Legislature(2009 - 2010)NOME
02/08/2009 01:00 PM House ENERGY
| Audio | Topic |
|---|---|
| Start | |
| Alaska Energy Authority Statewide Energy Report | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ENERGY
February 8, 2009
1:08 p.m.
MEMBERS PRESENT
Representative Bryce Edgmon, Co-Chair
Representative Charisse Millett, Co-Chair
Representative Kyle Johansen
Representative Jay Ramras
Representative Pete Petersen
Representative Chris Tuck
MEMBERS ABSENT
Representative Nancy Dahlstrom
OTHER MEMBERS PRESENT
Senator Donny Olson
COMMITTEE CALENDAR
Alaska Energy Authority Statewide Energy Report
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
DENISE MICHELS, Mayor
City of Nome
Nome, Alaska
POSITION STATEMENT: Testified during the discussion of the AEA
Statewide Energy Report.
JOHN HANDELAND, Utilities Manager
City of Nome
Nome, Alaska
POSITION STATEMENT: Testified during the discussion of the AEA
Statewide Energy Report.
TIM TOWARAK, President/CEO
Bering Straits Native Corporation (BSNC)
Nome, Alaska
POSITION STATEMENT: Testified during the discussion of the AEA
Statewide Energy Report.
JERALD BROWN, Vice President
Bering Straits Native Corporation (BSNC)
Nome, Alaska
POSITION STATEMENT: Testified during the discussion of the AEA
Statewide Energy Report.
NEAL FOSTER, Vice President
Sitnasuak Native Corporation
Nome, Alaska
POSITION STATEMENT: Testified during the discussion of the AEA
Statewide Energy Report.
LEO B. RASMUSSEN
Nome, Alaska
POSITION STATEMENT: Testified during the discussion of the AEA
Statewide Energy Report.
COLBY CARTER
Nome, Alaska
POSITION STATEMENT: Testified during the discussion of the AEA
Statewide Energy Report
CARL EMMONS
Nome Joint Utility System
Nome, Alaska
POSITION STATEMENT: Testified during the discussion of the AEA
Statewide Energy Report.
MITCH ERICKSON, Executive Director
Nome Chamber of Commerce
Nome, Alaska
POSITION STATEMENT: Testified during the discussion on the AEA
Statewide Energy Report.
BRIAN JACKSON
Western Community Energy (WCE)
Oasis, Idaho
POSITION STATEMENT: Testified during the discussion on the AEA
Statewide Energy Report.
KATIE PETERSON, Community Development Coordinator
Norton Sound Economic Development Corporation (NSEDC)
Nome, Alaska
POSITION STATEMENT: Testified during the discussion on the AEA
Statewide Energy Report.
NANCY MENDENHALL, Chair
Advisory Council
Co-operative Extension Service
University of Alaska - Fairbanks
Nome, Alaska
POSITION STATEMENT: Testified during the discussion on the AEA
Statewide Energy Report.
RUTH EMMONS
Nome, Alaska
POSITION STATEMENT: Testified during the discussion on the AEA
Statewide Energy Report.
JIM ADAMS
Nome, Alaska
POSITION STATEMENT: Testified during the discussion on the AEA
Statewide Energy Report.
CARL EMMONS, Member
Nome Joint Utility Board
Nome, Alaska
POSITION STATEMENT: Testified during the discussion of the AEA
Statewide Energy Report.
BRYCE GREEN
Western Community Energy
Nome, Alaska
POSITION STATEMENT: Testified during the discussion on the AEA
Statewide Energy Report.
ROBERT HAFNER
Western Community Energy
Nome, Alaska
POSITION STATEMENT: Testified during the discussion on the AEA
Statewide Energy Report.
JIM STIMPFLE
Nome, Alaska
POSITION STATEMENT: Testified during the discussion of the AEA
Statewide Energy Report.
FRED MOODY, Member
Nome Joint Utility System
Nome, Alaska
POSITION STATEMENT: Testified during the discussion on the AEA
Statewide Energy Report.
ACTION NARRATIVE
1:08:59 PM
CO-CHAIR CHARISSE MILLETT called the House Special Committee on
Energy meeting to order at 1:08 p.m. Representatives Petersen,
Tuck, Ramras, Johansen, Edgmon, and Millett were present at the
call to order. Senator Olson was also present.
^ALASKA ENERGY AUTHORITY STATEWIDE ENERGY REPORT
[Contains discussion of HB 66]
1:09:19 PM
CO-CHAIR MILLETT announced that the only order of business would
be discussion of the Alaska Energy Authority (AEA) Statewide
Energy Report.
1:09:39 PM
CO-CHAIR MILLETT noted some written materials from the Alaska
Energy Authority were available to the public.
1:10:00 PM
CO-CHAIR EDGMON said he recognizes some faces in Nome, because
he used to serve as an aide to Representative Foster and because
of his involvement with the Community Development Quota (CDQ)
program. He related that his district includes Bristol Bay and
the Aleutians, and that area is also facing critical energy
problems.
1:11:01 PM
REPRESENTATIVE PETERSEN acknowledged the progress the community
of Nome has made in harnessing wind power.
1:11:36 PM
REPRESENTATIVE JOHANSEN expressed appreciation for the
hospitality of the residents of Nome and expressed his hope that
solutions can be found to stabilize energy costs.
1:12:37 PM
REPRESENTATIVE TUCK praised the efforts of the community in
getting its wind farm to operate so efficiently, thus setting an
example for the rest of the state.
1:13:49 PM
REPRESENTATIVE RAMRAS credited Nome for having the largest wind
farm project in the state and talked about the applicability of
wind turbines for usage in other villages.
1:14:46 PM
SENATOR OLSON credited Nome with forward thinking, and he said
he thinks the purpose of bringing the residents together today
is to hear ideas regarding how to solve energy problems across
the state.
1:15:48 PM
CO-CHAIR MILLETT noted that the committee had heard compelling
testimony in Kotzebue and Noatak the prior day. She said she
thinks seeing first-hand what Nome and Kotzebue are facing will
make the House Special Committee on Energy a better committee.
1:16:44 PM
DENISE MICHELS, Mayor, City of Nome, spoke about the high prices
of energy and the community's commitment to tapping alternative
energy sources in order to no longer be dependent on diesel
fuel. She said Nome studied various forms of energy and decided
that wind was the best. The city applied for an Alaska Energy
Authority (AEA) $15 million grant and received $4 million.
Mayor Michels said the City of Nome is looking for the remaining
$11 million, and she expressed her hope that the legislature
would support Nome's efforts with further appropriations.
REPRESENTATIVE RAMRAS asked whether the City of Nome would
consider having a private partner that could fund the remaining
capital expense and take the tax credit, which would "buy down
the cost of the project by the amount of the federal tax
credit." He remarked, "... about 30 percent of your total
kilowatt generation is considered 100 percent of what you can
have as a portion of your wind portfolio."
1:20:49 PM
JOHN HANDELAND, Utilities Manager, City of Nome, responded that
Nome is open to the idea of finding additional partners for the
project. He said the project that the Bering Straits Native
Corporation and Sitnasuak Native Corporation put into effect in
Nome was one that "utilized those benefits." He confirmed that
Nome, as a municipal entity, would not benefit from the tax
credit. Mr. Handeland said the city of Nome is concerned, when
looking at alternative financing and joining with partners, that
it does not increase its costs. Currently, the city is working
on a power purchase agreement; however, there are concerns about
the costs of fuel and regarding how the integration of
technologies will impact the fuel efficiency that the City of
Nome has "on existing generation." He said the city is working
with the Alaska Energy Authority (AEA) to develop a model to
successfully use in Nome for the most efficient dispatch of the
city's diesel and wind resources.
