Legislature(2009 - 2010)BARNES 124

01/27/2009 03:00 PM House ENERGY


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03:02:23 PM Start
03:02:42 PM Overview; Aea Statewide Energy Plan Presentation by Steve Haagenson, Executive Director, Alaska Energy Authority
04:41:01 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Overview: AEA Statewide Energy Plan TELECONFERENCED
Presentation by Steve Haagenson,
Executive Director, Alaska Energy
Authority
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE SPECIAL COMMITTEE ON ENERGY                                                                              
                        January 27, 2009                                                                                        
                           3:02 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                                                                                                  
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                              
OVERVIEW:    AEA  Statewide Energy  Plan  Presentation  by  Steve                                                               
Haagenson, Executive Director, Alaska Energy Authority                                                                          
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                              
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                              
STEVEN   HAGGENSON,   Executive    Director;   Statewide   Energy                                                               
Coordinator                                                                                                                     
Alaska Energy Authority (AEA)                                                                                                   
Alaska Industrial Development & Export Authority (AIDEA)                                                                        
Department  of   Commerce,  Community,  &   Economic  Development                                                               
(DCCED)                                                                                                                         
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Presented the  Alaska Energy Authority (AEA)                                                             
book titled Alaska Energy, January 2009.                                                                                        
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:02:23 PM                                                                                                                    
                                                                                                                                
CO-CHAIR CHARISSE  MILLETT called the House  Special Committee on                                                               
Energy meeting  to order  at 3:02  p.m.   Representatives Ramras,                                                               
Petersen, Tuck, Edgmon,  and Millett were present at  the call to                                                               
order.   Representative Johansen  arrived as  the meeting  was in                                                               
progress.                                                                                                                       
                                                                                                                                
^Overview;  AEA  Statewide  Energy  Plan  Presentation  by  Steve                                                             
Haagenson, Executive Director, Alaska Energy Authority                                                                        
                                                                                                                                
CO-CHAIR  MILLETT  welcomed members  and  visitors  to the  first                                                               
meeting  of the  House  Special  Committee on  Energy.   [On  the                                                               
agenda was a presentation by the Alaska Energy Authority (AEA).]                                                                
                                                                                                                                
3:02:42 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  EDGMON anticipated  working with  committee members  on                                                               
comprehensive solutions for affordable  energy for all regions of                                                               
Alaska.   He  said  there  is an  opportunity  to  meet and  take                                                               
testimony  from  all  of the  different  organizations,  such  as                                                               
private  and public  entities,  currently  involved in  providing                                                               
energy throughout  the state.  After  [the forthcoming hearings],                                                               
he offered his  hope that the committee will come  forward with a                                                               
framework,   or  a   decision,  to   develop  a   policy  for   a                                                               
comprehensive  and coordinated  approach  to an  energy plan  for                                                               
Alaska.   Co-Chair Edgmon  announced that  the decision  has been                                                               
made to  have hearings throughout  the session in Juneau,  and to                                                               
also  travel to  Kotzebue,  Nome, Bethel,  and  Dillingham.   The                                                               
purpose is to  hear how high energy prices and  the energy crisis                                                               
is  affecting  utilities,  consumers, communities,  and  existing                                                               
programs in rural  Alaska.  He listed some of  the existing state                                                               
and federal  energy assistance programs and  their cost; however,                                                               
he concluded  that there is  more to be done  as energy is  now a                                                               
core safety issue for the state.                                                                                                
                                                                                                                                
3:06:53 PM                                                                                                                    
                                                                                                                                
CO-CHAIR MILLETT observed  that the committee will  be meeting on                                                               
Saturdays  and  during  the  interim in  order  to  complete  its                                                               
difficult work.  She invited opening comments.                                                                                  
                                                                                                                                
REPRESENTATIVE RAMRAS noted that  the House has reconfigured, for                                                               
the 21st century, the House  Special Committee on Energy from the                                                               
old House Special Committee on Oil and Gas.                                                                                     
                                                                                                                                
