Legislature(2011 - 2012)BARNES 124
02/09/2012 03:00 PM House ENERGY
| Audio | Topic |
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| Start | |
| Presentation: Overview of the Southeast Alaska Integrated Resource Plan by the Alaska Energy Authority | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ENERGY
February 9, 2012
3:08 p.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Lance Pruitt, Co-Chair
Representative Bob Lynn
Representative Dan Saddler
Representative Pete Petersen
Representative Chris Tuck
MEMBERS ABSENT
Representative Kurt Olson
OTHER LEGISLATORS PRESENT
Representative Cathy Munoz
Representative Bill Thomas, Jr.
Representative Peggy Wilson
COMMITTEE CALENDAR
PRESENTATION: OVERVIEW OF THE SOUTHEAST ALASKA INTEGRATED
RESOURCE PLAN BY THE ALASKA ENERGY AUTHORITY
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
SARA FISHER-GOAD, Executive Director
Alaska Energy Authority (AEA)
Department of Commerce, Community & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: Provided a brief history of the Southeast
Integrated Resource Plan (SEIRP).
JIM STRANDBERG, Project Manager
Southeast Integrated Resource Plan (SEIRP)
Alaska Energy Authority (AEA)
Department of Commerce, Community & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: Provided introductory comments prior to the
presentation of the Southeast Integrated Resource Plan (SEIRP).
KEVIN HARPER, Project Director
Southeast Integrated Resource Plan (SEIRP)
Black & Veatch
Issaquah, Washington
POSITION STATEMENT: As the consultant contracted by the Alaska
Energy Authority to complete the Southeast Integrated Resource
Plan - SEIRP, provided a PowerPoint presentation entitled,
"Building a World of Difference," dated 2/9/12, and answered
questions.
BILL LEIGHTY
Juneau, Alaska
POSITION STATEMENT: Expressed his belief in the value of the
Southeast Integrated Resource Plan.
BRAD FLUETSCH
Executive Committee Member
Alaska Native Brotherhood (ANB)
Juneau, Alaska
POSITION STATEMENT: Stated his objections to the Southeast
Integrated Resource Plan.
BOB GRIMM, Chief Executive Officer
Alaska Power and Telephone (AP&T)
Port Townsend, Washington
POSITION STATEMENT: Stated his objections to the Southeast
Integrated Resource Plan.
BOB LOESCHER
Juneau, Alaska
POSITION STATEMENT: Stated his objections to the Southeast
Integrated Resource Plan.
ANGEL DROBNICA, Energy Coordinator
Southeast Alaska Conservation Council (SEACC)
Juneau, Alaska
POSITION STATEMENT: As a participant in the Southeast
Integrated Resource Plan advisory working group, provided
comments.
RICK HARRIS, Executive Vice President
Sealaska Corporation
Juneau, Alaska
POSITION STATEMENT: As the chairman of the Southeast Integrated
Resource Plan working group, provided comments.
ROBERT VENABLES, Energy Coordinator
Southeast Conference
Haines, Alaska
POSITION STATEMENT: As a participant in the Southeast
Integrated Resource Plan, provided comments.
JAN TRIGG, Manager
Community Relations and Governmental Affairs
Coeur Alaska
Juneau, Alaska
POSITION STATEMENT: Stated her objections to the Southeast
Integrated Resource Plan.
FRED PARADY, Executive Director-elect
Alaska Miners Association (AMA)
Anchorage, Alaska
POSITION STATEMENT: Stated his objections to the Southeast
Integrated Resource Plan.
DON KUBLEY, Representative
Alaska Independent Power Producers Association
Juneau, Alaska
POSITION STATEMENT: Stated his opposition to the Southeast
Integrated Resource Plan.
ALBERT HOWARD, Mayor
City of Angoon
Angoon, Alaska
POSITION STATEMENT: Stated his opposition to the Southeast
Integrated Resource Plan.
ACTION NARRATIVE
3:08:55 PM
CO-CHAIR NEAL FOSTER called the House Special Committee on
Energy meeting to order at 3:08 p.m. Representatives Foster,
Pruitt, Tuck, Petersen, Saddler, and Lynn were present at the
call to order. Representative Olson was excused. Also present
were Representatives Munoz, Thomas, and P. Wilson.
^PRESENTATION: Overview of the Southeast Alaska Integrated
Resource Plan by the Alaska Energy Authority
PRESENTATION: Overview of the Southeast Alaska Integrated
Resource Plan by the Alaska Energy Authority
3:09:53 PM
CO-CHAIR FOSTER announced that the only order of business would
be a presentation on the status of the Southeast Alaska
Integrated Resource Plan (SEIRP) by the Alaska Energy Authority
(AEA), Department of Commerce, Community & Economic Development
(DCCED).
3:10:22 PM
SARA FISHER-GOAD, Executive Director, Alaska Energy Authority,
Department of Commerce, Community & Economic Development,
informed the committee SEIRP has been underway for over a year.
As part of the project, a working group was formed with
Southeast residents, and she recognized the group's efforts to
work with AEA and its consultant to produce the plan.
3:11:32 PM
JIM STRANDBERG, Project Manager, Southeast Integrated Resource
Plan (SEIRP), Alaska Energy Authority (AEA), Department of
Commerce, Community & Economic Development (DCCED), said the
presentation would be made by Mr. Harper, the project director
from Black & Veatch, which was the consultant firm contracted by
AEA. After the presentation, Mr. Harper will report on how
SEIRP recommendations are projected to affect energy costs in
three Southeast communities. Mr. Strandberg said AEA sought a
public "bottoms up" process in Southeast Alaska that included an
advisory work group of 22 members which met monthly. Because
this was an integrated approach that looked at heating costs and
electricity costs, it will be the foundation of an energy plan
that will affect many people, and he said he was glad to see the
high level of public interest. His staff is reviewing the
findings of the plan in depth, and is soliciting public comments
through 3/19/12. He extended his personal appreciation to Mr.
