Legislature(2009 - 2010)NOME

02/08/2009 01:00 PM House ENERGY

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01:08:59 PM Start
01:09:19 PM Alaska Energy Authority Statewide Energy Report
04:36:44 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Held in NOME at Old St. Joe's Church, TELECONFERENCED
407 Bering St.
AEA Statewide Energy Report
-- Public Testimony --
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE SPECIAL COMMITTEE ON ENERGY                                                                              
                        February 8, 2009                                                                                        
                           1:08 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Bryce Edgmon, Co-Chair                                                                                           
Representative Charisse Millett, Co-Chair                                                                                       
Representative Kyle Johansen                                                                                                    
Representative Jay Ramras                                                                                                       
Representative Pete Petersen                                                                                                    
Representative Chris Tuck                                                                                                       
MEMBERS ABSENT                                                                                                                
Representative Nancy Dahlstrom                                                                                                  
OTHER MEMBERS PRESENT                                                                                                         
Senator Donny Olson                                                                                                             
COMMITTEE CALENDAR                                                                                                            
Alaska Energy Authority Statewide Energy Report                                                                                 
PREVIOUS COMMITTEE ACTION                                                                                                     
No previous action to record                                                                                                    
WITNESS REGISTER                                                                                                              
DENISE MICHELS, Mayor                                                                                                           
City of Nome                                                                                                                    
Nome, Alaska                                                                                                                    
POSITION STATEMENT:  Testified during the discussion of the AEA                                                               
Statewide Energy Report.                                                                                                        
JOHN HANDELAND, Utilities Manager                                                                                               
City of Nome                                                                                                                    
Nome, Alaska                                                                                                                    
POSITION STATEMENT:  Testified during the discussion of the AEA                                                               
Statewide Energy Report.                                                                                                        
TIM TOWARAK, President/CEO                                                                                                      
Bering Straits Native Corporation (BSNC)                                                                                        
Nome, Alaska                                                                                                                    
POSITION STATEMENT:   Testified during the discussion  of the AEA                                                             
Statewide Energy Report.                                                                                                        
JERALD BROWN, Vice President                                                                                                    
Bering Straits Native Corporation (BSNC)                                                                                        
Nome, Alaska                                                                                                                    
POSITION STATEMENT:   Testified during the discussion  of the AEA                                                             
Statewide Energy Report.                                                                                                        
NEAL FOSTER, Vice President                                                                                                     
Sitnasuak Native Corporation                                                                                                    
Nome, Alaska                                                                                                                    
POSITION STATEMENT:   Testified during the discussion  of the AEA                                                             
Statewide Energy Report.                                                                                                        
LEO B. RASMUSSEN                                                                                                                
Nome, Alaska                                                                                                                    
POSITION STATEMENT:   Testified during the discussion  of the AEA                                                             
Statewide Energy Report.                                                                                                        
COLBY CARTER                                                                                                                    
Nome, Alaska                                                                                                                    
POSITION STATEMENT:   Testified during the discussion  of the AEA                                                             
Statewide Energy Report                                                                                                         
CARL EMMONS                                                                                                                     
Nome Joint Utility System                                                                                                       
Nome, Alaska                                                                                                                    
POSITION STATEMENT:   Testified during the discussion  of the AEA                                                             
Statewide Energy Report.                                                                                                        
MITCH ERICKSON, Executive Director                                                                                              
Nome Chamber of Commerce                                                                                                        
Nome, Alaska                                                                                                                    
POSITION STATEMENT:   Testified during the discussion  on the AEA                                                             
Statewide Energy Report.                                                                                                        
BRIAN JACKSON                                                                                                                   
Western Community Energy (WCE)                                                                                                  
Oasis, Idaho                                                                                                                    
POSITION STATEMENT:   Testified during the discussion  on the AEA                                                             
Statewide Energy Report.                                                                                                        
KATIE PETERSON, Community Development Coordinator                                                                               
Norton Sound Economic Development Corporation (NSEDC)                                                                           
Nome, Alaska                                                                                                                    
POSITION STATEMENT:   Testified during the discussion  on the AEA                                                             
Statewide Energy Report.                                                                                                        
NANCY MENDENHALL, Chair                                                                                                         
Advisory Council                                                                                                                
Co-operative Extension Service                                                                                                  
University of Alaska - Fairbanks                                                                                                
Nome, Alaska                                                                                                                    
POSITION STATEMENT:   Testified during the discussion  on the AEA                                                             
Statewide Energy Report.                                                                                                        
RUTH EMMONS                                                                                                                     
Nome, Alaska                                                                                                                    
POSITION STATEMENT:   Testified during the discussion  on the AEA                                                             
Statewide Energy Report.                                                                                                        
JIM ADAMS                                                                                                                       
Nome, Alaska                                                                                                                    
POSITION STATEMENT:   Testified during the discussion  on the AEA                                                             
Statewide Energy Report.                                                                                                        
CARL EMMONS, Member                                                                                                             
Nome Joint Utility Board                                                                                                        
Nome, Alaska                                                                                                                    
POSITION STATEMENT:   Testified during the discussion  of the AEA                                                             
Statewide Energy Report.                                                                                                        
BRYCE GREEN                                                                                                                     
Western Community Energy                                                                                                        
Nome, Alaska                                                                                                                    
POSITION STATEMENT:   Testified during the discussion  on the AEA                                                             
Statewide Energy Report.                                                                                                        
ROBERT HAFNER                                                                                                                   
Western Community Energy                                                                                                        
Nome, Alaska                                                                                                                    
POSITION STATEMENT:   Testified during the discussion  on the AEA                                                             
Statewide Energy Report.                                                                                                        
JIM STIMPFLE                                                                                                                    
Nome, Alaska                                                                                                                    
POSITION STATEMENT:   Testified during the discussion  of the AEA                                                             
Statewide Energy Report.                                                                                                        
FRED MOODY, Member                                                                                                              
Nome Joint Utility System                                                                                                       
Nome, Alaska                                                                                                                    
POSITION STATEMENT:   Testified during the discussion  on the AEA                                                             
Statewide Energy Report.                                                                                                        
ACTION NARRATIVE                                                                                                              
1:08:59 PM                                                                                                                    
CO-CHAIR CHARISSE  MILLETT called the House  Special Committee on                                                             
Energy meeting  to order at  1:08 p.m.  Representatives Petersen,                                                               
Tuck, Ramras, Johansen,  Edgmon, and Millett were  present at the                                                               
call to order.  Senator Olson was also present.                                                                                 
^ALASKA ENERGY AUTHORITY STATEWIDE ENERGY REPORT                                                                              
[Contains discussion of HB 66]                                                                                                  
1:09:19 PM                                                                                                                    
CO-CHAIR MILLETT announced that the  only order of business would                                                               
be  discussion of  the Alaska  Energy  Authority (AEA)  Statewide                                                               
Energy Report.                                                                                                                  
1:09:39 PM                                                                                                                    
CO-CHAIR  MILLETT noted  some written  materials from  the Alaska                                                               
Energy Authority were available to the public.                                                                                  
1:10:00 PM                                                                                                                    
CO-CHAIR EDGMON  said he recognizes  some faces in  Nome, because                                                               
he used to serve as an  aide to Representative Foster and because                                                               
of  his involvement  with the  Community Development  Quota (CDQ)                                                               
program.  He  related that his district includes  Bristol Bay and                                                               
the  Aleutians, and  that  area is  also  facing critical  energy                                                               
1:11:01 PM                                                                                                                    
REPRESENTATIVE PETERSEN  acknowledged the progress  the community                                                               
of Nome has made in harnessing wind power.                                                                                      
1:11:36 PM                                                                                                                    
REPRESENTATIVE   JOHANSEN   expressed    appreciation   for   the                                                               
hospitality of the residents of  Nome and expressed his hope that                                                               
solutions can be found to stabilize energy costs.                                                                               
1:12:37 PM                                                                                                                    
REPRESENTATIVE  TUCK  praised the  efforts  of  the community  in                                                               
getting its wind farm to  operate so efficiently, thus setting an                                                               
example for the rest of the state.                                                                                              
1:13:49 PM                                                                                                                    
REPRESENTATIVE RAMRAS  credited Nome for having  the largest wind                                                               
farm project in  the state and talked about  the applicability of                                                               
wind turbines for usage in other villages.                                                                                      
1:14:46 PM                                                                                                                    
SENATOR OLSON  credited Nome with  forward thinking, and  he said                                                               
he thinks  the purpose of  bringing the residents  together today                                                               
is to  hear ideas regarding  how to solve energy  problems across                                                               
the state.                                                                                                                      
1:15:48 PM                                                                                                                    
CO-CHAIR MILLETT  noted that the  committee had  heard compelling                                                               
testimony in  Kotzebue and Noatak  the prior  day.  She  said she                                                               
thinks seeing first-hand  what Nome and Kotzebue  are facing will                                                               
make the House Special Committee on Energy a better committee.                                                                  
1:16:44 PM                                                                                                                    
DENISE MICHELS, Mayor, City of  Nome, spoke about the high prices                                                               
of energy  and the community's commitment  to tapping alternative                                                               
energy  sources in  order to  no  longer be  dependent on  diesel                                                               
fuel.  She said Nome studied  various forms of energy and decided                                                               