3:08:20 PM                                                                                                                    
                                                                                                                                
STEVEN   HAGGENSON,   Executive    Director;   Statewide   Energy                                                               
Coordinator,   Alaska Energy  Authority (AEA),  Alaska Industrial                                                               
Development &  Export Authority (AIDEA), Department  of Commerce,                                                               
Community, &  Economic Development (DCCED), presented  the Alaska                                                               
Energy Authority book: Alaska Energy,  A first step toward energy                                                               
independence,  January,   2009.    Mr.  Haggenson   informed  the                                                               
committee that the  content of the book is not  a plan, but looks                                                               
at the  "use of local  resources to  make local energy  for local                                                               
Alaskans."   He  pointed  out  that his  agency  wants to  engage                                                               
Alaskans  in  energy  solutions  and  to  stimulate  the  state's                                                               
economy.   The AEA determined  [rates of] sustainable  energy and                                                               
the current use  of energy by asking communities  for their local                                                               
sources of energy,  what sources communities did not  want to use                                                               
for energy,  and why  those sources  should not  be used.   These                                                               
questions revealed potential local resources,  such as the use of                                                               
willows  for  biomass  feedstock  in  Bethel.    Energy  use  was                                                               
determined by looking at power  cost equalization (PCE) data, the                                                               
cost of electricity and heating  fuel, and anecdotal information.                                                               
Community  meetings and  data from  state  agencies provided  the                                                               
information needed to create a  matrix for each community and its                                                               
resources.  Technology  teams were then formed to  decide how the                                                               
resources,  such as  wind, hydro,  geothermal, solar,  coal, coal                                                               
bed methane, and natural gas, could be used and at what price.                                                                  
                                                                                                                                
3:12:35 PM                                                                                                                    
                                                                                                                                
MR.  HAAGENSON directed  attention  to the  meter illustrated  on                                                               
page 14,  and explained  that the colors  on the  meter represent                                                               
the price  of a  barrel of oil:  $50 and below  is green;  $50 to                                                               
$150  is yellow;  $150 and  above  is red.   He  warned that  the                                                               
changing  oil prices  could  divert the  state's  focus from  the                                                               
development  of alternative  sources  of energy  to  the cost  of                                                               
current sources  of energy.   Using the meter helps  [the reader]                                                               
understand the cost of the  alternative fuel relative to the cost                                                               
of a barrel of oil.  Page  15 illustrates the model for Akutan, a                                                               
community of  859 residents  in the  Aleutians East  Borough, and                                                               
includes energy  use estimates for  electric, space  heating, and                                                               
transportation.  Possible solutions for  Akutan are shown on page                                                               
16, and  include upgrades to the  current power plant or  the use                                                               
of geothermal,  hydro, and  wind diesel  hybrid sources  of fuel.                                                               
He discussed  the costs  associated with  each resource,  and how                                                               
the  projects must  be properly  sized for  the region  they will                                                               
serve, versus  the benefit to  the community of  new construction                                                               
that will grow the economy.                                                                                                     
                                                                                                                                
3:18:24 PM                                                                                                                    
                                                                                                                                
MR. HAAGENSON advised that the  estimates provided do not include                                                               
subsidies or grant  funds but are 100 percent debt  financed.  He                                                               
turned to  the Railbelt region  section on page 18  and explained                                                               
that the  Railbelt has  unique needs that  are separate  from the                                                               
rest  of Alaska.   An  integrated resource  plan for  this region                                                               
would consider  all of the  needs and  resources up and  down the                                                               
Railbelt, such as the Susitna  Hydroelectric (hydro) Project, the                                                               
Chakachamna Hydroelectric  Project, the  North Slope  natural gas                                                               
Bullet Line,  and liquefied  natural gas  (LNG) trucked  from the                                                               
North Slope  to Fairbanks.   The AEA  will develop  short-, mid-,                                                               
and  long-term plans  for Fairbanks,  Anchorage, and  Kenai.   On                                                               
page  23 a  graph  indicated that  Alaska's  total annual  energy                                                               
consumption of  over a trillion  Btu per  capita per year  is the                                                               
highest in  the U.  S.   As a  final example  of energy  needs in                                                               
Alaska,  Mr. Haagenson  stated  that to  generate  the amount  of                                                               
energy needed  by each Alaskan  every day, the  equivalent effort                                                               
of  65  Iditarod  sled  dogs  is needed.    Page  24  illustrated                                                               
Alaska's  Energy  Flow 2006  and  listed  the sources  of  energy                                                               
imported to, and exported from, the state.                                                                                      
                                                                                                                                
3:22:58 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  RAMRAS  asked Mr.  Haagenson  to  talk about  the                                                               
information  displayed  on  page  24,  and  further  explain  the                                                               
anticipated future growth as the  alternative energy projects are                                                               
selected.                                                                                                                       
                                                                                                                                
3:23:46 PM                                                                                                                    
                                                                                                                                
MR. HAAGENSON opined  that [the production of]  hydro and biomass                                                               
renewable electricity will grow.                                                                                                
                                                                                                                                
3:24:12 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RAMRAS  advised that Alaska is  presently using 25                                                               
percent  renewable energy  and the  administration's  goal is  to                                                               
increase use  to 50 percent  renewable energy by 2025.   However,                                                               
the chart  of Alaska's energy flow  in 2006 does not  reflect the                                                               
present use of 25 percent renewable energy.                                                                                     
                                                                                                                                
3:24:52 PM                                                                                                                    
                                                                                                                                
MR. HAAGENSON explained that the  illustration represented all of                                                               
the energy  use in Alaska  but the [25] percent  renewable figure                                                               
typically  refers   to  electricity  only,  including   hydro  in                                                               
Southeast and the Railbelt.                                                                                                     
                                                                                                                                