Venables, the energy coordinator at Southeast Conference, who
assisted in organizing meetings over the past 16 months.
3:15:48 PM
KEVIN HARPER, Project Director, Southeast Integrated Resource
Plan, Black & Veatch, stated that his company is an
international engineering consulting firm hired by AEA to
conduct the study for the resource plan. This overview will
provide the plan's findings and recommendations that are
intended to inform those who make the decisions on how to meet
the energy needs of the region. He acknowledged the extensive
public process was extremely important because completing the
plan was very challenging due to the unique nature of Southeast
Alaska. Mr. Harper said the role of an integrated resource plan
is to "help set a direction," and not to recommend the use of
specific equipment in a specific place. He characterized the
plan as "a conservative but radical plan," meaning that the
analyses was conservative from an analytical perspective, and
radical in that the conclusions and recommendations are
different from what was preconceived for the region. In fact,
the conclusions are "challenging for the region to get their
hands around," and the nature of the public comments received so
far support this.
3:20:02 PM
MR. HARPER displayed slide 2, entitled, "Key Findings." He said
that one of the key drivers for the Southeast Alaska region is
its limited size; for example, its electric load is about one-
fifth the size of the Railbelt, and the Railbelt is considered
small when compared to the Lower 48 and Canada. Thus the size
of the electrical loads in the region was fundamental, and led
to much of the plan's results. Also, the challenging economic
realities and population trends of the region do not help with
the fundamental "scale problem."
3:21:07 PM
REPRESENTATIVE P. WILSON noted the population trend of the last
10 years was of a loss of population in Southeast, and asked
whether the study took into consideration future changes that
will grow the population.
MR. HARPER explained the analysis looked at three load forecasts
for each of the three communities studied: high, base, and low.
The base forecast represents recent trends as reflected in state
projections of population growth, and the high forecast
represents two-thirds greater growth and load over the next 50
years; therefore, the analysis considered high, base, and low,
and the high reflects a growth in population within the region.
3:22:25 PM
REPRESENTATIVE P. WILSON restated her question.
MR. HARPER said, "When we looked at the high piece, that is ...
what happens if the growth of the region goes up, as opposed to
... the trends that are in the most recent state forecast."
REPRESENTATIVE MUNOZ asked whether current and projected mining
activity was included in the high load forecast.
3:23:42 PM
MR. HARPER said the high load forecast assumes growth in load as
a result of a growth in population, economic development loads,
or electric vehicles. The high load growth represents about
two-thirds growth over time, which is a significant difference
between the high and the reference [base] case. The plan did
not specify the trends that would cause the growth in load or
whether it is due to population, economic development, or
electric vehicles. He pointed out that if a major mine came
into the region it would be outside the high load forecast,
however, speculative potential loads - such as a large mine -
were not included.
REPRESENTATIVE MUNOZ asked whether the operational Kensington
mine is included in the forecast.
3:25:16 PM
MR. HARPER said the Kensington mine is included with others in
the region. He continued to say, "That load could be served and
still be within our ... high case load forecast." The
Kensington mine has several resources to serve the mine that
would not require a regional solution to a localized problem.
Returning attention to slide 2, he noted that 60-75 percent of
monthly energy bills are related to space heating, and SEIRP is
not an electric-only plan, but seeks to address both the high
cost of electricity as well as the high cost of space heating.
3:27:25 PM
MR. HARPER then discussed uncertainties in terms of the size of
loads and regarding resources, and advised that uncertainties
create the need for multiple options and the development of a
diverse portfolio of resources for the future. Slide 4 was a
chart that divided the region into eight subregions in order to
facilitate the modeling of the potential transmission segments
that would have connected the subregions. However, this
approach revealed that the large range of electric cost within
the region - from 9 cents per kilowatt hour to over 60 cents per
kW hour - led to the conclusion that "there was no silver bullet
that would solve all of the problems for the region, and so what
we present in the report is really kind of a roadmap for each of
the subregions that you see up on the screen." Mr. Harper
continued to slide 5 and noted the region has a shortage of
storage for hydroelectric (hydro) power; in fact, storage for
hydro holds more value for the region than run-of-the-river
power generation because the power can be generated upon demand.
In addition, space heating conversions from fuel oil to
electricity - at the residential and commercial levels - has led
to a loss of excess hydro capacity, raising the question of what
is the highest-value use of the hydro resource in the region,
and, in response, SEIRP's recommendation that people move to
biomass for space heating. Mr. Harper turned to the evaluation
of hydro projects, pointing out that the plan looked at about
300 different projects and chose 24 for screening; however, most
of the projects were not developed sufficiently for the plan to
reasonably estimate their cost-of-power. For example, many have
capital costs with estimates ranging from plus or minus 30
percent to 50 percent, and output estimates that are plus or
minus 50 percent; therefore using these estimates, the plan was
unable to complete its analysis of any of the 24 projects. He
advised that because the quality of the information is low,
SEIRP recommends that the available information on proposed
hydro projects is improved so that informed decisions can be
made. Due to this limitation, hydro costs and output in various
subregions were looked at in a generic way, and two cases were
compared to the present status. The first was an optimal
hydro/transmission case which was the present status with the
addition of the committed resources of near-term hydro and
transmission projects, together with future hydro and
transmission projects. The second case focused on demand side
management and energy efficiency (DSM/EE), and biomass
conversions, together with future hydro projects. These two
cases were compared to maintaining the status quo.