MR. HANDELAND said Nome is different in that the wind farm that
was constructed is relatively large compared to some of the
other areas. Kotzebue operates a wind farm a little smaller in
size, but uses the same technology; however, it is owned by the
utility.
MR. HANDELAND, regarding partnering with other agencies and
finding private financing, said the City of Nome has had some
discussions with the Norton Sound Economic Development
Corporation (NSEDC), an entity interested in reducing its own
energy costs for some of the facilities that it operates. He
said the NSEDC was supportive of the city's proposal to AEA,
under the Renewable Energy Fund. He said the city may also look
at what federal sources may be available. Whether or not the
city can generate [the remaining $11 billion] is, at this point,
unknown, he concluded.
1:23:36 PM
MAYOR MICHELS noted that the City of Nome has also submitted an
application to relocate and replace its electrical distribution.
She explained that every several years there are storms that
take down the city's power lines. She said the goal is to get
the power lines out of the flood zone, which will require $3
million. The City of Nome is also asking that larger
communities are allowed to take part in the Bulk Fuel Revolving
Loan Fund. She explained that because the population of the
City of Nome is over 2,000, it is not eligible; in fact, the
city had to secure a loan with the bank to purchase its fuel.
1:24:46 PM
MR. HANDELAND noted that previously he has had discussions with
"some of the members offline" regarding the Revolving Bulk Fuel
Fund that is available through AEA. He said there were
modifications to the fund to increase the maximum loan limits
last year; however, he confirmed that a city with a population
over 2,000 does not qualify. He noted that the current
population of the City of Nome is approximately 3,700. The
maximum fuel loan under the fund is $750,000. This year, the
City of Nome had to borrow $10 million for fuel purchases and
did so through tax-exempt, bank qualified financing with a local
financial institution. He noted that the loan was taken out in
two increments, the first being "relatively painless," while the
second being "quite painful" as a result of the credit crunch
throughout the nation and the subsequent reluctance of banks to
lend to anyone regardless of his/her credit worthiness.
MR. HANDELAND said that the City of Nome proposes that the state
could assist communities by amending statutes relative to the
Bulk Fuel Revolving Fund, to allow larger communities to
participate, to increase the maximum loan amount, and to either
lower the interest rate or eliminate it entirely, using an
application or origination fee for the administration of the
project. Furthermore, he said the city officials believe that
there needs to be more flexibility in the installment method of
payback, perhaps using a "pay-as-you-take" method, where fuel
loan payments would coincide with revenue generation. Mr.
Handeland said the current prohibition of any funding that lasts
longer than 12 months does not work for the City of Nome and
other communities, because they need to have more than a year's
supply [of fuel]. He said the city tries to get its supply at
the end of the year, but that is sometimes controlled by barge
companies and the weather. He said along with the desired
amendments, there would also need to be some additional
capitalization to the fund, so that there was sufficient corpus
to allow the agency to make loans to all of the eligible
communities.
1:28:31 PM
MR. HANDELAND, in response to Senator Olson, said he would
recommend the population limit be changed to 7,500; however, he
said the number may need to be higher, to include communities
off of the road system, because they need to purchase all of
their fuel during a "limited shipping window."
1:29:21 PM
REPRESENTATIVE RAMRAS remarked again about the possibilities of
partnering with a company. He opined that a large, Alaskan,
corporate partner would be able to have the federal government
subsidize almost one-half of the cost, in addition to tax
advantages. He stated, "There are so many ways to let the
federal government step in and take over half the cost of your
wind farm." He said that is what the City of Nome indicates it
wants - help from the state or federal government.
1:32:46 PM
MR. HANDELAND said he would welcome the opportunity to speak
further with Representative Ramras. He related that in the City
of Nome's application, it did anticipate that it would make a
local commitment to the project in the form of a 10 percent
match.
1:33:57 PM
MAYOR MICHELS brought up the next item, regarding the Power Cost
Equalization (PCE) program. She thanked the legislature for
raising the ceiling last year from $.52 to $1, but pointed out
that was a change with a sunset clause. She said the City of
Nome has gone on record to support Senator Hoffman's
recommendation to repeal the sunset clause. She asked that the
repeal be supported and also that [PCE] be expanded to include
municipalities, school districts, and businesses.
MAYOR MICHELS stated that the City of Nome supports the
following: the development and expansion of the state's
renewable resources program; the expansion of the Home Energy
Rebate Program to include businesses; continued funding of the
low income Housing Weatherization program; continued provision
of rural energy grant funding assistance to expand the
percentage of energy produced in the state from renewable and
alternative sources; the creation of a regulatory environment
which will encourage development of alternative and renewable
energy; the provision of funding assistance to all new and
retrofit public buildings that meet certified energy efficient
standards; the coordination of regional energy planning; the
construction of an Alaska gas line to reduce the dependency on
imported fuels.
1:36:06 PM
SENATOR OLSON mentioned the governor's recent announcement that
she would like a road built to Nome. He said that would bring
down the cost of fuel delivery to the community, but said there
is concern as to whether the citizens of Nome support such a
project, which would cost several billion dollars.
1:36:59 PM
MAYOR MICHELS said the City of Nome supports Department of
Transportation & Public Facilities' (DOT&PF's) "efforts in the
study" and is working to ensure all communities are included in
the planning process. She noted that there are some communities
that do not want a road, although having a road may open up
alternative energy opportunities.
1:38:01 PM
REPRESENTATIVE EDGMON noted that while in Kotzebue, the
committee had heard about local efforts to weatherize homes and
apply both the weatherization and home energy rebate programs
from the Alaska Housing Finance Corporation (AHFC), and he asked
Mayor Michels if the city could comment on those efforts.
1:38:40 PM
MAYOR MICHELS indicated that one program involved a long list of
items that would need to proceed the "retrofitting." The other
program required homeowners to pay up-front costs, and many
people in rural Alaska do not have the money to do that.
1:39:18 PM
REPRESENTATIVE EDGMON observed that in some areas these programs
have been successful, while in outlying areas, they have not;
therefore, he said he would be listening during today's
testimony for comments regarding this issue.
1:40:02 PM
TIM TOWARAK, President/CEO, Bering Straits Native Corporation
(BSNC), told the committee that the wind farm was a joint
venture between BSNC and the local village corporation, born out
of BSNC's desire to find a way to reduce the cost of living for
its 6,300 shareholders. He said rather than spending $37
million on PCE, the state could be spending the same amount on
alternative energy projects, and "in a matter of 20 years you
would take care of all 200 communities in rural Alaska." He
opined that that would be a smart use of the money coming from
the North Slope.
MR. TOWARAK said Alaska netted $900 million through its first
lease sales, and a lot of that money was spent on dams that
benefitted urban areas. The BSNC believes now is an opportune
time for the state to invest some of its money into alternative
energy that will be a long-term investment into rural
communities. He pointed out that BSNC and the Sitnasuak Native
Corporation invested $6 million to provide a wind farm to a
rural community, while the State of Alaska is giving a $25
million grant to build a wind farm on "the island right next to
Anchorage." He stated, "We'd like fair treatment."
