Legislature(2023 - 2024)BARNES 124
03/14/2023 10:15 AM House ENERGY
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| Audio | Topic |
|---|---|
| Start | |
| Presentation(s): Rural Energy Utilities | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ENERGY
March 14, 2023
10:15 a.m.
MEMBERS PRESENT
Representative George Rauscher, Chair
Representative Tom McKay
Representative Stanley Wright
Representative Mike Prax
Representative Calvin Schrage
Representative Ashley Carrick
MEMBERS ABSENT
Representative Josiah Patkotak
COMMITTEE CALENDAR
PRESENTATION(S): RURAL ENERGY UTILITIES
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
BILL STAMM, CEO
Alaska Village Electric Cooperative
Anchorage, Alaska
POSITION STATEMENT: Gave a PowerPoint presentation, titled
"Keeping the Lights on off the Road System."
JODI MITCHELL, CEO
Inside Passage Electric Cooperative
Juneau, Alaska
POSITION STATEMENT: Provided invited testimony during the
presentations on rural energy utilities.
TRAVIS MILLION, CEO
Copper Valley Electric Association
Anchorage, Alaska
POSITION STATEMENT: Gave a PowerPoint presentation, titled
"Copper Valley Electric."
ACTION NARRATIVE
10:15:36 AM
CHAIR GEORGE RAUSCHER called the House Special Committee on
Energy meeting to order at 10:15 a.m. Representatives McKay,
Schrage, Wright, Prax, and Rauscher were present at the call to
order. Representative Carrick arrived as the meeting was in
progress.
^PRESENTATION(S): Rural Energy Utilities
PRESENTATION(S): Rural Energy Utilities
10:17:11 AM
CHAIR RAUSCHER announced that the only order of business would
be presentations on rural energy utilities.
10:18:46 AM
BILL STAMM, CEO, Alaska Village Electric Cooperative (AVEC),
provided a PowerPoint presentation, titled "Keeping the Lights
on off the Road System" [hard copy included in the committee
packet]. He began on slide 2 and stated that AVEC provides
electricity to 31 thousand residents across 58 rural
communities. He stated that AVEC is a nonprofit organization
that generates the electricity it sells. It has 160 diesel
generators across 48 powerplants and used approximately 9.1
gallons of diesel in 2022. With 515 miles of distribution
lines, he said that in 2022 it sold 124.5 megawatts (MWhs) of
electricity, generating $60.7 million in revenue.
10:21:22 AM
MR. STAMM, in response to a question from Representative
Schrage, answered that wind power generation is prevalent along
the west coast of Alaska.
MR. STAMM resumed the presentation on slide 3 and gave an
overview of the number of AVEC employees. He stated that AVEC
has headquarters in Anchorage, with 48 full-time employees,
along with 120 local powerplant operators and 24 traveling
technicians. Referring to slide 4, he pointed out a graph
showing the relative size of the communities served by meter
count. He contextualized the pictures on slide 5 through slide
8, stating that 92 percent of the people served by AVEC are
Alaska Natives. In most communities served by AVEC, he said
that the school is the largest user of electricity; however,
fish processing plants in some communities are the greatest user
of electricity.
10:27:36 AM
MR. STAMM, in response to Representative Schrage, highlighted
AVEC's powerplant, shown in the aerial view of Toksook Bay on
slide 6.
MR. STAMM continued describing the image on slide 7, which is
the Noatak powerplant. He pointed out that the two blue
buildings house the power generators, and the circular buildings
are the fuel tanks, which hold between 7-12,000 gallons of
diesel. He added that all diesel used by Noatak must be flown
in at great expense.
10:29:35 AM
MR. STAMM, in response to Representative Prax's comment
concerning the poor condition of the powerplant, conveyed that
the diesel generator is state of the art; however, without barge
service it is difficult to transport large items for maintenance
and repair. In response to the further observation that the
tank farms appear to be falling apart, he confirmed that the
tank farm is on a high priority list for renovation and possible
replacement.
