Legislature(1997 - 1998)
04/10/1997 01:40 PM House FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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. 2 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 3 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 4 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 5 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. 6 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 7 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. 8 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 9 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 11 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: 12 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. 13 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 14 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.