3:25:29 PM                                                                                                                    
                                                                                                                                
CO-CHAIR EDGMON clarified  that the schematic does  not factor in                                                               
the reduced  overall demand resulting  from saving  measures such                                                               
as insulation and weather-proofing.                                                                                             
                                                                                                                                
3:26:06 PM                                                                                                                    
                                                                                                                                
MR. HAAGENSON  said, "... this  is basically a  supply-side look,                                                               
like the  rest of  this document,  not a  demand-side look."   In                                                               
response to  a question, he  noted that  there will be  a demand-                                                               
side document issued at a later date.                                                                                           
                                                                                                                                
3:26:47 PM                                                                                                                    
                                                                                                                                
CO-CHAIR EDGMON ascertained that a document without the demand-                                                                 
side [data]  can not  be an energy  plan; therefore,  he stressed                                                               
that the  role of  the committee  and other  entities must  be to                                                               
complete the plan.                                                                                                              
                                                                                                                                
3:27:14 PM                                                                                                                    
                                                                                                                                
MR. HAAGENSON  agreed that this  document is the first  step; its                                                               
purpose is  to provide clarity  to Alaskans about  what resources                                                               
are   available   and   their   options   to   achieving   energy                                                               
independence.     For  historical  background,  he   listed  some                                                               
specific factors that contributed  to the previous failed efforts                                                               
of  alternative  energy  initiatives:   state  agencies  did  not                                                               
develop  strong management  capabilities;  state agencies  lacked                                                               
methods for assessing the technical  and financial feasibility of                                                               
projects; coordination  among state  agencies was  often lacking;                                                               
features of  an alternative technology were  often poorly matched                                                               
with  a   useful  rural  application;   unrealistic  expectations                                                               
existed about what an agency  or technology could accomplish; and                                                               
too much  responsibility was delegated  to contractors  while the                                                               
state often assumed  the risk in the performance  of the project.                                                               
To learn from the past, AEA is  taking a new path toward a public                                                               
and private  partnership with the state  engaging municipalities,                                                               
co-ops,  utilities,   and  Native   corporations  in   search  of                                                               
solutions.   Mr. Haagenson turned  his attention to  the regional                                                               
summary of  round 1 proposals  found on  page 38.   The proposals                                                               
total $402,111,199;  with the addition  of round 2  proposals the                                                               
total  is  $775,000,000  for  240 applications.    Steps  to  the                                                               
successful  implementation  of  the  Renewable  Energy  Fund  are                                                               
depicted  on page  39; the  next steps  to be  completed are  the                                                               
Least  Cost  Plan/IRP  Feasibility   for  the  Railbelt  and  the                                                               
Renewable Energy Fund,  round 2.  Further issues  to be addressed                                                               
are  [finding]  outside methods  of  financing  for projects  and                                                               
working closely  with the Department  of Natural  Resources (DNR)                                                               
to facilitate project site permitting.                                                                                          
                                                                                                                                
3:31:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RAMRAS  related his conversation with  a member of                                                               
the Yukon  River Inter-Tribal Watershed Council  who informed him                                                               
of the Hydrokinetic Construction project  in Ruby [ID number 84.]                                                               
Representative   Ramras   assumed   that   AEA   "[was]   pushing                                                               
hydrokinetic projects" and asked whether  the village of Ruby may                                                               
[hypothetically] decide  to build four  hydro projects at  a cost                                                               
of $2  million each.   In  this case, what  would be  required of                                                               
Ruby to fund the projects and obtain permits, he asked.                                                                         
                                                                                                                                
3:33:35 PM                                                                                                                    
                                                                                                                                
MR. HAAGENSON referred  back to page 39 and opined  that the best                                                               
way to  get a good  project through is  to begin with  a business                                                               
plan, and a good understanding of  the project at the time of the                                                               
application.   During the project's  evaluation by AEA,  the goal                                                               
is to  "make sure  we have  good projects  with good  people that                                                               
understand what they're doing in  the project."  He stressed that                                                               
a great  project must also  have a knowledgeable team  behind it.                                                               
Permits  from  DNR must  also  be  obtained to  resolve  possible                                                               
Federal Energy  Regulatory Commission  (FERC) and  "fish" issues.                                                               
He  described  two  different  hydrokinetic  turbines  and  their                                                               
possible dangers to migrating fish.                                                                                             
                                                                                                                                
3:35:58 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RAMRAS  reiterated his questions  about financing,                                                               
the application for  the project, and the  mechanics of providing                                                               
transmission  lines  for  the transportation  of  power.    Also,                                                               
sometimes  companion legislation  is necessary  to prevent  state                                                               
agencies from becoming mired at cross-purposes.  He asked:                                                                      
                                                                                                                                