1:44:21 PM
REPRESENTATIVE RAMRAS said Nome's project did not score well in
the $100 million grant money distributed by AEA is because it
was not, at the time, "project ready." However, he observed
that six months later, the state has not yet passed out the
money, "while your project is done, complete, running, and
producing kilowatts." He questioned why the City of Nome could
not give [BSNC] the $4 million out of the $15 million grant
money, allow BSNC to build the project and take advantage of
the tax deductions from the depreciation associated with it, and
then sell it back to them at the end of the five-year period and
use the $4 million as a basis for "whatever that buy-out price
is." He said this transaction would buy down the cost of
kilowatts to almost nothing, provide the City of Nome with an
entity to provide them with the $11 million, and allow the
federal government over the next 60 months to come in and
subsidize just a little bit over 50 percent of the profit. He
asked Mr. Towarak whether he would consider a such a partnership
between BSNC, the City of Nome, and the federal government.
1:47:26 PM
MR. TOWARAK indicated BSNC's willingness to do so. He said that
part of the plan for the current project is to eventually sell
the facility to Nome's utility service, once BSNC gets its money
back. The other part of the plan, he said, is to reinvest any
profits made through the project into smaller communities. One
example being considered, he noted, would be to put nine wind
generators in Unalakleet, which is not even half the size of
Nome.
1:48:22 PM
JERALD BROWN, Vice President, BSNC, said the investment tax
credit, to which Representative Ramras previously referred, is
useful for solar and small wind projects. However, he
explained, "The version that's in front of the U.S. Congress
currently would not cover the large utility scale wind turbines
like the City of Nome is looking at. So, ... there's less of an
incentive for a tax partner in that environment." He said he
thinks the next focus for BSNC is to consider advancing
technology in villages where the need is even greater than it is
in Nome. He said he does not know if the corporation is able to
commit $11 million to "another project in Nome." The project
that has been constructed was financed at an interest rate of
prime plus zero, which he noted is still approximately three
times as high as that which a government entity can borrow. He
emphasized the importance of recovering the money.
MR. BROWN asked the legislature to reconsider the Banner Wind
Project, as well as the City of Nome, for state grants. He
stated, "Even with all of the tax credits, free money is still
better." For example, every million dollars of grant money
received "buys down" the future cost of electricity that is
generated from the wind farm by $.03 per kilowatt hour, for the
life of the wind farm, which he estimated should be 20-30 years.
He said about $.05 per kilowatt hour is needed just to maintain
the facility; anything above that is capital recovery. He said,
"Your dollars go along way when you invest into something that
has that kind of a life."
1:51:47 PM
NEAL FOSTER, Vice President, Sitnasuak Native Corporation,
underscored Mr. Brown's request for reconsideration of the
grant.
1:52:17 PM
MR. TOWARAK, in response to Representative Edgmon, clarified
that he would not advocate for eliminating the PCE program. He
said he thinks the state has enough money to be able to keep the
PCE program going, while simultaneously investing in alternative
energy that would eventually eliminate the need for the PCE
program.
1:53:34 PM
REPRESENTATIVE JOHANSEN noted that there are three PCE
communities in his district. He said he supports the idea of
funding long-term energy solutions to the point where PCE would
no longer be needed. He observed that Neal [Foster] and Larry
Pederson went away to school, and he said the community should
be proud that they both came back and are working on solutions
to improve life in their community.
1:55:03 PM
REPRESENTATIVE PETERSEN asked what percentage of people heat
their homes with fuel oil versus electricity.
MR. BROWN estimated that nearly 100 percent of Nome's residents
heat their homes with fuel oil.
[AN UNIDENTIFIED SPEAKER FROM THE BACK OF THE ROOM] said that's
correct.
MR. TOWARAK proffered, "I think in the whole region, there's
more people that burn wood than heat their homes with
electricity." In response to a follow-up question, he said,
considering the rising cost of fuel oil, if the price of
electricity were to come down, he might consider switching to
electricity to heat his own home.
1:56:14 PM
MR. TOWARAK, in response to Co-Chair Millett, reiterated that
BSNC may build a small wind farm in Unalakleet.
1:56:51 PM
REPRESENTATIVE RAMRAS asked for the sales price of the kilowatts
being generated at the wind farm.
MR. BROWN replied that an agreement has not yet been negotiated;
however, he estimated the price would be about $0.18-$0.19.
1:57:17 PM
REPRESENTATIVE RAMRAS noted that Representative Seaton is going
to introduce a net metering bill, through which an issue will be
addressed regarding whether a kilowatt made can be sold at the
retail or the wholesale cost. He estimated that Mr. Handeland
would be selling kilowatts "into the Nome system" at
approximately "half of the cost at which they're making them
right now" with diesel.
1:58:44 PM
MR. HANDELAND, in response to comments by Representative Ramras,
reported that the cost of a kilowatt two years ago, for the City
of Nome, was about $0.30, whereas now a kilowatt costs $0.36.
1:59:03 PM
REPRESENTATIVE RAMRAS said, "You are right on the edge of
setting energy policy for ... 200 communities."
1:59:58 PM
SENATOR OLSON asked whether the industry has looked for ways to
help the general public immediately so that they are not always
"looking to the government to try and give them something." He
mentioned temperature compensators, and questioned whether they
are good or bad, and what the industry can do to "take the
pressure off and still maintain themselves in a good business
light."
2:00:54 PM
MR. FOSTER said immediate action that can be taken is to
modernize and weatherize homes. He said temperature
compensators are a double-edged sword and explained that they
compensate 70 degrees; therefore, when it is warm out, they work
to people's favor. A lot of what can be done is what is already
being done. He said he thinks the legislators are impressed at
how quickly the wind farm was constructed, and he said he thinks
that is a model for the state. He said he doesn't think there
are quick solutions, but indicated that [the wind farm] was a
start.
REPRESENTATIVE EDGMON said Senator Olson has made a good point.
He said some communities will not have as much wind with which
to generate power; in fact, some communities can only use wind
power to supplement their source of power. He stated his
support of the tax credits and low interest rates and the
furthering of the availability of these types of programs. He
talked about the high cost of fuel, asked what will happen if
the prices remain high for the next couple of winters, and
emphasized the importance of ensuring that communities remain
sustainable.
2:05:31 PM
MR. TOWARAK predicted that because of the worsening of
conditions and the economy, village people are going to continue
to move to Anchorage where it is less expensive to live.
2:06:04 PM
MR. FOSTER said Norton Sound Economic Development Corporation
(NSEDC) has a program wherein villages within a region form a
cooperative and buy bulk fuel at a better rate.
2:07:34 PM
MR. BROWN, in response to Co-Chair Millett, said the timeline of
the wind farm process began in August 2007, when the U.S.
Department of Agriculture (USDA) Rural Development Energy
program offered grants for areas of high energy costs. In
December 2007, the manufacturer was about to raise its prices,
and there had been no word from the USDA, so the board offered a
refundable deposit of $180,000, to cover $10,000 per turbine.
By May 2008, the board still had not heard anything from the
USDA, and, considering the rising cost of fuel, decided it made
sense economically to take on the project on its own. He said,
"We could produce the power with wind at a price less than what
we figured the utilities could produce it, so we could save the
community some money, and at the same time make a profit on the
wind farm." At that point, working jointly, BSNC and the
Sitnasuak Corporation authorized moving forward with the project
and the order was placed for the manufacture of the turbines.