that wind  was the best.   The city applied for  an Alaska Energy                                                               
Authority  (AEA)  $15  million  grant and  received  $4  million.                                                               
Mayor Michels said the City of  Nome is looking for the remaining                                                               
$11  million, and  she expressed  her hope  that the  legislature                                                               
would support Nome's efforts with further appropriations.                                                                       
REPRESENTATIVE  RAMRAS  asked  whether  the City  of  Nome  would                                                               
consider having a  private partner that could  fund the remaining                                                               
capital expense  and take the  tax credit, which would  "buy down                                                               
the  cost  of the  project  by  the  amount  of the  federal  tax                                                               
credit."   He  remarked,  "...  about 30  percent  of your  total                                                               
kilowatt generation  is considered  100 percent  of what  you can                                                               
have as a portion of your wind portfolio."                                                                                      
1:20:49 PM                                                                                                                    
JOHN HANDELAND,  Utilities Manager, City of  Nome, responded that                                                               
Nome is open  to the idea of finding additional  partners for the                                                               
project.   He  said the  project that  the Bering  Straits Native                                                               
Corporation and  Sitnasuak Native Corporation put  into effect in                                                               
Nome was one  that "utilized those benefits."   He confirmed that                                                               
Nome,  as a  municipal entity,  would  not benefit  from the  tax                                                               
credit.  Mr.  Handeland said the city of Nome  is concerned, when                                                               
looking at alternative financing  and joining with partners, that                                                               
it does not  increase its costs.  Currently, the  city is working                                                               
on a power purchase agreement;  however, there are concerns about                                                               
the  costs  of   fuel  and  regarding  how   the  integration  of                                                               
technologies will  impact the  fuel efficiency  that the  City of                                                               
Nome has "on  existing generation."  He said the  city is working                                                               
with  the Alaska  Energy Authority  (AEA) to  develop a  model to                                                               
successfully use in  Nome for the most efficient  dispatch of the                                                               
city's diesel and wind resources.                                                                                               
MR. HANDELAND said  Nome is different in that the  wind farm that                                                               
was  constructed is  relatively  large compared  to  some of  the                                                               
other areas.   Kotzebue operates a wind farm a  little smaller in                                                               
size, but uses  the same technology; however, it is  owned by the                                                               
MR.  HANDELAND,  regarding  partnering with  other  agencies  and                                                               
finding private  financing, said  the City of  Nome has  had some                                                               
discussions   with   the   Norton  Sound   Economic   Development                                                               
Corporation  (NSEDC), an  entity interested  in reducing  its own                                                               
energy costs  for some of  the facilities  that it operates.   He                                                               
said  the NSEDC  was supportive  of the  city's proposal  to AEA,                                                               
under the Renewable Energy Fund.   He said the city may also look                                                               
at what  federal sources may  be available.   Whether or  not the                                                               
city can generate [the remaining  $11 billion] is, at this point,                                                               
unknown, he concluded.                                                                                                          
1:23:36 PM                                                                                                                    
MAYOR MICHELS noted  that the City of Nome has  also submitted an                                                               
application to relocate and  replace its electrical distribution.                                                               
She  explained that  every several  years there  are storms  that                                                               
take down the  city's power lines.   She said the goal  is to get                                                               
the power  lines out  of the  flood zone,  which will  require $3                                                               
million.    The   City  of  Nome  is  also   asking  that  larger                                                               
communities are allowed  to take part in the  Bulk Fuel Revolving                                                               
Loan  Fund.   She explained  that because  the population  of the                                                               
City of  Nome is  over 2,000,  it is not  eligible; in  fact, the                                                               
city had to secure a loan with the bank to purchase its fuel.                                                                   
1:24:46 PM                                                                                                                    
MR. HANDELAND noted  that previously he has  had discussions with                                                               
"some of the  members offline" regarding the  Revolving Bulk Fuel                                                               
Fund  that  is  available  through  AEA.    He  said  there  were                                                               
modifications to  the fund  to increase  the maximum  loan limits                                                               
last year;  however, he confirmed  that a city with  a population                                                               
over  2,000  does  not  qualify.    He  noted  that  the  current                                                               
population  of the  City of  Nome  is approximately  3,700.   The                                                               
maximum fuel  loan under the  fund is  $750,000.  This  year, the                                                               
City of  Nome had to  borrow $10  million for fuel  purchases and                                                               
did so through tax-exempt, bank  qualified financing with a local                                                               
financial institution.   He noted that the loan was  taken out in                                                               
two increments, the first being  "relatively painless," while the                                                               
second being  "quite painful"  as a result  of the  credit crunch                                                               
throughout the nation  and the subsequent reluctance  of banks to                                                               
lend to anyone regardless of his/her credit worthiness.                                                                         
MR. HANDELAND said that the City  of Nome proposes that the state                                                               
could  assist communities  by amending  statutes relative  to the                                                               
Bulk  Fuel  Revolving  Fund,  to   allow  larger  communities  to                                                               
participate, to increase  the maximum loan amount,  and to either                                                               
lower  the  interest rate  or  eliminate  it entirely,  using  an                                                               
application  or origination  fee  for the  administration of  the                                                               
project.   Furthermore, he said  the city officials  believe that                                                               
there needs to  be more flexibility in the  installment method of                                                               
payback,  perhaps using  a "pay-as-you-take"  method, where  fuel                                                               
loan  payments  would  coincide with  revenue  generation.    Mr.                                                               
Handeland said the current prohibition  of any funding that lasts                                                               
longer than  12 months  does not  work for the  City of  Nome and                                                               
other communities, because  they need to have more  than a year's                                                               
supply [of fuel].   He said the  city tries to get  its supply at                                                               
the end  of the year, but  that is sometimes controlled  by barge                                                               
companies  and the  weather.    He said  along  with the  desired                                                               
amendments,  there   would  also  need  to   be  some  additional                                                               
capitalization to the  fund, so that there  was sufficient corpus                                                               
to  allow  the agency  to  make  loans  to  all of  the  eligible                                                               
1:28:31 PM                                                                                                                    
MR.  HANDELAND,  in response  to  Senator  Olson, said  he  would                                                               
recommend the population  limit be changed to  7,500; however, he                                                               
said the  number may  need to be  higher, to  include communities                                                               
off of  the road  system, because  they need  to purchase  all of                                                               
their fuel during a "limited shipping window."                                                                                  
1:29:21 PM                                                                                                                    
REPRESENTATIVE RAMRAS  remarked again about the  possibilities of                                                               
partnering  with a  company.   He opined  that a  large, Alaskan,                                                               
corporate partner  would be able  to have the  federal government                                                               
subsidize  almost  one-half  of  the cost,  in  addition  to  tax                                                               
advantages.   He  stated,  "There are  so many  ways  to let  the                                                               
federal government  step in and take  over half the cost  of your                                                               
wind farm."  He  said that is what the City  of Nome indicates it                                                               
wants - help from the state or federal government.                                                                              
1:32:46 PM                                                                                                                    
MR.  HANDELAND said  he would  welcome the  opportunity to  speak                                                               
further with Representative Ramras.   He related that in the City                                                               
of Nome's  application, it  did anticipate that  it would  make a                                                               
local  commitment to  the project  in the  form of  a 10  percent                                                               
1:33:57 PM                                                                                                                    
MAYOR MICHELS brought up the  next item, regarding the Power Cost                                                               
Equalization  (PCE) program.   She  thanked  the legislature  for                                                               
raising the  ceiling last year from  $.52 to $1, but  pointed out                                                               
that was  a change with  a sunset clause.   She said the  City of                                                               
Nome   has  gone   on  record   to   support  Senator   Hoffman's                                                               
recommendation to repeal  the sunset clause.  She  asked that the                                                               
repeal be  supported and also  that [PCE] be expanded  to include                                                               
municipalities, school districts, and businesses.                                                                               
MAYOR  MICHELS  stated  that  the   City  of  Nome  supports  the                                                               
following:    the  development   and  expansion  of  the  state's                                                               
renewable  resources program;  the expansion  of the  Home Energy                                                               
Rebate Program  to include businesses;  continued funding  of the                                                               
low  income Housing  Weatherization program;  continued provision                                                               
of  rural   energy  grant  funding   assistance  to   expand  the                                                               
percentage of  energy produced  in the  state from  renewable and                                                               
alternative  sources; the  creation of  a regulatory  environment                                                               
which  will encourage  development of  alternative and  renewable                                                               
energy;  the  provision of  funding  assistance  to all  new  and                                                               
retrofit public  buildings that  meet certified  energy efficient                                                               
standards;  the coordination  of  regional  energy planning;  the                                                               
construction of  an Alaska gas  line to reduce the  dependency on                                                               
imported fuels.                                                                                                                 
1:36:06 PM                                                                                                                    
SENATOR OLSON  mentioned the governor's recent  announcement that                                                               
she would like  a road built to  Nome.  He said  that would bring                                                               
down the cost  of fuel delivery to the community,  but said there                                                               
is concern  as to  whether the  citizens of  Nome support  such a                                                               
project, which would cost several billion dollars.                                                                              
1:36:59 PM                                                                                                                    
MAYOR  MICHELS  said the  City  of  Nome supports  Department  of                                                               
Transportation &  Public Facilities'  (DOT&PF's) "efforts  in the                                                               
study" and is  working to ensure all communities  are included in                                                               
the planning process.  She  noted that there are some communities                                                               
that  do not  want a  road, although  having a  road may  open up                                                               
alternative energy opportunities.                                                                                               
1:38:01 PM                                                                                                                    
REPRESENTATIVE  EDGMON   noted  that   while  in   Kotzebue,  the                                                               
committee had heard  about local efforts to  weatherize homes and                                                               
apply  both the  weatherization and  home energy  rebate programs                                                               
from the Alaska Housing Finance  Corporation (AHFC), and he asked                                                               
Mayor Michels if the city could comment on those efforts.                                                                       
1:38:40 PM                                                                                                                    
MAYOR MICHELS indicated that one  program involved a long list of                                                               
items that would  need to proceed the "retrofitting."   The other                                                               
program  required  homeowners to  pay  up-front  costs, and  many                                                               
people in rural Alaska do not have the money to do that.                                                                        
1:39:18 PM                                                                                                                    
REPRESENTATIVE EDGMON observed that  in some areas these programs                                                               
have been  successful, while  in outlying  areas, they  have not;                                                               
therefore,  he   said  he  would  be   listening  during  today's                                                               
testimony for comments regarding this issue.                                                                                    
1:40:02 PM                                                                                                                    
TIM  TOWARAK, President/CEO,  Bering  Straits Native  Corporation                                                               