     How do you decide whether  Ruby is capable of coming up                                                                    
     with their 30  percent so that the state  puts up their                                                                    
     70 percent and what do you  do when the project goes 40                                                                    
     percent over  budget?  Who  comes in then so  you don't                                                                    
     have a partially finished hydrokinetic project ... ?                                                                       
                                                                                                                                
3:38:37 PM                                                                                                                    
                                                                                                                                
MR. HAAGENSON  responded to  the first part  of the  question and                                                               
said  that state  financing will  be  [arranged] this  year by  a                                                               
capital  funds  mechanism.    The second  part  of  the  question                                                               
relates to  the strength of  the project, and that  is determined                                                               
by  a  meaningful  evaluation  process.    Ruby  must  submit  an                                                               
application  for a  good project  with a  financing mechanism  in                                                               
place.  Regarding transmission lines  [specifically] for the 2008                                                               
Ruby project,  the turbine floats  on top  of the water  and only                                                               
works in  the summer,  so transmission lines  will not  present a                                                               
problem.   He warned that  construction of an  underwater turbine                                                               
may present a challenge during winter.                                                                                          
                                                                                                                                
3:40:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RAMRAS  requested Mr. Haagenson return  at a later                                                               
date and present  a single, representative project  from a small,                                                               
rural  area, complete  with PowerPoint  slides and  a flow  chart                                                               
that explains the entire process  from the beginning to "flipping                                                               
a light  switch."  The importance  of this, he said,  is to learn                                                               
the time frame for a  project, including the possible issues with                                                               
DNR, so  the committee can  make recommendations to  expedite the                                                               
permitting process.                                                                                                             
                                                                                                                                
3:42:44 PM                                                                                                                    
                                                                                                                                
CO-CHAIR MILLETT stated one of her  goals for the committee is to                                                               
"pull together  the resources, statewide  and federally,  that we                                                               
have to make that puzzle come together."                                                                                        
                                                                                                                                
3:43:23 PM                                                                                                                    
                                                                                                                                
MR. HAAGENSON  opined that  the question  put to  him was  how to                                                               
guarantee  success; in  fact, previous  failures  were caused  by                                                               
poor  coordination between  agencies  thus DNR  and  the AEA  are                                                               
working together.                                                                                                               
                                                                                                                                
3:43:59 PM                                                                                                                    
                                                                                                                                
CO-CHAIR EDGMON turned attention back  to the resource matrix and                                                               
the  dynamics of  communities.   He said  that community  leaders                                                               
have their own estimates of energy  use that vary wildly from the                                                               
AEA  book.    He  asked whether  the  technology  teams  actually                                                               
visited  communities to  collect data  or if  the estimates  were                                                               
taken from other sources.                                                                                                       
                                                                                                                                
3:45:30 PM                                                                                                                    
                                                                                                                                
MR.  HAAGENSON  responded  that the  electrical  information  was                                                               
taken  from  PCE  documents;  however, in  Unalaska  there  is  a                                                               
processor  that  is   not  "tied  to  the  grid,"   and  was  not                                                               
incorporated in the data.   This raises the importance of talking                                                               
to people on the ground to refine and update the document.                                                                      
                                                                                                                                
3:45:47 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  EDGMON  surmised  that   the  matrices  for  individual                                                               
communities are based on a snapshot.  He remarked:                                                                              
                                                                                                                                
     The  community of  Unalaska is  by  volume the  largest                                                                    
     port in  the United States  for the last 20  years, and                                                                    
     to  not   have  been  in  direct   contact  with  local                                                                    
     officials  there in  that very  sophisticated community                                                                    
     with a  large power  base and a  large demand  ... what                                                                    
     level of confidence can I  then take and apply to other                                                                    
     communities in this document?                                                                                              
                                                                                                                                
3:46:41 PM                                                                                                                    
                                                                                                                                
MR. HAAGENSON answered  that the information from  PCE is exactly                                                               
the  information that  the utility  reported that  they sold;  if                                                               
there is self-generation  in a community there is no  way to know                                                               
that until the sites are visited.                                                                                               
                                                                                                                                
3:47:05 PM                                                                                                                    
                                                                                                                                
CO-CHAIR EDGMON  expressed his dissatisfaction with  the response                                                               
in terms  of the  larger issue  of the accuracy  for some  of the                                                               
other communities.   The information  in the document may  not be                                                               
wrong; however, there is a huge disparity.                                                                                      
                                                                                                                                
3:47:46 PM                                                                                                                    
                                                                                                                                
CO-CHAIR MILLETT  asked Mr. Haagenson to  discuss the methodology                                                               
used to arrive at the inventory of resources for each community.                                                                
                                                                                                                                