The operation kicked into high gear in late May, with permitting
and site preparation, he noted. Mr. Brown said the site
location changed three times before settling on Banner Peak in
August 2008, at which point two and one half miles of road were
built. The actual construction timeframe was approximately from
the first of September to the end of November. The utility
company efficiently put in the underground power line. From the
initial thoughts about the project to its completion was
approximately one and one half years, he said. However, the
time from authorization to producing power was about seven to
eight months.
2:12:39 PM
REPRESENTATIVE PETERSEN recalled that during their tour of the
wind farm, legislators were told that the facility may be used
as a training center for wind farm maintenance workers. He
asked how that might work.
2:13:12 PM
MR. BROWN said there are storage containers that will be used to
build walls of a training facility. He said discussions have
been held with the University of Alaska, Northwest Alaska Career
and Technical Center (NACTEC), and the Nome Public Schools (NPS)
about "rotating people in through that facility for training in
alternative energy, particularly wind."
2:13:59 PM
MR. TOWARAK added that two of [BSNC's] staff have qualified as
inspectors for the state's energy rating program, which he said
shows just how important the concept of energy for the whole
region is to the board.
2:14:21 PM
LEO B. RASMUSSEN, noted that he recently retired from USDA, and
said getting any paperwork through that entity is a slow
process. He stated, "The greatest return we can give to our
people, with your assistance, is a better life standard, which
can come with an alternate energy resource that is far less
expensive than having to rely on the resource that we ship
outside, which is oil and gas." Mr. Rasmussen mentioned the
money in the permanent fund and suggested the need for Alaskans
to find some way to reinvest in themselves to achieve a better
standard of life. He said there is a water source across the
Lisianski Inlet from Pelican that could be tapped at a
reasonable cost to generate energy. He estimated that "of the
256 geopolitical units" in the state, close to 200 have a water
resource available at least half of the year that could generate
low-head hydro power. He estimated that the cost of burying a
pipe in the ground, at a source higher than its terminus, could
be only $1 to $2 million. He said Little Diomede has a
constant, six mile per hour current, and would only need a
turbine to collect that energy. He questioned looking for
multi-billion dollar projects when there are so many multi-
million dollar projects that would "do exactly the same thing."
MR. RASMUSSEN, regarding the aforementioned road to Nome, said
many surveys exist, including one from 1927. He said it would
be far less expensive to install a railroad than to put in a
road. He reiterated his encouragement to look for simple
solutions. He commended BSNC and Sitnasuak for its brave move
and encouraged the state to follow that example so that there
is no need for "20 different kinds of systems in Alaska." He
said the state could have bought solar panels, wind turbines,
and water generators, and offered them to communities around the
state, which then could have funded their own foundations and
technology.
2:25:53 PM
CO-CHAIR EDGMON concurred with Mr. Rasmussen regarding the
importance of looking for small scale projects. He said about
two weeks ago, the Yukon Tribal Watershed Organization came to
Juneau to talk about its turbine project. He offered further
details. He said [this information] will hopefully open the
doors for the legislature to provide funding streams or work as
partners with local efforts. The solution to energy problems,
he concluded, will not be from the government alone; the local
efforts combined with other entities are what will bring
success.
2:27:33 PM
MR. RASMUSSEN described a hydro energy system at a nearby mining
camp. He suggested that even on the North Slope, it is possible
to get four to five months of hydro electric power each year.
2:28:30 PM
REPRESENTATIVE TUCK expressed appreciation for Mr. Rasmussen's
comments regarding a rail versus road system to Nome. He noted
that Noatak wants a road built that would tie in to the haul
road to the Red Dog Mine and [bring in] competition for fuel
providers. In other situations, he said it would be less
expensive to transport fuel by rail than by road.
2:29:37 PM
MR. RASMUSSEN noted that a crane big enough to put the turbines
in place had to be shipped to Nome, and although it was used for
another project while it was in Nome, it could have been used
around the state for multiple projects if those projects were
scheduled to happen around the same time.
2:30:52 PM
REPRESENTATIVE TUCK said when he worked in construction,
whenever the company worked in a remote location, it would
purchase a backhoe, knowing that it would never be shipped back,
but instead would be left behind. He said that is because of
the high cost of shipping. He concluded that water is the
cheapest source of transportation, but is not available in Nome
year around; the second least expensive mode of transportation
is rail and air transportation is the most costly.
2:33:05 PM
COLBY CARTER stated that he would like the legislature to be
aware of Nome's natural gas resource. He deferred to Mr. Emmons
for further comment.
2:34:22 PM
CARL EMMONS, Nome Joint Utility System, noted that he is a
member of the Nome Joint Utility Board, and that during an
energy conference, a spokesperson from the United States
Department of Energy presented an engineering and economic
analysis of gas production in the Norton Basin. He said in the
early '80s drilling was done in the search for oil, and gas was
found about 30 miles from Nome. Two wells would cost about $112
million, and there would be a profit of approximately $10
million in about seven years, based on fuel oil at $2 per
gallon. The City of Nome tried to pursue this avenue with DOE,
but has been told essentially that the business of gas
production is for oil companies, not communities. He opined
that rural communities will always need some other source of
energy for the times when "the wind doesn't blow and the sun
doesn't shine." He encouraged the state to look at energy
independence by including natural gas as a source, which he said
would make a profit.
MR. CARTER added, "And it's here; it's a bird in the hand; it's
identified. We just need some help developing this."
2:35:47 PM
REPRESENTATIVE RAMRAS remarked that one obstacle is getting a
jack-up rig into the region. Attempts to do so in the Cook
Inlet have failed thus far, he indicated.
2:36:14 PM
MR. EMMONS pointed out that the report from [the spokesperson
from the U.S. Department of Energy] shows that the mobilization
costs would be low, because there are already jack-up rigs going
to the Canadian Arctic every year that could do the work on
their way north.
2:36:56 PM
REPRESENTATIVE RAMRAS promised that he would talk to Kevin Banks
at the Department of Natural Resources (DNR) about the concept.
2:37:18 PM
MR. EMMONS surmised that a lot of rural Alaska is "in the same
boat that we are," and that there is potential for everyone in
this part of Alaska to benefit.
MR. COLBY observed there are 3,412 Btus per kilowatt and 100,000
Btus per gallon [of oil]. He stated, "When I can buy enough
electricity to offset one gallon of fuel oil, I will switch my
boiler to an electric boiler [and] so will everybody else."
CO-CHAIR MILLETT requested copies [of the aforementioned DOE
report].
2:38:34 PM
MITCH ERICKSON, Executive Director, Nome Chamber of Commerce,
said the chamber held its first energy summit in April 2006,
which raised awareness regarding energy cost challenges. He
indicated that the summit was well attended, and topics were
discussed from "big picture, big dollar items" to ways to cut
energy costs immediately. However, he said, the rest of 2006
was basically wasted in attempting to put resolutions together
for the [Alaska] State Chamber of Commerce and working with the
Alaska Federation of Natives (AFN) to put its energy resolution
together. He stated, "We realized then that until the Railbelt
started feeling high energy prices, we are out here on our own."
Mr. Erickson said "a number of us" talked a lot about [energy
issues] and "what has happened since then is Banner Wind."
