Alaska                                                              
Energy Authority (AEA).                                                                                                         
                                                                                                                                
CO-CHAIR FOSTER  asked for a  description of the  original program                                                              
and why it was changed.                                                                                                         
                                                                                                                                
MR.  BERG recalled,  prior  to 1998,  the PCE  program  had a  700                                                              
kilowatt  hour  maximum  for residences,  and  schools  were  also                                                              
eligible.   A blue  ribbon commission report  issued at  that time                                                              
recommended reductions  to the program, because PCE  was viewed as                                                              
a  subsidy  to  rural  Alaska,   and  was  "under  fire  from  the                                                              
legislature."                                                                                                                   
                                                                                                                                
3:14:13 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FOSTER understood  that at  that time  the price  of oil                                                              
had dropped  to around $9  per barrel; the  point is that  now the                                                              
state is flush  with surplus, and  the price of oil is  about $120                                                              
per barrel.                                                                                                                     
                                                                                                                                
CO-CHAIR PRUITT  added that  there was no  endowment at  that time                                                              
and the program was funded from general funds (GF).                                                                             
                                                                                                                                
MR. BERG said yes.                                                                                                              
                                                                                                                                
REPRESENTATIVE   SADDLER   asked   whether   the   bill   contains                                                              
provisions requiring  those who receive  PCE to be  more efficient                                                              
and conserve energy.                                                                                                            
                                                                                                                                
MR. BERG said no.                                                                                                               
                                                                                                                                
3:15:52 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER  then asked  whether  the  sponsor of  the                                                              
bill  considered linking  the increased  amount of  PCE per  month                                                              
with improved efficiency.                                                                                                       
                                                                                                                                
MR. BERG  said many provisions  were discussed, including  whether                                                              
the  conservation community  would support  increasing the  amount                                                              
of kilowatt  hours that residents can  use.  As a matter  of fact,                                                              
residents  living in  areas of high  energy costs  are not  coming                                                              
close  to using  the 500  kilowatt hours  per month,  at least  in                                                              
summer.   He  said an  increase of  100 kilowatt  hours per  month                                                              
would not  cause residents  to burn more  power, because  they are                                                              
already in a conservation  mode due to high costs,  even with PCE.                                                              
Mr. Berg  noted that the weatherization  program works  great, but                                                              
can be  slow to reach  some areas  of the state.   He  asked, "Why                                                              
penalize somebody?   If they're  waiting for work on  their house,                                                              
they're  already paying  high  power  bills.   If  their house  is                                                              
inefficient ... they're paying the price ...."                                                                                  
                                                                                                                                
3:17:42 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FOSTER asked  for the general qualifications  that make a                                                              
community eligible for PCE.                                                                                                     
                                                                                                                                
MR. BERG  explained  that the base  price is  determined by  power                                                              
costs in  Fairbanks, Anchorage,  and Juneau.   He deferred  to AEA                                                              
for clarification.                                                                                                              
                                                                                                                                
3:18:42 PM                                                                                                                    
                                                                                                                                
SARA   FISHER-GOAD,  Executive   Director,   AEA,  Department   of                                                              
Commerce,   Community   &  Economic   Development,   advised   the                                                              
qualification for a  community to be eligible for PCE  is based on                                                              
whether  its utility  was  using a  certain  percentage of  diesel                                                              
fuel to  generate power  in 1985.   Utilities  that were  excluded                                                              
from eligibility  are the  Railbelt utilities,  the Four  Dam Pool                                                              
communities, and  some small "road"  communities served  by Golden                                                              
Valley   Electric   Association   and   Copper   Valley   Electric                                                              
Association.   Although Cordova  is generating with  hydroelectric                                                              
now, in the  '80s it was generating  with diesel, and  is eligible                                                              
for PCE.   In response to  Co-Chair Pruitt, she said  Cordova does                                                              
take advantage of its PCE eligibility.                                                                                          
                                                                                                                                
MS. FISHER-GOAD  further explained that  if a utility  chooses not                                                              
to use  its eligibility,  there  is a provision  for residents  to                                                              
petition the utility  to take advantage of the program.   She then                                                              
noted  that another  way a  community is  not eligible  is if  its                                                              
costs are  below the "floor,"  which is  currently 13 cents  to 13                                                              
and one-half cents per kilowatt hour.                                                                                           
                                                                                                                                