3:33:35 PM
MR. HARPER referred to slide 6 and said SEIRP recommends
approaching the future in two phases: Phase 1 is the period
from 2012-2016, and includes committed resources which are
projects currently underway or under development - many have
already received state funding or are being considered for
additional funding - and are projects that the advisory group
felt should go forward. From an analytical view, the plan
assumed that these projects will go forward, and slide 7 fully
described five hydro projects and two transmission extension
projects located in the region. So, the first part of Phase 1
is to go forward with these committed resources. The second
part of Phase 1 is to embark upon a significant energy
efficiency program, as well as a program to encourage the
conversion of space heating from fuel oil to biomass. Two other
parts of Phase 1 are to further study hydro and other renewable
energy projects in order that rational decisions are made on
whether they should be developed, and to repeat SEIRP with
updated information in about four years. As a matter of fact,
in four years the region will be in a better position to
evaluate hydro projects, will have a better sense of economic
development, and will know the feasibility of the biomass
conversions called for by SEIRP. He suggested that long-term
decisions should be made at that time. Phase 2, the period from
2017 and beyond, is a continuation of the plan and the
development of the projects indicated by the plan. Mr. Harper
turned to the subject of transmission segments and acknowledged
that the concept of the Southeast intertie has been studied for
many years. Additional analyses by SEIRP of various revisions
of the intertie by SEIRP revealed two key issues about
transmission in the region: it is expensive to build
transmission systems in Southeast Alaska because of the terrain
and distances; and small loads keep costs high. The plan looked
at the economic case and the public benefit case for building
the intertie. The economic case assumed that the utilities
would pay for all of the capital costs, operation and
maintenance (O&M), and replacement costs associated with the
lines. These transmission costs - not including the cost of
power - were compared to the cost of generating electricity with
diesel fuel. In the public benefit case, it was assumed that
the state would pay for the capital costs and the utilities and
their customers would pay for O&M and replacement costs. He
stressed that there was not one transmission segment studied
that had a lower unit transmission cost less than the existing
cost of diesel. Further, even if the state paid all capital
costs, the best possible benefit-cost ratio is that for every
dollar invested by the state, the region would receive 32 cents
benefit. He advised these ratios are attributed to size, as the
region is not large enough to reduce the unit cost to an
acceptable level. The plan also looked at the Alaska-British
Columbia (AK-BC) intertie within import and export scenarios.
The analysis of this intertie found that the intertie is not
justified based upon current market conditions; however, energy
prices are volatile and this may be reconsidered.
3:41:00 PM
MR. HARPER provided slide 10 entitled, "Capital Investment by
Category." Two pie charts indicated the capital investment for
the region during the period of 2012-2014 and during the period
of 2012-2061 by the type of resource, including committed
resources, additional hydro, replacement of existing diesel
facilities, energy efficiency, and biomass. Over the next three
years, the plan estimated that the recommended projects would
require investment in the amount of $346 million, and a total of
$2.15 billion would be required over the next 50 years. He
highlighted that if the five committed resources projects are
considered, this is not a "no-hydro plan;" in fact, total
recommended hydro projects would produce 70 megawatts (MW) of
power out of a total load of less than 200 MW. He characterized
the plan as one based on using committed resources, DSM/EE,
biomass conversions, and the careful consideration of potential
generation: hydro and otherwise. Slide 11 was entitled,
"Subregional Equity Considerations," and illustrated the
recommended capital investment by subregion during the same
periods of time. Slide 12 illustrated the savings from SEIRP
recommended projects relative to the status quo, which is the
continuation of a reliance on diesel and fuel oil. Looking at
the percentages, savings were 41 percent in electric bills, 46
percent in space heating bills, and 45 percent in total savings
from the recommended projects versus maintaining the status quo.
Savings were 17 percent in electric bills, 46 percent in space
heating bills, and 42 percent in total savings on recommended
projects versus building hydro and transmission projects. Mr.
Harper advised that SEIRP recommended projects provide savings
in the 40 percent to 46 percent level for all of the subregions.
Further, the electric savings projected from the hydro and
transmission option are less than one-half. Mr. Harper
concluded that the path recommended by SEIRP "will save
somewhere north of 40 percent in people's energy bills on a
monthly basis."
3:46:15 PM
MR. HARPER opined using existing and future hydro resources for
residential heating is not the highest value from the resource,
but the highest value is power that can be used to "turn motors
which create jobs." The analysis suggested that options other
than hydro are more cost effective to meet the needs for
electricity and space heating. Slide 13 was entitled, "Regional
Supporting Studies and Other Actions," and he acknowledged that
there are legitimately different views on this complex issue.
However, there is a lot of experience to draw from on energy
efficiency and conversions to biomass, and he urged that the
public should be educated on these decisions. Mr. Harper
cautioned that the regional approach has been proven more
successful than if each community or utility plans on its own.
Finally, he pointed out that SEIRP includes money for the
recommended study of hydro and other renewable projects, and
also includes recommendations aimed at making the region
conducive to private interests to develop power projects, such
as making the transmission system available and using standard
power purchase contracts. Mr. Harper reiterated the major
points of the overview: the Southeast region load is very
small; two-thirds of the monthly bills paid for energy are for
space heating; electricity is not the only issue; there is a
large disparity in the cost of electricity; hydro projects are
not sufficiently developed to evaluate economically;
transmission segments do not cost less than diesel; transmission
segment benefit-cost ratios are too low; new hydro is part of
the plan; and 40 percent savings in energy costs will improve
economics for residents and economic development.
3:52:26 PM
REPRESENTATIVE PETERSEN asked how long of a life span was used
to determine the long-range cost of hydro projects.
MR. HARPER said the economic analysis used a 50-year timeframe.
CO-CHAIR PRUITT asked for the current rate of electricity use in
the region.