(BSNC),  told  the committee  that  the  wind  farm was  a  joint                                                               
venture between BSNC and the  local village corporation, born out                                                               
of BSNC's desire to  find a way to reduce the  cost of living for                                                               
its  6,300  shareholders.    He said  rather  than  spending  $37                                                               
million on  PCE, the state could  be spending the same  amount on                                                               
alternative energy  projects, and  "in a matter  of 20  years you                                                               
would take  care of  all 200  communities in  rural Alaska."   He                                                               
opined that  that would be a  smart use of the  money coming from                                                               
the North Slope.                                                                                                                
MR. TOWARAK  said Alaska  netted $900  million through  its first                                                               
lease  sales, and  a lot  of that  money was  spent on  dams that                                                               
benefitted urban areas.   The BSNC  believes now  is an opportune                                                               
time for the  state to invest some of its  money into alternative                                                               
energy   that  will   be  a   long-term  investment   into  rural                                                               
communities.  He  pointed out that BSNC and  the Sitnasuak Native                                                               
Corporation  invested $6  million to  provide  a wind  farm to  a                                                               
rural  community, while  the  State  of Alaska  is  giving a  $25                                                               
million grant to  build a wind farm on "the  island right next to                                                               
Anchorage."  He stated, "We'd like fair treatment."                                                                             
1:44:21 PM                                                                                                                    
REPRESENTATIVE RAMRAS said  Nome's project did not  score well in                                                               
the $100  million grant  money distributed by  AEA is  because it                                                               
was  not, at  the time,  "project ready."   However,  he observed                                                               
that  six months  later, the  state has  not yet  passed out  the                                                               
money,  "while  your  project is  done,  complete,  running,  and                                                               
producing kilowatts."   He questioned why the City  of Nome could                                                               
not  give [BSNC]  the $4  million out  of the  $15 million  grant                                                               
money, allow  BSNC  to  build the  project and take  advantage of                                                               
the tax deductions from the  depreciation associated with it, and                                                               
then sell it back to them at  the end of the five-year period and                                                               
use the  $4 million as a  basis for "whatever that  buy-out price                                                               
is."   He  said  this  transaction would  buy  down  the cost  of                                                               
kilowatts to  almost nothing,  provide the City  of Nome  with an                                                               
entity  to provide  them  with  the $11  million,  and allow  the                                                               
federal  government  over the  next  60  months  to come  in  and                                                               
subsidize just  a little bit over  50 percent of the  profit.  He                                                               
asked Mr. Towarak whether he  would consider a such a partnership                                                               
between BSNC, the City of Nome, and the federal government.                                                                     
1:47:26 PM                                                                                                                    
MR. TOWARAK indicated BSNC's willingness to  do so.  He said that                                                               
part of  the plan for the  current project is to  eventually sell                                                               
the facility to Nome's utility  service, once BSNC gets its money                                                               
back.  The  other part of the  plan, he said, is  to reinvest any                                                               
profits made through  the project into smaller  communities.  One                                                               
example being  considered, he  noted, would be  to put  nine wind                                                               
generators  in Unalakleet,  which is  not even  half the  size of                                                               
1:48:22 PM                                                                                                                    
JERALD  BROWN,  Vice President,  BSNC,  said  the investment  tax                                                               
credit, to  which Representative  Ramras previously  referred, is                                                               
useful  for  solar   and  small  wind  projects.     However,  he                                                               
explained,  "The version  that's in  front of  the U.S.  Congress                                                               
currently would not  cover the large utility  scale wind turbines                                                               
like the City of Nome is looking  at.  So, ... there's less of an                                                               
incentive for  a tax partner  in that  environment."  He  said he                                                               
thinks  the  next  focus  for   BSNC  is  to  consider  advancing                                                               
technology in villages where the need  is even greater than it is                                                               
in Nome.  He said he does not  know if the corporation is able to                                                               
commit $11  million to  "another project in  Nome."   The project                                                               
that has  been constructed  was financed at  an interest  rate of                                                               
prime  plus zero,  which he  noted is  still approximately  three                                                               
times as high  as that which a government entity  can borrow.  He                                                               
emphasized the importance of recovering the money.                                                                              
MR. BROWN  asked the  legislature to  reconsider the  Banner Wind                                                               
Project,  as well  as the  City of  Nome, for  state grants.   He                                                               
stated, "Even  with all of the  tax credits, free money  is still                                                               
better."   For  example,  every million  dollars  of grant  money                                                               
received  "buys down"  the  future cost  of  electricity that  is                                                               
generated from the  wind farm by $.03 per kilowatt  hour, for the                                                               
life of the wind farm, which  he estimated should be 20-30 years.                                                               
He said about  $.05 per kilowatt hour is needed  just to maintain                                                               
the facility; anything above that  is capital recovery.  He said,                                                               
"Your dollars  go along way  when you invest into  something that                                                               
has that kind of a life."                                                                                                       
1:51:47 PM                                                                                                                    
NEAL  FOSTER,  Vice   President,  Sitnasuak  Native  Corporation,                                                               
underscored  Mr.  Brown's  request  for  reconsideration  of  the                                                               
1:52:17 PM                                                                                                                    
MR.  TOWARAK, in  response  to  Representative Edgmon,  clarified                                                               
that he would  not advocate for eliminating the PCE  program.  He                                                               
said he thinks the state has enough  money to be able to keep the                                                               
PCE program going, while  simultaneously investing in alternative                                                               
energy  that would  eventually  eliminate the  need  for the  PCE                                                               
1:53:34 PM                                                                                                                    
REPRESENTATIVE   JOHANSEN  noted   that  there   are  three   PCE                                                               
communities in  his district.   He said  he supports the  idea of                                                               
funding long-term energy  solutions to the point  where PCE would                                                               
no longer  be needed.  He  observed that Neal [Foster]  and Larry                                                               
Pederson went  away to school,  and he said the  community should                                                               
be proud  that they both came  back and are working  on solutions                                                               
to improve life in their community.                                                                                             
1:55:03 PM                                                                                                                    
REPRESENTATIVE  PETERSEN asked  what  percentage  of people  heat                                                               
their homes with fuel oil versus electricity.                                                                                   
MR. BROWN estimated  that nearly 100 percent  of Nome's residents                                                               
heat their homes with fuel oil.                                                                                                 
[AN UNIDENTIFIED SPEAKER  FROM THE BACK OF THE  ROOM] said that's                                                               
MR.  TOWARAK proffered,  "I think  in the  whole region,  there's                                                               
more  people   that  burn  wood   than  heat  their   homes  with                                                               
electricity."   In  response to  a follow-up  question, he  said,                                                               
considering  the  rising  cost  of  fuel oil,  if  the  price  of                                                               
electricity were  to come  down, he  might consider  switching to                                                               
electricity to heat his own home.                                                                                               
1:56:14 PM                                                                                                                    
MR.  TOWARAK, in  response to  Co-Chair Millett,  reiterated that                                                               
BSNC may build a small wind farm in Unalakleet.                                                                                 
1:56:51 PM                                                                                                                    
REPRESENTATIVE RAMRAS asked for the  sales price of the kilowatts                                                               
being generated at the wind farm.                                                                                               
MR. BROWN replied that an  agreement has not yet been negotiated;                                                               
however, he estimated the price would be about $0.18-$0.19.                                                                     
1:57:17 PM                                                                                                                    
REPRESENTATIVE RAMRAS  noted that Representative Seaton  is going                                                               
to introduce a net metering bill,  through which an issue will be                                                               
addressed regarding  whether a kilowatt  made can be sold  at the                                                               
retail or  the wholesale cost.   He estimated that  Mr. Handeland                                                               
would   be  selling   kilowatts   "into  the   Nome  system"   at                                                               
approximately  "half of  the cost  at which  they're making  them                                                               
right now" with diesel.                                                                                                         
1:58:44 PM                                                                                                                    
MR. HANDELAND, in response to  comments by Representative Ramras,                                                               
reported that the cost of a  kilowatt two years ago, for the City                                                               
of Nome, was about $0.30, whereas now a kilowatt costs $0.36.                                                                   
1:59:03 PM                                                                                                                    
REPRESENTATIVE  RAMRAS  said,  "You  are right  on  the  edge  of                                                               
setting energy policy for ... 200 communities."                                                                                 
1:59:58 PM                                                                                                                    
SENATOR OLSON asked  whether the industry has looked  for ways to                                                               
help the general  public immediately so that they  are not always                                                               
"looking to the  government to try and give them  something."  He                                                               
mentioned temperature  compensators, and questioned  whether they                                                               
are  good or  bad, and  what  the industry  can do  to "take  the                                                               
pressure off  and still  maintain themselves  in a  good business                                                               
2:00:54 PM                                                                                                                    
MR.  FOSTER  said  immediate  action  that can  be  taken  is  to                                                               
modernize   and   weatherize   homes.     He   said   temperature                                                               
compensators  are a  double-edged sword  and explained  that they                                                               
compensate 70 degrees; therefore, when  it is warm out, they work                                                               
to people's favor.  A lot of what  can be done is what is already                                                               
being done.   He said he thinks the legislators  are impressed at                                                               
how quickly the wind farm was  constructed, and he said he thinks                                                               
that is a  model for the state.   He said he  doesn't think there                                                               
are quick  solutions, but  indicated that [the  wind farm]  was a                                                               
REPRESENTATIVE EDGMON said  Senator Olson has made  a good point.                                                               
He said  some communities will not  have as much wind  with which                                                               
to generate  power; in fact,  some communities can only  use wind                                                               
power  to  supplement their  source  of  power.   He  stated  his                                                               
support  of  the tax  credits  and  low  interest rates  and  the                                                               
furthering of  the availability of  these types of programs.   He                                                               
talked about  the high cost  of fuel,  asked what will  happen if                                                               
the  prices remain  high  for  the next  couple  of winters,  and                                                               
emphasized  the importance  of ensuring  that communities  remain                                                               
2:05:31 PM                                                                                                                    
MR.  TOWARAK   predicted  that  because   of  the   worsening  of                                                               
conditions and the economy, village  people are going to continue                                                               
to move to Anchorage where it is less expensive to live.                                                                        
2:06:04 PM                                                                                                                    
MR.  FOSTER said  Norton Sound  Economic Development  Corporation                                                               
(NSEDC) has  a program  wherein villages within  a region  form a                                                               
cooperative and buy bulk fuel at a better rate.                                                                                 
2:07:34 PM                                                                                                                    
MR. BROWN, in response to  Co-Chair Millett, said the timeline of                                                               
the  wind  farm process  began  in  August  2007, when  the  U.S.                                                               
Department  of   Agriculture  (USDA)  Rural   Development  Energy                                                               