3:20:28 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  PRUITT  restated his  earlier  question  on whether  the                                                              
endowment fund  can "handle  this," and  how the appropriation  of                                                              
$400 million from last year is affected.                                                                                        
                                                                                                                                
MS. FISHER-GOAD  said the power  cost equalization  endowment fund                                                              
is  a percent  of market  value (POMV)  fund that  is invested  to                                                              
earn 7  percent over  time and -  on an annual  basis -  7 percent                                                              
can be  used for the  PCE program.   This is  based upon  a three-                                                              
year,  monthly,   average  market  value,  so  the   $400  million                                                              
appropriated as  of 6/30/11, does  not calculate for the  PCE cost                                                              
for fiscal year  2013 (FY 13).   The fund balance is  based on the                                                              
three years prior,  for FY 12, FY 11, and FY 10.   Therefore, one-                                                              
third of  the fund can be  incorporated into FY 14,  two-thirds by                                                              
FY 15,  and the  full $400  million would  be utilized  by FY  16.                                                              
She advised  that is the  reason there is  a delay.   Further, she                                                              
opined  the  program, without  the  changes  proposed  by HB  294,                                                              
would  only need  to  use 5  percent  of the  fund,  instead of  7                                                              
percent.    In  fact,  part  of  the  7  percent  is  invested  in                                                              
equities, and  she said there  were concerns  that 7 percent  is a                                                              
very aggressive investment rate in these times.                                                                                 
                                                                                                                                
3:22:34 PM                                                                                                                    
                                                                                                                                
CO-CHAIR PRUITT asked for the amount of the principal.                                                                          
                                                                                                                                
MS.  FISHER-GOAD estimated  the principal  is a  little over  $700                                                              
million.   She pointed out  that with the  changes to  the program                                                              
in  HB 294,  Version B,  even though  there could  be $51  million                                                              
available  from the  endowment  in  FY 16,  the  fund would  still                                                              
require  $7.3 million  from  the  GF for  the  total  cost of  the                                                              
program, which  is estimated  at $58.3 million.   The  fiscal note                                                              
indicated a  $21.1 million  increment this year  would have  to be                                                              
covered  by  the  GF,  in addition  to  what  is  already  in  the                                                              
governor's FY 13 budget.                                                                                                        
                                                                                                                                
CO-CHAIR  PRUITT concluded  that even  after the  $400 million  is                                                              
fully utilized  in three  years, the program  would still  need $7                                                              
million from the GF to support the changes in HB 294.                                                                           
                                                                                                                                
3:24:08 PM                                                                                                                    
                                                                                                                                
MS.  FISHER-GOAD acknowledged  it  is very  difficult to  estimate                                                              
the cost  of the PCE  program because AEA  must predict  costs one                                                              
and  one-half years  ahead.   Also, the  floor of  the program  is                                                              
unknown because  it is  based on  the cost of  fuel for  the prior                                                              
year, after  the cost  is averaged  between Fairbanks,  Anchorage,                                                              
and  Juneau.   To  determine rough  cost  estimates on  commercial                                                              
facilities,  AEA assumed  25 percent of  the commercial  customers                                                              
in eligible  communities would qualify,  bringing the  estimate to                                                              
about $12.5 million.   The additional 100 eligible  kilowatt hours                                                              
added  by the  bill  is  estimated to  increase  the  cost to  the                                                              
program  by $7.5  million.   Ms.  Fisher-Goad  closed, saying  her                                                              
expectation  is that  there would  continue to  be a  need for  GF                                                              
support, depending  on the market performance of the  fund, and on                                                              
other factors, such as fuel costs.                                                                                              
                                                                                                                                
3:25:38 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  PRUITT estimated  an appropriation  of  $100 million  to                                                              
$150  million  would be  required  to  prevent  the need  to  pull                                                              
monies from the GF in FY 16.                                                                                                    
                                                                                                                                
