Legislature(2021 - 2022)SENATE FINANCE 532

04/20/2022 09:00 AM Senate FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Heard & Held
Heard & Held
-- Testimony <Invitation Only> --
-- Public Testimony <Time Limit May Be Set> --
+ Bills Previously Heard/Scheduled TELECONFERENCED
SENATE BILL NO. 243                                                                                                           
   "An Act relating to power cost equalization; and                                                                             
   providing for an effective date."                                                                                            
10:29:29 AM                                                                                                                   
Co-Chair Bishop relayed that it  was the first hearing of SB
243.  It  was  the  committee's intention  to  hear  a  bill                                                                    
introduction, consider  public testimony,  and set  the bill                                                                    
10:29:52 AM                                                                                                                   
ERIN  SHINE,  STAFF,  SENATOR  CLICK  BISHOP,  read  a  bill                                                                    
     SB 243 proposes to raise the maximum kilowatt-hours                                                                        
     available to residential customers for Power Cost                                                                          
     Equalization relief?from 500 kilowatt-hours a  month to                                                                  
     700 kilowatt-hours.                                                                                                        
     In your  bill file you  will find an  analysis provided                                                                    
     by  the  Alaska  Energy   Authority  assumes  that  all                                                                    
     residential  customers can  utilize?the additional  250                                                                  
     kilowatt-hours,  SB   243?will add   approximately  $16                                                                  
     million?to the yearly PCE payment.                                                                                       
     Alaska's  PCE  program  was  established  in  1984  and                                                                    
     provides?economic?assistance?to communities?and residents                                                          
     of   rural  electric  utilities  where   the  cost   of                                                                  
     electricity?can be three to five times  higher than for                                                                  
     customers in more urban areas of the state.                                                                                
     The PCE program was further established?to assist rural                                                                  
     residents at  the same  time state  funds were  used to                                                                    
     construct major  energy projects  to assist  more urban                                                                    
     areas.? As most  urban and  road connected  communities                                                                  
     benefit from major state-subsidized energy projects.                                                                       
     Rural  communities? not on  the  road system  that  are                                                                  
     dependent  on  diesel  fuel do  not  benefit  from  the                                                                    
     large, subsidized  energy projects, and PCE  is a cost-                                                                    
     effective  alternative   to  provide   comparable  rate                                                                    
     relief to rural  residents. ?The program reimburses the                                                                  
     utility for credits it extends to its customers.                                                                           
     The  PCE  program?is funded  by  earnings  of  the  PCE                                                                  
     Endowment  Fund,  which the  last  Market  Value as  of                                                                    
     March  31st,  2022,  was   $1.1B,  provides  that  five                                                                    
     percent  of  the   fund's  three-year  monthly  average                                                                    
     market value may be appropriated to the PCE Program.                                                                       
     As you  may be aware  the percent of market  value draw                                                                    
     on the PCE  Endowment Fund not only funds  PCE but also                                                                    
     Community revenue sharing  or community assistance, the                                                                    
     renewable energy  grant fund,  the bulk  fuel revolving                                                                    
     loan fund or the rural power system upgrades.                                                                              
Ms. Shine noted that bill  packets contained a document from                                                                    
the Alaska  Energy Authority  (copy on  file), which  was an                                                                    
analysis that  assumed if adding  $16 million to  the yearly                                                                    
PCE payment  if all residential customers  could utilize the                                                                    
additional 250  kilowatt hours. She  reminded that  the POMV                                                                    
draw  on the  Power Cost  Equalization (PCE)  Endowment Fund                                                                    
not  only  funded  PCE but  also  the  Community  Assistance                                                                    
Program and  the Rural Energy  Grant Fund. According  to the                                                                    
calculations  done by  LFD, it  would  take approximately  a                                                                    
$320 million  appropriation to capitalize the  PCE Endowment                                                                    
Fund  to continue  funding the  waterfall programs  from the                                                                    
10:32:14 AM                                                                                                                   
Senator von Imhof  asked if more money went  towards the PCE                                                                    
program,   less   funding   would   go   towards   Community                                                                    
Ms. Shine  stated there was  still a statutory  formula that                                                                    
would be followed  that was outlined in  AS 42.45.085. There                                                                    
were  certain triggers  in  the fund.  She  stated that  the                                                                    
money  that  would  go  to  the  PCE  Fund  would  fund  the                                                                    
residential  program   first,  after  which   the  waterfall                                                                    