program  offered grants  for  areas  of high  energy  costs.   In                                                               
December 2007,  the manufacturer was  about to raise  its prices,                                                               
and there had been no word from  the USDA, so the board offered a                                                               
refundable  deposit of  $180,000, to  cover $10,000  per turbine.                                                               
By May  2008, the  board still  had not  heard anything  from the                                                               
USDA, and, considering  the rising cost of fuel,  decided it made                                                               
sense economically to  take on the project on its  own.  He said,                                                               
"We could produce  the power with wind at a  price less than what                                                               
we figured the  utilities could produce it, so we  could save the                                                               
community some money,  and at the same time make  a profit on the                                                               
wind  farm."   At  that  point,  working  jointly, BSNC  and  the                                                               
Sitnasuak Corporation authorized moving  forward with the project                                                               
and the  order was  placed for the  manufacture of  the turbines.                                                               
The operation kicked into high  gear in late May, with permitting                                                               
and  site  preparation,  he  noted.   Mr.  Brown  said  the  site                                                               
location changed  three times before  settling on Banner  Peak in                                                               
August 2008, at  which point two and one half  miles of road were                                                               
built.  The actual construction  timeframe was approximately from                                                               
the  first of  September to  the end  of November.   The  utility                                                               
company efficiently put in the  underground power line.  From the                                                               
initial  thoughts  about  the  project   to  its  completion  was                                                               
approximately  one and  one half  years, he  said.   However, the                                                               
time from  authorization to  producing power  was about  seven to                                                               
eight months.                                                                                                                   
2:12:39 PM                                                                                                                    
REPRESENTATIVE PETERSEN  recalled that  during their tour  of the                                                               
wind farm,  legislators were told  that the facility may  be used                                                               
as  a training  center for  wind  farm maintenance  workers.   He                                                               
asked how that might work.                                                                                                      
2:13:12 PM                                                                                                                    
MR. BROWN said there are storage  containers that will be used to                                                               
build walls  of a  training facility.   He said  discussions have                                                               
been held with the University  of Alaska, Northwest Alaska Career                                                               
and Technical Center (NACTEC), and  the Nome Public Schools (NPS)                                                               
about "rotating people  in through that facility  for training in                                                               
alternative energy, particularly wind."                                                                                         
2:13:59 PM                                                                                                                    
MR. TOWARAK  added that two  of [BSNC's] staff have  qualified as                                                               
inspectors for the  state's energy rating program,  which he said                                                               
shows  just how  important the  concept of  energy for  the whole                                                               
region is to the board.                                                                                                         
2:14:21 PM                                                                                                                    
LEO B. RASMUSSEN,  noted that he recently retired  from USDA, and                                                               
said  getting  any  paperwork  through  that  entity  is  a  slow                                                               
process.   He stated,  "The greatest  return we  can give  to our                                                               
people, with  your assistance, is  a better life  standard, which                                                               
can  come with  an alternate  energy  resource that  is far  less                                                               
expensive  than having  to  rely  on the  resource  that we  ship                                                               
outside,  which is  oil and  gas."   Mr. Rasmussen  mentioned the                                                               
money in the  permanent fund and suggested the  need for Alaskans                                                               
to find  some way to reinvest  in themselves to achieve  a better                                                               
standard of  life.  He  said there is  a water source  across the                                                               
Lisianski  Inlet  from   Pelican  that  could  be   tapped  at  a                                                               
reasonable cost  to generate energy.   He estimated that  "of the                                                               
256 geopolitical units"  in the state, close to 200  have a water                                                               
resource available at least half  of the year that could generate                                                               
low-head hydro  power.  He estimated  that the cost of  burying a                                                               
pipe in the  ground, at a source higher than  its terminus, could                                                               
be  only  $1  to $2  million.    He  said  Little Diomede  has  a                                                               
constant,  six mile  per  hour  current, and  would  only need  a                                                               
turbine  to  collect that  energy.    He questioned  looking  for                                                               
multi-billion  dollar  projects when  there  are  so many  multi-                                                               
million dollar projects that would "do exactly the same thing."                                                                 
MR. RASMUSSEN,  regarding the aforementioned  road to  Nome, said                                                               
many surveys  exist, including one from  1927.  He said  it would                                                               
be far  less expensive  to install  a railroad than  to put  in a                                                               
road.    He  reiterated  his encouragement  to  look  for  simple                                                               
solutions.   He commended BSNC  and Sitnasuak for its  brave move                                                               
and   encouraged the state to  follow that example so  that there                                                               
is no  need for "20  different kinds of  systems in Alaska."   He                                                               
said the  state could  have bought  solar panels,  wind turbines,                                                               
and water generators, and offered  them to communities around the                                                               
state, which  then could  have funded  their own  foundations and                                                               
2:25:53 PM                                                                                                                    
CO-CHAIR  EDGMON  concurred  with  Mr.  Rasmussen  regarding  the                                                               
importance of  looking for small  scale projects.  He  said about                                                               
two weeks  ago, the Yukon  Tribal Watershed Organization  came to                                                               
Juneau to  talk about  its turbine project.   He  offered further                                                               
details.   He  said [this  information] will  hopefully open  the                                                               
doors for the  legislature to provide funding streams  or work as                                                               
partners with  local efforts.   The solution to  energy problems,                                                               
he concluded,  will not be  from the government alone;  the local                                                               
efforts  combined  with  other   entities  are  what  will  bring                                                               
2:27:33 PM                                                                                                                    
MR. RASMUSSEN described a hydro  energy system at a nearby mining                                                               
camp.  He suggested that even  on the North Slope, it is possible                                                               
to get four to five months of hydro electric power each year.                                                                   
2:28:30 PM                                                                                                                    
REPRESENTATIVE  TUCK expressed  appreciation for  Mr. Rasmussen's                                                               
comments regarding a  rail versus road system to Nome.   He noted                                                               
that Noatak  wants a  road built  that would tie  in to  the haul                                                               
road to  the Red  Dog Mine  and [bring  in] competition  for fuel                                                               
providers.    In other  situations,  he  said  it would  be  less                                                               
expensive to transport fuel by rail than by road.                                                                               
2:29:37 PM                                                                                                                    
MR. RASMUSSEN noted  that a crane big enough to  put the turbines                                                               
in place had to be shipped to  Nome, and although it was used for                                                               
another project  while it was  in Nome,  it could have  been used                                                               
around the  state for  multiple projects  if those  projects were                                                               
scheduled to happen around the same time.                                                                                       
2:30:52 PM                                                                                                                    
REPRESENTATIVE  TUCK   said  when  he  worked   in  construction,                                                               
whenever  the  company worked  in  a  remote location,  it  would                                                               
purchase a backhoe, knowing that  it would never be shipped back,                                                               
but instead  would be left  behind.  He  said that is  because of                                                               
the  high cost  of  shipping.   He concluded  that  water is  the                                                               
cheapest source of  transportation, but is not  available in Nome                                                               
year around;  the second least  expensive mode  of transportation                                                               
is rail and air transportation is the most costly.                                                                              
2:33:05 PM                                                                                                                    
COLBY  CARTER stated  that he  would like  the legislature  to be                                                               
aware of Nome's natural gas resource.   He deferred to Mr. Emmons                                                               
for further comment.                                                                                                            
2:34:22 PM                                                                                                                    
CARL  EMMONS, Nome  Joint  Utility  System, noted  that  he is  a                                                               
member  of the  Nome  Joint  Utility Board,  and  that during  an                                                               
energy  conference,   a  spokesperson  from  the   United  States                                                               
Department  of  Energy  presented  an  engineering  and  economic                                                               
analysis of gas  production in the Norton Basin.   He said in the                                                               
early '80s drilling  was done in the search for  oil, and gas was                                                               
found about 30 miles from Nome.   Two wells would cost about $112                                                               
million,  and  there  would  be a  profit  of  approximately  $10                                                               
million  in about  seven  years,  based on  fuel  oil  at $2  per                                                               
gallon.  The  City of Nome tried to pursue  this avenue with DOE,                                                               
but  has  been   told  essentially  that  the   business  of  gas                                                               
production  is for  oil companies,  not communities.   He  opined                                                               
that  rural communities  will always  need some  other source  of                                                               
energy for  the times  when "the  wind doesn't  blow and  the sun                                                               
doesn't  shine."   He  encouraged  the state  to  look at  energy                                                               
independence by including natural gas  as a source, which he said                                                               
would make a profit.                                                                                                            
MR. CARTER added,  "And it's here; it's a bird  in the hand; it's                                                               
identified.  We just need some help developing this."                                                                           
2:35:47 PM                                                                                                                    
REPRESENTATIVE  RAMRAS remarked  that one  obstacle is  getting a                                                               
jack-up  rig into  the region.   Attempts  to do  so in  the Cook                                                               
Inlet have failed thus far, he indicated.                                                                                       
2:36:14 PM                                                                                                                    
MR. EMMONS  pointed out  that the  report from  [the spokesperson                                                               
from the U.S.  Department of Energy] shows  that the mobilization                                                               
costs would be low, because  there are already jack-up rigs going                                                               
to  the Canadian  Arctic every  year that  could do  the work  on                                                               
their way north.                                                                                                                
2:36:56 PM                                                                                                                    
REPRESENTATIVE RAMRAS promised that he  would talk to Kevin Banks                                                               
at the Department of Natural Resources (DNR) about the concept.                                                                 
2:37:18 PM                                                                                                                    
MR. EMMONS  surmised that a lot  of rural Alaska is  "in the same                                                               
boat that  we are," and that  there is potential for  everyone in                                                               
this part of Alaska to benefit.                                                                                                 
MR. COLBY observed there are  3,412 Btus per kilowatt and 100,000                                                               
Btus per  gallon [of  oil].   He stated, "When  I can  buy enough                                                               
electricity to  offset one gallon of  fuel oil, I will  switch my                                                               
boiler to an electric boiler [and] so will everybody else."                                                                     
CO-CHAIR  MILLETT requested  copies  [of  the aforementioned  DOE                                                               
2:38:34 PM                                                                                                                    
MITCH  ERICKSON, Executive  Director, Nome  Chamber of  Commerce,                                                               
said  the chamber  held its  first energy  summit in  April 2006,                                                               
which  raised awareness  regarding  energy cost  challenges.   He                                                               
indicated  that the  summit was  well attended,  and topics  were                                                               
discussed from  "big picture,  big dollar items"  to ways  to cut                                                               
energy costs  immediately.   However, he said,  the rest  of 2006                                                               
was basically  wasted in attempting  to put  resolutions together                                                               
