Legislature(2013 - 2014)BARNES 124
02/20/2013 08:00 AM House ENERGY
| Audio | Topic |
|---|---|
| Start | |
| Overview(s): Power Cost Equalization by the Alaska Energy Authority | |
| Overview(s): Susitna-watana Hydro by the Alaska Energy Authority | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ENERGY
February 20, 2013
8:01 a.m.
MEMBERS PRESENT
Representative Doug Isaacson, Co-Chair
Representative Charisse Millett, Co-Chair
Representative Neal Foster
Representative Pete Higgins
Representative Shelley Hughes
Representative Benjamin Nageak
Representative Andy Josephson
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
OVERVIEW(S): POWER COST EQUALIZATION BY THE ALASKA ENERGY
AUTHORITY
- HEARD
OVERVIEW(S): SUSITNA-WATANA HYDRO BY THE ALASKA ENERGY
AUTHORITY
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
SARA FISHER-GOAD, Executive Director
Alaska Energy Authority (AEA)
Department of Commerce, Community & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: Provided a PowerPoint presentation
entitled, "Power Cost Equalization Overview," dated 2/20/13, and
introduced the PowerPoint presentation on the Susitna-Watana
Hydro project.
STUART GOERING, Assistant Attorney General
Commercial and Fair Business Section
Civil Division (Anchorage)
Department of Law
Anchorage, Alaska
POSITION STATEMENT: Speaking on behalf of the Regulatory
Commission of Alaska, answered a question during the overview on
Power Cost Equalization by the Alaska Energy Authority.
WAYNE DYOK, Project Manager
Susitna-Watana Hydro Project
Alaska Energy Authority (AEA)
Department of Commerce, Community & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: Provided a PowerPoint presentation on the
Susitna-Watana Hydro project.
ACTION NARRATIVE
8:01:01 AM
CO-CHAIR CHARISSE MILLETT called the House Special Committee on
Energy meeting to order at 8:01 a.m. Representatives Hughes,
Higgins, Isaacson, Josephson, and Millett were present at the
call to order. Representatives Nageak and Foster arrived as the
meeting was in progress.
^OVERVIEW(S): POWER COST EQUALIZATION BY THE ALASKA ENERGY
AUTHORITY
OVERVIEW(S): POWER COST EQUALIZATION BY THE ALASKA ENERGY
AUTHORITY
8:01:43 AM
CO-CHAIR MILLETT announced that the first order of business
would be an overview of the Power Cost Equalization program by
the Alaska Energy Authority (AEA), Department of Commerce,
Community & Economic Development (DCCED).
8:01:55 AM
SARA FISHER-GOAD, Executive Director, Alaska Energy Authority
(AEA), provided a PowerPoint presentation entitled, "Power Cost
Equalization Overview," dated 2/20/13. She informed the
committee that AEA reduces the cost of energy in Alaska with
four strategies: energy planning and policy; investing in
energy infrastructure; diversifying Alaska's energy portfolio;
and technical training and assistance. The power cost
equalization (PCE) program directly reduces the cost of energy
for approximately 80,000 residents primarily living in rural
Alaska. She compared the price of electricity across the state,
noting that the prices in Juneau, Anchorage, and Fairbanks make
up part of the formula for the PCE program [slide 3]. Because
the electric rates in rural Alaska can be three to five times
higher than the rates in urban areas, assistance is needed to
maintain and operate the power systems in rural Alaska. The PCE
program was created when state funds were used to construct
major energy projects in the urban areas of the state,
particularly the Four Dam Pool projects that served Kodiak,
Valdez, Wrangell-Petersburg, and Ketchikan. This type of
infrastructure is not practical in most rural areas, so PCE was
devised as an alternative to infrastructure [slide 4]. Ms.
