Legislature(2007 - 2008)SENATE FINANCE 532
07/25/2008 11:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB4005 | |
| SB4006 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB4005 | TELECONFERENCED | |
| *+ | SB4006 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE BILL NO. 4006
"An Act amending the power cost equalization program,
repealing the exclusion from eligibility for power cost
equalization for certain power projects that take their
power from hydroelectric facilities, and amending the
definition of 'eligible electric utility' as it applies
to the power cost equalization program and the grant
program for small power projects for utility
improvements; and providing for an effective date."
Senator Hoffman surmised that the power cost equalization
program would be a two-year program and might possibly be
considered for implementation on a long-term basis. The
cost of the proposed program is about $75 million, as was
LIHEAP. The Governor's proposal was for about $700 million.
These two pieces of legislation are much smaller "ticket
items" and address the high costs of heating oil and
electricity throughout the state.
Mr. Livey touched on several major issues in the bill. He
stated that this piece of legislation addresses the high
cost of electricity. He pointed out that this bill no
longer makes a geographical assumption of eligibility of a
utility. It allows all utilities that provide electricity
that costs more than 1.2 percent above the average rate in
Anchorage, Fairbanks, and Juneau, which is about 15.4 cents
per kilowatt hour.
12:38:00 PM
Mr. Livey said that the bill proposes raising the maximum
level from .525 cents to $2.00 so that more relief goes to
more Alaskans. He pointed out that the current law only
provides relief for 6000 kilowatt hours per year. The bill
proposes to change the distribution by season so that during
winter months more relief would be available.
12:41:05 PM
Senator Elton noted an unintended consequence of the formula
basing costs on Juneau, Fairbanks, and Anchorage electrical
use when something extreme happens like the Snettisham
avalanche which caused Juneau's power costs to skyrocket.
PCE reimbursement under that scenario would be less. He
wondered if the bill's new formula addresses this problem.
Mr. Livey said he understands that PCE cost is based on
filings made with the Regulatory Commission of Alaska in
which utilities describe their costs. If an event takes
place and costs for the utility increase, those costs are
acknowledged by the rate setting system.
DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
explained that the case in Juneau would affect PCE; however,
it was a fairly brief period of high rates and the impact
would be spread over several years and is a weighted
average. He said the floor would be more influenced by the
fact that Anchorage uses much more fuel than Juneau and
Fairbanks uses diesel for 47 percent of its power.
Senator Elton stated appreciation that this legislation is
based on cost rather than location. He assumed that if
there was a temporary spike in cost in an urban area it
would be accommodated under the new PCE formula.
Mr. Teal said that the base rate would have been adjusted
under the old formula as well.
12:45:57 PM
Senator Elton used the example of the Snettisham avalanche
to compare the old and new versions of PCE. Under the old
system there was no assistance to Juneau rate payers; under
the new system there would be energy relief to Juneau.
Mr. Teal said it was true that Juneau would be eligible
under the new PCE. He stated that he was not sure that the
system was designed to be used for only a portion of the
year. He gave an example of excessive costs in Fairbanks.
SARAH FISHER-GOAD, DEPUTY DIRECTOR OF OPERATIONS, ALASKA
ENERGY AUTHORITY, DEPARTMENT OF COMMERCE, COMMUNITY, AND
ECONOMIC DEVELOPMENT, stated that Section 2 of the bill
would have allowed Juneau to be eligible.
Senator Huggins asked about the households with the most
expensive kilowatt hour costs.
12:49:10 PM
Ms. Fisher-Goad requested clarification of the question.
Senator Huggins wondered how many people were "off grid".
Ms. Fisher-Goad stated she did not have information on un-
served, "off grid" areas.
Senator Huggins felt it important to identify who is "off
grid" as soon as possible. Ms. Fisher Goad agreed, but
thought it would require legislative assistance.
Mr. Teal pointed out that the current and proposed PCE
legislation make utilities eligible for PCE reimbursement.
Senator Huggins pointed out that people "off grid" will need
assistance, too.
Co-Chair Hoffman thought the cost of transporting fuel to
the site was what drove up the cost of generating
electricity in rural Alaska.
12:53:40 PM
Co-Chair Hoffman asked if some communities would fall off
eligibility if the floor were to be raised.
Ms. Fisher-Goad said there are a few communities in the
North Slope Borough that would not be eligible.
Senator Thomas cited the "Power Cost Equalization Program"
(copy on file) costs under various assumptions. He asked
about the low costs in Lime Village and if they were based
on low population.
Mr. Livey thought that they were paying the difference
between $52.4 and $1.17 per kilowatt under current law.
Senator Thomas thought the numbers did not add up.
Mr. Teal referred to a handout for further information.
12:56:56 PM
Co-Chair Hoffman inquired if electric line extension
programs are "still on the books".
Ms. Fisher-Goad reported that the electrical service
extension fund was repealed several years ago. Such
programs are typically funded by grants.
12:57:48 PM
Co-Chair Hoffman referred to the Estimated FY 2009 General
Fund chart (copy on file.) He asked if Alaska received
about $10 billion in oil revenues last year. Mr. Teal said
it did. Co-Chair Hoffman inquired if general fund
expenditures totaled $4 billion a year. Mr. Teal agreed.
Co-Chair Hoffman summarized that last year Alaska started
off with a debt of $5.2 billion to the Constitutional Budget
Reserve (CBR). He pointed out that $4 billion was paid off.
He wondered what the balance of the CBR was today.
Mr. Teal reported that after last year's legislative session
there was a deficit projected of about $200 million based on
the official oil forecast, which turned out to be about $1.1
billion low. At the end of FY 08, the forecast on the year
end surplus or deficit is now a surplus of about $900
million and would have been swept into the CBR on June 30.
12:59:39 PM
Mr. Teal observed that the surplus is approximately $900
million, which would have been swept into the CBR, along
with the $4 billion that was previously appropriated to the
CBR. Currently, about $4.9 billion of the $5.2 billion has
been repaid.
Co-Chair Hoffman summarized that $300 million is still owed.
Next year, if the price of oil averages even $110 per
barrel, Alaska will have just under $12 billion in revenue.
The $300 million will be paid off - just a drop in the
bucket of the CBR. The state will have an operating budget
in the neighborhood of $4 billion, which will leave
potentially $8 billion in revenue. This gives the
appearance to the general public that the state is "awash in
money". He questioned what the state is doing to assist
Alaskans with energy relief. He maintained that the
legislature needs to look at ways to help Alaskans in light
of the anticipated surplus.
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