Legislature(1997 - 1998)
04/10/1997 01:40 PM House FIN
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE CONCURRENT RESOLUTION 16
Proposing recommendations concerning the sale of the
Four Dam Pool hydroelectric facilities.
1
REPRESENTATIVE RAMONA BARNES briefed the Committee that
communities served by the Four Dam Pools have been
negotiating to acquire the dams from the Alaska Energy
Authority (AEA). Unfortunately, they are not willing or
able to give the State reasonable payment for the value of
the property. She stated that she opposed any divestiture
which did not guarantee to the State full value for the Four
Dam Pools. Representative Barnes recommended that a
competitive sale resulting from a public Request For
Proposals (RFP) be the best guarantee that the people of the
State receive fair and full value for valuable assets.
Constituents in Anchorage have a great financial interest in
the divestiture process as do the citizens of the
communities that buy the dam power. All Alaskans are owners
of the dams; approximately $500 million dollars of State
funds were used to subsidize the investment.
Representative Barnes continued, the controversy over the
Four Dam Pool stirs up old political wounds and frustrations
over unfulfilled regional energy agreements. She noted that
originally, legislators had indented to create an equitable
energy policy for the entire State, wanting to develop and
export fossil fuel resources. Substantial portions of oil
revenue generated by that policy were appropriated to build
and support energy projects like the Four Dam Pool, designed
to lower the cost of electricity to Alaskan residential and
business consumers.
In areas of the State where electric generation costs could
not be lowered with present technology, the State instituted
a Power Cost Equalization (PCE) program in the interest of
economic justice. She emphasized that since the oil wealth
of Alaska belongs to all its citizens, a fair energy policy
dictates that every community should have reasonable
electric rates, which is a fundamental prerequisite for
community growth and economic viability.
She continued, there are those who feel that the State
should sell the power generated by the dams to local
utilities pursuant to a Power Sales Agreement (PSA). Under
the PSA, the State carries the liability burden for
substantial repairs, uninsured losses, inflation, loss of
power sales, insufficiency in the R&R fund, performance
failures and the liability of a catastrophic event. The
State is currently paying for substantial repairs to the
facilities from the income stream of the Four Dam Pool,
through the PSA self-help clause and projected at
approximately $27 million dollars over the next three years.
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She maintained that Alaska Energy Authority (AEA) has
pursued and continues to pursue a divestiture process that
is flawed. Since August, 1995, AEA sale negotiations have
only been with the local utilities from the private sector;
there has not been one instance, of an offer to pay the
State's asking price. Representative Barnes stated there
are no reasons why the private sector should be shut out of
the sale process in favor of a "sole-source" effort to
transfer the dams to local governments and associations for
$20 million dollars.
Representative Barnes pointed out that HCR 16 only addresses
how the dams are to be sold. AEA should employ a public
competitive sale process and publish, as soon as possible,
an RFP to elicit qualified buyers. The RFP should be
designed to secure the greatest value for the State, with a
guarantee that the sale would not alter existing rates to
local communities under the PSA.
AEA has volunteered to seek the final approval for the sale
from the Legislature. That action would not correct the
flawed sole-source process. She suggested that such action
would pass on to the Legislature, the serious procedural
errors and their attendant conflicts. She recommended that
AEA respond with a dispatch in publishing an RFP so that the
Legislature could know by the end of the session that the
divestiture process of the Four Dam Pool was being properly
handled.
Representative Barnes provided a historical overview of the
Four Dam Pool transfer fund and State loan. In 1984, as the
$200 million dollar variable demand bonds became due, the
State appropriated $210 million dollars to the Power
Development Revolving Loan Fund (PDRLF) for a loan to AEA
for the long term financing of the Four Dam Pool
hydroelectric projects. AEA paid off the interim financing,
lapsing substantial amounts to the general fund, and used
the remaining loan proceeds to complete construction of the
facilities.
That was initially administered by the Division of
Investments, Department of Commerce and Economic Development
(DCED). In 1989, the fund was transferred to AEA. Then CH.