Fisher-Goad stated earlier programs were the Power Production
Assistance Program and the Power Cost Assistance Program which
were replaced by PCE under current law AS 42.45.100-190. The
intent of the program is to equalize the cost of power at a rate
that is close or equal to the average residential rate of
Anchorage, Fairbanks, and Juneau [slide 5].
8:05:15 AM
CO-CHAIR ISAACSON observed the power under discussion is limited
to the cost of electricity. He asked for clarification of the
graph of heating costs on slide 3.
MS. FISHER-GOAD responded that the graph illustrates the heating
costs in Nome but does not represent the portion of a person's
income that must go to heating. Turning to PCE eligibility, she
said at the outset in 1984, eligibility for a community depended
upon its fuel source, if diesel generation was greater than 75
percent of consumption, and if residential sales were less than
7,500 megawatt hours (MW). She pointed out that Cordova has
built hydroelectric (hydro) facilities but residents are still
eligible because debt keeps the cost of generation high.
Eligible for PCE are: 30 percent of all kilowatt hour (kWh)
sold; community facilities; and residential customers.
Ineligible for PCE are: kWh greater than the monthly cap; state
and federal facilities; and commercial customers [slide 6].
Importantly, when new infrastructure is planned, the new
generation will count toward all of a community's kWh and not
just the 30 percent. Participating communities are located
throughout Alaska with the exception of the Railbelt region
[slide 7].
8:08:16 AM
CHAIR HUGHES asked how the mix of fuel affects eligibility.
MS. FISHER-GOAD explained that a community that has had a change
in the percentage of electricity generated by diesel can still
be eligible depending on the cost of power. Calculating the
floor for the program - based on the average cost for
residential customers in Anchorage, Fairbanks, and Juneau - is
affected by the percentage of the sales by the utility. For
example, Golden Valley Electric Association (GVEA) rates are
higher; however, the program does not include the entire service
area. Therefore, increases to Chugach Electric Association
rates will have more of an impact on the floor. For fiscal year
2013 (FY 13), the floor is $0.1430 [slide 8]. In response to
Co-Chair Millett, Ms. Fisher-Goad said the formula is in
statute, which sets a floor of $0.12 per kWh, or the
aforementioned formula. In the past, the price of fuel has
dropped the floor to the statutory minimum of $0.12 per kWh.
REPRESENTATIVE HIGGINS asked why GVEA is limited to Fairbanks
proper when 60 percent of the houses are in the Fairbanks North
Star Borough (FNSB).
MS. FISHER-GOAD said the statute directs the calculation to
include the City of Fairbanks. The PCE level is calculated for
each participating utility per community and there are two
categories of costs: fuel and non-fuel. The rates change
throughout the year depending on when fuel is purchased. The
formula also has a ceiling of $1.00; the maximum PCE level
equals 95 percent of ($1.00 - $0.1430) [slide 9]. The
residential PCE rate is based on a credit on the first 500 kWh
consumed each month per customer. The community facility
calculation is based on a credit of 70 kWh multiplied by the
population. The customer is billed for the total cost less the
calculated PCE credit, and each utility must notify its
customers of the credit. This information is also provided to
AEA and AEA reimburses the utility for the eligible credits
[slide 10].
8:13:51 AM
CO-CHAIR MILLETT asked why the reimbursements are not paid
quarterly.
MS. FISHER-GOAD surmised a quarterly payment would create cash
flow difficulties for the utilities. She provided a graph that
illustrated the rates and the eligibility of the kWh.
Presently, the eligible utility cost is $0.47 per kWh [slide
11]. In addition, a second graph illustrated that the current
residential rate of $0.53 per kWh is adjusted to the effective
rate, which currently averages $0.22 per kWh [slide 12].
REPRESENTATIVE HUGHES asked whether a customer pays $0.22 per
kWh for their entire bill.
MS. FISHER-GOAD said that rate is only for the eligible hours.
An example of a bill showed the rate for total kWh used, less
the PCE credit of 500 kWh at the PCE rate [slide 13].