MS. FISHER-GOAD  offered to provide the committee  with additional                                                              
analysis on this matter.                                                                                                        
                                                                                                                                
3:26:33 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SADDLER  recalled the  intent of the  PCE endowment                                                              
was to "take  a big lump-sum of  money, put it aside  and have the                                                              
spin-off from that  - the proceeds - pay for PCE  so we don't come                                                              
back for annual  GF appropriations.  That's not  happening in this                                                              
case."   He  surmised  the  additional  hours have  affected  this                                                              
calculation.   Representative  Saddler then  asked, "Does  raising                                                              
the amount  ... of kilowatt hours  per month and  increasing those                                                              
who receive it,  [does] that put ... the fundamental  structure of                                                              
PCE at risk again?"                                                                                                             
                                                                                                                                
MS. FISHER-GOAD  responded that  is a  "policy call" with  respect                                                              
to  the endowment  as  a  funding source  for  the  program.   She                                                              
explained the GF  dollars have been made available  at 100 percent                                                              
of  the  formula cost,  thus  it  really  depends on  whether  the                                                              
intent is  for the  endowment to  fully sustain  the program.   In                                                              
2001,  the estimate  for full  funding  of the  program was  $15.7                                                              
million per  year, which is  significantly less than  now, because                                                              
fuel prices were lower then.                                                                                                    
                                                                                                                                
3:29:03 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SADDLER  asked whether  the PCE endowment  was ever                                                              
envisioned as the one, sole source of funding.                                                                                  
                                                                                                                                
MS. FISHER-GOAD said  at one time it was necessary  to prorate the                                                              
program for  the appropriation.   She  advised, "There's  a couple                                                              
different  ways that  you can get  there and  the legislature  has                                                              
chosen, and  ... the  governor's budget  includes, the  assumption                                                              
[that] the goal is to pay PCE at 100 percent."                                                                                  
                                                                                                                                
REPRESENTATIVE  PETERSEN  referred  to renewable  energy  projects                                                              
coming   online,  and   the  weatherization   and  energy   rebate                                                              
programs.    He asked  whether  these  programs would  reduce  the                                                              
demand for PCE.                                                                                                                 
                                                                                                                                
MS.  FISHER-GOAD  expressed  her belief  that  renewable  projects                                                              
leading to significant  reductions in PCE is  a far-reaching goal;                                                              
however, there have  been reductions in costs where  projects have                                                              
been completed, but  some projects - such as wind  generation - do                                                              
not displace  all of  the diesel  fuel needed  for a community  to                                                              
run its utilities.                                                                                                              
                                                                                                                                
CO-CHAIR PRUITT opened public testimony.                                                                                        
                                                                                                                                
3:32:23 PM                                                                                                                    
                                                                                                                                
RAE BELLE WHITCOMB,  Director, Workforce Development,  Bristol Bay                                                              
Native  Association   (BBNA),  informed  the  committee   she  was                                                              
speaking on  behalf of BBNA  and as a  small business owner.   She                                                              
said BBNA manages  a low-income heating assistance  program and is                                                              
finding  that PCE  is  a significant  benefit  for rural  families                                                              
towards  paying  for  their household  heating  needs.    Further,                                                              
because many  communities are running  out of fuel,  and residents                                                              
are using electric  heat, the cost of electricity  per kilowatt is                                                              
increasing;  in  fact, households  are  facing electric  bills  of                                                              
$500 to $700  per month and  higher.  Ms. Whitcomb  confirmed that                                                              
the   weatherization  program   has   not  reached   all  of   the                                                              
communities  of her region,  and some  homes may  be on  a waiting                                                              
list for years.    As a  small business owner, she  advised having                                                              
PCE  would make  a big  difference  to rural  businesses, and  may                                                              
enable a  business in a small  community to hire a  local employee                                                              
and provide  local supplies  at a reasonable  cost.   Ms. Whitcomb                                                              
expressed  her support  for  the  additional kilowatt  hours,  and                                                              
said from  the perspective of  workforce development,  the benefit                                                              
of PCE to businesses will spur economic business development.                                                                   
                                                                                                                                