MR. STAMM, in response to Representative Schrage, answered that
the community no longer receives barge service because the river
has changed course. He explained that because of erosion, the
airport is in the process of being moved.
10:33:26 AM
MR. STAMM directed attention to slide 8, which featured an image
of the power facility in Stebbins. He described the powerplant,
stating that the tanks are elevated to avoid issues with
settling. He added that the plant has four generators. In
response to a committee question concerning the recent
windstorm, he expressed the understanding that there was some
flooding in the community of Stebbins, but no substantial damage
was sustained. In response to a follow-up question, he stated
that Stebbins is southeast of Nome, across Norton Sound.
10:36:24 AM
MR. STAMM described the map of vendors on slide 9, explaining
that the map also shows marine fuel supply routes. He pointed
out the system of fuel delivery, stating that many villages in
Alaska receive service from only one or two vendors. He turned
to slide 10, overviewing renewable energy generation for the
rural utilities. He said that 4.5 MWh was generated by wind and
0.2 MWh by solar in 2022. The total generation from these two
sources amounted to approximately 5 percent of energy generated
by AVEC. In response to a committee question, he stated that
the axle height for the wind turbines is approximately 150 feet.
10:38:54 AM
REPRESENTATIVE SCHRAGE highlighted renewable energy and asked
how something variable, like wind, is integrated into the power
grid.
MR. STAMM answered that water heaters must be used to provide
heat for some buildings in the community. He added that battery
storage technology [for renewable energy] is improving.
MR. STAMM continued to slide 11 and displayed a chart showing
power consumption and generation by AVEC. He said that AVEC has
a line loss of between 5 and 6 percent, and as a result it
generates less electricity for the 31,000 members than the
members would typically require.
10:42:22 AM
REPRESENTATIVE PRAX asked whether the increase of power
consumption comes from the acquisition of existing facilities.
MR. STAMM answered that it does. In response to a follow-up
question, he expressed uncertainty concerning the money that has
been saved. He expressed the belief that the economy of scale
has given AVEC savings and opportunities that would not be
available if each community produced its own power.
MR. STAMM detailed the graph on slide 12, which showed the
average cost to operate per kWh sold in 2022. He said that the
dotted line on the graph separates the cost of fuel from other
costs such as payroll. He stated that the fuel cost accounts
for over half of spending.
10:45:31 AM
REPRESENTATIVE PRAX speculated that many of the capital
expenditures had been funded through grants, which kept the
interest expenses low. He asked whether the depreciation
expense is high enough to replace equipment.
MR. STAMM answered that it is not. In response to a follow-up
question, he stated that in order to replace equipment in the
future, AVEC would have to raise its rates.
MR. STAMM, in response to a committee question concerning the
lifespan of the equipment, indicated that there is a variety of
depreciation values. He said that wind turbines and diesel
generators have a 20-year lifespan. He said maintenance is a
key part for the systems. In response to a committee question
concerning funding for AVEC's growth, answered that most of the
funding has come from acquiring additional locations, thereby
increasing its revenue base.
MR. STAMM outlined AVEC's funding on slide 13. Describing the
pie charts, he noted that power cost equalization (PCE) does not
apply to commercial or state services. This means that when PCE
is applied it typically reimburses half of the costs for a
residential consumer. He estimated the contribution from
membership to be 80 percent.
10:50:29 AM
MR. STAMM advanced to slide 14 and slide 15 and overviewed why
power is so expensive in rural Alaska and what AVEC is doing in
order to reduce some of these costs. He stated that because the
economy of scale is small, efficiency is lower. Rural Alaska is
remote and difficult to access, and communities do not have the
infrastructure for more efficient means of transportation. He
said that AVEC is working to interconnect different communities,
as this would increase the economy of scale; however, he
acknowledged that AVEC is not always accepted in certain
communities.
MR. STAMM, in response to a committee question, said AVEC does
not reach out to communities to offer power; instead,
communities request to join the cooperative. In response to a
committee question concerning whether there is a standard rate,
he stated that it depends on the community. For example, he
said, Bethel and Yakutat are "standalone" communities that have
different rates.