CO-CHAIR MILLETT asked how many households exceed the maximum
PCE allowance of 500 kWh.
8:17:34 AM
MS. FISHER-GOAD estimated an average bill is less than 500 kWh
with few exceptions; however, the average changes on a monthly
basis especially in winter. She turned to the administration of
the program and said AEA's role is to authorize payments to the
electric utilities; determine the eligibility of residential and
community facility customers; administer the PCE fund based on
appropriations by the legislature; process monthly reports
submitted by the utilities; and ensure compliance with statutes
and regulations. This administrative work is done by two full-
time AEA staff who work with the utilities and provide their
clerks PCE training. The role of the Regulatory Commission of
Alaska (RCA) is to determine the eligibility of utilities, set
the PCE rates, calculate the formula between fuel and non-fuel
costs, and ensure compliance with statutes and regulations. The
two agencies work in partnership to provide training for the
utilities' clerks.
8:20:28 AM
STUART GOERING, Assistant Attorney General, Commercial and Fair
Business Section, Civil Division (Anchorage), Department of Law,
speaking on behalf of RCA, said that there is no full-time RCA
staff dedicated to the PCE program; however, there are three
people "who have at least a part-time relationship with the PCE
program." The annual PCE rate-setting procedure involves the
commissioners [slide 14].
CO-CHAIR ISAACSON asked how many staff hours are dedicated to
the PCE program by AEA and RCA.
MS. FISHER-GOAD offered to provide that information from the
budget. The hours dedicated to the program sometime involve a
higher level of staff.
REPRESENTATIVE NAGEAK urged for the legislature to address the
situation with the PCE formula when adding renewable energy and
energy efficiency to the community utilities. When communities
install renewable energy, because of the current PCE formula, it
is the customers that do not receive PCE that benefit the most
from the decrease in the cost to produce power. As less fuel is
used and the cost to produce power decreases, the PCE subsidy
also decreases. Customers with PCE may end up paying more than
before the renewable resource was developed, but non-PCE
customers will benefit from the decrease in fuel costs. The PCE
program does not address the fundamental barriers to improving
energy efficiency. Because the formula currently used to
calculate rates is directly tied to fuel costs, integrating
alternative or renewable generation technologies could result in
a lower PCE payment causing the effective electric rates to
increase. According to the Institute of Social and Economic
Research (ISER), University of Alaska Anchorage, surveys in PCE
communities, energy use is roughly divided up as follows:
electricity, 27 percent; transportation, 33 percent; and space
heat, 40 percent. Leading edge renewable projects are trying to
address the significant heating energy needs by increasing the
production of renewable electrons and sending the excess to make
heat for large community structures or groups of homes. This is
a good idea and stands to make significant cuts to import fuel
but the PCE formula does not reward this and may actually be a
disincentive. Including heat kilowatt hours (kWh) in the PCE
formula further exacerbates the problem of dividing by all kWh
sold rather than diesel generated kWh only. An alternate
application of the formula, dividing solely by diesel electric
kWh sold, and offsetting electric revenue requirements with heat
sales revenues can accurately compensate the utility while
providing benefits to community members.
8:25:22 AM
CO-CHAIR MILLETT agreed that the displacement of diesel fuel by
renewable energy will skew PCE rates. The solution for how to
incentivize communities towards renewable sources of energy
without lowering PCE eligibility has not been found.
MS. FISHER-GOAD agreed projects built through the Renewable
Energy Fund Grant Program do impact 100 percent of the kWh sold
in a community; in fact, an evaluation of the program has found
that the PCE program has an impact on the Renewable Energy Fund
Grant Program. A ratepayer serviced by a utility that builds a
successful renewable energy project may not see a difference in
their rate for the first 500 kWh; however, a portion of the
benefit is shared by the state "essentially from one program to
another, so there is a reduction that happens ... the reduction
is less outlay of PCE dollars." Thus the residential ratepayer
has either a subsidized rate or a lower rate based upon the
diesel displacement.