3:35:18 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FOSTER  observed the  Institute  of the  North  recently                                                              
reported that  rural Alaska  households are  paying 47  percent of                                                              
their  household income  for heating  and electricity.   He  asked                                                              
what the  kilowatt rate per  hour is - before  and after PCE  - in                                                              
Dillingham.                                                                                                                     
                                                                                                                                
MS. WHITCOMB  said the  rate in  Dillingham is  48 cents,  but the                                                              
rate is closer  to one dollar  per kilowatt in villages  along the                                                              
river.                                                                                                                          
                                                                                                                                
CO-CHAIR PRUITT  asked whether Ms.  Whitcomb could  determine what                                                              
percentage  of the  cost of milk  in Dillingham  is attributed  to                                                              
energy.                                                                                                                         
                                                                                                                                
MS. WHITCOMB gave  the example of a small grocery  store that pays                                                              
between $30,000 and  $40,000 per month for the  electricity to run                                                              
freezers  and  coolers.   This  expense  is  passed along  to  the                                                              
customer.  Small  businesses of all kinds are  greatly affected by                                                              
the cost of power.                                                                                                              
                                                                                                                                
3:38:11 PM                                                                                                                    
                                                                                                                                
DAVID  PELUNIS-MESSIER  disclosed  that  he works  for  the  Yukon                                                              
River Inter-Tribal  Watershed Council and was speaking  on his own                                                              
behalf.   Mr.  Pelunis-Messier  cited  his experience  working  on                                                              
energy projects  in rural  Alaska for  three years, and  expressed                                                              
his concern  that extending  the  amount of PCE  credits to  rural                                                              
businesses  will act  as  a disincentive  for  businesses to  make                                                              
energy  efficient   modifications.     For  example,   in  certain                                                              
buildings in PCE  communities, there is no incentive  to change to                                                              
high  efficiency  lighting  because  with PCE  credits,  the  heat                                                              
produced  by inefficient  lighting  sources  is cheaper  than  the                                                              
extra  fuel oil  burned  to  make up  the  heat in  the  building.                                                              
However, creating  electricity from  fuel with village  generators                                                              
is about  30 percent  efficient, and creating  heat from  fuel oil                                                              
is 80  percent to 90  percent efficient.   Also, an  Alaska entity                                                              
was  unwilling to  spend American  Recovery  and Reinvestment  Act                                                              
(ARRA)  funds  on   a  lighting  retrofit,  because   PCE  credits                                                              
lengthened the  payback period  on the project  to 10 years.   Mr.                                                              
Pelunis-Messier said  he supported solutions to the  energy crisis                                                              
in  Alaska  through  the  renewable  energy  grant  fund  and  the                                                              
emerging  energy technology  fund, and proposed  using a  matching                                                              
grant  program  for  businesses,  rather  than PCE  credits.    He                                                              
provided a personal  example of the energy savings  for a business                                                              
in Anaktuvuk  Pass, and  said he supports  the state's  efforts to                                                              
make   living  in   rural  Alaska   more   affordable,  and   more                                                              
sustainable,  by   rewarding  innovation,  rather   than  enabling                                                              
inefficiency.                                                                                                                   
                                                                                                                                
CO-CHAIR FOSTER  stressed the importance  of looking at  a problem                                                              
from  multiple  angles, noting  that  PCE  was  intended to  be  a                                                              
"bridge" and not to be relied on in the long-term.                                                                              
                                                                                                                                
3:42:11 PM                                                                                                                    
                                                                                                                                
CHUCK  WHEELER stated  he is  a  life-long resident  of Nome,  and                                                              
uses heating  fuel.  Mr. Wheeler  said he supported the  intent of                                                              
the bill, but the  bill does not take care of  the problems of the                                                              
coastal villages, which  need to utilize alternate fuels.   In the                                                              
coastal  villages,  PCE  covers  the fuel  surcharge  and  nothing                                                              
more.  He  urged that the  amount of electricity eligible  for PCE                                                              
should be raised  to 700 or 800 kilowatt hours,  because residents                                                              
have no  choice but  to run  electric heaters.   Power  assistance                                                              
programs  are  available  in  other  parts of  the  state,  but  a                                                              
northern energy  fund is needed  for the coastal villages  and for                                                              
the Interior.  Mr.  Wheeler opined the cost of the  PCE program is                                                              
low when compared to what is spent for other energy projects.                                                                   
                                                                                                                                
