Legislature(2003 - 2004)
04/22/2004 08:00 AM House CRA
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ALASKA STATE LEGISLATURE
HOUSE COMMUNITY AND REGIONAL AFFAIRS
STANDING COMMITTEE
April 22, 2004
8:00 a.m.
MEMBERS PRESENT
Representative Carl Morgan, Chair
Representative Kelly Wolf, Vice Chair
Representative Ralph Samuels
Representative Sharon Cissna
MEMBERS ABSENT
Representative Pete Kott
Representative Tom Anderson
Representative Albert Kookesh
COMMITTEE CALENDAR
^OVERVIEW: AK ENERGY POLICY TASK FORCE NONRAILBELT REPORT:
FINDINGS AND RECOMMENDATIONS
TAPES
04-13, SIDE(S) A & B
CHAIR CARL MORGAN convened the meeting of the House Community
and Regional Affairs Standing Committee at 8:00 a.m.
SUMMARY OF INFORMATION
TOMAS BOUTIN, Deputy Commissioner, Department of Revenue;
Member, Alaska Energy Policy Task Force, explained that he was
the designee on the Alaska Energy Policy Task Force (Task Force)
for the Department of Revenue. The NonRailbelt Report completes
the work of the Task Force, which won't meet again. Mr. Boutin
emphasized that "economies come with a regional consolidation
and that's on point for this NonRailbelt Report." He related
the need for the state and the Denali Commission to coordinate
long-term planning in order to avoid misdirecting resources.
Pending the resolution of the broader fiscal issues, the long-
term sustainability of the power cost equalization (PCE)
continues to be a question.
ROBERT WILKINSON, CEO, Copper Valley Electric Association;
Member, Alaska Energy Policy Task Force, characterized his
experience on the Task Force as an educational process in which
he educated the Task Force in regard to an energy community in
the state that doesn't receive a lot of discussion. The
aforementioned energy community was labeled the Southcentral
Coastal Region, which includes communities served by Cordova
Electric Cooperative, Copper Valley Electric Association, and
the Kodiak Electric Association. The aforementioned [electrical
entities] generate, transmit, and distribute electrical energy
from power plants to end consumers. This region isn't
interconnected electrically to any other [entity]. With the
exception of Copper Valley Electric Association, the [other
entities] are only accessible by air or water. With the
exception of Kodiak, the areas aren't islands. Furthermore, the
only area in the region that does participate in the state's PCE
program is Cordova. None of the [electrical entities] are
partners with the Denali Commission or AEA in the delivery of
energy services to the communities. Mr. Wilkinson highlighted
that although the [electrical entities for this region] are
smaller than the Railbelt counterparts, compliance with all of
the same regulations that Chugach Electric Association, one of
the nation's largest electrical cooperatives, has to follow is
required. Mr. Wilkinson related some of the achievements of the
Southcentral Coastal Region, including building over 780 miles
of distribution line.
MR. WILKINSON highlighted the words the report used to describe
the path in developing energy policy for the NonRailbelt energy
communities in Alaska, such as "daunting tasks, immense area,
small population, and limited resources." The report addresses
those challenges. Mr. Wilkinson urged the committee to
thoroughly read and study the report.
DAVE CARLSON, Intertie Coordinator, Southeast Conference;
Member, Alaska Energy Policy Task Force, focused his comments on
the geographic region of Southeast Alaska. In Southeast Alaska
there is a mix of investor-owned and municipal utilities as well
as a cooperative and a joint action agency (JAA). He
highlighted the fact that Southeast Alaska has a unique climate
and topography that lends itself to hydroelectric generation.
He discussed the Four Dam Pool Power Agency that now owns four
projects in the state, two of which are located in Southeast
Alaska. Mr. Carlson noted that Southeast Alaska suffers as does
the entire state due to the lack of infrastructure. He then
discussed the Southeast Intertie projects. Although it will
take decades to complete the projects, it's a plan for the
future of Southeast Alaska. He noted that all of the new
transmission lines will include fiber optics in order to provide
telecommunications as well. Mr. Carlson related that the
Southeast Conference and its member utilities and communities
recently voted to create a generation and transmission
cooperative, which will be the owning and operating entity for
these new segments of the [Southeast Intertie projects] as they
are added, with the exception of the Swan Lake to Lake Tyee that
will be owned by the Four Dam Pool. The formation process will
begin in the next couple of weeks, he related. Mr. Carlson
expressed concern with the difficult permitting process for
hydroelectric projects. "Alaska's energy needs are immense and
complex with no easy answer, but affordable energy certainly is
the underpinning of economic development in the state," he
stated. Mr. Carlson answered questions relating to the ill
impact of hydroelectric power on Cooper Creek.