MR. ERICKSON mentioned various projects, including the
conversion of wind to heat hot water, the use of evacuated tube
solar panels, and "small wind" installed in Shaktoolik and in
Nome. All the projects were funded by private sources in an
attempt, not only to cut energy costs, but also to create an
industry in the region to design and install this equipment.
Banner Wind is a success, because now there is a company in Nome
that can design, build, and install wind farms. He related that
the chamber supports making Nome the wind training center for
Alaska and has been working with the University of Alaska (UA)
to make that happen.
MR. ERICKSON said that since 2004, the audited energy costs for
Nome's schools has nearly doubled from $500,000 to over $1
million this year; and that money comes straight out of the
classroom. He explained that the school budget is due July 1,
while the fuel barge shows up in October, and the result is that
money has to be taken out of the classroom to pay for the fuel.
Since fiscal year 2004 (FY 04), energy costs, on an incremental
basis, have increased by $1.3 million. He said the governor has
asked for accountability, but he reemphasized the difficulty of
planning the school budget without knowing what the cost of fuel
will be.
MR. ERICKSON said the chamber would like to see PCE made
available to schools, businesses, and "everyone." Wind [power]
in the Lower 48 is growing at a 20 to 40 percent rate, even
though rates there range between $0.06 and $0.11, and billions
of dollars are being invested. He said the reason for that is
because of the model set by Banner Wind. Mr. Erickson said "out
here," where the rate is $0.40 to $1.00, it is a logical step to
allow for-profit entities to partner to build the wind farms.
He opined that in considering whether or not to build a turbine
in the villages, there needs to be a minimum of a 25 percent
penetration rate, because it costs just as much to bring six
turbines in as it does one.
MR. ERICKSON concluded his testimony by saying that AEA is
grossly understaffed. He also stated his belief that UA should
take the lead in developing alternative energy sources. He
commented favorably about the NSEDC vertical wind turbine
project for small villages that have constant wind conditions.
2:47:39 PM
MR. ERICKSON, in response to Representative Johansen, said the
progress regarding working with UA is going well. He said those
involved are looking at syllabi from wind technician programs of
junior colleges in the Lower 48; however, more turbines will
need to be built in order for such a program to be successful.
He said the chamber realizes that renewable energy will always
be a secondary source. The goal of some of the solar projects
would be to produce power from February 15 to October, when
according to the National Aeronautics and Space Administration
(NASA), "we" had more sun insulation than Tucson, Arizona. He
indicated his eagerness to install solar tubes by the fifteenth
[of February] in order to begin recording data; in fact, the
chamber brought in a company from Seattle, Washington, two weeks
ago, to provide solar thermal training, and 25 people attended
that training session. He clarified for the co-chair that the
solar panels seen on buildings are for generating electricity,
while the system to which he is referring uses tubes to heat
water.
2:49:32 PM
REPRESENTATIVE PETERSEN asked about the vertical wind generator
project.
2:49:58 PM
BRIAN JACKSON, Western Community Energy (WCE), explained that
the vertical wind project predated the Banner Wind project, but
there have been delays in the project. The prototype unit has
just been delivered to Nome and will be installed over the next
several weeks. Mr. Jackson emphasized that this is a research
project. Vertical axis turbines have not performed [well]
historically, he said; however, they have unique
characteristics, in that they can be used on buildings and in
towns, and they can deal with turbulence and varying wind
directions. Mr. Jackson said in Nome's environment, heat loss
is dramatically enhanced when the wind is blowing; therefore, a
technology that could offset the heat loss with the generation
of energy would be a great benefit.
2:52:40 PM
KATIE PETERSON, Community Development Coordinator, NSEDC,
relayed that the intent of the [vertical turbine wind] project
is to provide something that the average resident in the region
can install on his/her house. She said NSEDC would use
Unalakleet and Nome as hubs, and would train locals to help
maintain the units, thus providing jobs and lowering energy
costs.
2:53:31 PM
MR. JACKSON emphasized that the project has undergone many
phases, and he said NSEDC decided that they wanted to fund it
because such a project does not exist in the rural world at the
present. He spoke of taking action rather than "just waiting
for some solution to materialize."
2:54:09 PM
REPRESENTATIVE JOHANSEN said he supports efforts to create
multiple sources of power, rather than thinking something "big
and grand" has to be done. He expressed appreciation for the
testimony heard thus far.
2:55:45 PM
MR. ERICKSON said many of the projects being tested locally are
ultimately meant to be exported to the villages.
2:56:11 PM
REPRESENTATIVE RAMRAS talked about the City of Nome transforming
one third of its portfolio from diesel to [wind energy], and he
said it would set a precedent for other communities of its size.
[Co-Chair Millett passed the gavel to Co-Chair Edgmon.]
3:00:17 PM
MR. ERICKSON, in response to Co-Chair Edgmon, reiterated the
information pertaining to the $1.3 million increase in the
energy cost to Nome schools in the last five years.
3:00:45 PM
CO-CHAIR EDGMON noted that the fuel bill for Noatak's school was
$40,000 in December, and about $50,000 in January.
3:01:21 PM
MR. ERICKSON indicated that his reason for researching the
information pertaining to the school budget was inspired by
repeatedly hearing the arguments at the city council meetings
every October [after the fuel barge arrived]. The idea is to
try to get more money back into the school districts that has
been taken out because of escalating fuel costs, he concluded.
3:01:53 PM
REPRESENTATIVE EDGMON told Mr. Erickson that he sits on the
House Special Committee on Education and the issue of school
districts working to conserve energy is not lost on him.
3:02:57 PM
NANCY MENDENHALL, Chair, Advisory Council, Co-operative
Extension Service, University of Alaska - Fairbanks, related
that the purpose of the service is to educate householders, and
that the priority topic of the extension service for this year
and last has been energy education. She welcomed any
suggestions from the legislature regarding ways to teach people
how to save energy costs in their homes. She said she agrees
that immediate solutions are needed, and suggested the state
consider a matching grant program to help families install wood
stoves in those communities with a good wood supply. She
remarked that two sources of wood are driftwood and discarded
shipping pallets.
MS. MENDENHALL said the recently released state energy plan
highlighted the need for the upgrading of power plants in rural,
off-road communities. She stated that while her emphasis is in
alternative energy, the upgrading of the power plants seems to
be a vital need.
MS. MENDENHALL, speaking on her own behalf, said all the people
she has spoken with in Nome would prefer a railroad to a road.
3:06:10 PM
RUTH EMMONS told the committee that she lives in senior housing
and receives a credit from rural development for her
electricity. She stated that many people who do not live in
rural areas do not understand the PCE program. She related that
this year, because one of "the management company people" failed
to include PCE as part of its electricity cost figures, those
who had previously been receiving a credit of $83 a month are
now only getting a credit of $55 a month. She revealed that she
is living with multiple sclerosis and is heat sensitive. She
expressed her appreciation of the legislature coming to Nome to
hear the testimony of residents. She recalled various places
she has lived and other places that used wind or water power.
[Co-Chair Edgmon returned the gavel to Co-Chair Millett.]