18, SLA 93, repeated the PDRLF and transferred those assets
to the Four Dam Pool Transfer Fund administered by the
Division of Energy, Department of Community and Regional
Affairs (DCRA).
She stated that the Four Dam Pool Transfer Fund is currently
the holder of the loan agreement between the State of Alaska
and AEA. The loan is secured by promissory notes totaling
approximately $185 million dollars and all revenues from the
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Four Dam Pool systems; AEA's rights under any agreement
related to the systems and AEA's resulting rights to receive
payments. The loan would also be secured by the assets of
the hydroelectric projects in the Four Dam Pool areas.
The revenue to the Four Dam Pool varies depending on the
power purchased and/or available; it also depends on
determinations made by AEA and the wholesale power
purchasers to retain part or all of the debt service to
cover certain project risks. AEA and the wholesale power
purchasers are retaining debt service up through July, 1997,
for a total of approximately $27 million dollars.
Representative Barnes pointed out that her concern was that
the Railbelt communities had not received their fair share
of the appropriations historically granted for energy
concerns. After all was "said and done", in 1994, the
Railbelt communities were left with $100 million dollars.
She pointed out that Ketchikan had received a $20 million
dollar intertie. A commitment was made that the loan would
be paid back and that $4 million dollars a year would
additionally be reimbursed for a total of $28 million
dollars. She pointed out that Senator Sharp offered an
amendment recommending the sale of the Four Dam Pool. She
noted that the amendment was proposed one year after he had
negotiated "in good faith" the same legislation to lend $20
million dollars to build the intertie from the Railbelt
Energy fund.
The revenue stream from the Four Dam Pool generates
approximately $11 million dollars in interest only. No
money has been paid into the principle. The $11 million
dollars was intended to be split as follows:
* 40% to the Power Cost Equalization (PCE) & Rural
Electric Capitalization Fund (RECF);
* 40% to the Southeast Energy Fund; and
* 20% to the Power Project (revolving loan) Fund.
She elaborated that the Four Dam Pool communities were
currently negotiating to have the dams given to them at no
charge. At this time, private enterprise has also offered
to buy the dams for $84 million dollars. The small
communities thus realized the situation and offered to pay
$20 million dollars.
Representative Barnes explained that Alaska Industrial
Development & Export Authority's (AIDEA) Board works as the
umbrella for AEA. AEA was transferred as a result of the
debts on the dams and transmission lines. She reiterated
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that these assets are being negotiated at a give-away cost.
Representative Barnes demanded that these communities be
required to keep their word to the people of the Railbelt.
She recommended that AIDEA's flawed process go no further
forward.
Representative Grussendorf briefed the Committee, the
original commitment specified that as long as the Railbelt
money was used for energy projects, there would be no
problem. The project became "wide open" when those funds
were used by the Railbelt communities and spent on "other"
projects. He stressed that the intent of current
negotiations was not to "give" the dams away and that there
will be compensation given for the services provided.
MIKE GRAVEL, SENATOR, PRESIDENT, THE ENERGY GROUP, CITIZENS
POWER OF ALASKA, stated that he represented himself and a
group who had submitted a proposal for the purchase of the
Four Dam Pool. He spoke to what he understood would be in
the best long term interest of the State's energy power. He
pointed out that HCR 16 would require the Legislature to
determine if a public asset is to be sold. He added, if
that asset is to be sold, it should then be sold "in the
public". A procedure for that process exists and would
involve providing a competitive bid, making it open to
qualified bidders.
Determination of the worth of the Four Dam Pool would be
assessed by the cash flow of the project. Senator Gravel
reminded Committee members that the dams had been built as
part of a State energy program to bring the cost of energy
to a reasonable arena so that communities could be
competitive.
Senator Gravel provided information on the project
construction dates and the communities served by each dam.
Lake Tyee serves Petersburg and was built in 1985. Wrangell
is served by Solomon Gulch, Swan Lake serves Ketchikan and
Terror Lake serves Kodiak. None of these dams are
interties. He maintained that the dam areas could be
connected to a Canadian grid intertie within a decade,
although, such action would require private participation
and not just governmental action.
The dams were constructed by State and local governments.