MEERA KOHLER, President/CEO, Alaska Village Electric
Cooperative; Member, Alaska Energy Policy Task Force, related
that the Task Force received testimony from numerous individuals
regarding the challenges of rural Alaskan communities, the
almost nonexistent availability of viable commercially robust
alternative technology, and the continued justification of the
PCE program. She highlighted the definition of the PCE
communities and the history of the PCE program, which is
included in the report. Ms. Kohler explained that the PCE
program is available on the first 500 kilowatt hours used by
households and on up to 70 kilowatt hours per resident for
certain public facilities. The PCE communities are usually
small, remote, and accessible by air or seasonal barge service,
which make alternative technologies cost prohibitive and
impractical. Even after the application for PCE, the average
cost of electricity for most rural communities is still more
that $.20 per kilowatt-hour, she related. Ms. Kohler noted that
she is the only member of the Task Force who has resided for 21
years in PCE communities and who has worked for a PCE utility.
MS. KOHLER related the Task Force's findings in relation to the
PCE program. Although small hydroelectric projects have been
built in rural Alaska, most rural communities still rely
exclusively on isolated diesel power plants since the prevailing
characteristics of rural Alaska render most alternatives to
diesel power infeasible. Therefore, the PCE program was
initiated for rural Alaska. She noted that while diesel has
proven to be the most cost effective in most parts of Alaska and
the economic potential for wind-driven energy is improving,
there may be site specific opportunities that may economically
justify other sources of power generation. Ms. Kohler related
that the full program demand for fiscal year 2003 was
approximately $18.4 million if funded at 100 percent. She noted
that if the program is insufficiently funded, PCE benefits are
reduced to a prorated amount for the year. In fact, for the
last four months of fiscal year 2004, PCE benefits will be paid
at the 75 percent level. "Ironically, as the high world price
of oil contributes to filling the state's coffers and narrowing
the state's fiscal gap, it also contributes directly to widening
the budget deficit of the poorest Alaskans in their small
communities as an ever increasing portion of their limited cash
income must be used to pay for the most essential of needs:
gasoline for their ATVs and snow machines, heating oil for their
homes, electricity for their modest lighting and power needs,"
she said. Mr. Kohler reviewed the Task Force's PCE-related
recommendations, which are the following: to encourage the
formation of new owning entities and support existing regional
operators; encourage regional planning among utilities in order
to lower the cost of installation, administration, operations,
and maintenance; when funds are available the state should fully
fund the PCE endowment in order to make the program sustainable
and self-funding at the level the legislature deems appropriate;
maximize federal appropriations for Alaska by appropriately
providing state matching funds for energy projects.
MS. KOHLER, in response to questions, reviewed the wind project
in Kotzebue and addressed what it would take to fully fund the
PCE endowment.
MR. BOUTIN provided the committee with the Alaska Energy
Authority's prioritized ranking of rural power projects.
BECKY GAY, Project Manager, Alaska Industrial Development &
Export Authority and Alaska Energy Authority, Department of
Community & Economic Development, in response to Chair Morgan,
addressed alternative energy sources. She related that a
diesel-wind combination looks to be the best alternative in
terms of economics. She noted that there is also fuel cell
technology. However, at this time none of the alternatives seem
to be as good as the diesel standard and hydro.
MS. KOHLER related that the University of Alaska - Fairbanks has
a five-kilowatt fuel cell, from which there has been very good
results over the last year as there has been almost 6,000
uninterrupted hours of operation. However, this five-kilowatt
fuel cell costs about $383,000, which is $76,000 per kilowatt.
The aforementioned is 10 times the cost of wind and 100 times
the cost of diesel generation. Therefore, until the technology
can compete with other technologies in terms of installation and
the cost of operation, it isn't viable. She suggested that fuel
cells wouldn't become viable for five to ten years because the
fuel source for fuel cells is nonrenewable fuel.
ANNOUNCEMENTS
There were no announcements.
COMMITTEE ACTION
The committee took no action.
ADJOURNMENT
The committee recessed to the call of the chair.
[This meeting did not reconvene.]
NOTE: The meeting was recorded. A copy of the tape(s) may be
obtained by contacting the House Records Office at State
Capitol, Room 3, Juneau, Alaska 99801 (mailing address), (907)
465-2214, and after adjournment of the second session of the
Twenty-Third Alaska State Legislature this information may be
obtained by contacting the Legislative Reference Library at
(907) 465-3808.
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