3:12:24 PM
MR. HANDELAND returned to the witness table to discuss the City
of Nome's utilities. He acknowledged the presence of the
following three Nome Joint Utility Board members: Carl Emmons,
David Barron, and Fred Moody. Mr. Handeland noted that the
subject of fuel stabilization is addressed on page 44 of a
handout in the committee packet entitled "Alaska Energy - A
first step toward energy independence." He said, "That, as a
policy for the state, is something that the City of Nome and
[the Nome Joint Utility System (NJUS)] supports." He said the
NJUS does not care about the price of fuel between October and
May; the window for purchasing fuel is between June and October.
Because of the schedule of fuel purchasing, Nome and all the
rural communities are in a position of continuing to pay high
energy costs "for some period into the future." Mr. Handeland
said the city and NJUS recommend that the state consider putting
together an assistance program for communities that only have
fuel shipping available for a portion of each year, to help
equalize the fuel costs either by buying them down or through
the "hedging of fuel." He suggested either the trustees of the
permanent fund dividend, or AEA, are "well suited to assist in
that hedging program." Being able to pay today's fuel cost of
$1.40 [per gallon] to be delivered this summer would "change the
picture for rural communities."
MR. HANDELAND noted that the issue of net metering is found on
page 50 of the aforementioned handout. He said net metering is
of interest to utilities and to the community of Nome. He
stated:
While we certainly want to see the benefit of reduced
energy costs going to members of our community, we
also are concerned that some of these programs, such
as the wind power and ... alternative solar are not
24/7, 365. And so, utilities must maintain a plant
that is capable and ready to operate in the times when
the wind is not blowing or the sun is not shining.
And so, that should be taken into consideration.
... I mean, if everybody in town goes onto an
alternate source, I mean that's great for the time
that that source is available to them, but pretty soon
they're going to want to turn that switch and get it
back from the utility. And if in the net metering
program, there's not some consideration taken to a
formula or ... a way to limit the revenue that a
utility would lose by other people doing the
generation, ... it could impact our abilities to
maintain plants and have them available when those
alternatives are not available.
MR. HANDELAND said that the city and NJUS support AHFC's various
weatherization programs, although he echoed the previous
testifier who mentioned that people have trouble coming up with
the upfront cost. He said if he were not currently spending
$15,000 this winter just to heat his home, he would be putting
that money into energy upgrades. This is something he said he
would pursue this summer. He concurred with Ms. Mendenhall that
the upgrade of diesel plants in the communities is an important
way to save fuel. The City of Nome has had an efficient power
plant over time, but has done some upgrades, utilizing diesel
engine and switchgear controls, as suggested on pages 62 and 63
of the handout.
MR. HANDELAND said the city is also looking at distribution
system upgrades. There is a need to replace some of the power
lines because they are in danger of being impacted by storms in
the area. One of the strategies in the state plan, he said, is
to upgrade distribution systems and increase voltage in order to
eliminate some of the line losses. Mr. Handeland said the city
is glad to know that the state, through the renewable energy
program, is looking at developing wind technologies and other
resources. He relayed that there has been consideration given
to applications that were submitted, and he expressed
appreciation of the committee regarding other ways that the city
might be able to fund those projects. He noted, however, that
there is "very little of the wind capacity in the state of
Alaska that is being utilized," and the energy study done in the
region of Nome, "that would seem to be one of the most
promising." Mr. Handeland said there is also a geothermal
resource about 55 miles away from Nome, in Pilgrim Hot Springs.
The state energy plan and the "by community" summaries that are
included in it list the potential for significant cost savings
to consumers through the use of geothermal energy. He
concluded, "We do believe there are a few areas where this
document should be adjusted, because it does note that wind is
not feasible in our area, and I think that you've seen
otherwise."
3:22:05 PM
MR. HANDELAND, in response to a request for clarification, said
that information is noted in "an AEA per community document for
the City of Nome." He said the document says a wind diesel
hybrid system actually loses $800,000, which he said he hoped is
not correct. In response to a follow-up question, he stated his
belief that [the City of Nome and NJUS] were consulted through
the Alaska Power Association regarding the document; however, he
said he was not consulted directly. In response to a request
for further clarification regarding the compilation of
information, he said:
I believe that, to the best of my knowledge, AEA took
this information off of submittals that were done
under the PCE program for the first portion of it, and
I am unsure as to where they took the information on
the geothermal or the wind hybrid.
3:23:54 PM
CO-CHAIR EDGMON noted that the City of Unalaska had the same
concern regarding their "local numbers, as well, not being
consulted."
3:24:25 PM
MR. HANDELAND, in response to Co-Chair Millett, said in all
fairness to AEA, he did not speak with that entity directly
about the information, he read it last night, and he just found
out that there is a 10 megabyte addendum on AEA's website.
3:25:25 PM
CO-CHAIR EDGMON emphasized that no one is trying to undercut the
good work that has been done by AEA. The energy crisis in
Alaska is a huge issue, and there may or may not be an immediate
solution depending on in which area of the state one lives, he
said. While AEA plays a significant role, the House Special
Committee on Energy, as well as "other efforts" also play an
extensive role in the issue. He said he has heard from other
community members that they think the community profiles "may
have been hastily put together in order to meet some sort of
arbitrary deadline, in terms of having an energy plan out." He
said he has candidly said that he does not think that the
document from AEA represented the energy plan, and the director,
Steve Haagenson, agreed that it was a "building block."
3:27:27 PM
MR. HANDELAND, in response to Representative Petersen,
reiterated that the location of the geothermal resource outside
of Nome is Pilgrim Hot Springs. He noted that page 143 of the
AEA document lists other sites currently being looked at for
geothermal energy, including Chena Hot Springs. He said Mr.
Emmons just handed a report regarding the energy potential at
Pilgrim Hot Springs to him. Furthermore, he related that the
agent at the University of Alaska who addresses wind issues
submitted an application to the Renewable Energy Fund to find
out if it would be possible to do additional drilling [at
Pilgrim Hot Springs] to determine whether or not the resource
should be "on the table or off the table for the City of Nome."
3:29:04 PM
REPRESENTATIVE JOHANSEN said he has heard from many community
members that geothermal energy is not taken seriously by AEA.
He encouraged anyone who has felt that way to contact his/her
representative, senator, or a member of the House Special
Committee on Energy, because he said he thinks that resource has
great potential.
3:30:20 PM
MR. HANDELAND commented that the community of Nome is interested
in any alternative that will save money on energy. Some people
in town have determined that the cost of using electric heat, at
$0.36 per kilowatt, is still less expensive than buying diesel
fuel with which to operate an oil fired boiler. He added, "But
neither one is something that is sustainable by any of us for
any length of time." He said the city has been following with
interest the discussions occurring in Galena relative to the
potential for some small-scale nuclear technology being
introduced, which potentially may be available to smaller
communities. He mentioned a company that is considering the
licensing of facilities that would be either 10 megawatts or 50
megawatts, which he said would be too big for Nome and its
surrounding communities. However, he remarked, "If nuclear
technology could be used safely and less costly than potentially
putting in more efficient transmission lines and
interconnections to a grid system in rural Alaska, it might be
feasible."
MR. HANDELAND expressed his appreciation to the committee for
travelling to Nome for the meeting.
3:33:59 PM
CO-CHAIR MILLETT said she had anticipated hearing negative
testimony, but she commended the residents of Nome for their
positive attitude and proactive approach to finding solutions to
the energy challenge.