MR. HARPER answered about 170 MW. In further response to Co-
Chair Pruitt, he said if the majority of residents convert to
electricity for space heating, the load would increase by about
two to three times the current load.
3:54:30 PM
CO-CHAIR PRUITT referred to the cost-benefit ratio of
transmission lines and asked whether the "issue" with hydro is
generation or just the spread-out features of the area.
MR. HARPER explained that the total megawatts possible from the
24 hydro projects that were studied is about 300 MW, so there
would be sufficient hydro generation; however, the question is
whether it is cost-effective with the problem of "getting that
hydro power to where the loads are." When connecting hydro to a
nearby load center the transmission costs can generally be
supported, but building a network to connect all areas of the
region does not work economically.
CO-CHAIR PRUITT understood last year that the state would pay
for transmission lines, and then the utilities would pay for O&M
and replacement costs. Currently, the Regulatory Commission of
Alaska (RCA) does not allow a utility to save for replacement
costs. He asked whether this was a consideration in the
analysis because it would potentially bring down the cost to the
customer, if the utilities are not saving for future
replacement.
3:57:20 PM
MR. HARPER said what was considered in the public benefit case
was an estimate of the annual costs of general O&M and repair
and replacement, with the assumption that those costs would be
paid by local utilities and their customers. The analyses did
not look at alternative rate structures to deal with these
issues, but does include general approaches that can be taken -
for example, amortizing the high upfront costs of hydro - thus
these issues are addressed in a generic way. Because the near-
term implementation plan is focused on DSM, biomass, and
committed resources that have already been financed, there was
no need to assess financing models. However, financing will be
an important part of the long-term decisions in the future.
REPRESENTATIVE MUNOZ asked for the cost of the project so far
and the cost of Phase 2.
3:59:01 PM
MR. STRANDBERG said the current project budget is $1,000,000, of
which over $900,000 was spent to pay for the consultant contract
and the extensive travel and per diem costs of the advisory work
group. The cost of Phase 2 is now being formulated.
REPRESENTATIVE MUNOZ asked, "Had we not already supported the
projects that you identified - the hydro projects - would you
have recommended moving forward independently on those
projects?"
MR. HARPER said those were deemed to be projects that should go
forward thus a detailed economic analysis of those projects was
not done.
REPRESENTATIVE MUNOZ asked for the market price used to evaluate
the energy costs on the AK-BC intertie project.
4:01:05 PM
MR. HARPER responded that to evaluate the exporting of power,
the plan looked at different market prices from Canada to
California. The most positive metric was in California, which
has the nation's most aggressive renewable standard and has
contracts in place for renewable power which are significantly
above the current market prices. The plan determined that using
that price over 20 years, on a base load, was the best possible
market price under the scope of the analysis. The plan further
assumed firm transmission from here to California, the costs of
moving the power, and losses. He said the analyses was
"screening-level, based on the information available today." In
further response to Representative Munoz, he said he did not
remember the market price, but that it is in the plan.
4:03:18 PM
REPRESENTATIVE SADDLER asked for a description of the elements
of the plan in simpler terms.
MR. HARPER explained that in the near-term, the plan recommends
the completion of five hydro projects and two transmission
projects that have been in progress in the region; to embark
upon a substantive energy efficiency program of residential and
commercial spaces in order to reduce use and improve the quality
of life; to embark upon an aggressive program to convert fuel
oil space heating equipment to biomass - largely pellets; and to
identify potential hydro and renewable projects for the future.
4:05:48 PM
REPRESENTATIVE TUCK observed that Kensington mine was not
considered part of the integrated plan and thus is supposed to
find a solution to its power needs independently. He asked
whether other mines fall into that category.
MR. HARPER stated that the report lists about 14 potential
mines, some of which have options for a localized solution as
there are nearby hydro or other renewable resources, and others
that would benefit from an integrated transmission network.
The report needed to consider what would happen if the load in
the region is significantly higher than it is now, but did not
consider what factors would instigate that increase, such as
mines, population growth, or electric vehicles. The high
forecast is about 65 percent higher than the base forecast, and
that amount reflects a higher load from a mine not using
localized power.
4:07:53 PM
REPRESENTATIVE TUCK asked whether the list of potential mines
included those in Canada, because Canada is interested in
importing power from Alaska.
MR. HARPER said the mines in the report are Alaska mines.
Furthermore, he noted that it is difficult to predict prices in
the competitive energy market and also to predict Canada's
viewpoint towards imported power. The current Canadian
administration is less interested than the previous one, which
creates uncertainty.
4:09:59 PM
REPRESENTATIVE TUCK recalled Canadian interest was expressed
last week. Looking at the 50-year plan, he asked whether the
mines that are nearby hydro are part of the integrated plan, or
if they were excluded.
MR. HARPER said they are outside of the integrated plan. In
further response to Representative Tuck, he said the analysis
was not specific to individual mines because trying to predict a
growth in load could be speculative, as is the use of electric
vehicles or population trends. The plan focused on how to meet
higher energy needs due to any of the various causal elements.
4:12:06 PM
REPRESENTATIVE TUCK then asked whether biomass pellets would be
manufactured in Southeast and how the cost of burning pellets
was determined.
MR. HARPER said the economic analysis assumed the use of
imported pellets from Canada or the Lower 48. The cost of the
pellets was based on information from Sealaska Corporation and
others. This is a radical assumption because if all of the
conversions to space heating by biomass were made, the pellets
could be economically manufactured locally, which would reduce
the cost; using the higher cost of imported pellets was the
conservative approach.
4:13:40 PM
CO-CHAIR PRUITT cautioned that conversions would make a
significant change while relying on a source of pellets from a
niche market. He asked whether there is confidence that a
supply of pellets will be available.