3:44:15 PM                                                                                                                    
                                                                                                                                
MEERA  KOHLER,   President  and   CEO,  Alaska  Village   Electric                                                              
Cooperative, Inc.,  (AVEC), stated AVEC serves 54  villages across                                                              
the state.   She stated  her support for  HB 294, saying  the bill                                                              
is  quite  significant,  primarily  because  of  the  addition  of                                                              
commercial customers  to those  eligible for  PCE.  In  2011, AVEC                                                              
reported the  average PCE consumption  for a residential  user was                                                              
about 250  kilowatt hours per month.   As the  average electricity                                                              
usage  was about  400  kilowatt  hours per  month,  only about  60                                                              
percent  of   the  residential  electricity  usage   receives  PCE                                                              
benefits.    She  expected  that   an  increase  to  600  eligible                                                              
kilowatt hours would  result in the maximum of a  20 percent to 25                                                              
percent increase  for residential  users.   However, the  addition                                                              
of  600 eligible  kilowatt hours  for commercial  users is  fairly                                                              
significant.   Ms. Kohler  recalled the  original PCE  legislation                                                              
included  700 eligible  kilowatt hours  per month  for all  users,                                                              
including commercial  consumers.  She pointed out that  one of the                                                              
original requirements  for a community to be eligible  for PCE was                                                              
that the  residential kilowatt per hour  sales had to be  equal to                                                              
- or less than  - seven and one-half million  kilowatt hours, thus                                                              
all of  the larger  communities were excluded.   Also,  75 percent                                                              
of  the electricity  generated in  the  community in  1984 had  to                                                              
come  from  diesel  fuel.   Ms.  Kohler  advised  AVEC  and  other                                                              
utilities  in   rural  Alaska  are  installing   renewable  energy                                                              
projects  - primarily  funded  by the  Denali  Commission and  the                                                              
Rural  Utility Services,  Rural  Development,  U.S. Department  of                                                              
Agriculture -  resulting in the  cost of the fuel  for electricity                                                              
decreasing  by  five  or  more cents  per  kilowatt  hour.    This                                                              
reduces  the  PCE rate,  thereby  saving  the  state money.    Ms.                                                              
Kohler opined  raising the  amount of  eligible kilowatt  hours to                                                              
600 will  result in  a net  PCE cost  to the  state that will  not                                                              
exceed  the  7 percent  "spin  off"  from the  existing  endowment                                                              
fund.                                                                                                                           
                                                                                                                                
3:48:47 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FOSTER asked  Ms.  Kohler to  provide  to the  committee                                                              
copies  of  the  report  issued   by  Commonwealth  of  the  North                                                              
entitled, "Energy  for a Sustainable Alaska The  Rural Conundrum,"                                                              
dated  February  2012.   He  then  asked  her  to respond  to  Mr.                                                              
Pelunis-Messier's comments on the effects of PCE on businesses.                                                                 
                                                                                                                                
MS. KOHLER  offered to  present the  aforementioned report  to the                                                              
committee.   In  response  to Mr.  Pelunis-Messier,  she said  his                                                              
position that  commercial establishments  are reluctant  to change                                                              
from  incandescent to  more energy  efficient  lighting -  because                                                              
PCE pays for part  of the electricity - is part  of the conundrum.                                                              
She acknowledged  that would be  true in a facility  receiving PCE                                                              
for all of its  electricity, such as a community  facility that is                                                              
already receiving  PCE in an  amount up  to 70 kilowatt  hours per                                                              
resident;  however,  most  community   facilities  are  below  the                                                              
maximum, and  it is her experience  that most community  buildings                                                              
are using  fluorescent tubes.    Ms. Kohler opined the  bill would                                                              
not have an impact on conservation measures.                                                                                    
                                                                                                                                
3:53:32 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  PRUITT asked  whether incandescent  lighting will  still                                                              
be available in two years.                                                                                                      
                                                                                                                                