CO-CHAIR ISAACSON surmised that a community may create an
alternative source of energy, but the cost of energy may not
reach an affordable level below the PCE formula. He asked how
the Renewable Energy Fund Grant Program is working to reduce the
total kWh cost to communities.
MS. FISHER-GOAD offered to provide additional information on the
cost of projects to a community. The program recognizes that
realizing the goal to equalize rates through infrastructure
development only is not possible, and she pointed out that
displacing the use of diesel fuel through AEA's Renewable Energy
Fund Grant Program makes a difference by eliminating fluctuation
and lowering the rates significantly for commercial customers
and schools. In addition, AEA and RCA will further explain the
efficiency standards that affect the PCE formula.
8:30:44 AM
CO-CHAIR MILLETT advised the ultimate goal of the Renewal Energy
Fund Grant Program was to displace the use of diesel fuel and
its inherent delivery problems.
REPRESENTATIVE HUGHES questioned whether Ms. Fisher-Goad agrees
that "customers with PCE may end up paying more than before the
renewable resource was developed."
MS. FISHER-GOAD said she would need to look at a specific
example because a project may have reduced the amount of diesel
used in a community, but other factors may be affecting the
rate. Other factors are involved when AEA calculates the full
effect on the PCE program.
REPRESENTATIVE NAGEAK observed that residents in the Far North
have problems with the delivery of fuel and sometimes must fly
in fuel or use Rolligons for delivery. At this time in Barrow
gas costs $6.20 per gallon and diesel is higher, but before
spring the cost will go up, especially in the smaller villages.
REPRESENTATIVE FOSTER asked for clarification of the statement,
"as less fuel is used and the cost to produce power decreases."
He surmised that this is due to fixed costs.
8:35:58 AM
MS. FISHER-GOAD explained that the intent of the PCE program is
to equalize cost for a certain selection of kWh in a community;
thus the PCE subsidy may go down but customers should be paying
about the same. The further benefit is to the state because it
is paying a lower subsidy and infrastructure is being built.
She agreed that fixed costs are spread amongst less kWh,
although in general efficiencies have a net effect.
CO-CHAIR MILLETT concluded that energy efficiency and renewable
energy is skewing the PCE program and asked whether adjustments
need to be made for the influx of renewable energy projects in
rural Alaska, in spite of the benefit to the state.
MS. FISHER-GOAD said it is premature for her to know until she
can review details of the Renewable Energy Fund Grant Program
and garner more information from the [third-party] evaluation of
the Renewable Energy Fund Grant Program. These findings will be
made available to the committee so that the legislature can
participate in the determination on whether there is a need to
change the formula.
CO-CHAIR MILLETT expressed her reluctance to increase costs to
consumers in rural Alaska, which may be an unintended
consequence of the Renewable Energy Fund Grant Program.
8:39:08 AM
MS. FISHER-GOAD assured the committee that a significant amount
of diesel fuel is being displaced by renewable sources of
energy, which dampens the effect of inflation in rural
communities by providing energy at a stable cost. She offered
to provide further information on renewable infrastructure
throughout the state and its positive impact on fluctuating
costs. She turned attention to PCE funding, which is by the PCE
Endowment Fund, the general fund (GF), and the PCE Fund and
Rural Electric Capitalization Fund, the latter of which is
inactive. The PCE Endowment Fund and GF are the two sources
shown in the operating budget that funded PCE payments totaling
$39.5 million in FY 12 [slide 15]. The endowment fund is an AEA
fund - managed by the Department of Revenue (DOR) - that was
created in 2001 and originally capitalized with the
Constitutional Budget Reserve (CBR) and the sale of the Four Dam
Pool project. Further capitalization came from GF in FY 07 in
the amount of $182.7 million and in FY 12 in the amount of $400
million. As established in statute, 7 percent of the endowment
fund's three year monthly average may be appropriated to the PCE
program. As of 12/31/12 the fund has $788 million, and by FY 15
or FY 16 the endowment fund will be the only funding source
[slide 16].