4:14:57 PM
MR. HARPER acknowledged that each technology has a set of
associated risks. The analysis assumed that 80 percent of
residential customers will convert to biomass within 10 years;
the rational approach is to run pilot programs to test the
acceptability of the technology, to follow the supply chain, and
to build the infrastructure regionally. In further response to
Co-Chair Pruitt, he said burning biomass is not the cleanest
option, but it is "a significant improvement over the current
situation in terms of emissions, and then economically it's ...
very compelling, from our perspective."
4:18:25 PM
REPRESENTATIVE SADDLER called attention to slide 5 and surmised
the plan compared the options of building large hydro plants and
sending the power elsewhere, with the use of biomass and other
renewables. He asked for an explanation of DSM.
MR. HARPER said DSM stands for demand-side management, which is
reducing energy demand to help manage it. For example, using
high efficiency dishwashers and adding insulation are common
options to reduce energy use and manage demand. In further
response to Representative Saddler, he explained that when doing
a study, all of the good data is put in the model - the black
box - and the result is the most economical solution. However,
because the quality of the data on the hydro projects was
inferior, the plan used generic hydro data. That meant there
could not be an "apples to apples comparison" of all of the
resources. Therefore, the plan used two cases: existing
resources, including the committed resources, with hydro and
transmission; and the conversion of 80 percent of houses to
biomass, an energy efficiency program, with hydro and other
renewables in the long-term. The conclusion came from a
comparison of those two cases over a long period of time.
4:22:41 PM
CO-CHAIR FOSTER invited public comment.
4:23:02 PM
BILL LEIGHTY said he was a 40-year Juneau resident and small
business owner. He provided a short history of his expertise in
alternatives to electricity for transmission. Mr. Leighty said
SEIRP is valuable because it broadens the view from the
electricity industry to include space heating. In fact in
Juneau, electricity accounts for less than one-fourth of its
energy use. Eventually, all communities must supply all of
their energy from renewable resources. It is in the public's
interest to solve the complete energy problem for the region in
the long-term by the use of renewables. The problem extends to
the region's external supply of fuel, including fuels for
airlines, cruise ships, and barges. Secondly, because SEIRP
concludes that interties are uneconomic, the region should look
beyond electricity transmission; one alternative is to convert a
renewable source of electricity to anhydrous ammonia at the
site, and ship it as a liquid fuel. This would be a firm supply
of renewable-source energy that may be less expensive than
electricity. Mr. Leighty advised that there are other
affordable ways to store and move energy.
4:25:56 PM
BRAD FLUETSCH, Executive Committee Member, Alaska Native
Brotherhood (ANB), said he was a Chartered Financial Analyst
with 25 years of experience. He read the following [original
punctuation provided]:
I believe the most significant and fundamental flaw in
this document is the stated objective of minimizing
future power supply that is the second sentence of the
first paragraph of the executive summary. By
exploring only the options to minimize future power
supply, the document excludes many of the hydro
resources in Southeast, and completely ignores wind,
geo-thermal, tidal and wave energy generating
capacity. I have included maps from AEA and the
Renewable Energy Alaska Project that demonstrate all
those potential power supplies here in Southeast
[Provided in the committee packet]. By not exploring
the potential maximum load and generating capacity in
Southeast, the conclusions and pathways the consultant
recommends are not valid and in fact are biased
against growth and prosperity and if implemented will
lead to regional deterioration, continued
outmigration, and further redistricting. Ignoring the
maximum future energy generation options, the
consultant never determines Southeast would be able to
achieve the economies of scale that the export of
surplus power would allow. Imagine sizing TAPS to the
demand of the Railbelt in 1970 and ignoring the
benefits exporting oil has brought to the State of
Alaska. Affordable energy is a building block of any
economy and Southeast is no different. Locally
produced energy builds our local economy and tax base.
I view this in terms of Gross State Product (GSP)
which is comparable to the national Gross Domestic
Product (GDP). Creating local jobs and circulating
the citizens energy expense in state, as opposed to
exporting both to foreign countries - some of which
are not our friends; expands GSP substantially,
generating wages, taxes and demand for other local
business services. Imagine all the jobs secondary
processing of natural resources harvested from the
waters and land of Southeast Alaska and the wealth
that it would create. Imagine all the IBEW jobs a 900
mile grid would create building and maintaining it.
After twenty years of economic decline this SEIRP
would lock Southeast Alaska into the worst economic
period of time for eternity by minimizing its future
power supply therefore minimizing its future economic
vibrancy and forcing future generations to import
their energy at the price whims of the global economy.
The SEIRP is fundamentally flawed, biased and because
it lacks agreed upon goals and objectives is
economically invalid and should not be used to develop
any energy policies for Southeast Alaska.
4:29:32 PM
BOB GRIMM, Chief Executive Officer, Alaska Power and Telephone
(AP&T), described his company as a small, investor-owned public
utility operating primarily in rural areas of Alaska. Its
current and past employees own 80 percent of the company.
Alaska Power & Telephone began in 1957 and its employees have
reinvested in the region, but there has been a decline in the
number of jobs in Southeast Alaska. Mr. Grimm stated that the
Department of Labor & Workforce Development is projecting a 30
percent loss in population by 2034 for some communities. He
opined that the report is a threat to his company's investment,
and said, "We believe that there should be a brighter future
than is envisioned in this draft." Alaska Power & Telephone is
like a public servant in that it is responsible for providing
safe electric power for many communities. He quoted Skagway
Mayor Stan Selmer as follows:
The government of the Yukon Territory is clearly
supportive of responsible development. It is an
isolated system similar to Southeast Alaska. However,
the government there is fully engaged in finding cost
effective solutions to meet the huge increase in
electrical demands required for those resource
developments to be successful. The opposite is true
of the Southeast Integrated Resource Plan that has not
included or incorporated the large energy requirements
associated with the present and future resource
development in Southeast Alaska or even other existing
diesel-based loads like cruise ships in its plan.