3:34:43 PM
MR. HANDELAND, in regard to a previous testifier's mention of
the Northwest Alaska Career and Training Center (NACTC), noted
that that entity is a cooperative venture between Nome Public
Schools and Bering Strait School District. He offered further
details.
3:36:31 PM
CO-CHAIR EDGMON recalled that during hearings last summer, there
had been some reference to tax liabilities, in that if the state
were to give money to a community to help it pay down its fuel
cost, there would be a tax consequence. He asked Mr. Handeland
if he could expound on that.
3:37:50 PM
MR. HANDELAND said he remembered an ongoing discussion and
concern regarding "what it would actually do to PCE levels, as
well." He said as a municipal utility, "we would see it simply
as a reduction in our costs." He said as opposed to the PFD
being a payment directly to an individual, "we would envision
this as a payment directly to a utility." He said it would be
helpful to have that also apply to heating fuel, but that would
involve other vendors. He concluded, "If we could at least cut
some of the energy costs, it might make some of the other high
costs bearable."
3:39:12 PM
CO-CHAIR EDGMON indicated that he would be asking that question
at an upcoming meeting of the Alaska Power Association. He
said, "I do vaguely recollect there being some sort of a chain
reaction from that money from the state to the utilities that
would be passed on either to the utility or to the consumers in
a way that wasn't really beneficial to the local community."
3:39:50 PM
JIM ADAMS stated his support of more tax credits to individuals
rather than businesses, and highlighted the need for access to
power, including power lines and railways.
3:41:26 PM
REPRESENTATIVE PETERSEN shared that he comes from farm country,
and the power lines there were installed during the Depression
by rural electric cooperatives that were loaned federal money.
He suggested that perhaps that might be a program that could be
recreated in Alaska, since the state is still a developing area.
3:42:02 PM
CARL EMMONS, Member, Nome Joint Utility Board, explained that
because Nome must pay for its fuel in advance, even after fuel
prices begin to go down in the urban areas of the state,
residents in Nome will continue to pay the higher price until
all of that fuel is used. Mr. Emmons concluded by telling the
committee that Nome could use any assistance that the
legislature can offer.
3:44:45 PM
MR. JACKSON reappeared before the committee to introduce Bryce
Green and Robert Hafner who are two students involved in WCE's
training program. He said Mr. Green is an example of a local
young person who is training to work, and stay, in his
community.
3:46:43 PM
BRYCE GREEN answered questions regarding his work on the wind
turbine tower.
MR. JACKSON emphasized the value of hiring local employees when
his company brings its product to a community.
3:48:39 PM
ROBERT HAFNER stressed that having a locally trained workforce
can mean the difference between the failure or success of a
project. He also expressed his excitement at working toward an
environmentally sound goal.
3:50:12 PM
MR. JACKSON presented a "wind" map that shows that those areas
in Alaska that have the highest energy costs are also in the
richest wind source areas. He stated that this situation makes
Western Alaska an area economically viable to start making
changes. He reported that nationally, the wind industry grew 50
percent last year, on top of a 45 percent growth the prior year.
In 2007, there were $9 billion worth of wind projects developed
in the nation, and in 2008, there were $17 billion worth. He
offered specific examples of other states' growth in wind
development; in fact, the total wind power in the nation is up
to more than 25,000 megawatts. He said there is a tremendous
opportunity for growth and improvement, and the state has the
resources to justify it.
MR. JACKSON stated his belief that maximum value is achieved by
getting the local community involved, including those who
service, install, invest, and give community support. He talked
about the trickle-down effect on a rural community from the
economic stimulus of a wind project. He emphasized that the
stakes are currently extremely high, as people are choosing
between buying food or fuel.
3:45:45 PM
MR. JACKSON said when his company uses local investors and local
construction, a project can be financed with a 10-year, 6
percent loan, provide a 10 percent return to a local tax equity
investor, and provide a target energy sales rate of between
$0.19 to $0.25 a kilowatt hour. Those are communities that are
currently paying between $0.50 and $1.10 per kilowatt hour. He
pointed out that without the success of the project in Nome
first, his company cannot afford to go to a village without
"having a base operation in a place like this to be able to
source from." He talked about the uncertainty of the barge
schedule as it relates to trying to ensure the completion date
of a project, and talked about the effect of weather in Alaska
on project schedules.
3:57:58 PM
MR. JACKSON said the company is at the point, in February, where
it needs commitments for deposits and financing for projects in
2009. In fact, turbines are available for this construction
cycle. He said grants and subsidies are not needed as federal
incentives are in place. Furthermore, it looks like the bonus
appreciation will be renewed, and there may be an investment tax
credit rather than a production tax credit, because this is
smaller turbine project, he noted. Mr. Jackson said it is
sometimes difficult to get financing without a deposit or
project status and vice versa. He described Alaska's Energy
Loan Program as "the beginnings of a strong mechanism to help
finance rural energy projects in Alaska." The program is
designed to go from zero to 100 percent financing, with zero to
6 percent interest rates, and fluctuates between almost being a
grant program with a payback, to being a valid business loan, he
remarked. Mr. Jackson said many projects are faced with the
hurdle of a tight market right now, so he encouraged the state
to consider increasing or accelerating that mechanism.
4:00:31 PM
MR. JACKSON, in response to a question from Representative
Petersen regarding the barge and the timing of the project, said
once the company has the turbines committed, they are scheduled
to be on the barge. He indicated that an April meeting with
BSNC and Sitnasuak Corporation last year put the company in a
winter-time construction cycle, and if that were earlier, it
would allow the company to be two months ahead of the barge
cycle and, thus, do the projects in June, July, and August. He
added, "And so, that's really our timeline. If it turns into
April, ... the turbine might not be available." He noted that
the company has been talking to a lot of local entities that
have a tax liability and that can be investors. The bottom
line, he concluded, is that this year's project is on the
[earlier] schedule.
MR. JACKSON mentioned a study done on the benefits and effects
of the Federal Tax Credit, which shows a greater than two-times
return for the federal government on the investment in tax
projects for the tax credit issued. Furthermore, he noted that
the State of Oregon has a business energy tax incentive driving
many of its wind projects. That incentive, he related, offsets
a 50 percent tax credit on a small project, which over a period
of five years has shown to be a benefit to the community and the
state of approximately three times the cost. He said the states
that create such incentives get successful projects. Mr.
Jackson assured the committee that the company is in a position
to move forward in Alaska without extra incentives; however, he
emphasized the need for "a little bit of extra support."
MR. JACKSON opined that it would be a tragedy not to move
forward this year with village installations. He said
representatives of BSNC told WCE that the villages have an even
greater need than that of the City of Nome, and the Sitnasuak
Corporation echoed that sentiment. However, the company
explained to those entities that it would not be possible to go
to the villages first because a base was needed in Nome where to
provide access to training, expertise, skills, and spare parts.
Furthermore, the company believes that it can take care of the
village installations from Nome as long-term operation and
maintenance is the most critical part of the project; it is
critical to the industry that the turbines keep running. The
week that the turbines are activated and the wind is blowing,
the [diesel] generators begin using less fuel. He stated the
biggest message to community was:
I can't take out all of your diesel consumption, but
we can do something this year to at least reduce it -
and not only to reduce it, but to take that first step
that we can add to later on to reduce it even more.