3:48:03 PM                                                                                                                    
                                                                                                                                
MR. HAAGENSON  explained that to  develop the matrix,  AEA talked                                                               
with communities and explored the  surrounding areas.  All of the                                                               
hydrological sites  across Alaska  were studied and  reviewed, as                                                               
were wind sites;  in fact, modeling for wind sources  was done in                                                               
a  five  mile  radius  around  each  village.    He  assured  the                                                               
committee AEA has  good data, although the data is  not exact for                                                               
cities like Craig, where sawmill  waste makes fuel from wood less                                                               
expensive;   however, further  details will  be acquired  for the                                                               
models.   Mr. Haagenson characterized  the book as a  "high level                                                               
picture to  say, 'These are  things you  should be looking  at in                                                               
certain areas.'   It's not the final answer."   He added that the                                                               
Alaska Resource  Inventory, DNR, and  the U.S. Department  of the                                                               
Interior, Department  of Geological Survey, will  identify all of                                                               
the  geological  sites in  the  state  including coal,  coal  bed                                                               
methane, and natural gas.                                                                                                       
                                                                                                                                
3:49:48 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  RAMRAS  referred  to  a wind  energy  project  in                                                               
California that  utilizes fifteen hundred wind  turbines and nine                                                               
miles of transmission  lines to transport power to the  grid.  He                                                               
asked whether the  77 entities that were  awarded grants included                                                               
construction to  provide for the  transmission of power  in their                                                               
applications.                                                                                                                   
                                                                                                                                
3:51:00 PM                                                                                                                    
                                                                                                                                
                                                                                                                                
MR. HAAGENSON confirmed that the  applications are for "delivered                                                               
cost, so it  includes the transmission if it's a  remote.  So, we                                                               
can  do  an  apples-to-apples comparison  with  the  alternatives                                                               
today."   He  turned  the  subject to  page  57  where there  was                                                               
detailed  information  on  energy  technologies,  such  as  wind,                                                               
hydroelectric,  and solar,  and also  information on  vendors who                                                               
supply these technologies.   Detailed case studies  on Alaska are                                                               
also included.   The  book concludes  with the  acknowledgment of                                                               
participants  and  a  compact  disk  that holds  a  copy  of  the                                                               
document  and four  reference databases.    Mr. Haagenson  stated                                                               
that  the next  step for  AEA  is to  go to  the communities  and                                                               
create  a  regional plan  that  includes  solutions to  financing                                                               
questions,  and that  fosters cooperation  between partners.   He                                                               
then provided  a hand-out titled Alaska  Calista Regional Example                                                               
1-09.  As  an example, he noted that in  Bethel usages are around                                                               
39,000,000 kilowatt hours (kW-hours) per  year, and its needs are                                                               
about  217,913 [million]  Btu (MmBtu).   The  book converts  fuel                                                               
needs to  a common  base and  he described  how the  region would                                                               
combine renewable  sources of energy  into a mini-grid  to supply                                                               
sufficient energy for all of the communities in the region.                                                                     
                                                                                                                                
3:57:34 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHANSEN  pointed out that  on page 97 there  is a                                                               
reference to a hydropower project  at Mahoney Lake, which is near                                                               
Ketchikan.  However, the project is not listed in the inventory.                                                                
                                                                                                                                
3:58:44 PM                                                                                                                    
                                                                                                                                
MR. HAAGENSON acknowledged the omission.                                                                                        
                                                                                                                                
3:59:02 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHANSEN  noted  that  [Mahoney Lake]  is  a  9.6                                                               
megawatt  project  with  federal  authorization  of  up  to  $384                                                               
million  in  appropriations; its  omission  in  an assessment  of                                                               
hydro power in Southeast is disconcerting.                                                                                      
                                                                                                                                
3:59:40 PM                                                                                                                    
                                                                                                                                
MR. HAAGENSON restated that there  was not an oversight; in fact,                                                               
the project  was not considered because  it involves transmission                                                               
lines that  connect Southeast and it  is not a part  of the local                                                               
picture.                                                                                                                        
                                                                                                                                
4:00:32 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHANSEN asked:                                                                                                  
                                                                                                                                
     If  a  project  was  not incorporated  in  a  Southeast                                                                    
     Conference plan  or a Tlingit  Haida plan  for whatever                                                                    
     reason, whether it be  oversight or political exclusion                                                                    
     or whatever, [would] that preclude  you from looking at                                                                    
     those projects?                                                                                                            
                                                                                                                                
4:00:40 PM                                                                                                                    
                                                                                                                                
MR.  HAAGENSON said  no.   The project  will be  included in  the                                                               
updated version  of the book,  along with more  information about                                                               
electrical usage by the Four Dam Pool Power Agency.                                                                             
                                                                                                                                
4:01:18 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHANSEN stressed that  [the Mahoney Lake project]                                                               
has a FERC  license, is ready to go, and  must be included, along                                                               
with the Whitman Lake [proposed hydro project].                                                                                 
                                                                                                                                
4:01:49 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RAMRAS  asked for a definition  of "postage stamp"                                                               
in the context of the cost of kilowatts.                                                                                        
                                                                                                                                