The cost was paid for by the State in the amount of $187
million dollars. Senator Gravel predicted that the private
sector could deliver service more efficiently and cheaper
than the government. The local governments deliver it at a
cost of 8% more. The State is not qualified to operate the
dams, whereas, the local municipalities were required to
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operate them, even though the dams are not controlled by the
local communities. He summarized, the dams are currently
operated locally and are controlled by a project management
committee.
He questioned if it was legal that local entities are the
only ones who could bid on the dam sale. He pointed out
that national studies have indicated that the private sector
provides the most efficient electrical energy service.
Senator Gravel suggested the problem exists from the manner
in which the sale is being handled. He commented that the
dams are a valuable asset which should not be sold on a
sole-source basis. When a valuable State asset is to be
sold, it should be handled in a competitive way.
Senator Gravel addressed the municipal practices for the
sale of a sole-source process. He distributed a handout
reviewing a cross section of Alaskan city policies. [Copy
on file]. An open competitive bid process is self evident.
These communities are feeling threatened because a "cash"
cow could disappear, making them responsible to address dam
management. The dams have an operation cost of 2.5 cents
per kilowatt hour, whereas, similar dams in the lower 48 are
operated at .7 cents per hour. He commented such a sale
would not be in the best interest for Alaska.
Senator Gravel reiterated that by the State selling to the
municipalities, there would be no winners. The action would
create a community monopoly and would leave no alternatives.
He advised that passage of HCR 16 will have important
political consequences, and reiterated that selling a public
asset should be addressed publicly.
Co-Chair Therriault questioned how prospective buyers would
address the power sale agreements (PSA). Senator Gravel
replied that agreement had been specifically crafted for a
point in history for those communities, when a lot more
money had been available in the State. The dams were built
without knowing who would buy the power; there were no legal
agreements regarding these issues. The State was behind the
agreement, even though it was not good for the Alaska, it
was very beneficial to the locals. The agreement stipulates
that the State is ultimately responsible for the upkeep of
the projects. Senator Gravel noted that the Legislature
would be the final authority on the decision to sell.
(Tape Change HFC 97-91, Side 2).
Senator Gravel concluded that the purpose of the bonding
agreement would be to sell power and to sell that power at a
fair and continuous rate.
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Representative Martin asked Senator Gravel if his group had
essential financial backing to purchase the Four Dam Pool.
Senator Gravel acknowledged a letter which had been
distributed to members by Mr. Hoffman, Pacific Power,
indicating that his company was no longer interested in the
Alaska endeavor. Senator Gravel provided an additional
letter from the Alaska Power and Telephone Company
addressing financial support of the project. [Copy on
file]. Alaska Power and Telephone Company commented that
they could operate the dams for half the current costs. He
thought that additional funding could be raised through an
RFP process.
In response to Representative Grussendorf's query, Senator
Gravel commented that when the asset is sold, no swap would
be included. There are no procedures within the Alaskan
communities which allow the current procedure determination
process in selling the dams. He added, the possibility
exists that financiers could come to AIDEA and request
financing. He did not think that would be unusual. Senator
Gravel pointed out that both a Canadian company and a
national company have received financing through AIDEA.
RANDY SIMMONS, EXECUTIVE DIRECTOR, ALASKA INDUSTRIAL
DEVELOPMENT & EXPORT AUTHORITY (AIDEA), ALASKA ENERGY
AUTHORITY, DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT,
noted that he was in agreement with much of the previous two
testimonies. He stated that the problem was where that
perspective ends.
Mr. Simmons explained the time-line for the divestiture
(sale) talks. In August, 1995, AIDEA met with the local
utilities to talk about the potential of the sale of the
dams. Specific requirements were stipulated which the
communities had to incorporate in the sale before AIDEA
would support that move. The first was adequate value, a
determination which would be made at negotiations and
through the process; additionally, the decision must come
before the Legislature for approval.
Mr. Simmons spoke to the State's need to sell the dams. In
1993, legislation reorganized AEA, breaking it up, at which
time, AIDEA received the oversight of $1 billion dollars in
assets. In that legislation, it was clarified that the
State should divest itself from all operations. The State
has done that and no longer operates any of the facilities.