4:07:06 PM
CO-CHAIR EDGMON said the State of Alaska does not have low-
interest, incentive loan programs in place, and this is an issue
that the committee will be discussing. He mentioned that he has
sponsored legislation that would create an energy efficiency
loan program for commercial fishermen; however, further
testimony from Mr. Jackson would be helpful so that the
committee can study incentive loan programs.
4:08:42 PM
JIM STIMPFLE referred to HB 66, regarding net metering. He said
the "sea change" benefit of that proposed legislation is that it
would turn meters back by allowing individuals and businesses to
use alternative energy. The possible effect would be to "zero
out" the electrical costs for a homeowner for home heating and
even for a car in the near future. He opined it is the
individual Alaskan resident who will benefit from the bill,
while the power companies will lose revenue. Mr. Stimpfle said
rate-payers will support net-metering but power companies will
not. He pointed out that BSNC and NJUS have not negotiated a
[power purchase agreement] for the current wind farm, thus BSNC
has made a $6 million investment with no revenue stream. He
said HB 66, as written, is a good law, but it could be better.
He relayed that 40 of the Lower 48 states have net metering laws
and New Jersey's is the best as it allows individual homeowners
and business owners to install 2 megawatt systems and "credits
go forward for a whole year." He said he knows that
Representative Seaton and his staff have worked hard to "keep
the radar screen low for the power companies so they don't get
bit too hard right up front." He suggested a possible change to
the proposed requirement that power generation systems be on
premises, emphasizing the importance of putting systems where
they will work best. He observed that the passage of HB 66
would be a great service to individual Alaskans, but would not
cost the state a penny, because "we go out and buy $20,000,
$50,000, $100,000 systems to generate [power] connected to the
grid." Mr. Stimpfle suggested Alaskans question who owns the
grid and who would service it.
4:16:31 PM
CO-CHAIR EDGMON said the issue of net metering was brought up
last year when Representative Seaton introduced the bill, and
there were hearings held on the subject with opposition by some
utility companies. Times are changing, however, he said, and
there are increasing attempts to create energy at the local
level. He talked about the need for balance, and said he
invited Mr. Handeland's response to Mr. Stimpfle's testimony.
4:18:21 PM
MR. HANDELAND recognized that net metering is not a new concept;
however, what makes it more difficult in Alaska is that the
state is not connected to a grid and each of the individual
companies or the utility in each village is its own entity that
needs to be maintained. He suggested net metering may work in
Anchorage and Fairbanks, where the utilities are "intertied."
He said he does not know if some communities could feasibly
continue to operate a power plant if everybody's bills were
zero. He explained that it would be fine if the company could
completely turn off the diesel generation, but in the winter,
"that isn't really palatable to people." There are some
communities that have decided to shut off their electric utility
at 11:00 p.m. and start it again at 7:00 a.m., but that does not
work for a majority of communities. Mr. Handeland said NJUS
does not have a problem with these alternative systems and
encourages residents to install them, but he does not think it
is fair to the utility company to receive no revenue while
remaining in "stand-by mode" to provide power to the customers.
CO-CHAIR EDGMON mentioned hearing from the Nushigak Cooperative
in Dillingham that it already has the ability to put together a
net metering policy without any statutory changes. He said,
"So, this issue, I think, ... is just starting to take shape,
and it may actually wind up in statute."
4:21:07 PM
MR. STIMPFLE said some villages are linked together; in fact,
the Alaska Village Electric Cooperative (AVEK) has 53 villages
in its system. He related various topics that have been in
AVEK's newsletters; for example, opinions for and against net
metering. In January, AVEK's president and CEO warned
cooperative members against people like Mr. Jackson coming into
the community to install private systems "connected to their
grid," because companies such as Western Community Energy (WCE)
are motivated by profit. Eventually, there will be a major
switch to alternatives, and that change must be addressed at
some point. He described PCE as "a dog chasing his own tail,"
and opined that Alaska may never have renewable energy because
the state is "stuck with a diesel model that you've got to pay
for." Mr. Stimpfle said addressing the issues of HB 66 will be
a tough job.
4:23:25 PM
CO-CHAIR MILLETT pointed out that Representative Olson has
introduced a net metering bill which takes into account the
infrastructure costs borne by utilities.
4:23:43 PM
MR. HANDELAND related that Nome has adopted a net billing
platform as opposed to net metering. He said, "Anything that
somebody sends back is at the avoided cost, because we're not
having to buy a gallon of diesel fuel to generate it. But they
still would be responsible for covering the fixed cost." He
said NJUS does not yet have a power purchase agreement with
Banner Wind for several reasons. One reason, he advised, is
that the project was initiated at the end of December, and it
would not be prudent to rush into a contract, that may last up
to 30 years, before seeing real data.
4:25:07 PM
CO-CHAIR EDGMON asked if the power purchase agreement has to go
through the Regulatory Commission of Alaska or the Alaska Energy
Authority Commission.
4:25:28 PM
MR. HANDELAND said he did not know the answer to that question.
He said the City of Nome utility is regulated by the Nome City
Council and the Nome Joint Utility Board. He suggested Mr.
Brown could answer the question with regard to what Banner Wind,
as a power producer, "may have to do."
4:25:56 PM
FRED MOODY noted that he has worked in the electrical industry
for 50 years. He offered his understanding that it was 1973
when the federal government passed a law regarding "co-
generation." The reason for the law had to do with the
existence of many military bases and other industry entities
that ran their own generators and were not able to hook up to a
utility because of the difference in cost ratio. The law
provided that an entity with surplus electricity could hook up
to the utility company, and the utility would pay the entity the
deferred cost. He related an incident from 1971, when the City
of Kenai was without power for seven days and could not use
electricity from Wildwood Army Station because there was no law
allowing the government to sell electricity to the utility
company. Mr. Moody stated that the entities who put up the wind
farms want to make money; however, they do not want to be a
utility. The state requires those selling electricity must have
a utility license and operate in a specific area. In the Lower
48, an individual can generate power, but must pay to use a
utility's power lines and switchgear. He indicated that as long
as costs are determined, no one will complain, except possibly
someone with a 20 kilowatt windmill who has to pay to buy and
sell electricity and can not "use your free system."
4:30:16 PM
MR. STIMPFLE said most people who believe in net metering want
to use their own power first and the utility company's power
second. Net billing is set up to force the reverse of that.
4:31:21 PM
CO-CHAIR MILLETT closed public testimony.
4:31:35 PM
REPRESENTATIVE PETERSEN remarked upon the vast amount of
information received, and said it is possible to solve the
energy problems if everyone works together. Sometimes, he
opined, the government just has to get out of people's way to
let progress take place.
4:32:18 PM
REPRESENTATIVE JOHANSEN thanked the resident of Nome and said he
learned a lot today.
4:32:34 PM
REPRESENTATIVE TUCK thanked the people of Nome for their warm
welcome and their determination and desire to solve the problems
in their community and serve as a role model to solve the energy
problems of the state.
4:32:54 PM
CO-CHAIR EDGMON concurred with the value of the committee's
visit to Nome. He announced that the committee would be holding
similar meetings in Bethel and Dillingham. He said Bush
residents are resourceful survivors and will find answers to
this issue. He encouraged those present to call with comments
and suggestions.
4:35:00 PM
CO-CHAIR MILLETT thanked staff and others responsible for
facilitating the meeting. She also thanked the residents of
each community for their hospitality and their testimony on this
challenging issue.
4:36:44 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Energy meeting was adjourned at 4:36 p.m.
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