for the [Alaska]  State Chamber of Commerce and  working with the                                                               
Alaska Federation of  Natives (AFN) to put  its energy resolution                                                               
together.  He  stated, "We realized then that  until the Railbelt                                                               
started feeling high energy prices, we  are out here on our own."                                                               
Mr. Erickson  said "a number  of us"  talked a lot  about [energy                                                               
issues] and "what has happened since then is Banner Wind."                                                                      
MR.   ERICKSON   mentioned   various  projects,   including   the                                                               
conversion of wind  to heat hot water, the use  of evacuated tube                                                               
solar panels,  and "small  wind" installed  in Shaktoolik  and in                                                               
Nome.   All the  projects were  funded by  private sources  in an                                                               
attempt, not  only to  cut energy  costs, but  also to  create an                                                               
industry  in the  region to  design and  install this  equipment.                                                               
Banner Wind is a success, because  now there is a company in Nome                                                               
that can design, build, and install  wind farms.  He related that                                                               
the chamber  supports making  Nome the  wind training  center for                                                               
Alaska and  has been working  with the University of  Alaska (UA)                                                               
to make that happen.                                                                                                            
MR. ERICKSON said  that since 2004, the audited  energy costs for                                                               
Nome's  schools  has nearly  doubled  from  $500,000 to  over  $1                                                               
million  this year;  and that  money  comes straight  out of  the                                                               
classroom.   He explained that the  school budget is due  July 1,                                                               
while the fuel barge shows up  in October, and the result is that                                                               
money has to be  taken out of the classroom to  pay for the fuel.                                                               
Since fiscal year  2004 (FY 04), energy costs,  on an incremental                                                               
basis, have increased by $1.3 million.   He said the governor has                                                               
asked for  accountability, but he reemphasized  the difficulty of                                                               
planning the school budget without  knowing what the cost of fuel                                                               
will be.                                                                                                                        
MR.  ERICKSON  said  the  chamber  would like  to  see  PCE  made                                                               
available to  schools, businesses, and "everyone."   Wind [power]                                                               
in the  Lower 48  is growing  at a  20 to  40 percent  rate, even                                                               
though rates  there range between  $0.06 and $0.11,  and billions                                                               
of dollars  are being invested.   He said the reason  for that is                                                               
because of the model set by  Banner Wind.  Mr. Erickson said "out                                                               
here," where the rate is $0.40 to  $1.00, it is a logical step to                                                               
allow for-profit  entities to  partner to  build the  wind farms.                                                               
He opined that  in considering whether or not to  build a turbine                                                               
in the  villages, there  needs to  be a minimum  of a  25 percent                                                               
penetration  rate, because  it costs  just as  much to  bring six                                                               
turbines in as it does one.                                                                                                     
MR.  ERICKSON  concluded his  testimony  by  saying that  AEA  is                                                               
grossly understaffed.   He also stated his belief  that UA should                                                               
take  the lead  in  developing alternative  energy  sources.   He                                                               
commented  favorably  about  the   NSEDC  vertical  wind  turbine                                                               
project for small villages that have constant wind conditions.                                                                  
2:47:39 PM                                                                                                                    
MR. ERICKSON,  in response to  Representative Johansen,  said the                                                               
progress regarding working with UA is  going well.  He said those                                                               
involved are looking at syllabi  from wind technician programs of                                                               
junior  colleges in  the Lower  48; however,  more turbines  will                                                               
need to  be built in order  for such a program  to be successful.                                                               
He said  the chamber realizes  that renewable energy  will always                                                               
be a  secondary source.  The  goal of some of  the solar projects                                                               
would  be to  produce power  from  February 15  to October,  when                                                               
according to  the National  Aeronautics and  Space Administration                                                               
(NASA), "we"  had more sun  insulation than Tucson, Arizona.   He                                                               
indicated his eagerness  to install solar tubes  by the fifteenth                                                               
[of February]  in order to  begin recording  data;  in  fact, the                                                               
chamber brought in a company  from Seattle, Washington, two weeks                                                               
ago, to  provide solar thermal  training, and 25  people attended                                                               
that training  session.  He  clarified for the co-chair  that the                                                               
solar panels  seen on buildings  are for  generating electricity,                                                               
while the  system to  which he  is referring  uses tubes  to heat                                                               
2:49:32 PM                                                                                                                    
REPRESENTATIVE PETERSEN  asked about the vertical  wind generator                                                               
2:49:58 PM                                                                                                                    
BRIAN  JACKSON, Western  Community Energy  (WCE), explained  that                                                               
the vertical wind  project predated the Banner  Wind project, but                                                               
there have  been delays in the  project.  The prototype  unit has                                                               
just been delivered  to Nome and will be installed  over the next                                                               
several weeks.   Mr. Jackson  emphasized that this is  a research                                                               
project.    Vertical  axis turbines  have  not  performed  [well]                                                               
historically,    he    said;    however,   they    have    unique                                                               
characteristics, in  that they  can be used  on buildings  and in                                                               
towns,  and  they  can  deal with  turbulence  and  varying  wind                                                               
directions.   Mr. Jackson said  in Nome's environment,  heat loss                                                               
is dramatically enhanced  when the wind is  blowing; therefore, a                                                               
technology that  could offset the  heat loss with  the generation                                                               
of energy would be a great benefit.                                                                                             
2:52:40 PM                                                                                                                    
KATIE   PETERSON,  Community   Development  Coordinator,   NSEDC,                                                               
relayed that  the intent of  the [vertical turbine  wind] project                                                               
is to provide  something that the average resident  in the region                                                               
can  install  on  his/her  house.    She  said  NSEDC  would  use                                                               
Unalakleet  and Nome  as hubs,  and  would train  locals to  help                                                               
maintain  the  units, thus  providing  jobs  and lowering  energy                                                               
2:53:31 PM                                                                                                                    
MR.  JACKSON  emphasized  that the  project  has  undergone  many                                                               
phases, and  he said NSEDC  decided that  they wanted to  fund it                                                               
because such a  project does not exist in the  rural world at the                                                               
present.   He spoke  of taking action  rather than  "just waiting                                                               
for some solution to materialize."                                                                                              
2:54:09 PM                                                                                                                    
REPRESENTATIVE  JOHANSEN  said  he  supports  efforts  to  create                                                               
multiple sources  of power, rather  than thinking  something "big                                                               
and grand"  has to be  done.   He expressed appreciation  for the                                                               
testimony heard thus far.                                                                                                       
2:55:45 PM                                                                                                                    
MR. ERICKSON said  many of the projects being  tested locally are                                                               
ultimately meant to be exported to the villages.                                                                                
2:56:11 PM                                                                                                                    
REPRESENTATIVE RAMRAS talked about  the City of Nome transforming                                                               
one third of  its portfolio from diesel to [wind  energy], and he                                                               
said it would set a precedent for other communities of its size.                                                                
[Co-Chair Millett passed the gavel to Co-Chair Edgmon.]                                                                         
3:00:17 PM                                                                                                                    
MR.  ERICKSON, in  response to  Co-Chair  Edgmon, reiterated  the                                                               
information  pertaining  to  the  $1.3 million  increase  in  the                                                               
energy cost to Nome schools in the last five years.                                                                             
3:00:45 PM                                                                                                                    
CO-CHAIR EDGMON noted that the  fuel bill for Noatak's school was                                                               
$40,000 in December, and about $50,000 in January.                                                                              
3:01:21 PM                                                                                                                    
MR.  ERICKSON  indicated  that his  reason  for  researching  the                                                               
information  pertaining  to the  school  budget  was inspired  by                                                               
repeatedly  hearing the  arguments at  the city  council meetings                                                               
every October  [after the fuel  barge arrived].   The idea  is to                                                               
try to  get more money  back into  the school districts  that has                                                               
been taken out because of escalating fuel costs, he concluded.                                                                  
3:01:53 PM                                                                                                                    
REPRESENTATIVE  EDGMON told  Mr.  Erickson that  he  sits on  the                                                               
House  Special Committee  on Education  and the  issue of  school                                                               
districts working to conserve energy is not lost on him.                                                                        
3:02:57 PM                                                                                                                    
NANCY   MENDENHALL,   Chair,   Advisory   Council,   Co-operative                                                               
Extension  Service, University  of  Alaska  - Fairbanks,  related                                                               
that the purpose  of the service is to  educate householders, and                                                               
that the  priority topic of  the extension service for  this year                                                               
and  last   has  been  energy   education.    She   welcomed  any                                                               
suggestions from  the legislature regarding ways  to teach people                                                               
how to  save energy costs  in their homes.   She said  she agrees                                                               
that  immediate solutions  are needed,  and  suggested the  state                                                               
consider a matching  grant program to help  families install wood                                                               
stoves  in  those communities  with  a  good  wood supply.    She                                                               
remarked that  two sources  of wood  are driftwood  and discarded                                                               
shipping pallets.                                                                                                               
MS.  MENDENHALL  said the  recently  released  state energy  plan                                                               
highlighted the need for the  upgrading of power plants in rural,                                                               
off-road communities.   She stated that while her  emphasis is in                                                               
alternative energy,  the upgrading of  the power plants  seems to                                                               
be a vital need.                                                                                                                
MS. MENDENHALL, speaking  on her own behalf, said  all the people                                                               
she has spoken with in Nome would prefer a railroad to a road.                                                                  
3:06:10 PM                                                                                                                    
RUTH EMMONS told  the committee that she lives  in senior housing                                                               
and   receives  a   credit  from   rural   development  for   her                                                               
electricity.   She stated  that many  people who  do not  live in                                                               
rural areas do not understand the  PCE program.  She related that                                                               
this year, because one of  "the management company people" failed                                                               
to include  PCE as  part of its  electricity cost  figures, those                                                               
who had  previously been receiving  a credit  of $83 a  month are                                                               
now only getting a credit of $55  a month.  She revealed that she                                                               
is living  with multiple  sclerosis and is  heat sensitive.   She                                                               
expressed her appreciation  of the legislature coming  to Nome to                                                               
hear the  testimony of  residents.   She recalled  various places                                                               
she has lived and other places that used wind or water power.                                                                   
[Co-Chair Edgmon returned the gavel to Co-Chair Millett.]                                                                       
3:12:24 PM                                                                                                                    
MR. HANDELAND returned  to the witness table to  discuss the City                                                               
of  Nome's  utilities.    He acknowledged  the  presence  of  the                                                               
following three Nome  Joint Utility Board members:   Carl Emmons,                                                               
David  Barron, and  Fred Moody.    Mr. Handeland  noted that  the                                                               
subject  of fuel  stabilization  is  addressed on  page  44 of  a                                                               
