Legislature(1997 - 1998)
04/24/1997 08:10 AM 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. Co-Chair Hanley MOVED that work draft, 0-LS0755\B, Cramer, 4/18/97, be the version before the Committee. There being NO OBJECTION, it was adopted. Representative Grussendorf MOVED to adopt Amendment #1. [Copy on file]. Co-Chair Therriault OBJECTED. Representative Grussendorf explained that the amendment would allow Alaska Industrial Development Export Authority (AIDEA) to be responsible for investments to make the determination what would be in the State's best interest. He reminded members that AIDEA generates a $11 million dollar revenue stream each year. Co-Chair Hanley pointed out that it was not AIDEA who originally requested the sale; the Legislature placed intent language in a previous year's bill. He added, whether it is a community process or private enterprise, both would need to come to the Legislature to debate the deal. He believed that if the communities do not come up with a reasonable offer, private sector bids should be placed. Representative Grussendorf referenced a memo sent to Speaker Gail Phillips by Randy Simmons, Executive Director, AIDEA, stipulating that if no positive direction had been taken by July 31, 1997, it was AIDEA's intent to seek other proposals. AIDEA has already indicated that they will seek alternative measures. He noted that he had faith in AIDEA, while questioning the Legislative mandate. Representative Martin commented that the Legislature should be the authority that makes the "policy call" whether the dams are to be sold. At that time, AIDEA can guarantee that the State receive the best deal. Co-Chair Therriault agreed with Co-Chair Hanley, elaborating that the State needs a definite answer. If the proposal comes back from the utilities and AIDEA believes that it is not an acceptable arrangement for the State, then the private sector should be given an opportunity. AIDEA will have the authority to determine if the proposals are acceptable and whether they should be submitted to the Legislature for ratification. The Legislature will control the final decision. Representative J. Davies MOVED an amendment to Amendment #1. 3 He proposed to delete "that" and "the Four Dam Pool Projects should be sold", and insert "and request for proposal is appropriate at that time". That language would require AIDEA to decide whether or not. An RFP would be appropriate at that point in time. There being NO OBJECTION to the amended language to Amendment #1, it was incorporated. Representative Grussendorf commented that the amendment change would allow AIDEA a little more time to evaluate what the next approach should be. A roll call vote was taken on the MOTION to adopt amended Amendment #1. IN FAVOR: J. Davies, G. Davis, Grussendorf, Martin, Moses OPPOSED: Foster, Kelly, Kohring, Mulder, Therriault, Hanley The MOTION FAILED (5-6). Representative Grussendorf MOVED to adopt Amendment #2. [Copy on file]. Co-Chair Therriault OBJECTED. Representative Grussendorf explained that at this time, AIDEA is operating with two ground rules: * The power sale agreement remain in tact; and * The State back away and assume no greater risk. At this time, negotiations have begun using these ground rules. He emphasized that the Power Sales Agreement (PSA) is the most important aspect of the negotiations and should be guaranteed. Co-Chair Hanley asked what restrictions had been placed on the power sales agreement, and if it would be difficult to relieve the State of it's liability if there were no changes to that agreement. RANDY SIMMONS, EXECUTIVE DIRECTION, ALASKA INDUSTRIAL DEVELOPMENT EXPORT AUTHORITY, noted that it would be difficult to relieve the State of all of it's responsibilities. The State could be relieved under the contracts by selling the facilities. He explained that Representative Grussendorf's language addressed if there was a major disaster and the State had sold the dams, would the buyer come back to the State requesting relief. If a State entity finances the sale of the utilities, the State maintains some risk. 4 He reiterated the two most important requirements established by AIDEA are: * The power sales agreement stays in place until after the sale; and * The State be relieved of its risk in the contract. Mr. Simmons stressed that AIDEA has never implied that should a party to the agreement want to amend or change that agreement, that they could not do it. Instead, AIDEA has maintained that they want to sell all the dams as a package rather than selling the two best dams and leaving the State with the two that have problems. He reiterated that AIDEA has never said that the private sector could not work with the utilities to make changes in the PSA. Co-Chair Therriault pointed out that if the language of Amendment #2 was adopted, the private sector would have an unfair constraint. Mr. Simmons noted that a PSA could be amended by all involved parties. Representative J. Davies noted that if the utilities agreed to a change in the PSA, there would then be a new PSA or no PSA. If a private sector offer comes in and relieves the State of the PSA, they are picking up the State's obligation in the PSA. After that transaction occurs, if the utilities and private entities agree to make the PSA work, the original contract would be preserved. The State submitting an RFP suggests that it is not upholding responsibilities under the PSA. He