The contrast between the planning approach being used
by these similar governments is striking. Even more
striking is the governor's vocal roads to resources
platform, while the state agency in charge of the
planning efforts has presented a draft energy plan
that leaves the resource industry homeless. While
another state agency, AIDEA, is here in Skagway trying
to increase the ore-handling facilities in Skagway to
handle the increased demand of ore ... headed our way
from the Yukon.
Mr. Grimm continued, stating his objections to the use of the
low scenario load forecast which has caused the flawed
conclusions of the plan. However, this serious mistake can and
should be corrected in order to save SEIRP. Although there are
strong objections to the assumptions of the plan, it is a start,
and $900,000 was spent to collect data, which can still be used
with different input for the model. He also urged for the
committee to support the committed resources which are good
projects and should be funded in the near-term. Mr. Grimm
concluded that waiting four years to update the plan is not an
option when trying to attract economic development.
4:35:33 PM
BOB LOESCHER said he was a 40-year Juneau resident and informed
the committee of his professional experience with Tlingit-Haida
Central Council, Tlingit-Haida Housing Authority, Tlingit-Haida
Electrical Authority, and as CEO of Sealaska Corporation. He
provided a Native leadership perspective of this plan, saying
that the Native community is suffering economically - in rural
and urban settings - from few jobs and the high cost of energy.
In fact, the cost of electricity and fuel for cars and space
heating is causing families to choose between heating fuel,
food, and medical care. He stressed that this is an emergency
situation which needs to be addressed now. Mr. Loescher said
the draft of the plan is from the perspective of AEA and the
public utilities, and is focused on proposals that will not
solve the immediate energy needs of the region. Furthermore,
the plan is not tied to the public policy issues that the
legislature and the national government have identified; it has
no stated public policy goals and objectives. Mr. Loescher
noted that the plan is also not tied to regional economic goals
and objectives that relate to the region's five industries of
fisheries, timber, minerals, tourism, and government. He
suggested that energy should be added as an industrial pillar to
those of the region, because doing so will add to the economy,
create jobs, and provide a product for our needs, and those of
the "super region" of British Columbia and the western U.S. He
opined that this plan does not consider the benefits of adding
energy as an industry, and regional leaders should focus
attention on those possibilities. Mr. Loescher said he would
counsel Native leaders that this plan needs a lot more work, and
he hoped the legislature will not use the plan as a basis for
policy, or for the funding of projects that are currently
underway in the region.
4:41:13 PM
ANGEL DROBNICA, Energy Coordinator, Southeast Alaska
Conservation Council, disclosed that the Southeast Alaska
Conservation Council (SEACC) held a seat on the advisory working
group during the creation of the draft plan. She stated that
the purpose of SEIRP was to identify actions that could be taken
by residents, businesses, and local and state government, in
response to energy issues facing the region, including the high
cost of energy. Her organization recognizes that the process
and the outcome of SEIRP are not without flaws, and more work is
needed, but believes that the plan offers a balanced approach to
energy issues. Ms. Drobnica stated that SEACC is pleased with
the plan's emphasis on efficiency and conservation which will
reduce loads in cost effective and achievable ways, and she
encouraged the state to design and implement conservation and
efficiency programs. In addition, SEACC believes there is
potential for savings by biomass heat conversions, but that
attention should also be paid to other technologies such as heat
pumps. Black & Veatch's analysis found a regional intertie
system to be uneconomic, and SEACC urged for solutions to
address critical local needs as soon as possible. She also
encouraged the committee's support for renewable and local hydro
projects, and for all of the committed projects identified in
SEIRP, and cautioned that support for the AK-BC intertie may
detract from projects in rural communities; moreover, the first
priority of the state is to ensure that all of the needs of
Alaskans are met. Her organization supported Black & Veatch's
assessment of the AK-BC intertie, and encouraged the legislature
to act on the plan's recommendations for using energy wisely and
for supporting the use of local renewable projects to address
critical needs.
4:44:55 PM
REPRESENTATIVE THOMAS advised those in the audience to provide
public comments on HB 250.
4:45:27 PM
RICK HARRIS, Executive Vice President, Sealaska Corporation, as
chairman of the Southeast Integrated Resource Plan working
group, stated that the working group consisted of approximately
21 members, and its first action was to support the committed
resources projects and encourage the funding thereof. Mr.
Harris opined the plan is a "jaw-dropping change" directional
document because of the many developments in the plan that have
not been seen before: challenges and questioning to the
transmission line and intertie; different kinds of approaches to
looking at energy; and staggering public policy. For this
reason, the committee did not endorse the plan, but it did want
the plan to go before the public for review and comment. As a
matter of fact, the committee understood that AEA and the
consultants are committed to listening to public comments to
ensure that the plan can satisfy residents' concerns. The
members of the committee included utilities, the mayors of
cities, and Native corporations, and did not endorse the plan,
but held the expectation that there would be public comment and
the final result will "be a strong plan that will in fact be a
good direction plan, and will be one that will be able to lead
Southeast to its energy." In response to previous comments, Mr.
Harris stressed that the plan does recommend looking at
alternative energy of all types including tidal, wave, and
biomass.