MS.  KOHLER advised  incandescent  100 watt  bulbs  are slated  to                                                              
"vanish" in  2014, followed  by those of  lower wattages,  but she                                                              
cautioned  that they  are being  hoarded  by some.   She  recalled                                                              
that  compact fluorescent  (CFL)  bulbs were  met with  resistance                                                              
originally,  but are  now available  at  a reasonable  cost.   Her                                                              
utility informs its  members about savings in energy  from the use                                                              
of CFL bulbs.   In further response to Co-Chair  Pruitt, she noted                                                              
that the  collection of  CFL bulbs for  recycling is  taking place                                                              
at city offices  and landfills.  Recycling bulbs is  a minor issue                                                              
that can be addressed locally.                                                                                                  
                                                                                                                                
CO-CHAIR  PRUITT encouraged  the  proper handling  of a  hazardous                                                              
product.                                                                                                                        
                                                                                                                                
3:57:43 PM                                                                                                                    
                                                                                                                                
MARY  ERICKSON  said she  was  speaking  as  a business  owner  in                                                              
Hoonah.   She, along with  the previous testifiers,  was concerned                                                              
about  the   high  cost   of  diesel   fuel  needed  to   generate                                                              
electricity,  which is  causing a  severe hardship  on those  with                                                              
fixed incomes.   Ms. Erickson said her main concern  was for local                                                              
businesses.    She noted  the cost to  weatherize her  business by                                                              
changing  lighting,  removing  fans, and  turning  off  machinery.                                                              
Ms.  Erickson  encouraged  the  use  of  PCE  for  businesses,  in                                                              
addition  to  long-term   solutions  such  as  the   intertie  and                                                              
hydroelectric  power.  Hoonah  has jobs  available, but  residents                                                              
cannot  afford to  live there  due  to the  cost of  energy.   She                                                              
stated  her strong  support of  HB 294  and long-range  solutions.                                                              
In  response to  Co-Chair Pruitt,  she  said her  business is  The                                                              
Office Bar.                                                                                                                     
                                                                                                                                
4:02:19 PM                                                                                                                    
                                                                                                                                
ELMER SEETOT  JR said he  is an AVEC  delegate in Brevig  Mission.                                                              
Mr. Seetot  relayed that  the cost  of fuel  is determined  on the                                                              
day the  fuel is loaded  on the barge,  and local businesses  have                                                              
to  choose  whether  to  pay  for   the  fuel  in  full,  or  make                                                              
installments.   In  communities, customers  pay a  high price  for                                                              
groceries  and retail  items due  to  shipping costs.   In  Brevig                                                              
Mission,  fuel  prices are  not  as high  as  those  on the  river                                                              
system where  the water level is low.    There has been  a radical                                                              
shift  in rural  Alaska  to a  dependency  on electricity,  except                                                              
during  subsistence seasons.     Mr. Seetot pointed  out there  is                                                              
only  seasonal  employment,  and   more  young  people  depend  on                                                              
commercial goods  instead of a  subsistence lifestyle.   He stated                                                              
his support of HB 294.                                                                                                          
                                                                                                                                
4:05:59 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SADDLER  asked whether  one questions if  the shift                                                              
to electricity is good.                                                                                                         
                                                                                                                                
MR.  SEETOT  said  some  community  members  have  discussed  that                                                              
issue.   In further  response to  Representative Saddler,  he said                                                              
he lives  an outdoor lifestyle and  does not need the  Internet or                                                              
a computer.                                                                                                                     
                                                                                                                                
CO-CHAIR  FOSTER asked  how much  electricity  costs per  kilowatt                                                              
hour.                                                                                                                           
                                                                                                                                
MR. SEETOT said 30 cents to 35 cents.                                                                                           
                                                                                                                                