programs  would  be  funded.  The  fund  would  need  to  be                                                                    
capitalized with some additional funds for the payments.                                                                        
Senator von  Imhof understood  that the  residential program                                                                    
would  be the  first item  paid from  the fund.  She thought                                                                    
there was a consequence in  that the trigger and other items                                                                    
mentioned in statute might not have adequate funding.                                                                           
Ms. Shine  noted that the  executive director of  the Alaska                                                                    
Energy  Authority (AEA)  was  available  for questions.  She                                                                    
believed that the fund would be  fine for the next couple of                                                                    
Senator Hoffman  stated that he  had asked the  LFD director                                                                    
to  come up  with  a number  to keep  the  fund intact.  The                                                                    
number that Ms.  Shine had mentioned in  her presentation to                                                                    
achieve no changes in the programs would be $320 million.                                                                       
Senator  von  Imhof  asked  if   the  funding  would  be  an                                                                    
additional $320 million in a grant to the PCE Fund.                                                                             
Senator Hoffman stated  that the funds would  be directed to                                                                    
the endowment.                                                                                                                  
Co-Chair Bishop relayed that the  fund had a current balance                                                                    
of $1.1 billion, and the $320  million would be added to the                                                                    
endowment for a rough total of $1.4 billion.                                                                                    
Senator  von Imhof  understood that  others were  looking at                                                                    
adding funds  to other endowments like  the Higher Education                                                                    
Trust  Fund.  She mentioned  a  homeless  trust fund  and  a                                                                    
deferred  maintenance  fund.  She thought  there  were  many                                                                    
competing priorities.                                                                                                           
10:35:52 AM                                                                                                                   
CURTIS THAYER,  EXECUTIVE DIRECTOR, ALASKA  ENERGY AUTHORITY                                                                    
(via  teleconference), noted  that the  information provided                                                                    
by Ms. Shine was correct.  It was estimated that the program                                                                    
would cost  an additional  $15.7 million  per year  by going                                                                    
from  500 to  700 kilowatts.  There would  be no  additional                                                                    
administrative costs  on the  part of  AEA. He  offered that                                                                    
the last five years, the  Endowment Fund earnings had ranged                                                                    
from $48 million to $155  million. The first bucket of money                                                                    
was  the PCE  Program,  which was  budgeted  at roughly  $32                                                                    
million, but there was budget  language that allowed for the                                                                    
amount to increase based on the true cost.                                                                                      
Mr. Thayer mentioned  community assistance at a  cost of $30                                                                    
million.  The  only  year   that  the  Community  Assistance                                                                    
program  was  not  fully  funded  was in  FY  20,  when  the                                                                    
earnings from the PCE Endowment  Fund were only $48 million.                                                                    
There was a cascading waterfall  of funding for one of three                                                                    
items:  rural  power  houses, the  Rural  Energy  Fund,  and                                                                    
capitalization  of the  Revolving  Loan  Fund. He  discussed                                                                    
AEAs   recommendation to  the  legislature  about using  $25                                                                    
million in funds.  He could not comment on  the $320 million                                                                    
identified by LFD.                                                                                                              
Co-Chair Bishop  asked if  bumping up  the kilowatts  to 750                                                                    
was a new idea.                                                                                                                 
Senator  Hoffman  stated  that  the 750  kilowatts  was  the                                                                    
original  amount  that was  utilized  when  the program  was                                                                    
initially contemplated.                                                                                                         
10:38:23 AM                                                                                                                   
AT EASE                                                                                                                         
10:38:29 AM                                                                                                                   
Co-Chair Bishop OPENED public testimony.                                                                                        
Mr. Thayer stated he was  available for questions. He stated                                                                    
that it would  be easy for AEA to enact  the change proposed                                                                    
in  the bill.  He noted  that the  fiscal note  assumed that                                                                    
everyone in the  program would use the  750 kilowatts, which                                                                    
meant the  fiscal note was  a very conservative  estimate of                                                                    
what the additional cost would be.                                                                                              
Co-Chair  Stedman  asked  for  Mr.  Thayer  to  discuss  the                                                                    
community portion for non-residential  homes and whether the                                                                    
amount was capped.                                                                                                              