4:48:39 PM
ROBERT VENABLES, Energy Coordinator, Southeast Conference, said
his organization is the state's regional development
organization and the federally recognized economic development
district for Southeast. Southeast Conference participated in
the public process underway that provided value and regional
integration for the benefit of those seeking to implement the
project. The board of directors and the membership of Southeast
Conference are reviewing the plan and listening carefully to
public comments. Mr. Venables acknowledged that many of the
findings of the plan are consistent with the Southeast
Conference work plan. He commended AEA for its unprecedented
effort, which was not a "top-down exercise, you know, from the
agency to the communities;" in fact, meetings were held in
Juneau, Prince of Wales, Ketchikan, Wrangell, Petersburg, Kake,
Sitka, Hoonah, Angoon, Haines, Skagway, and Yakutat, which
allowed citizens from all over to participate. Mr. Venables
urged the committee to retain focus on the committed units, and
on the immediate need for full construction funding in order to
build the identified projects now. He also urged support for
the space heat recommendations, and for the immediate analysis
of the proposed hydro projects. Regarding DSM/EE measures, he
said, "Many in the region only have a superficial understanding
of what that really means, and what measures should be taken ...
and so some sort of awareness campaign would be appropriate."
Mr. Venables concluded that SEIRP will provide the technical
insights to identify future projects.
UNIDENTIFIED SPEAKER (Indisc.)
4:53:12 PM
JAN TRIGG, Manager, Community Relations and Governmental
Affairs, Coeur Alaska, said she was a 34-year resident of
Juneau, and has worked for Coeur Alaska for 15 years. Coeur
Alaska owns and operates the Kensington mine located 45 miles
northeast of Juneau. It has 250 employees and 100 contractors
employed at its project. The mine site is accessible by boat
and air, and six generators on-site provide all of its power
needs. She said the future energy needs of the mine will be
eight to nine MW. Ms. Trigg advised that the basic economics of
mining are that lower costs - including energy costs - allow for
mining a lower grade, which extends the life of the mine. Like
most of its neighboring communities, the mine has high energy
costs associated with diesel generation, however, the draft
SEIRP fails to define "affordable, low-cost power," and also
fails to provide a pathway to lowest-cost power for communities
and projects like the Kensington mine. She said lowest-cost
energy provides opportunities for growth and for attracting new
industry and jobs. The draft SEIRP fails to plan for growth and
discounts the construction of electrical interties on the basis
that mineral development in Southeast Alaska is too speculative.
The plan should not ignore the electrical demands of existing
projects and reasonably foreseeable resource development. Ms.
Trigg said Canada is setting an example of proactively planning
for the current mining boom in British Columbia and Yukon, and
Alaska should be looking at this possible demand for its energy.
A Southeast intertie and the AK-BC intertie are long-term
solutions which support energy independence and security. Coeur
Alaska is concerned about its long-term outlook for energy
costs, and encourages plans for alternative energy options for
an overall strategy for the region. Ms. Trigg also urged
additional analyses of the data by a third-party consultant.
4:57:09 PM
REPRESENTATIVE MUNOZ recalled that the Kensington mine was
excluded from the energy load in the plan because it has other
options for energy generation on-site. She asked whether this
was true.
MS. TRIGG said the mine has been approached with several
proposals, but has not entered into an agreement at this time.
4:57:48 PM
FRED PARADY, Executive Director-elect, Alaska Miners Association
(AMA), described the Alaska Miners Association, saying it was
founded in 1939 and has 1,400 members across the state including
prospectors, geologists, engineers, vendors, recreational
miners, suction dredge operators, small family mines, junior
mining companies, and the major mines. Alaska Miners
Association supports the construction of interties and the
development and implementation of strategies to provide stable,
low-cost sources of energy to the region, and to the region's
mining interests. Mr. Parady called attention to a brochure
included in the committee packet entitled, "The Economic
Benefits of Alaska's Mining Industry," dated January 2012, and
pointed out that mining supports 4,500 direct mining jobs with
an average annual wage of $100,000 per year, and there are 30
projects that have had exploration expenditures of over
$1,000,000 last year. Mr. Parady described the current activity
at the Niblack gold, silver, and zinc property and said, "I
don't consider those kind[s] of opportunities speculative, they
are in process and in development, and should be accommodated
and accounted for in this kind of long-term regional plan." He
further noted that AMA advocates for the funding of
infrastructure to provide access to remote areas - especially in
Southeast - and its energy interests are parallel to those of
the governor in supporting roads to resources and lines to
mines. Mr. Parady said a difficult issue all Alaskans face is
the desire to lock up the state, and that efforts to provide new
access, such as Revised Statute 2477, must be maintained.
Finally, existing roads and utility corridors must be protected
along with the development of roads and interties to promising
mining sites.
5:02:13 PM
DON KUBLEY, Representative, Alaska Independent Power Producers
Association, said he was speaking on behalf of the Alaska
Independent Power Producers Association which has members from
Prince of Wales Island to Fairbanks who generate power from all
kinds of sources including wind, tidal, hydro, and others. His
organization is comprised of Alaska's leading independent power
producers and developers, including entrepreneurs and private
companies working to develop energy infrastructure. Alaska
Independent Power Producers Association believes monopolies of
any kind need competition, and that free enterprise and market
demands will increase the supply of cheap power to residents,
industry, businesses, and the region. Alaska has vast energy
resources sufficient to drive its economy and to provide energy
independence at a reasonable cost for every citizen. He
referred to a recent preliminary overview released by the Alaska
Center for Energy and Power (ACEP), University of Alaska
Fairbanks (UAF), indicating that there is a huge amount of
stranded renewable energy resources in Alaska; in fact, Alaska
has over 677 MW of known geothermal capacity, the largest amount
of class 7 wind - the highest velocity - in the U.S., 90 percent
of the tidal potential and 50 percent of the wave energy
potential of the U.S., and tremendous hydropower potential, much
of which is located in the region. The overview also pointed
out that Southeast has great differences in electrical cost as
some areas have hydropower and other nearby communities pay
between three and six times the cost of electricity because
there is no intertie connection. Mr. Kubley said SEIRP does not
recognize this fact and is further flawed in that it ignores key
points of the state energy policy regarding integrating economic
development with energy policy as stated in AS 44.99.115. He
read:
(2) to encourage economic development by promoting
development of renewable and alternative energy
resources including geothermal, wind, solar,
hydroelectric, hydrokinetic, tidal, biomass, for use
by all Alaskans.