4:03:28 PM                                                                                                                    
                                                                                                                                
MR.  HAAGENSON   explained  that  postage  stamp   is  a  utility                                                               
statement that means "we all pay the same rate."                                                                                
                                                                                                                                
4:03:36 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  RAMRAS  further   asked  whether  this  reference                                                               
applies only to  Railbelt utilities or also  to rural communities                                                               
such as Ruby, Bethel, and Ketchikan.                                                                                            
                                                                                                                                
4:04:11 PM                                                                                                                    
                                                                                                                                
MR.  HAAGENSON  confirmed  that the  reference  was  to  Railbelt                                                               
utilities  coming  under  one umbrella  for  the  generation  and                                                               
transmission assets,  and then providing  postage stamp  rates to                                                               
the  [communities] that  they  serve.   In  further response,  he                                                               
acknowledged that the book has  flaws; however, in order to avoid                                                               
"analysis  paralysis,"  AEA took  the  first  step and  issued  a                                                               
"living document" that will be  updated with current information.                                                               
The next milepost is for the  agency to talk to Alaskans and give                                                               
them a chance  to choose projects that they  will support through                                                               
completion.                                                                                                                     
                                                                                                                                
4:06:07 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  RAMRAS  shared  his observation  that  under  any                                                               
administration, state  agencies have few decision-makers  "at the                                                               
top of  the [organizational] chart."     He asked whether  the 77                                                               
projects   will   be    prioritized,   sanctioned,   and   funded                                                               
simultaneously.    Additionally,  what  affect  will  the  hiring                                                               
freeze [ordered  by the  governor to  be effective  through June,                                                               
2009] have  on AEA's ability  to provide the  necessary attention                                                               
to an extraordinarily long list of projects.                                                                                    
                                                                                                                                
4:07:44 PM                                                                                                                    
                                                                                                                                
MR. HAAGENSON  clarified that the  Renewable Energy Fund  and the                                                               
Alaska Energy  document are  tied together  loosely.   The Alaska                                                               
Energy document  is meant  to engage Alaskans  in the  concept of                                                               
renewable energy so  they will own the solutions  and support the                                                               
construction  of  alternative  energy  plants.   He  agreed  that                                                               
processing  applications for  the  77 projects  submitted to  the                                                               
Renewable Energy  Fund is  a sizeable workload  for the  staff at                                                               
AEA.  The next step by  AEA involves the grants and grant manager                                                               
assignments.  He  assured the committees that  projects are ready                                                               
to go  forward independently and  are offered by very  strong and                                                               
qualified applicants.   If AEA  has issues on  project management                                                               
it will bring in contract labor to go around the hiring freeze.                                                                 
                                                                                                                                
4:11:02 PM                                                                                                                    
                                                                                                                                
CO-CHAIR MILLETT  observed that  there was great  anticipation of                                                               
the  energy  plan;  therefore, there  is  frustration  from  [the                                                               
public]  not  understanding that  the  document  is a  matrix  of                                                               
inventory and not  policy.  In addition,  representatives and the                                                               
public  need  to understand  the  magnitude  of writing  a  state                                                               
energy plan.   The  committee would  like to  support the  AEA in                                                               
writing the  plan and expediting  the policy associated  with it.                                                               
She opined  that Alaskans should  not wait longer  for leadership                                                               
to develop state  energy policy.  Co-Chair  Millett expressed her                                                               
assumption  that  when  AEA visits  communities,  there  will  be                                                               
interest from the communities in  further help with their current                                                               
energy costs,  and she asked  for the administration's  stance on                                                               
additional state support.                                                                                                       
                                                                                                                                
4:13:19 PM                                                                                                                    
                                                                                                                                
MR. HAAGENSON opined  that help for communities should  be in the                                                               
form of  "vision" and assistance  in financing  energy solutions.                                                               
Because previous state energy plans  have not produced results, a                                                               
different  approach was  chosen.   The document  is not  lists of                                                               
projects  recommended  by state  agencies,  but  choices so  that                                                               
communities will "buy into" a  project and take it to completion.                                                               
This approach will guarantee successful  results.  On the subject                                                               
of policy, Mr.  Haagenson expressed his interest  in working with                                                               
citizens and the committee to write high-level policy.                                                                          
                                                                                                                                
4:15:03 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  MILLETT invited  Mr. Haagenson  to  address House  Bill                                                               
152(FIN)  [signed   into  law  on  5/22/08,]   and  the  relevant                                                               
attachment.                                                                                                                     
                                                                                                                                