handout  in the  committee  packet entitled  "Alaska  Energy -  A                                                               
first step  toward energy  independence."  He  said, "That,  as a                                                               
policy for  the state,  is something  that the  City of  Nome and                                                               
[the Nome  Joint Utility System  (NJUS)] supports."  He  said the                                                               
NJUS does  not care about the  price of fuel between  October and                                                               
May; the window for purchasing  fuel is between June and October.                                                               
Because  of the  schedule of  fuel purchasing,  Nome and  all the                                                               
rural communities  are in  a position of  continuing to  pay high                                                               
energy costs  "for some period  into the future."   Mr. Handeland                                                               
said the city and NJUS  recommend that the state consider putting                                                               
together  an assistance  program for  communities that  only have                                                               
fuel  shipping available  for a  portion  of each  year, to  help                                                               
equalize the  fuel costs  either by buying  them down  or through                                                               
the "hedging of  fuel."  He suggested either the  trustees of the                                                               
permanent fund  dividend, or AEA,  are "well suited to  assist in                                                               
that hedging  program."  Being able  to pay today's fuel  cost of                                                               
$1.40 [per gallon] to be  delivered this summer would "change the                                                               
picture for rural communities."                                                                                                 
MR. HANDELAND  noted that the issue  of net metering is  found on                                                               
page 50 of  the aforementioned handout.  He said  net metering is                                                               
of  interest to  utilities  and to  the community  of  Nome.   He                                                               
     While we certainly  want to see the  benefit of reduced                                                                    
     energy  costs going  to members  of  our community,  we                                                                    
     also are  concerned that some  of these  programs, such                                                                    
     as the  wind power  and ...  alternative solar  are not                                                                    
     24/7, 365.   And  so, utilities  must maintain  a plant                                                                    
     that is capable and ready  to operate in the times when                                                                    
     the  wind is  not blowing  or the  sun is  not shining.                                                                    
     And so, that should be taken into consideration.                                                                           
     ...  I  mean,  if  everybody   in  town  goes  onto  an                                                                    
     alternate  source, I  mean that's  great  for the  time                                                                    
     that that source is available  to them, but pretty soon                                                                    
     they're going  to want to  turn that switch and  get it                                                                    
     back  from the  utility.   And if  in the  net metering                                                                    
     program,  there's not  some  consideration  taken to  a                                                                    
     formula  or ...  a  way  to limit  the  revenue that  a                                                                    
     utility   would  lose   by  other   people  doing   the                                                                    
     generation,  ...  it  could  impact  our  abilities  to                                                                    
       maintain plants and have them available when those                                                                       
     alternatives are not available.                                                                                            
MR. HANDELAND said that the  city and NJUS support AHFC's various                                                               
weatherization   programs,  although   he  echoed   the  previous                                                               
testifier who mentioned  that people have trouble  coming up with                                                               
the upfront  cost.   He said  if he  were not  currently spending                                                               
$15,000 this  winter just to heat  his home, he would  be putting                                                               
that money  into energy upgrades.   This is something he  said he                                                               
would pursue this summer.   He concurred with Ms. Mendenhall that                                                               
the upgrade of  diesel plants in the communities  is an important                                                               
way to save  fuel.  The City  of Nome has had  an efficient power                                                               
plant over  time, but  has done  some upgrades,  utilizing diesel                                                               
engine and switchgear  controls, as suggested on pages  62 and 63                                                               
of the handout.                                                                                                                 
MR.  HANDELAND said  the  city is  also  looking at  distribution                                                               
system upgrades.   There is a  need to replace some  of the power                                                               
lines because they  are in danger of being impacted  by storms in                                                               
the area.  One  of the strategies in the state  plan, he said, is                                                               
to upgrade distribution systems and  increase voltage in order to                                                               
eliminate some of  the line losses.  Mr. Handeland  said the city                                                               
is  glad to  know that  the state,  through the  renewable energy                                                               
program,  is looking  at developing  wind technologies  and other                                                               
resources.   He relayed that  there has been  consideration given                                                               
to   applications  that   were   submitted,   and  he   expressed                                                               
appreciation of the committee regarding  other ways that the city                                                               
might be  able to fund those  projects.  He noted,  however, that                                                               
there  is "very  little  of the  wind capacity  in  the state  of                                                               
Alaska that is being utilized," and  the energy study done in the                                                               
region  of  Nome,  "that  would  seem  to  be  one  of  the  most                                                               
promising."    Mr. Handeland  said  there  is also  a  geothermal                                                               
resource about 55  miles away from Nome, in  Pilgrim Hot Springs.                                                               
The state energy  plan and the "by community"  summaries that are                                                               
included in  it list the  potential for significant  cost savings                                                               
to  consumers  through   the  use  of  geothermal   energy.    He                                                               
concluded,  "We do  believe  there  are a  few  areas where  this                                                               
document should  be adjusted, because  it does note that  wind is                                                               
not  feasible  in  our  area,   and  I  think  that  you've  seen                                                               
3:22:05 PM                                                                                                                    
MR. HANDELAND, in  response to a request  for clarification, said                                                               
that information is  noted in "an AEA per  community document for                                                               
the  City of  Nome."   He said  the document  says a  wind diesel                                                               
hybrid system actually loses $800,000,  which he said he hoped is                                                               
not correct.  In response to  a follow-up question, he stated his                                                               
belief that  [the City of  Nome and NJUS] were  consulted through                                                               
the Alaska Power Association regarding  the document; however, he                                                               
said he  was not consulted  directly.   In response to  a request                                                               
for   further   clarification   regarding  the   compilation   of                                                               
information, he said:                                                                                                           
     I believe that,  to the best of my  knowledge, AEA took                                                                    
     this  information  off  of submittals  that  were  done                                                                    
     under the PCE program for  the first portion of it, and                                                                    
     I am  unsure as to  where they took the  information on                                                                    
     the geothermal or the wind hybrid.                                                                                         
3:23:54 PM                                                                                                                    
CO-CHAIR  EDGMON noted  that the  City of  Unalaska had  the same                                                               
concern  regarding  their  "local  numbers, as  well,  not  being                                                               
3:24:25 PM                                                                                                                    
MR.  HANDELAND, in  response  to Co-Chair  Millett,  said in  all                                                               
fairness  to AEA,  he did  not  speak with  that entity  directly                                                               
about the information,  he read it last night, and  he just found                                                               
out that there is a 10 megabyte addendum on AEA's website.                                                                      
3:25:25 PM                                                                                                                    
CO-CHAIR EDGMON emphasized that no  one is trying to undercut the                                                               
good  work that  has been  done  by AEA.   The  energy crisis  in                                                               
Alaska is a huge issue, and there  may or may not be an immediate                                                               
solution depending  on in which area  of the state one  lives, he                                                               
said.   While  AEA plays  a significant  role, the  House Special                                                               
Committee  on Energy,  as well  as "other  efforts" also  play an                                                               
extensive role  in the issue.   He said  he has heard  from other                                                               
community  members that  they think  the community  profiles "may                                                               
have been  hastily put  together in  order to  meet some  sort of                                                               
arbitrary deadline, in  terms of having an energy plan  out."  He                                                               
said  he has  candidly  said  that he  does  not  think that  the                                                               
document from AEA represented the  energy plan, and the director,                                                               
Steve Haagenson, agreed that it was a "building block."                                                                         
3:27:27 PM                                                                                                                    
MR.   HANDELAND,   in   response  to   Representative   Petersen,                                                               
reiterated that  the location of the  geothermal resource outside                                                               
of Nome is  Pilgrim Hot Springs.   He noted that page  143 of the                                                               
AEA  document lists  other sites  currently being  looked at  for                                                               
geothermal  energy, including  Chena Hot  Springs.   He said  Mr.                                                               
Emmons just  handed a  report regarding  the energy  potential at                                                               
Pilgrim Hot  Springs to  him.  Furthermore,  he related  that the                                                               
agent  at the  University  of Alaska  who  addresses wind  issues                                                               
submitted an  application to  the Renewable  Energy Fund  to find                                                               
out  if  it would  be  possible  to  do additional  drilling  [at                                                               
Pilgrim Hot  Springs] to  determine whether  or not  the resource                                                               
should be "on the table or off the table for the City of Nome."                                                                 
3:29:04 PM                                                                                                                    
REPRESENTATIVE  JOHANSEN said  he has  heard from  many community                                                               
members that  geothermal energy  is not  taken seriously  by AEA.                                                               
He encouraged  anyone who  has felt that  way to  contact his/her                                                               
representative,  senator,  or  a  member  of  the  House  Special                                                               
Committee on Energy, because he  said he thinks that resource has                                                               
great potential.                                                                                                                
3:30:20 PM                                                                                                                    
MR. HANDELAND commented that the  community of Nome is interested                                                               
in any alternative  that will save money on energy.   Some people                                                               
in town have determined that the  cost of using electric heat, at                                                               
$0.36 per  kilowatt, is still  less expensive than  buying diesel                                                               
fuel with which  to operate an oil fired boiler.   He added, "But                                                               
neither one  is something that  is sustainable  by any of  us for                                                               
any length  of time."  He  said the city has  been following with                                                               
interest  the discussions  occurring  in Galena  relative to  the                                                               
potential   for  some   small-scale   nuclear  technology   being                                                               
introduced,  which  potentially  may   be  available  to  smaller                                                               
communities.   He  mentioned a  company that  is considering  the                                                               
licensing of facilities  that would be either 10  megawatts or 50                                                               
megawatts,  which he  said  would be  too big  for  Nome and  its                                                               
surrounding  communities.    However, he  remarked,  "If  nuclear                                                               
technology could be used safely  and less costly than potentially                                                               
putting    in    more    efficient   transmission    lines    and                                                               
interconnections to  a grid system  in rural Alaska, it  might be                                                               
MR.  HANDELAND expressed  his appreciation  to the  committee for                                                               
travelling to Nome for the meeting.                                                                                             
3:33:59 PM                                                                                                                    
CO-CHAIR  MILLETT  said  she  had  anticipated  hearing  negative                                                               
testimony,  but she  commended the  residents of  Nome for  their                                                               
positive attitude and proactive  approach to finding solutions to                                                               
the energy challenge.                                                                                                           
3:34:43 PM                                                                                                                    
MR. HANDELAND,  in regard  to a  previous testifier's  mention of                                                               
the Northwest  Alaska Career and  Training Center  (NACTC), noted                                                               
that that  entity is  a cooperative  venture between  Nome Public                                                               
Schools and  Bering Strait School  District.  He  offered further                                                               