4:07:53 PM                                                                                                                    
                                                                                                                                
ED  PHILLIPS said  he  owns the  Icy Strait  Lodge  in Hoonah  and                                                              
expressed his strong  support of HB 294.  His  business experience                                                              
indicates that the  residents of Hoonah have  little discretionary                                                              
income due  to the  high cost of  electric heat.   He  opined more                                                              
attention  should  be  paid  to   educating  residents  on  energy                                                              
efficiency.  There  are also many homes with  defective electrical                                                              
systems  that could  be  corrected  by a  program  similar to  the                                                              
weatherization  program, but that  analyzes electric  consumption.                                                              
Mr.  Phillips   stressed  that  diesel-electric   communities  are                                                              
slowly dying  because the high  cost of  living is causing  a loss                                                              
of  businesses  and  jobs,  which  are  necessary  for  a  healthy                                                              
society.  Mr.  Phillips said in  the past 12 years, the  high cost                                                              
of  energy  in Hoonah  has  caused  an  increase  in the  cost  of                                                              
freight  and a  loss  of school  population  that  is eroding  the                                                              
community.   As noted  in other communities,  the high  cost makes                                                              
purchasing  groceries  at  local  stores  a  "last  resort."    He                                                              
pointed  out that  most  of the  economy  left  in communities  is                                                              
based on  government projects instead  of business.   Mr. Phillips                                                              
suggested  the   mechanism  of  HB  294  could   track  electrical                                                              
consumption and  quickly determine  the cost  of the program.   He                                                              
urged for  an understanding of the  severity of the problem.   Mr.                                                              
Phillips  closed,  pointing  out  that using  the  consumption  of                                                              
2,400 kilowatts  to determine a  small business is not  a relevant                                                              
number.                                                                                                                         
                                                                                                                                
4:15:55 PM                                                                                                                    
                                                                                                                                
BRIAN  HIRSCH, Alaska  Representative,  National Renewable  Energy                                                              
Laboratory,  U.S. Department  of Energy,  commissioned a  study by                                                              
the University  of Alaska  Anchorage (UAA),  Institute for  Social                                                              
and Economic Research  (ISER), to look at various  aspects of PCE.                                                              
Some of  the conclusions from  the study indicate  that increasing                                                              
the  amount  of  eligible kilowatt  hours  monthly  increases  the                                                              
state's  liability,  yet  he  agreed with  Ms.  Kohler  that  many                                                              
recipients of PCE  do not exceed or reach the limit.   He proposed                                                              
that  a solution  would  be "a  seasonal  fixed payment,"  meaning                                                              
that  in summer  and winter  rates  would be  a different  amount;                                                              
however, if consumption  is reduced, the resident  would "keep the                                                              
difference" as  an incentive.   Mr. Hirsch  agreed there  would be                                                              
an  increased  cost   to  extend  PCE  to   commercial  customers,                                                              
although there  is a clear need  and benefit that would  come from                                                              
supporting   businesses.      He  offered   to   provide   further                                                              
information on his suggestion.                                                                                                  
                                                                                                                                
4:19:53 PM                                                                                                                    
                                                                                                                                
INGEMAR   MATHIASSON,   Energy   Coordinator,   Northwest   Arctic                                                              
Borough, said  his region has  the highest  cost of energy  in the                                                              
state and  the borough  has taken steps  to raise awareness,  such                                                              
as installing  smart energy meters  that tell residents  when they                                                              
reach  the PCE  limit.   In addition,  the  energy meters  provide                                                              
useful data.   He said  the borough strongly  supports HB  294, as                                                              
households  and   businesses  have   reached  their   limits,  and                                                              
communities must  have jobs and  businesses.  Mr.  Mathiasson then                                                              
pointed out that  AEA grants do not benefit communities  that have                                                              
no recognized  renewable resources.   He expressed his  support of                                                              
Mr. Hirsch's proposal.                                                                                                          
                                                                                                                                
CO-CHAIR PRUITT  observed that  the bill  sponsors looked  at many                                                              
options  -  some with  varying  amounts  -  that were  deemed  too                                                              
complex.                                                                                                                        
                                                                                                                                