8:44:32 AM
REPRESENTATIVE FOSTER asked whether the current level of funding
is sufficient to meet the increased cost to the program that is
proposed by forthcoming legislation.
MS. FISHER-GOAD said the funding is explained in the fiscal note
attached to the forthcoming legislation. She expressed her
belief that the FY 12 capitalization of $400 million was
calculated to use less than 7 percent over time and to provide a
buffer. She referred to the fiscal note attached to the
proposed legislation and estimated there would continue to be a
need for $4.8 million in GF. In further response to
Representative Foster, she said AEA assumed flat earnings of 7
percent, although in reality, earnings fluctuate significantly.
REPRESENTATIVE NAGEAK asked how many fund managers are involved
in the PCE fund.
MS. FISHER-GOAD responded that the PCE Endowment Fund is
managed, along with many other funds, by the treasury group at
DOR.
8:50:20 AM
REPRESENTATIVE NAGEAK recalled generally there are three
managers per fund.
MS. FISHER-GOAD then presented an example of the electric use
for the community of Akiak. Akiak has 121 electric customers,
and 89 residential and 9 community facilities are eligible for
the program [slide 17]. In July most customers' use is below
the 500 kWh limit, and community facility use is associated with
water and sewer [slide 18]. In December a few residential
customers exceed the limit, and the highest use is by the high
school, which is not eligible for PCE [slide 19]. In summary,
few residential kWh are not eligible for the PCE program [slide
20].
CO-CHAIR ISAACSON asked why the lift station usage is higher in
July than in December.
MS. FISHER-GOAD was unsure.
CO-CHAIR ISAACSON surmised that more people are home in Akiak
during December, thus the question is how the power usage by the
utility affects that of the entire community.
8:55:31 AM
REPRESENTATIVE FOSTER heard that the residential average in the
Railbelt is over 500 kWh per month.
MS. FISHER-GOAD estimated that the average use in Anchorage is
typically between 600 and 700 kWh per month and over 400 kWh per
month in rural Alaska.
REPRESENTATIVE FOSTER questioned why the average usage is higher
in the Railbelt.
MS. FISHER-GOAD suggested that houses are bigger in urban areas
and may be equipped with more electronics. Also, generally
speaking electricity costs less in Anchorage and customers may
not conserve as they do in rural areas.
^OVERVIEW(S): SUSITNA-WATANA HYDRO BY THE ALASKA ENERGY
AUTHORITY
OVERVIEW(S): SUSITNA-WATANA HYDRO BY THE ALASKA ENERGY
AUTHORITY
8:58:29 AM
CO-CHAIR MILLETT [announced] that the final order of business
would be a presentation on the Susitna-Watana Hydro project by
the Alaska Energy Authority.
8:59:01 AM
SARA FISHER-GOAD, Executive Director, Alaska Energy Authority
(AEA), introduced a PowerPoint presentation on the Susitna-
Watana Hydro project. She reminded the committee that one of
AEA's strategies is to reduce the cost of energy in the state
and the Susitna-Watana Hydro project is an investment in the
state's energy infrastructure [slide 2]. Alaska's energy
challenges include varied energy costs by region, declining oil
production, volatile fossil fuel costs, aging facilities,
dispersed communities, and no central grid, thus a portfolio of
programs is necessary to provide short- and long-term solutions
for energy needs in Alaska [slide 3]. The Susitna-Watana Hydro
project is a long-term solution to provide clean and reliable
power to the Railbelt region for the next 100 years. She said
the project is a significant part of reaching the state's goal
of 50 percent renewable energy by 2025 [slide 4]. Currently
hydroelectric (hydro) provides 21 percent of Alaska's
electricity, and new wind projects are now online [slide 5].