argued that the State should live up to their agreement. Representative J. Davies MOVED to amend Amendment #2 by adding language "and continue the State's obligation under the PSA". That language would guarantee that whom ever takes responsibility would need to maintain the terms of the agreement. Co-Chair Therriault asked what the directive had been to the utilities. Mr. Simmons replied that the intent was that the agreement would remain in place until the point of sale. AIDEA would request that all contracts in place now be fulfilled. Mr. Simmons suggested adding language to Amendment #2, "as in place today". In response to Representative Therriault, Mr. Simmons noted that the utilities would not be barred from participating in an open RFP process. Co-Chair Therriault suggested that awareness would remove the need for Amendment #2. Mr. Simmons testified that if the intent of the Legislative body was not to fulfill the contracts, but instead put an RFP out to breech it, then AIDEA needs direction regarding that intent. If that is not the intent 5 of the Legislature, that should then be clarified. If the Legislature does not intent for the contracts to be breached, Mr. Simmons agreed the amendment would not be needed. Co-Chair Therriault replied that it was not his intent nor that of the prime sponsor that the contracts be breached. Representative J. Davies WITHDREW the amendment to Amendment Representative Grussendorf MOVED additional language change to Amendment #2, adding the language previously recommended by Mr. Simmons, "as in place today". He pointed out that HCR 16 is a resolution and all important information should be indicated. Representative J. Davies agreed that the amendment was not technically necessary, but noted that concern exists among the utilities which has not been addressed in the resolution. He emphasized that it is appropriate that the game rules are up front, which they would be with inclusion of the amended language. There being NO OBJECTION to the amended language to Amendment #2, it was adopted. Co-Chair Therriault OBJECTED to the amended Amendment #2. He believed that language was not needed. A roll call vote was taken on the MOTION. IN FAVOR: G. Davis, Grussendorf, Kelly, Moses, J. Davies OPPOSED: Foster, Kohring, Martin, Mulder, Therriault, Hanley The MOTION FAILED (5-6). Representative G. Davis WITHDREW Amendment #3. [Copy on file]. There being NO OBJECTION, it was withdrawn. Representative J. Davies MOVED to adopt Amendment #4. [Copy on file]. Co-Chair Therriault OBJECTED. Representative J. Davies explained that the amendment would delete the "whereas" section which addresses what the contracts are worth. He suggested that it was inappropriate language and could be harmful to the State. Mr. Simmons advised that a hard and fast number could not be calculated. The number determined by the sponsor corresponds to a specific set of circumstances including current repairs. There are a range of numbers which could determine the sale price. (Tape Change HFC 97-112, Side 2). 6 Representative Martin suggested that AIDEA be given a "bottom line" expected price. Co-Chair Therriault agreed that depending on the parameters used in making the bid, the value could change. He WITHDREW his OBJECTION to Amendment A roll call vote was taken on the MOTION. IN FAVOR: Grussendorf, Kelly, Moses, J. Davies, G. Davis, Hanley, Therriault OPPOSED: Foster, Kohring, Moses, Mulder The MOTION PASSED (7-4). Representative J. Davies MOVED to adopt Amendment #5. [Copy on file]. He pointed out that the amendment had been amended by hand before it was submitted, with a new inserted date of August 31, 1997, as the drop-dead date. Co-Chair Therriault inquired if AIDEA had been operating under the direction of their Board to receive proposals from the utilities. Mr. Simmons replied that the Chairman of Board has directed AIDEA to show that there has been substantial progress in reaching a sales agreement by July 31, 1997, although, the full extent of that determination has not been clarified. Any sales process will take many months to a year to complete. At this time, AIDEA is attempting to receive an agreement in principle. Co-Chair Therriault asked if the language of the resolution stipulating that AIDEA would need to receive an acceptable proposal, covered an agreement of principle. Mr. Simmons understood that it would. He was not sure that he would be able to get to the Board by July 31st, which would be a definite concern if Board action was required. A roll call vote was taken on the MOTION. IN FAVOR: Grussendorf, Moses, J. Davies, G. Davis OPPOSED: Kelly, Kohring, Martin, Mulder, Therriault, Hanley Representative Foster was not present for the vote. The MOTION FAILED (4-6). Co-Chair Therriault noted that the fiscal note would be $120 thousand dollars funding from AIDEA. Mr. Simmons advised that AIDEA has not identified how to fund the legislation because it is not an AIDEA project; it is an Alaska Energy Authority (AEA) project and they have no funding for this. 7 He reiterated, he did not know how to internally address this concern. Representative Mulder MOVED to report CS HCR 16 (FIN) out of Committee with individual recommendations and with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CS HCR 16 (FIN) was reported out of Committee with a "do pass" recommendation and with a fiscal note by the Department of Commerce and Economic Development.