3:36:31 PM                                                                                                                    
CO-CHAIR EDGMON recalled that during  hearings last summer, there                                                               
had been some reference to tax  liabilities, in that if the state                                                               
were to give  money to a community  to help it pay  down its fuel                                                               
cost, there would  be a tax consequence.  He  asked Mr. Handeland                                                               
if he could expound on that.                                                                                                    
3:37:50 PM                                                                                                                    
MR.  HANDELAND  said  he remembered  an  ongoing  discussion  and                                                               
concern regarding  "what it would  actually do to PCE  levels, as                                                               
well."  He  said as a municipal utility, "we  would see it simply                                                               
as a  reduction in  our costs."   He said as  opposed to  the PFD                                                               
being a  payment directly  to an  individual, "we  would envision                                                               
this as a  payment directly to a  utility."  He said  it would be                                                               
helpful to have  that also apply to heating fuel,  but that would                                                               
involve other vendors.   He concluded, "If we could  at least cut                                                               
some of  the energy costs, it  might make some of  the other high                                                               
costs bearable."                                                                                                                
3:39:12 PM                                                                                                                    
CO-CHAIR EDGMON indicated  that he would be  asking that question                                                               
at  an upcoming  meeting of  the  Alaska Power  Association.   He                                                               
said, "I  do vaguely recollect there  being some sort of  a chain                                                               
reaction from  that money  from the state  to the  utilities that                                                               
would be passed  on either to the utility or  to the consumers in                                                               
a way that wasn't really beneficial to the local community."                                                                    
3:39:50 PM                                                                                                                    
JIM ADAMS stated  his support of more tax  credits to individuals                                                               
rather than  businesses, and highlighted  the need for  access to                                                               
power, including power lines and railways.                                                                                      
3:41:26 PM                                                                                                                    
REPRESENTATIVE PETERSEN  shared that he comes  from farm country,                                                               
and the  power lines there  were installed during  the Depression                                                               
by rural  electric cooperatives that  were loaned  federal money.                                                               
He suggested that  perhaps that might be a program  that could be                                                               
recreated in Alaska, since the state is still a developing area.                                                                
3:42:02 PM                                                                                                                    
CARL  EMMONS, Member,  Nome Joint  Utility Board,  explained that                                                               
because Nome  must pay for its  fuel in advance, even  after fuel                                                               
prices  begin  to go  down  in  the  urban  areas of  the  state,                                                               
residents in  Nome will  continue to pay  the higher  price until                                                               
all of  that fuel is used.   Mr. Emmons concluded  by telling the                                                               
committee   that  Nome   could  use   any  assistance   that  the                                                               
legislature can offer.                                                                                                          
3:44:45 PM                                                                                                                    
MR. JACKSON  reappeared before the  committee to  introduce Bryce                                                               
Green and  Robert Hafner who  are two students involved  in WCE's                                                               
training program.   He said  Mr. Green is  an example of  a local                                                               
young  person  who  is  training   to  work,  and  stay,  in  his                                                               
3:46:43 PM                                                                                                                    
BRYCE GREEN  answered questions  regarding his  work on  the wind                                                               
turbine tower.                                                                                                                  
MR. JACKSON emphasized  the value of hiring  local employees when                                                               
his company brings its product to a community.                                                                                  
3:48:39 PM                                                                                                                    
ROBERT HAFNER  stressed that having  a locally  trained workforce                                                               
can  mean the  difference between  the  failure or  success of  a                                                               
project.  He  also expressed his excitement at  working toward an                                                               
environmentally sound goal.                                                                                                     
3:50:12 PM                                                                                                                    
MR. JACKSON  presented a "wind"  map that shows that  those areas                                                               
in Alaska  that have  the highest  energy costs  are also  in the                                                               
richest wind source  areas.  He stated that  this situation makes                                                               
Western  Alaska  an  area economically  viable  to  start  making                                                               
changes.  He reported that  nationally, the wind industry grew 50                                                               
percent last year, on top of  a 45 percent growth the prior year.                                                               
In 2007, there  were $9 billion worth of  wind projects developed                                                               
in the  nation, and in  2008, there were  $17 billion worth.   He                                                               
offered  specific  examples  of  other  states'  growth  in  wind                                                               
development; in  fact, the total wind  power in the nation  is up                                                               
to more  than 25,000 megawatts.   He  said there is  a tremendous                                                               
opportunity for  growth and  improvement, and  the state  has the                                                               
resources to justify it.                                                                                                        
MR. JACKSON stated  his belief that maximum value  is achieved by                                                               
getting  the  local  community   involved,  including  those  who                                                               
service, install, invest, and give  community support.  He talked                                                               
about  the trickle-down  effect  on a  rural  community from  the                                                               
economic  stimulus of  a wind  project.   He emphasized  that the                                                               
stakes  are  currently extremely  high,  as  people are  choosing                                                               
between buying food or fuel.                                                                                                    
3:45:45 PM                                                                                                                    
MR. JACKSON said when his  company uses local investors and local                                                               
construction,  a  project  can  be financed  with  a  10-year,  6                                                               
percent loan, provide  a 10 percent return to a  local tax equity                                                               
investor,  and provide  a  target energy  sales  rate of  between                                                               
$0.19 to $0.25  a kilowatt hour.  Those are  communities that are                                                               
currently paying between  $0.50 and $1.10 per kilowatt  hour.  He                                                               
pointed  out that  without the  success  of the  project in  Nome                                                               
first,  his company  cannot afford  to  go to  a village  without                                                               
"having  a base  operation in  a place  like this  to be  able to                                                               
source  from."   He talked  about  the uncertainty  of the  barge                                                               
schedule as  it relates to  trying to ensure the  completion date                                                               
of a  project, and talked about  the effect of weather  in Alaska                                                               
on project schedules.                                                                                                           
3:57:58 PM                                                                                                                    
MR. JACKSON said the company is  at the point, in February, where                                                               
it needs commitments  for deposits and financing  for projects in                                                               
2009.   In  fact, turbines  are available  for this  construction                                                               
cycle.   He said grants and  subsidies are not needed  as federal                                                               
incentives are  in place.   Furthermore, it looks like  the bonus                                                               
appreciation will be renewed, and  there may be an investment tax                                                               
credit  rather than  a  production tax  credit,  because this  is                                                               
smaller  turbine project,  he  noted.   Mr.  Jackson  said it  is                                                               
sometimes  difficult  to  get  financing  without  a  deposit  or                                                               
project  status and  vice versa.   He  described Alaska's  Energy                                                               
Loan Program  as "the  beginnings of a  strong mechanism  to help                                                               
finance  rural  energy  projects  in Alaska."    The  program  is                                                               
designed to go  from zero to 100 percent financing,  with zero to                                                               
6 percent interest  rates, and fluctuates between  almost being a                                                               
grant program with a payback, to  being a valid business loan, he                                                               
remarked.   Mr.  Jackson said  many projects  are faced  with the                                                               
hurdle of  a tight market right  now, so he encouraged  the state                                                               
to consider increasing or accelerating that mechanism.                                                                          
4:00:31 PM                                                                                                                    
MR.  JACKSON,  in  response to  a  question  from  Representative                                                               
Petersen regarding the barge and  the timing of the project, said                                                               
once the company  has the turbines committed,  they are scheduled                                                               
to be  on the  barge.   He indicated that  an April  meeting with                                                               
BSNC and  Sitnasuak Corporation  last year put  the company  in a                                                               
winter-time  construction cycle,  and  if that  were earlier,  it                                                               
would  allow the  company to  be two  months ahead  of the  barge                                                               
cycle and, thus,  do the projects in June, July,  and August.  He                                                               
added, "And  so, that's really  our timeline.   If it  turns into                                                               
April, ...  the turbine might not  be available."  He  noted that                                                               
the company  has been  talking to  a lot  of local  entities that                                                               
have  a tax  liability and  that can  be investors.   The  bottom                                                               
line,  he  concluded, is  that  this  year's  project is  on  the                                                               
[earlier] schedule.                                                                                                             
MR. JACKSON  mentioned a study  done on the benefits  and effects                                                               
of the Federal  Tax Credit, which shows a  greater than two-times                                                               
return  for  the federal  government  on  the investment  in  tax                                                               
projects for the  tax credit issued.  Furthermore,  he noted that                                                               
the State of  Oregon has a business energy  tax incentive driving                                                               
many of its  wind projects.  That incentive,  he related, offsets                                                               
a 50 percent  tax credit on a small project,  which over a period                                                               
of five years has shown to be  a benefit to the community and the                                                               
state of approximately three times the  cost.  He said the states                                                               
that  create  such  incentives  get  successful  projects.    Mr.                                                               
Jackson assured the  committee that the company is  in a position                                                               
to move forward  in Alaska without extra  incentives; however, he                                                               
emphasized the need for "a little bit of extra support."                                                                        
MR.  JACKSON opined  that  it  would be  a  tragedy  not to  move                                                               
forward  this   year  with  village   installations.     He  said                                                               
representatives of BSNC  told WCE that the villages  have an even                                                               
greater need  than that of  the City  of Nome, and  the Sitnasuak                                                               
Corporation  echoed   that  sentiment.    However,   the  company                                                               
explained to those  entities that it would not be  possible to go                                                               
to the villages first because a  base was needed in Nome where to                                                               
provide access  to training, expertise, skills,  and spare parts.                                                               
Furthermore, the  company believes that  it can take care  of the                                                               
village  installations  from  Nome  as  long-term  operation  and                                                               
maintenance  is the  most critical  part  of the  project; it  is                                                               
critical to  the industry  that the turbines  keep running.   The                                                               
week that  the turbines  are activated and  the wind  is blowing,                                                               
the [diesel]  generators begin  using less fuel.   He  stated the                                                               
biggest message to community was:                                                                                               
     I can't  take out all  of your diesel  consumption, but                                                                    
     we can do  something this year to at least  reduce it -                                                                    
     and not only to reduce it,  but to take that first step                                                                    
     that we can add to later on to reduce it even more.                                                                        
4:07:06 PM                                                                                                                    
CO-CHAIR  EDGMON said  the State  of  Alaska does  not have  low-                                                               
interest, incentive loan programs in  place, and this is an issue                                                               
that the committee will be discussing.   He mentioned that he has                                                               
sponsored  legislation that  would  create  an energy  efficiency                                                               