CO-CHAIR MILLETT asked how much the renewable portfolio has
increased since the passage of the Renewable Energy Fund Grant
Program.
MS. FISHER-GOAD said AEA is now keeping annual statistics and
the renewable sources of energy have increased from about 17
percent or 18 percent to over 20 percent depending on the
fluctuating contribution by hydro.
CO-CHAIR MILLETT, noting an increase in renewable energy of
about 5 percent over the last four years, asked whether the
state's goal will be reached with or without Susitna-Watana
Hydro.
MS. FISHER-GOAD explained that Susitna-Watana Hydro is a 600
megawatt (MW) project which would serve 80 percent of the
state's population and would put the state over its goal of 50
percent renewable; in fact, it would provide 50 percent for the
entire region. Without Susitna-Watana Hydro, she opined there
is no other project that would do so.
REPRESENTATIVE JOSEPHSON asked whether the 50 percent goal is in
statute.
MS. FISHER-GOAD responded that House Bill 306 established the
goal and is in session law.
9:03:35 AM
CO-CHAIR MILLETT said the goal was set in policy that was passed
four years ago along with the goal of a 15 percent reduction of
electricity usage during the years 2010 to 2020.
MS. FISHER-GOAD provided a short history of Susitna-Watana
Hydro, which was first studied in the 1950s by the U.S. Bureau
of Reclamation, U.S. Department of the Interior. In the 1980s a
three-phase, two dam 1,600 MW project was studied by the Alaska
Power Authority but abandoned due to low gas prices and limited
state funds. In 2008-2009, further interest by legislators and
the passage of the renewable energy goal in 2010 brought the
project back to the attention of AEA, which identified Susitna-
Watana Hydro as the large hydro project that would best serve
the Railbelt. In 2011 the legislature authorized AEA to pursue
the project [slide 7]. She introduced Mr. Dyok, the project
manager, who is very experienced with hydro projects worldwide.
REPRESENTATIVE NAGEAK asked whether the studies on the project
are being contracted out or are done by the state in-house.
MS. FISHER-GOAD said there is a significant amount of private
sector involvement in the project and the involved AEA staff is
very small.
9:08:31 AM
WAYNE DYOK, Project Manager, Susitna-Watana Hydro Project, AEA,
Department of Commerce, Community & Economic Development
(DCCED), informed the committee benefits from this project are:
serves approximately 80 percent of the state's population;
generates 1,000 jobs during the peak of construction; provides
stable electric rates for over 100 years; provides
diversification to the state's energy portfolio; provides clean
and reliable energy; and promotes the integration of variable
resources such as wind [slide 8].
REPRESENTATIVE HIGGINS recalled the abandoned 1,600 MW project
would have produced enough energy for the entire state. He
asked why the proposed project is reduced to 600 MW.
MR. DYOK responded that in the 1980s the 1,600 MW project
exceeded the existing electrical demand and this was a barrier
to obtaining power sales agreements "for more power than you can
possibly sell." Currently, the state uses approximately 5.2
million MW hours annually and the project will provide 2.8
million MW hours; this will meet the goal of 50 percent
renewable. In addition, the project is designed for expansion
in the future should the need arise. Part of the reason the
project is this size is for diversification and part is the
overall cost, because the utilities can only bear so much of the
cost. Mr. Dyok turned attention to highlights of the project.
The location is in a remote part of the Susitna River, 184 miles
upriver from Cook Inlet and 87 river miles from Talkeetna. An
important attribute to the location of the project is Devils
Canyon, a 10-mile portion of the river below the project that is
an impediment for fish traveling upstream.
9:13:45 AM
REPRESENTATIVE JOSEPHSON interpreted Mr. Dyok's statement to say
that because Devils Canyon is an obstacle to anadromous fish,
the project will not have an effect on fish.