Facilities are currently operated by utilities and
communities. Additionally, in the legislation, AEA was not
given financial where-with-all to live up to their
responsibilities. AIDEA understood that the intent meant
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that the Legislature wanted the State to get out of the
energy business, at which time, AIDEA took upon itself to
divest. At no time, had it been discussed to give the
utilities away.
In 1995, the State was sued by the utilities, under the
Power Sales Agreement (PSA) for not living up to the
agreement. There is a provision in the agreement called
"self help" which allows the utilities to withhold the funds
to make the repairs themselves. Currently, the State has
two more years of self help. One of the provisions
requested by the utilities was that the State negotiate with
them; the State agreed. This is how the State arrived at
the exclusive negotiations with utilities. At that time,
the need for a risk assessment was obvious. The cost would
be $300-$400 thousand dollars. AIDEA asked that the
utilities pay for half of that cost and they agreed. Mr.
Simmons stressed that the risk assessment has value to the
State, irregardless of the sale negotiation. It would
outline the risks of continued ownership.
In 1996, AIDEA and the utilities had their last meeting. A
sale price was proposed by AIDEA, which was more than the
utilities thought the dams are worth. At that time, a
hiatus was taken. The worth is between $84 and $104 million
dollars with many contingencies to address repair costs.
The value was determined in projecting the present value of
the revenue stream which is calculated by the revenue that
the State anticipates to receive from the sales of power
over the next thirty-four years. At this time, the State
must determine what the risk of continued ownership of the
projects would be. The three risks are:
1. Future repairs;
2. Inadequate repairs & replacement; and
3. Down time of the facility.
Mr. Simmons acknowledged that Senator Gravel had submitted
his proposal to AIDEA. The utilities offered to negotiate
with the Senator, with the stipulation that they would
control the power sales agreement. Senator Gravel's
proposal calls for that contract being amended or
terminated. AIDEA was left in a "catch 22" position.
Additionally, Senator Gravel wants his proposal to receive a
12-15% rate of return. AIDEA does not see how the contract
can stay in place and at the same time, the Senator's group
receiving that rate of return. Either the contract would be
broken or the price which comes to the State would be
substantially less. Under those terms, AIDEA would not
bring this potential sale to the Legislature for approval.
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In February, 1997, Senator Gravel made a proposal to the
AIDEA Board. In October, 1996, the utilities then started
contacting AIDEA to come back to the table. In March, 1997,
the utilities outlined a proposal which would be within the
parameters established in 1975; Mr. Simmons suggested that
the proposal has value. The Board granted the local
utilities 120 days to make substantial progress in those
discussions. If progress is not made, the Board has
requested that other alternatives be initiated.
Mr. Simmons noted that AIDEA does not oppose competitive
sales, although, there is no legal requirement for AIDEA to
do a competitive sale. To provide an RFP, at this time,
would require two conditions:
1. All State and federal laws are adhered to;
and
2. Any contract in place is also honored.
Mr. Simmons noted that action would bring AIDEA back to the
catch-22 situation, in as much as Senator Gravel has told
AIDEA that he would not be able to get his 12-15% rate of
return and at the same time, offer AIDEA the necessary
funds, while continuing to live within the contract. The
Legislature has the power to authorize AIDEA to go out and
accept the highest bid, breaching the contract. The Board
does not want to do that. Every week, AIDEA is negotiating
contracts with the private sector. To become more involved
in a competitive sale, AIDEA would need more than a
resolution; they would need information specified in statute
to make such a determination.
Co-Chair Therriault pointed out that there has never been
public notification of the pending sale. He asked why. Mr.
Simmons countered that many groups involved in the energy
field were aware of AIDEA's intent. At this time, there are
two private sector entities interested. AIDEA has not
undertaken an RFP process because they have no funds; AEA
receives no legislative funds for any activities;
consequently, the sale has not been publicized.
In response to Representative Martin, Mr. Simmons explained
that AIDEA is included under the Executive Budget Act,
although, there is nothing written in the Procurement Code
in which real estate is specifically exempted.