10:55:08 AM
MR. STAMM, in response to a committee question concerning energy
education and workforce development, stated that AVEC works with
other nonprofits that provide education in K-12 schools.
Additionally, he detailed various other projects that promote
workforce development with Native Corporations and the Alaska
Energy Authority (AEA).
MR. STAMM continued to slide 16, which displayed a map of St.
Mary's Family Projects, including a 900-kWh wind turbine, a 20-
mile intertie to Mountain Village, 410,000-gallons in bulk fuel
storage, and a 3-MWh powerplant.
10:58:42 AM
REPRESENTATIVE PRAX inquired about the sustainability of the
project.
MR. STAMM reiterated that additional funding sources would be
needed in the future.
REPRESENTATIVE PRAX asked whether there was a plan for any costs
the state might incur 20 years from now.
MR. STAMM clarified that this was not a new problem, as many
facilities in Alaska need replacement. In response to a series
of follow-up questions, he said that AVEC's goal is to be
sustainable. He stated that AVEC uses years of studies to make
decisions for the best possible return. He continued that AVEC
does fund some of its own studies, in addition to using studies
from a variety of other sources. He added that some of the
other sources include AEA and the U.S. Department of
Agriculture.
11:04:02 AM
JODI MITCHELL, CEO, Inside Passage Electric Cooperative (IPEC),
stated that IPEC serves four separate microgrids in Southeast
Alaska. She touched on the remoteness of communities and stated
that the unreliability of the ferry service makes it difficult
to source materials. She stated that it has been challenging,
but IPEC has been trying to reduce reliance on diesel over the
years. The average price of diesel had been $2.77 but has
increased to over $6 in recent years. She said IPEC has been
focusing on building small hydroelectric projects to reduce
diesel consumption and save money. She shared, for example,
that Hoonah is powered by a small hydroelectric project.
11:09:02 AM
MS. MITCHELL discussed the small hydroelectric project in Kake,
characterizing these projects as "small but mighty." She noted
that hydroelectric projects use assets with a long-life span,
saving money over time, reporting that Gold Creek in Juneau has
been online for 120 years. She opined that reliance on diesel-
generated power would never be completely eliminated.
Additional projects are in the works, including the Fair Creek
Hydroelectric Project in Angoon. She stated that the project
would provide 99 percent of the power needed by the community
with room for new businesses and economic tourism. She said
that another project being built, the Gartina Falls
Hydroelectric Project would bring Hoonah to between 50 and 60
percent renewable energy.
11:14:15 AM
MS. MITCHELL discussed the relationship between PCE and larger
communities. She explained that PCE rates are dependent on
larger community rates, with the aim of lowering the cost
difference between the two. The high rates currently facing
customers make it difficult to attract new communities to the
cooperative. She indicated that the goal is to have a
sustainable restaurant in each community and to provide enough
energy to support these businesses. She indicated that relying
on solar energy generation is a problem because of the frequency
of overcast skies, as this could cause a blackout; however, she
suggested that some solar generation should be utilized, owned,
and operated by the utility.
11:18:19 AM
REPRESENTATIVE CARRICK inquired about the options for other
rural communities in Southeast Alaska that were not part of the
cooperative.
MS. MITCHELL expressed uncertainty. She suggested that there is
a desire from certain communities to remain independent. In
response to a follow-up question, she said that there have been
discussions for other communities to join the cooperative, but
nothing has solidified.
MS. MITCHELL, in response to a follow-up question from
Representative Prax concerning attracting other communities,
answered that IPEC has much to offer as a nonprofit
organization. She added that IPEC is made up of "the diesel
experts of the Southeast." She advised that an increased
economy of scale [by adding additional communities] would result
in lower electric rates.
11:22:35 AM
TRAVIS MILLION, CEO, Copper Valley Electric Association (CVEA),
began on slide 2 and stated that CVEA Association also uses a
cooperative business model. He said that CVEA has assets
totaling approximately $150 million. He added that it has 45
employees and does not benefit from the PCE program.