Mr.  Thayer   explained  that  the   PCE  Program   was  for                                                                    
residential  customers only  in the  PCE-eligible community,                                                                    
and for  community buildings up  to a certain  kilowatt. The                                                                    
program was  not for commercial buildings  or for commercial                                                                    
Co-Chair Stedman had  heard a concern that one  of the choke                                                                    
points was the community  buildings, which seemed to consume                                                                    
more power  and need more  relief versus homes. He  asked if                                                                    
Mr. Thayer could shed light on the issue.                                                                                       
Mr.  Thayer stated  that the  issue had  been of  concern to                                                                    
AEA.  He continued  that AEA  was  currently undertaking  an                                                                    
audit of all  193 communities in order  to better understand                                                                    
what  community  buildings had  been  built  since the  last                                                                    
Co-Chair Stedman  asked if the topic  of community buildings                                                                    
should be  a component  of the  legislation. He  wondered if                                                                    
the legislature  was ignoring part  of the problem  in rural                                                                    
Alaska by not accounting for rural buildings.                                                                                   
Mr. Thayer noted that the  program did account for community                                                                    
buildings.  He  emphasized  that  AEA needed  to  work  with                                                                    
communities   to  identify   new  or   additional  community                                                                    
buildings  that  were  not  currently  in  the  PCE  program                                                                    
system. He  acknowledged that some community  buildings were                                                                    
missing, and emphasized  that AEA was reaching  out to every                                                                    
community for the information, which  would take most of the                                                                    
10:42:35 AM                                                                                                                   
BERT  HOUGHTALING,  SELF,  BIG  LAKE  (via  teleconference),                                                                    
spoke  in opposition  to the  bill.  He did  not agree  with                                                                    
adding funds  to the PCE  program. He thought the  state was                                                                    
catering to certain individuals.  He wished that legislature                                                                    
would address  those that had suffered  during the pandemic.                                                                    
He was against  increasing any funding for  the PCE Program.                                                                    
He mentioned federal funds.                                                                                                     
10:44:22 AM                                                                                                                   
Co-Chair Bishop CLOSED public testimony.                                                                                        
Senator  Wilson asked  for  more  information regarding  the                                                                    
five-year plan  of increase  to the PCE  Program and  how it                                                                    
would affect the endowment. He  asked how the increase would                                                                    
be funded.                                                                                                                      
Co-Chair Stedman  thought that the committee  could consider                                                                    
building  the endowment  up over  time if  the bill  were to                                                                    
become  law. He  mentioned the  option of  having a  trigger                                                                    
based  on  the price  of  oil.  He  thought there  could  be                                                                    
flexibility  in   funding  the  proposed  increase   to  the                                                                    
program.   He  acknowledged   that   $300   million  was   a                                                                    
significant amount of money.                                                                                                    
Senator  Wilson wondered  how the  other waterfall  programs                                                                    
would be affected if there was not an increase.                                                                                 
Senator  Hoffman preferred  to fully  fund the  endowment so                                                                    
that  the Community  Assistance Program  and other  programs                                                                    
were fully  funded. He thought  there was merit  to Co-Chair                                                                    
Stedman's  comments but  considered that  delaying the  fund                                                                    
increase would cause  a loss of focus. He  reminded that the                                                                    
33rd  legislature and  the future  governor was  unknown. He                                                                    
thought the  committee should give serious  consideration to                                                                    
fully funding the endowment to at least $300 million.                                                                           
10:48:04 AM                                                                                                                   
AT EASE                                                                                                                         
10:50:34 AM                                                                                                                   
Co-Chair Bishop set an amendment  deadline for Friday, April                                                                    
22, at five oclock.                                                                                                             
SB  243  was  HEARD  and   HELD  in  committee  for  further                                                                    

Document Name Date/Time Subjects
SB 121 Support Szczepanski PFAS.pdf SFIN 4/20/2022 9:00:00 AM
SB 121
SB 121 Support Sylvester PFAS.pdf SFIN 4/20/2022 9:00:00 AM
SB 121
SB 121 Support Miller.pdf SFIN 4/20/2022 9:00:00 AM
SB 121
SB 121 ACC testimony on SB 121 - April 12.pdf SFIN 4/20/2022 9:00:00 AM
SB 121
SB 121 Support PWSRCAC.pdf SFIN 4/20/2022 9:00:00 AM
SB 121
SB 243 Sectional Analysis ver. B 4.19.22.pdf SFIN 4/20/2022 9:00:00 AM
SB 243
SB 243 Supporting Document - AEA PCE Analysis from 500 to750.pdf SFIN 4/20/2022 9:00:00 AM
SB 243
SB 199 SFIN Fiscal Modeling Presentation 4-20-22 UPDATED.pdf SFIN 4/20/2022 9:00:00 AM
SB 199