Representative Martin spoke to Chapter 8, State
Constitution, regarding sales and grants.
KEITH LAUFER, ASSISTANT ATTORNEY GENERAL, AIDEA, DEPARTMENT
OF LAW, stated that the requirements under the Constitution
are for notice of disposal of natural resources. In the
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above case, the State is addressing the real property assets
of the State, a process which entails legislative action.
AIDEA envisioned a public process with sufficient public
notice for the disposal.
Representative Barnes pointed out that she had not heard
publicity of the availability of the Four Dam Pool sale.
Mr. Simmons agreed that some people do not know about it,
while adding that any RFP process undertaken would contain a
provision that the present contracts be honored. He added
that any purchase price offered at this time would be
inadequate in regards to what Representative Barnes expects.
Representative Barnes clarified that she had never
insinuated that the power sales agreement should not be
honored. She pointed out that last year, AIDEA came forward
with a proposal to sell the dams. That proposal provided
bonds which she felt would have tied up the revenue stream
for five years. If the self-help agreement had been
instituted, the same job could have been done in two years
rather than the proposed ten.
Representative Mulder questioned if the power sale
agreements would be a good deal for the State. Mr. Simmons
replied that in today's circumstances, there is no authority
to negotiate that agreement. AIDEA's intent would be that
if negotiations are not successful with the communities,
AIDEA will then come before the Legislature next year with
other options. Representative Mulder asked if communities
would be capable of paying $84 million dollars for the
assets. Mr. Simmons stated that he would not be able to
answer that without negotiating terms with the communities.
(Tape Change HFC 97-92, Side 1).
Co-Chair Hanley asked if the utilities were anticipating
renegotiating their own power sales agreements in order to
achieve the needed amount for the sale. He questioned how
the communities could make the numbers work without breaking
the power sales agreement. Mr. Simmons advised that those
who control the power sale agreements, control the outcome
of what can be offered on the facilities. The utilities
control the power sale agreements and can make any
modifications to it that they want as long as they all
agree. Co-Chair Hanley pointed out that local communities
have the advantage to modify it. He suggested that they
could modify it, coming forward with a proposal which was
substantially less, based on the agreement.
Co-Chair Hanley pointed out that the communities currently
10
have the best deal that they could possibly have, and would
want the situation to continue to work as it currently is.
Mr. Simmons noted that there are some advantages for the
communities to take over the utilities. Owning it would put
the energy control through the community rather than through
the federal government. He agreed that to date the
communities have not made a serious offer. He reiterated
that AIDEA will not bring to the Legislature any offer which
is not fair market value.
ERIC REDMAN, COUNSEL, CITY OF WRANGELL, provided written
testimony. [Copy on file]. He noted that he represented
Wrangell on the Tyee Lake Project and on Four Dam Pool
matters. In the 1980's, Mr. Redman helped to draft and
negotiate the long-term power sales agreement and related
documents for the projects.
Mr. Redman noted that the shortest route to an optimal
divestiture outcome would be for both the State and the
utilities to stay with the current course of negotiations.
If either side drags its feet or if there is no agreement
reached, or if an agreement is reached and it fails to
satisfy the Legislature, then a different course would make
sense. He pointed out that there has been no failure yet.
Mr. Redman commented that there are strong reasons of
prudence and policy for trying to divest the facilities to
the communities rather than to other parties. If HCR 16
were adopted, it would terminate an on-going divestiture
negotiation. He believed that the negotiations are a good
idea and have a significant likelihood of success. He asked
that the Legislature consider four basic points:
1. The current divestiture negotiation process
was selected by AIDEA on behalf of the State.
That process has not failed yet.
2. As all parties to the current divestiture
negotiations recognize, any negotiated
divestiture proposal will require enactment
of enabling legislation. No divestiture can
be implemented under existing law.
Therefore, no negotiated divestiture will be
possible except on terms and conditions the
Legislature first reviews and approves.
3. The State and the utilities are bound to one
another through the PSA, a long term contract
from which neither side can be forced to
release the other against its will.