MR. DYOK explained that the project has the potential to affect
salmon and anadromous fish downstream because the flow of the
river will be varied. The water temperature can be managed by
multi-level intake, but the influence of the flow on the salmon
downstream is a major focus of study. He opined there is no
comparison to the Columbia River system [in Washington State]
where salmon must pass upstream of projects; however, there are
king - chinook - salmon, which will be studied for three years.
Mr. Dyok said, "The indications are very consistent with what we
had in the 1980s that there are not a lot of salmon making it
upstream of Devils Canyon. But certainly that's something that
we are evaluating as well, in addition to the potential effects
downstream."
REPRESENTATIVE HUGHES asked whether water levels will also be
studied.
MR. DYOK agreed that there is a direct correlation between flows
and water levels downstream. The Susitna River flow fluctuates
annually thus studies will look at how the operation of the
project will affect salmon, other fish species, and aquatic
resources from two sides: optimal operation from an energy and
power perspective and optimal operation for the protection of
anadromous fish and the environment. In further response to
Representative Hughes, he confirmed that the design of the
project is a roller compacted concrete dam with the powerhouse
placed so that the height of the dam could be expanded in a cost
effective manner when needed.
9:19:12 AM
REPRESENTATIVE HIGGINS recalled before the construction of the
Trans-Alaska Pipeline System (TAPS) there was unfounded concern
about the caribou herd. He asked whether there are ways in
which the dam can benefit fish.
MR. DYOK said in his experience other projects have made
enhancements to the fishery populations downstream by managing
the flows of the river and temperatures, and by restricting
sediment. He recalled seeing high flows in the sloughs 50 miles
downstream in August of 1983, and in September the salmon redds
were "high and dry." The project includes a habitat-based
assessment of the fisheries that will be added to baseline data
from the 1980s, and data from the Alaska Department of Fish &
Game (ADFG) to evaluate the water quality and fish habitat. He
said, "Your fundamental question is, 'Is it possible?' Yes."
In response to Representative Josephson, he described how the
salmon lay their eggs in redds.
CO-CHAIR MILLETT asked whether there are regulations on the
Susitna River similar to those on the Kenai River as to the size
of boat engines in order to protect fish habitat.
9:25:00 AM
MR. DYOK surmised there is not the same level of regulation on
the Susitna River as on the Kenai River. He assured the
committee the project will work with ADFG and learn about where
the fish are spawning and the potential effects on the river
system in the next two years. It is known from comparing the
1980s data to last year's that the system has not changed a lot,
but the numbers of fish have decreased.
CO-CHAIR MILLETT said, "It we're going to have a conversation
about fish, we should talk about, on the other side of it,
making sure that we are doing everything we can to sustain the
bank - habitat - for returning salmon."
REPRESENTATIVE NAGEAK asked for the form of transmission that
will take power to communities.
MR. DYOK explained the power will be conveyed to the [Alaska
Intertie] for transmission to the Railbelt. The primary
transmission line to the grid system is part of the study that
will be submitted to the Federal Energy Regulatory Commission
(FERC) for approval of the license. The grid system begins at
the Parks Highway. In further response to Representative
Nageak, he confirmed that the plan is to connect the intertie to
existing transmission lines.
REPRESENTATIVE HUGHES understood that the current intertie
cannot handle the power from the project.
MR. DYOK deferred to Ms. Fisher-Goad.
9:29:14 AM
MS. FISHER-GOAD answered that last year AEA was funded to do a
transmission study for the entire Railbelt region. There is a
significant amount of transmission upgrades that are needed with
or without the Susitna-Watana Hydro project. A capital request
has been submitted for work on the transmission system that
carries power from Bradley Lake Hydro to the other utilities in
Southcentral. The transmission study will also look at the
possibility of hydro-to-hydro coordination between the Bradley
Lake and Susitna-Watana projects, and at further integrating
wind power from Fire Island and Eva Creek. The utilities desire
a unified system so there can be a one-tariff rate throughout
the system and power can move freely. She stressed that this
study is independent from the interties that are needed for the
proposed project.