loan   program  for   commercial   fishermen;  however,   further                                                               
testimony  from  Mr.  Jackson  would   be  helpful  so  that  the                                                               
committee can study incentive loan programs.                                                                                    
4:08:42 PM                                                                                                                    
JIM STIMPFLE referred to HB 66,  regarding net metering.  He said                                                               
the "sea change" benefit of  that proposed legislation is that it                                                               
would turn meters back by  allowing individuals and businesses to                                                               
use alternative  energy.  The  possible effect would be  to "zero                                                               
out" the  electrical costs for  a homeowner for home  heating and                                                               
even  for  a car  in  the  near future.    He  opined it  is  the                                                               
individual  Alaskan  resident who  will  benefit  from the  bill,                                                               
while the power  companies will lose revenue.   Mr. Stimpfle said                                                               
rate-payers will  support net-metering  but power  companies will                                                               
not.   He pointed out  that BSNC and  NJUS have not  negotiated a                                                               
[power purchase agreement]  for the current wind  farm, thus BSNC                                                               
has made  a $6  million investment  with no  revenue stream.   He                                                               
said HB 66,  as written, is a  good law, but it  could be better.                                                               
He relayed that 40 of the  Lower 48 states have net metering laws                                                               
and New Jersey's  is the best as it  allows individual homeowners                                                               
and business  owners to install  2 megawatt systems  and "credits                                                               
go  forward  for   a  whole  year."    He  said   he  knows  that                                                               
Representative Seaton  and his  staff have  worked hard  to "keep                                                               
the radar  screen low for the  power companies so they  don't get                                                               
bit too hard right up front."   He suggested a possible change to                                                               
the  proposed requirement  that  power generation  systems be  on                                                               
premises,  emphasizing the  importance of  putting systems  where                                                               
they  will work  best.   He observed  that the  passage of  HB 66                                                               
would be  a great service  to individual Alaskans, but  would not                                                               
cost  the state  a penny,  because "we  go out  and buy  $20,000,                                                               
$50,000, $100,000  systems to generate  [power] connected  to the                                                               
grid."   Mr. Stimpfle  suggested Alaskans  question who  owns the                                                               
grid and who would service it.                                                                                                  
4:16:31 PM                                                                                                                    
CO-CHAIR EDGMON  said the  issue of net  metering was  brought up                                                               
last  year when  Representative Seaton  introduced the  bill, and                                                               
there were hearings  held on the subject with  opposition by some                                                               
utility companies.   Times  are changing,  however, he  said, and                                                               
there  are increasing  attempts  to create  energy  at the  local                                                               
level.   He  talked  about  the need  for  balance,  and said  he                                                               
invited Mr. Handeland's response to Mr. Stimpfle's testimony.                                                                   
4:18:21 PM                                                                                                                    
MR. HANDELAND recognized that net  metering is not a new concept;                                                               
however,  what makes  it more  difficult  in Alaska  is that  the                                                               
state  is not  connected to  a grid  and each  of the  individual                                                               
companies or the  utility in each village is its  own entity that                                                               
needs to  be maintained.  He  suggested net metering may  work in                                                               
Anchorage  and Fairbanks,  where the  utilities are  "intertied."                                                               
He  said he  does not  know  if some  communities could  feasibly                                                               
continue  to operate  a  power plant  if  everybody's bills  were                                                               
zero.   He explained that it  would be fine if  the company could                                                               
completely turn  off the  diesel generation,  but in  the winter,                                                               
"that  isn't  really  palatable  to  people."    There  are  some                                                               
communities that have decided to  shut off their electric utility                                                               
at 11:00 p.m. and start it again  at 7:00 a.m., but that does not                                                               
work  for a  majority of  communities.   Mr. Handeland  said NJUS                                                               
does  not  have a  problem  with  these alternative  systems  and                                                               
encourages residents  to install them,  but he does not  think it                                                               
is  fair to  the  utility  company to  receive  no revenue  while                                                               
remaining in "stand-by mode" to provide power to the customers.                                                                 
CO-CHAIR EDGMON  mentioned hearing from the  Nushigak Cooperative                                                               
in Dillingham that  it already has the ability to  put together a                                                               
net  metering policy  without any  statutory changes.   He  said,                                                               
"So, this  issue, I think,  ... is  just starting to  take shape,                                                               
and it may actually wind up in statute."                                                                                        
4:21:07 PM                                                                                                                    
MR. STIMPFLE  said some  villages are  linked together;  in fact,                                                               
the Alaska  Village Electric Cooperative  (AVEK) has  53 villages                                                               
in  its system.   He  related various  topics that  have been  in                                                               
AVEK's  newsletters; for  example, opinions  for and  against net                                                               
metering.     In  January,  AVEK's   president  and   CEO  warned                                                               
cooperative members  against people like Mr.  Jackson coming into                                                               
the  community to  install private  systems  "connected to  their                                                               
grid,"  because companies such  as Western Community Energy (WCE)                                                               
are  motivated by  profit.   Eventually,  there will  be a  major                                                               
switch  to alternatives,  and that  change must  be addressed  at                                                               
some point.   He described PCE  as "a dog chasing  his own tail,"                                                               
and opined  that Alaska may  never have renewable  energy because                                                               
the state  is "stuck with a  diesel model that you've  got to pay                                                               
for."  Mr.  Stimpfle said addressing the issues of  HB 66 will be                                                               
a tough job.                                                                                                                    
4:23:25 PM                                                                                                                    
CO-CHAIR  MILLETT  pointed  out  that  Representative  Olson  has                                                               
introduced  a net  metering  bill which  takes  into account  the                                                               
infrastructure costs borne by utilities.                                                                                        
4:23:43 PM                                                                                                                    
MR.  HANDELAND  related  that  Nome has  adopted  a  net  billing                                                               
platform as  opposed to  net metering.   He said,  "Anything that                                                               
somebody sends  back is  at the avoided  cost, because  we're not                                                               
having to buy a  gallon of diesel fuel to generate  it.  But they                                                               
still  would be  responsible for  covering the  fixed cost."   He                                                               
said  NJUS does  not yet  have  a power  purchase agreement  with                                                               
Banner  Wind for  several reasons.   One  reason, he  advised, is                                                               
that the  project was initiated  at the  end of December,  and it                                                               
would not  be prudent to rush  into a contract, that  may last up                                                               
to 30 years, before seeing real data.                                                                                           
4:25:07 PM                                                                                                                    
CO-CHAIR EDGMON asked  if the power purchase agreement  has to go                                                               
through the Regulatory Commission of  Alaska or the Alaska Energy                                                               
Authority Commission.                                                                                                           
4:25:28 PM                                                                                                                    
MR. HANDELAND said  he did not know the answer  to that question.                                                               
He said  the City of Nome  utility is regulated by  the Nome City                                                               
Council  and the  Nome Joint  Utility  Board.   He suggested  Mr.                                                               
Brown could answer the question  with regard to what Banner Wind,                                                               
as a power producer, "may have to do."                                                                                          
4:25:56 PM                                                                                                                    
FRED MOODY  noted that he  has worked in the  electrical industry                                                               
for 50  years.   He offered  his understanding  that it  was 1973                                                               
when  the   federal  government  passed  a   law  regarding  "co-                                                               
generation."    The  reason  for  the law  had  to  do  with  the                                                               
existence  of many  military bases  and  other industry  entities                                                               
that ran their own  generators and were not able to  hook up to a                                                               
utility  because  of the  difference  in  cost  ratio.   The  law                                                               
provided that  an entity with  surplus electricity could  hook up                                                               
to the utility company, and the  utility would pay the entity the                                                               
deferred cost.   He related an incident from 1971,  when the City                                                               
of  Kenai was  without power  for seven  days and  could not  use                                                               
electricity from Wildwood  Army Station because there  was no law                                                               
allowing  the  government  to sell  electricity  to  the  utility                                                               
company.  Mr. Moody stated that  the entities who put up the wind                                                               
farms  want to  make money;  however, they  do not  want to  be a                                                               
utility.  The state requires  those selling electricity must have                                                               
a utility license  and operate in a specific area.   In the Lower                                                               
48,  an individual  can generate  power, but  must pay  to use  a                                                               
utility's power lines and switchgear.   He indicated that as long                                                               
as costs  are determined, no  one will complain,  except possibly                                                               
someone with  a 20 kilowatt  windmill who has  to pay to  buy and                                                               
sell electricity and can not "use your free system."                                                                            
4:30:16 PM                                                                                                                    
MR. STIMPFLE  said most people  who believe in net  metering want                                                               
to  use their  own power  first and  the utility  company's power                                                               
second.  Net billing is set up to force the reverse of that.                                                                    
4:31:21 PM                                                                                                                    
CO-CHAIR MILLETT closed public testimony.                                                                                       
4:31:35 PM                                                                                                                    
REPRESENTATIVE  PETERSEN   remarked  upon  the  vast   amount  of                                                               
information  received,  and said  it  is  possible to  solve  the                                                               
energy  problems  if  everyone  works together.    Sometimes,  he                                                               
opined, the  government just has  to get  out of people's  way to                                                               
let progress take place.                                                                                                        
4:32:18 PM                                                                                                                    
REPRESENTATIVE JOHANSEN thanked the resident  of Nome and said he                                                               
learned a lot today.                                                                                                            
4:32:34 PM                                                                                                                    
REPRESENTATIVE TUCK  thanked the  people of  Nome for  their warm                                                               
welcome and their determination and  desire to solve the problems                                                               
in their community and serve as  a role model to solve the energy                                                               
problems of the state.                                                                                                          
4:32:54 PM                                                                                                                    
CO-CHAIR  EDGMON  concurred with  the  value  of the  committee's                                                               
visit to Nome.  He announced  that the committee would be holding                                                               
similar  meetings  in  Bethel  and  Dillingham.    He  said  Bush                                                               
residents  are resourceful  survivors  and will  find answers  to                                                               
this issue.   He encouraged  those present to call  with comments                                                               
and suggestions.                                                                                                                
4:35:00 PM                                                                                                                    
CO-CHAIR  MILLETT  thanked  staff   and  others  responsible  for                                                               
facilitating  the meeting.   She  also thanked  the residents  of                                                               
each community for their hospitality  and their testimony on this                                                               
challenging issue.                                                                                                              
4:36:44 PM                                                                                                                    
There being no  further business before the  committee, the House                                                               
Special Committee on Energy meeting was adjourned at 4:36 p.m.                                                                  

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