4. The very purpose of the State's huge and
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often frustrating investment in the Four Dam
Pool and other energy projects was to provide
economic benefit to the State and its
citizens through a reliable and affordable
power supply that would maintain and enhance
economic development in Alaskan localities.
Mr. Redman pointed out that most divestitures take place at
prices lower than the cost of the assets being sold.
Divestiture of the Four Dam Pool will not necessarily follow
that rule. The result of a below-cost sale of the
particular assets to private parties would be that, at least
a portion of the economic benefit that the facilities are
still capable of producing, would be sacrificed and
transferred into private hands.
He added that two years ago, AIDEA asked the five consumer-
owned utilities to discuss the possible divestiture of these
State-owned projects to the utilities. AIDEA initiated
these discussions and dictated the ground rules; the
communities agreed. Over time, the discussions evolved into
negotiations which made progress. The discussion of
potential purchase price was driven by the fact that the
price would have to be low enough so that the communities
could pay it, taking on the Four Dam Pool financial risks
currently borne by the State, and still not end up worse off
than they are at this time under the PSA.
Mr. Redman continued, the problem is high costs and risks
which characterize the history of the Four Dam Pool. These
projects have greatly disappointed the original expectations
of the State and the Four Dam Pool communities alike. The
State ended up having to spend far more to build the
projects than it intended, about $500 million dollars total.
The financial expectations of the communities were also
bitterly disappointed. Southeast communities are paying
twice the price of power from Bradley or Snettisham. The
Four Dam Pool projects turned out to be very expensive for
the relatively small amount of power they produce. Despite
their costs, some of the Four Dam Pool projects also turned
out to have serious design and construction flaws that have
cost the State much to correct. The costs of those errors
in the original construction are borne by the State because
under the PSA, the communities are obligated to pay all
costs which are reasonable to receive power.
In recent years, some of the funds the communities pay the
State for debt service have been diverted to AIDEA on an
emergency basis through the PSA's self-help provisions to
fund repairs of initial design and construction flaws.
Mr. Redman pointed out ground rules which AIDEA imposed on
the negotiations and included two key aspects:
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1. The existing PSA could not be changed; and
2. The State had to end up completely free of
all risks and obligations under the PSA.
He agreed that the communities would have to work hard just
to prevent power cost increases resulting from the
combination of having to buy the projects and bear the
project risks.
In response to Co-Chair Therriault's statement regarding the
utilities advantage, Mr Redman noted he disagreed. He
reminded members that the utilities currently are in a
process begun by AIDEA. He pointed out that at this time,
there exists an agreement between the two parties; a third
party must respect the fact that the first two parties are
in a contract at this time. He added, in order to do any
divestiture, there exists a need to arrive at an agreement
with the communities.
For the Committee members, Representative Barnes itemized
the amount of kilowatt cost per hour for energy within the
community. The City of Anchorage pays 9.8 cents per
residential kilowatt hour; Ketchikan pays 9.3 cents;
Petersburg pays 9.7 cents; Sitka pays 9.0 cents; Alaska
Light and Power pays 8.7 cents; Wrangle pays 10.3 cents;
Chugiak Electric and other Railbelt communities pays 9.5
cents; Golden Valley pays 9.8 cents; and Fairbanks pays 10.7
cents. She asked if Mr. Redman felt the Four Dam Pool
communities were paying an excessive rate. Representative
Barnes commented that she left out Homer and Kodiak because
those communities had excessive rates due to poor
management. Mr. Redman stated that the power cost to the
Four Dam Pool was not excessive, but rather, the whole-sale
power rate was quite high in comparison to the costs of
power for other hydro projects in the State.
Representative Barnes inquired if a State Senator had been
on contract with the City of Wrangell in 1995 when the
intent language had been added to the budget bill. Mr.
Redman replied that Senator Taylor has been the attorney for
the City of Wrangell at various points in time; Mr. Redman
did not know if he was in that position at the time in
question.
Co-Chair Hanley questioned the PSA obligation. Mr. Redman
replied that AIDEA has indicated that the PSA would not be
amended as a part of the divestiture; also, the divestiture
would have to be complete. In that respect, the PSA would
be amended to let the State completely out of the agreement.