MR. HAAGENSON called  the committee's attention to  his letter of                                                               
1/21/09  to the  senate president  and the  speaker of  the house                                                               
requesting a time  extension for the Renewable  Energy Fund Round                                                               
2  Application.   He  explained  that  the time  extension,  from                                                               
1/30/2009  to 3/3/2009,  will  allow AEA  staff  to complete  the                                                               
evaluations  for the  115  second round  applications  for FY  10                                                               
grants.   At this time,  he discussed the evaluation  process for                                                               
FY  09  grants that  were  appropriated  in  the amount  of  $100                                                               
million.    The  evaluations  began with  a  three-stage  process                                                               
looking at  completeness, eligibility, and responsiveness  of the                                                               
application.  The second stage  considered technical and economic                                                               
feasibility.   The third stage  ranked the application  by region                                                               
and recommended  projects for  grant funding.   He  then detailed                                                               
the duties of the evaluation staff.                                                                                             
                                                                                                                                
4:19:55 PM                                                                                                                    
                                                                                                                                
MR. HAAGENSON  advised that caps  on the amount of  money granted                                                               
to a region were necessary  to maintain "regional spreading;" one                                                               
exception to this is in  Southeast where Angoon, Hoonah, and Kake                                                               
were  designated a  non-Southeast  region.   The  cost of  energy                                                               
became the  final demographic and  was weighted at 30  percent of                                                               
the  total evaluation.   He  relayed the  evaluators are  pleased                                                               
with  the  results  [of  the  selection  process];  moreover,  an                                                               
attempt  was made  to approve  feasibility money,  eliminate poor                                                               
projects, and  comply with  the intent of  the legislation.   The                                                               
AEA has  114 applications  that will  be put  on the  [World Wide                                                               
Web] to share, including comments  from the evaluation committee.                                                               
The  evaluation is  a very  open process,  involving five  or six                                                               
meetings of  the Renewable  Energy Fund  Advisory Committee.   He                                                               
then referred to  the Proposed Grant Allocation  Round 1 projects                                                               
and noted  that this  list has not  been officially  submitted to                                                               
the Legislative  Budget and  Audit Committee.   The  second round                                                               
has  about 114  applications  requesting a  total  of about  $200                                                               
million; however,  the amount  of the second  round grant  is $50                                                               
million,  and   the  request  [for   funding]  will  go   to  the                                                               
legislature on 3/3/09.                                                                                                          
                                                                                                                                
4:24:41 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  EDGMON  asked whether  the  list  incorporated the  $50                                                               
million that the governor has in her proposed budget.                                                                           
                                                                                                                                
4:25:02 PM                                                                                                                    
                                                                                                                                
MR. HAAGENSON said, "... this list of  77 is for FY 09 money that                                                               
was appropriated;  $50 million in  the original, and  last, main,                                                               
session and $50  million in the special session, last  year.  The                                                               
amount included  in the [governor's  budget] of $50  million will                                                               
be FY 10 money, which will be the second round."                                                                                
                                                                                                                                
4:25:17 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  EDGMON affirmed  that  the evaluation  process has  not                                                               
"leaped  forward,  then,  to  the  $50 million  that  is  in  the                                                               
pipeline in front of the legislature at the moment."                                                                            
                                                                                                                                
4:25:24 PM                                                                                                                    
                                                                                                                                
MR. HAAGENSON concurred.  In fact,  AEA staff is working on round                                                               
2 evaluations now.                                                                                                              
                                                                                                                                
4:25:35 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE PETERSEN referred to House  Bill 152 and noted the                                                               
intent of  the legislature  was that  for each  of the  next five                                                               
years,  $50,000  million  will be  appropriated  to  [the  Alaska                                                               
Renewable  Energy  Fund.]   He  asked  whether the  committee  is                                                               
assuming additional funds  will be budgeted in  the coming years,                                                               
and warned that  future legislatures can not be  obligated by the                                                               
sitting legislature.                                                                                                            
                                                                                                                                
4:26:12 PM                                                                                                                    
                                                                                                                                
MR. HAAGENSON  expressed his understanding that  $100,000 million                                                               
of FY 09  money has been appropriated.  A  new process will begin                                                               
to appropriate  FY 10 money, based  on the promise made  by House                                                               
Bill 152.                                                                                                                       
                                                                                                                                
4:26:51 PM                                                                                                                    
                                                                                                                                
CO-CHAIR EDGMON  asked Mr. Haagenson  whether changes need  to be                                                               
made to House Bill 152.                                                                                                         
                                                                                                                                
4:27:14 PM                                                                                                                    
                                                                                                                                
MR. HAAGENSON  suggested there are definitions  and language that                                                               
need clarification in the bill.                                                                                                 
                                                                                                                                
4:27:45 PM                                                                                                                    
                                                                                                                                
CO-CHAIR EDGMON  cautioned that  there is  no requirement  in the                                                               
bill for AEA to follow-up on the approved projects.                                                                             
                                                                                                                                
4:28:11 PM                                                                                                                    
                                                                                                                                
MR. HAAGENSON advised  that AEA will require, under  the terms of                                                               
the  grant, the  reporting back  of data  on the  status of  each                                                               
project.                                                                                                                        
                                                                                                                                