(B) promoting the development, transport, and
efficient use of nonrenewable and alternative energy
resources, including natural gas, coal, oil, gas
hydrates, heavy oil, nuclear energy, for use by
Alaskans and for export
(C) working to identify and assist with the
development of the most cost-effective, long-term
sources of energy for each community statewide;
(D) creating and maintaining a state fiscal regime and
permitting the regulatory processes that encourages
private sector development of the state's energy and
resources;
MR. KUBLEY stated that the fact that the independent power
producers and large private energy resource developers were not
invited to the SEIRP working group is in conflict with the
state's energy policy. In addition, SEIRP focuses on serving
the needs of a dying region, rather than planning for
opportunities for private enterprise and business, job creation,
regional economic growth from resource development as provided
for in Article VIII, Section 1 of the Alaska State Constitution.
He stressed that the development of renewable energy in
Southeast Alaska, especially hydropower, is consistent with the
public interest. Furthermore, one-half of the Southeast
intertie from Ketchikan to Petersburg is already a proven
success. Also, SEIRP ignores that federally sanctioned routes
for the Southeast intertie, and up to 80 percent of its funding,
are already approved. He said, "Abandoning a proven energy
transmission success defies common sense." Completion of the
grid would provide power for the region and excess for a new
energy export industry just like oil or gas.
5:11:19 PM
MR. KUBLEY stated that currently businesses in the region are
desperate for great amounts of additional electricity that are
potentially available. He advised that SEIRP should be
"scrapped" and should serve as a warning to other regions that
centralized planning by AEA and outside contractors that fails
to follow state policy, and does not include the private sector,
is a "nonstarter." Moreover, any future advisory group must
include all industries and participants in a transparent and
open process. He cautioned that the region is facing a
crossroads with a choice to retreat to survive, or meet the
challenge, follow the state policy, and allow the free market
forces and private enterprise to flourish. He quoted Speaker
of the House Chenault and his "clear vision of what is truly
needed in the Panhandle," and praised the governor for his
support of roads to resources, although high-voltage power lines
need to accompany the roads. Mr. Kubley concluded that the
region is in a death spiral that can be changed by a new
industry providing cheap power locally and to the West Coast.
5:14:33 PM
ALBERT HOWARD, Mayor of Angoon, said the residents of Angoon
live 60 miles from Juneau and pay 67 cents per kilowatt. Angoon
is also 32 miles from a line that was built to a mine. Mr.
Howard said he has seen a downward spiral for the 466 people he
represents who live in Angoon, and he is trying to make a better
life for them. He questioned what would have happened if the
Trans-Alaska Pipeline System (TAPS) had not been built because
people said it cost too much, and said he knew what the return
on investment from an intertie would be to the people of Angoon.
He pointed out that SEIRP does not reflect the human aspect of
the benefits of building an intertie to the people of his
community. Mr. Howard said he and 25 percent of his community
are veterans who served their country. Angoon's concerns about
SEIRP include: the lack of meaningful public process; the lack
of real goals and objectives; and AEA's arbitrary and capricious
denial of requests. This is the first time the public benefit
aspect has been described and he said he looked forward to
understanding the assumptions made by the Black & Veatch
presentation. Returning to his concern with the public process,
he pointed out that there were meetings held in Seattle with
select stakeholders who seemed to benefit the most under the
draft document, but meetings were not held in communities with
tribal governments in Southeast Alaska. He heard that Southeast
Conference was included to provide local knowledge, but when
asked, Southeast Conference indicated its role was to provide
administrative support. He also questioned why comments and
concerns were not posted on the AEA website in a timely manner
so that the public could follow the SEIRP process. The elected
officials of the City of Angoon asked by resolution for the west
Admiralty segment of the intertie to be carefully looked at
because the intertie would provide access to low cost power and
relieve Angoon's struggles, and would also benefit the state by
eliminating the need to provide the community with power cost
equalization (PCE) funds. Mr. Howard reminded the committee of
the Alaska State Constitution and state policy to encourage
settlement of its lands and development of its resources by
making available the maximum use consistent with public
interest. He said the city council of Angoon best represents
its citizens, and a consultant or public official "should not be
telling us 35 cents per kilowatt is best for us, when we and our
citizens of Angoon deserve 11 and 14 cents, if we can come up
with a plan that gets us there." The mayor has yet to receive a
response from AEA or the contractor to its inquiry of 10/29/11.
The plan ignores Angoon's efforts to achieve its goals and keeps
the status quo of separate communities and utilities. He
offered proof that SEIRP is a policy-making document: it was
used to deny funding for two renewable projects in round 5 of
AEA projects because the projects were not consistent with SEIRP
findings. The potential projects of Thomas Bay, Ruth Lake, and
Scenery Creek storage would provide 70 MW and the preliminary
permits are held by the city, yet AEA turned the projects down.
Mr. Howard spoke of the quality of life in Angoon and his hope
for the future.
5:26:39 PM
CO-CHAIR FOSTER announced further comments would be taken at a
later date.
5:27:43 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Energy meeting was adjourned at 5:27 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| A - Black Veatch power point.pdf |
HENE 2/9/2012 3:00:00 PM |
|
| B - Jim Strandberg SEIRP H ENE Presentation 02 09 12.pdf |
HENE 2/9/2012 3:00:00 PM |
|
| Comments for House Energy Committee SE-IRP Hearing__Edwards_9Feb12.pdf |
HENE 2/9/2012 3:00:00 PM |
Southeasst Integrated Resource Plan |