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Whereas, if the State signed the PSA over to another entity
at this point in time, the laws of assignment are such that
they could not relieve themselves of their initial
obligations. He understood that the State wants to be
relieved of that obligation.
Co-Chair Hanley asked if the State could relieve itself
without a change in the PSA. Mr. Redman noted that the
State could do as Senator Gravel had suggested, in as much
as it is a sovereign entity and could tear up the contract.
Co-Chair Hanley recommended establishing a deadline. Mr.
Redman noted that for the City of Wrangell, any reasonable
time line would be acceptable for reaching an "agreement in
principle".
Representative Martin questioned if there was a guarantee
that could be given by AIDEA to make the State whole. Mr.
Redman replied that $91 million dollars has been paid in
debt service to date. There are other insurances; in order
to borrow money, the bond holders will need to have
assurances that they will be repaid. Individual communities
will be required to enter into big covenants. The market is
an additional risk. If the power tends to be too expensive,
the communities could end up with different power suppliers.
He added that 6.5 cents per kilowatt hour is a dangerously
high price over the long term.
(Tape Change HFC 97-92, Side 2).
Representative G. Davis questioned the payback provisions
included in the Bradley Lake agreement. Mr. Redman advised
that Bradley Lake was financed with 50% grant money and 50%
conventional market bond financing. The State has no pay
back for that grant; the loan portion was financed in the
open market.
ALAIRE STANTON, (TESTIFIED VIA TELECONFERENCE), MAYOR, CITY
OF KETCHIKAN, testified in support of Mr. Redman's remarks.
The City of Ketchikan requests the opportunity to continue
the current negotiations with AIDEA.
JEROME SELBY, (TESTIFIED VIA TELECONFERENCE), MAYOR, CITY OF
KODIAK, encouraged the Committee to accept the communities
requests to negotiate a deal and then return before the
Legislature at the next session. At that time, the
Legislature could decide if the proposal was a good deal.
He stressed that the local communities have a lot more at
stake than maximizing the dollar return. There is a keen
interest among the citizens in the State to help the
communities who are buying the power to be viable and
provide it at a reasonable rate. He noted that
Representative Barnes had omitted the power rate for the
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City of Kodiak. That rate is 14.0 cents per kilowatt hour.
Mr. Selby pointed out the one item which keeps Kodiak from
being competitive with Seattle in the fish processing market
is that power cost.
ALAN LEMASTER, (TESTIFIED VIA TELECONFERENCE), GAKONA, noted
that tourism is a major industry in many of the communities
which are served by the Four Dam Pool projects. He pointed
out that high costs associated within those areas are passed
down to the tourists. He suggested that increased
electrical costs would also be passed on to the tourists.
He noted that in Gakona, residents are paying close to 20.0
cents per kilowatt hour and are not subsidized. He urged
Committee members not to pass the bill from Committee,
claiming that it has the potential to adversely impact the
stable electric rates enjoyed by the Four Dam Pool
communities.
PAUL ANDERSON, MAYOR, PETERSBURG, noted that his community
had fought long and hard for the long term power sale
agreement (PSA). He spoke to the efficiencies of having the
local community in control of the power conditions. He
spoke to the problems which would result in having an out-
of-state company owning the electrical power. Mr. Anderson
requested that Committee members refrain from passing the
legislation and let the local communities proceed with the
divestiture negotiations. Those communities have been
acting in "good faith"; concluding that the Gravel proposal
has hampered action on the local level.
DOUGLAS ROBERTS, (TESTIFIED VIA TELECONFERENCE), MAYOR, CITY
OF WRANGELL, stressed that breaching the power sale
agreement with the City of Wrangell, would not be in the
best interest of the State or the City. Mr. Roberts noted
that to proceed with an RFP when knowing that any proposal
to divest the project would require changing the power sales
agreement, which would be detrimental. He urged the House
Finance Committee to keep HCR 16 in Committee.
HCR 16 was HELD in Committee for further consideration.
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