4:28:50 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RAMRAS indicated that he  was troubled by the idea                                                               
that  agencies will  "contract out"  when a  hiring freeze  is in                                                               
effect.    He  then  reiterated  his  request  for  a  PowerPoint                                                               
presentation describing  a typical  project in  a rural  area and                                                               
one in  an urban area,  complete from  beginning to end.   Though                                                               
skeptical of the  program, he expressed his  appreciation for the                                                               
concept  of  "good projects  with  good  teams" and  praised  Mr.                                                               
Haagenson's abilities and his passion  for, and knowledge of, the                                                               
subject of renewable energy.                                                                                                    
                                                                                                                                
4:32:49 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHANSEN agreed  with  the  previous speaker  and                                                               
echoed other members'  frustrations.  Hydro is  the obvious first                                                               
solution  for Southeast;  in fact,  there  is a  long history  of                                                               
support from  local and federal  government for hydro power.   He                                                               
pointed out  that some  projects listed in  round 1  are unknown,                                                               
but after  years of analysis,  the general understanding  is that                                                               
"hydro and interties  connecting is the way to go  in our neck of                                                               
the   woods."      Nevertheless,  a   $25,000   million   biomass                                                               
gasification  project  was  approved  in   round  1;  this  is  a                                                               
disconnect and this project should not  be "in the mix," he said.                                                               
Representative Johansen remarked:                                                                                               
                                                                                                                                
     ... not  a criticism, I  just don't understand  how the                                                                    
     process worked  and it's not  meant to diminish  any of                                                                    
     the work that  you guys did, but  it's frustrating that                                                                    
     there's not that policy direction ... .                                                                                    
                                                                                                                                
4:35:52 PM                                                                                                                    
                                                                                                                                
MR.  HAAGENSON  assured  the   committee  that  the  gasification                                                               
project in  Ketchikan was not  recommended for funding  and would                                                               
not move forward after its evaluation.                                                                                          
                                                                                                                                
4:36:23 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHANSEN suggested  that a  policy that  directed                                                               
AEA to  support hydro in  Southeast could have prevented  a waste                                                               
of time.                                                                                                                        
                                                                                                                                
4:36:39 PM                                                                                                                    
                                                                                                                                
CO-CHAIR EDGMON  appreciated Mr. Haagenson's answers,  and stated                                                               
his frustration is not with  the effort, but for constituents who                                                               
are hurting  from energy costs.   Although there will  be further                                                               
discussion  he  is  interested,  in  addition  to  the  long-term                                                               
solution,   the  near-term   term  umbrella   approach  to   keep                                                               
communities  alive.   He anticipated  that  testimony from  rural                                                               
areas  will emphasize  that, even  though the  legislature funded                                                               
existing programs in  the amount of $1 billion, the  state is not                                                               
where it needs to go; moreover,  state agencies do not seem to be                                                               
pulling  together  in  the  same   direction.    Co-Chair  Edgmon                                                               
expressed his  hope that the  committee will have  an opportunity                                                               
to  talk about  fuel hedging,  energy audits,  weather stripping,                                                               
energy-rated  appliances, appropriately-sized  furnaces, delivery                                                               
of fuel, and price differentials  throughout Western Alaska.  One                                                               
question remaining is  whether AEA has the  staff, resources, and                                                               
structure  needed to  administer  the "tallest  order  in all  of                                                               
Alaska."    Co-Chair  Edgmon  concluded  by  saying  that  fiscal                                                               
constraints  brought by  lower  oil prices  must  be observed  as                                                               
well.                                                                                                                           
                                                                                                                                
4:41:01 PM                                                                                                                    
                                                                                                                                
CO-CHAIR MILLETT  thanked Mr. Haagenson  for his testimony.   She                                                               
offered that  the committee  has made  a commitment  [to develop]                                                               
the framework of an energy plan  with the help of state agencies,                                                               
the  public, and  business.   She reminded  the committee  of the                                                               
public's high expectations  for the AEA, and stated  that she was                                                               
not  disappointed   in  the  work  product.     Co-Chair  Millett                                                               
announced that the  committee will be meeting  in Kotzebue, Nome,                                                               
Bethel, and Dillingham in order  to see first-hand the impacts of                                                               
the high cost of energy on communities and to seek solutions.                                                                   
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Special Committee on Energy meeting was adjourned at 4:43 p.m.                                                                  
                                                                                                                              

Document Name Date/Time Subjects
AEA project list 2.pdf.PDF HENE 1/27/2009 3:00:00 PM
AEA Letter.pdf.PDF HENE 1/27/2009 3:00:00 PM
HB0152Z.pdf HENE 1/27/2009 3:00:00 PM
AEA project list.pdf HENE 1/27/2009 3:00:00 PM