4:24:02 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FOSTER  related that  affordable energy  is a  concern of                                                              
all Alaskans, and  is becoming more of a problem  in Fairbanks and                                                              
Anchorage.   Alaska is an energy-rich  state which may  build a $5                                                              
billion dam  in the Railbelt  and a $7  billion to $8  billion gas                                                              
line  from   the  North  Slope   to  Southcentral.   In  addition,                                                              
Southeast  has hydroelectric  to  expand via  an intertie  system.                                                              
For rural  Alaska, PCE was  meant to be a  bridge to the  day when                                                              
all  residents  have  fully  benefitted  from all  of  the  energy                                                              
programs,    and    perhaps    from    consolidating    utilities.                                                              
Representative  Foster agreed  with  the governor  that the  focus                                                              
should be  on the development of  sources of energy on  a regional                                                              
level, such  as biomass  in the Interior  and Copper  River basin,                                                              
natural gas in  Kotzebue, shipping propane to  Western Alaska, and                                                              
geothermal  in  Nome  and  the Bering  Strait  region.    The  PCE                                                              
program is one of many programs across the state.                                                                               
                                                                                                                                
4:27:15 PM                                                                                                                    
                                                                                                                                
CO-CHAIR PRUITT closed public testimony.                                                                                        
                                                                                                                                
4:27:36 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER  acknowledged  that  the  PCE  program  is                                                              
important and  urged for a  portion of  the funds to  be dedicated                                                              
to   increased    fuel   efficiency,   energy    efficiency,   and                                                              
weatherization.                                                                                                                 
                                                                                                                                
4:28:13 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER  moved to  report  the proposed  committee                                                              
substitute  (CS)   for  HB   294,  Version  27-LS1108\B,   Nauman,                                                              
3/12/12,  out of  committee  with individual  recommendations  and                                                              
the accompanying  fiscal notes.   There  being no objection,  CSHB
294(ENE)  was  reported  from  the   House  Special  Committee  on                                                              
Energy.                                                                                                                         

Document Name Date/Time Subjects
A - RuralCAP Energy Wise Presentation.pdf HENE 3/20/2012 3:00:00 PM
RuralCAP Energywise Program
HB 294 - 01 HB 294, Version A.pdf HENE 3/20/2012 3:00:00 PM
HB 294
HB 294 - 02 CS HB 294(ENE) version B.pdf HENE 3/20/2012 3:00:00 PM
HB 294
HB 294 - 03 PCE Endowment Existing Statutes.pdf HENE 3/20/2012 3:00:00 PM
HB 294
HB 294 - 04 Sponsor Statement.pdf HENE 3/20/2012 3:00:00 PM
HB 294
HB 294 - 05 Existing PCE Statutes.pdf HENE 3/20/2012 3:00:00 PM
HB 294
HB 294 - 06 Energy Appropriations FY08-12.pdf HENE 3/20/2012 3:00:00 PM
HB 294
HB 294 - 07 Leg Research 99 086.pdf HENE 3/20/2012 3:00:00 PM
HB 294
HB 294 - 08 Leg Research 00 022.pdf HENE 3/20/2012 3:00:00 PM
HB 294
HB 294 - 09 Leg Research 06 016.pdf HENE 3/20/2012 3:00:00 PM
HB 294
HB 294 - 10 Leg Research 09 200.pdf HENE 3/20/2012 3:00:00 PM
HB 294
HB 294 - 11 PCE_Report_Gov_Blue_ribbon_2-1-991.pdf HENE 3/20/2012 3:00:00 PM
HB 294
HB 294 - 12 Fiscal Note Version A DCCED-AEA-02-10-12.pdf HENE 3/20/2012 3:00:00 PM
HB 294
HB 294 - 14 Letter of Support Minto Development Corp.pdf HENE 3/20/2012 3:00:00 PM
HB 294
HB 294 - 15 Letter of Support BBNA.pdf HENE 3/20/2012 3:00:00 PM
HB 294
HB 294 - 16 Testimony APIAI.pdf HENE 3/20/2012 3:00:00 PM
HB 294
HB 294 - 17 Testimony R.Venables.pdf HENE 3/20/2012 3:00:00 PM
HB 294
HB 294 - 18 Testimony AVEC Testimony.pdf HENE 3/20/2012 3:00:00 PM
HB 294
HB 294 - 13 Fiscal Note Version A DCCED-AIDEA-02-10-12.pdf HENE 3/20/2012 3:00:00 PM
HB 294
HB 294 - 19 Testimony Ed Phillips.pdf HENE 3/20/2012 3:00:00 PM
HB 294