MR. MILLION continued to slide 3 and detailed the service area
covered by CVEA. He noted that the number of employees at CVEA
is small compared to the amount of land covered by CVEA. He
stated that the corporate headquarters for CVEA is located in
Glenallen, and the total service area is approximately the size
of the state of Maryland.
11:24:28 AM
CHAIR RAUSCHER asked whether it would be dangerous to set up
lines connecting CVEA to Matanuska Electric Association (MEA).
MR. MILLION answered that because of the limitations of the
different lines being used in remote areas, it would not be very
effective. In response to a follow-up question, he said that
there is only one home that he knows of that is within CVEA's
range, but not serviced.
11:26:53 AM
MR. MILLION detailed the CVEA's system on slide 4 and stated
that it has three transmission and six distribution substations,
106 miles of transmission lines, and over 500 miles of
distribution lines. He continued to slide 5 and slide 6 and
gave a brief overview of some of CVEA's generation plants. He
stated that between 60 and 70 percent of its electricity is
generated from hydroelectric plants, including those at Solomon
Gulch and Allison Creek. He said CVEA is still able to generate
hydroelectric power during the winter; it generates
approximately 25 percent of its electricity with its 5.2 MWh gas
turbine cogeneration plant.
11:31:08 AM
MR. MILLION, in response to a committee question, answered that
the source of the natural gas bought by CVEA is the Petro Star
refinery. In response to a follow-up question, he confirmed
that there is some trade-off when CVEA sells the heat back to
Petro Star.
MR. MILLION described the diesel generation plants operated by
CVEA, saying that between 5 and 15 percent of its energy is
generated by diesel. The plant in Glenallen has a capacity of
9.2 MWh and the plant in Valdez has a capacity of 8.6 MWh. He
stated that CVEA has placed significant emphasis on maintenance
over the last five years. He discussed the graph on slide 8
featuring cost per kWh generated by hydroelectric plants versus
diesel plants. He discussed the high cost of fuel, peaking at
more than double summertime rates during the winter when CVEA
needs diesel to make up the difference in generated power. He
continued to slide 9 and gave an overview of the challenges
faced by CVEA. He said that CVEA has seen several long-time
employees enter retirement, with more set to retire in the
coming years.
MR. MILLION, in response to a committee question, answered that
CVEA has been fortunate enough to fill all its positions and
currently has no openings. In response to a follow-up question,
he stated that all employees are required to live within the
coverage area of CVEA.
11:36:54 AM
REPRESENTATIVE PRAX asked whether depreciation costs have been
accounted for.
MR. MILLION answered that CVEA is recouping the necessary costs
to replace its aging infrastructure. He reiterated that some of
its projects receive funding from grants. In response to a
follow-up question, he stated that CVEA is in talks with Alyeska
Electric to exchange power. He said that the Regulatory
Commission of Alaska has already approved some aspects of the
plan.
11:41:05 AM
MR. MILLION resumed the presentation on slide 9 and discussed
increasing regulations. He said that the federal government has
increased regulations on hydroelectric power. He noted that a
feasibility study had been conducted to consider deploying a
micromodule reactor in CVEA's coverage area. He highlighted the
rising cost of materials, noting a 300 percent rate increase in
the cost of transformers. He said that CVEA has also had some
difficulties in working with the Alaska Department of Natural
Resources because of staff turnover at the department.
11:44:48 AM
CHAIR RAUSCHER inquired about the price of the microreactor.
MR. MILLION answered that CVEA had provided a price range to
vendors that would keep CVEA competitive. In response to a
follow-up question, he said the price depends on the vendor, but
it would be around $100 million.
CHAIR RAUSCHER asked for a projection on the cost of an intertie
between CVEA and MEA.
MR. MILLION answered that the cost estimate is $566 million.
11:47:49 AM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Energy meeting was adjourned at 11:47 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 2023 House Energy_Rural Energy_AVEC.pdf |
HENE 3/14/2023 10:15:00 AM |
AVEC |
| House Energy Committee Copper Valley.pdf |
HENE 3/14/2023 10:15:00 AM |
Copper Valley |