REPRESENTATIVE HIGGINS said if the dam were upgraded, what would
be the MW on the upgraded transmission line.
MR. DYOK said the "ultimate build-out" would enable 1,000 MW.
REPRESENTATIVE HIGGINS observed that industry draws on power and
cheap energy costs will bring industry to the state. He urged
for the project to be built as big as possible.
REPRESENTATIVE NAGEAK agreed and pointed out that construction
costs will be cheaper using "today's dollars."
REPRESENTATIVE HUGHES asked how much power is drawn by a typical
mining operation.
MS. FISHER-GOAD heard that power usage of over 300 MW is not
unusual for a mine. She advised that the AEA board of directors
sought to ensure the right size of the project. She described
the power produced by different project designs, and said a
balance was reached by taking into consideration that power
sales agreements with the utilities guided the level of power
needed. Also considered was the goal of 50 percent renewable
energy set by the legislature.
9:35:19 AM
CO-CHAIR ISAACSON stated that this is the time to talk about the
complexities of funding construction. He pointed out that the
current design is a base load to provide affordable electricity,
with future opportunities to induce mining production with
expansion. He stressed that the committee needs to learn the
details of the project - not just the general information - in
order to "make good law and to provide proper and adequate
funding or proper and adequate direction for you."
MS. FISHER-GOAD recalled at the time AEA was funded for the
project the target was to provide 50 percent of the power needed
by the Railbelt and to retire older facilities in the region.
In fact, looking at future or industrial loads was not part of
the equation. She urged the committee to see the economic
impacts revealed later in the presentation.
CO-CHAIR ISAACSON encouraged AEA to present a closer look at all
of the facets of the project for the new members of the
committee.
CO-CHAIR MILLETT suggested members review past legislation.
9:39:12 AM
REPRESENTATIVE JOSEPHSON asked why the dam is needed if a large
diameter natural gas pipeline is built.
MS. FISHER-GOAD said this project is not in competition with any
type of gas pipeline. The best use of natural gas is to provide
a source for heating fuel, and natural gas will also continue to
be part of the energy portfolio for the generation of
electricity.
REPRESENTATIVE JOSEPHSON expressed his impression that the
majority of the residents of Talkeetna disfavor the project. He
asked why there is strong opposition.
MS. FISHER-GOAD stated that the community of Talkeetna is 80
miles away from the site. She acknowledged opposition and
residents' concerns about the potential impact on fish and about
seismic activity. These issues are being addressed by the study
plan and through FERC's dam safety program which requires the
construction of the safest dam possible.
MR. DYOK opined the real issue is the fishery issue and the
effects of change on the community. The study plans will
address all of the concerns.
9:43:12 AM
REPRESENTATIVE JOSEPHSON asked for a list of dams in the U.S.
that have helped fish in some way. He estimated the loss of
habitat at 185,000 acres.
MR. DYOK said the study addresses 185,000 acres, but the loss of
habitat is the area that would be inundated by the reservoir,
which is 23,500 acres.
REPRESENTATIVE HIGGINS clarified that the dam must be built to
bring down cost for the Interior and the villages too, not just
for the Railbelt.
REPRESENTATIVE JOSEPHSON questioned whether 20 percent of the
Railbelt's electrical needs would be met by the dam.
MR. DYOK reiterated that electrical demand in the Railbelt is
about 5.2 million MW now and the project will provide 2.8
million MW; when the project is completed in 2024, it will meet
about 50 percent of the electrical demand.
REPRESENTATIVE JOSEPHSON asked for the cost of the expanded
1,000 MW project.
MR. DYOK said the current cost projection is estimated at $5.2
billion, and he was unsure of the cost of the ultimate built-
out.
REPRESENTATIVE JOSEPHSON heard that other western states are
abandoning their dams and if so, asked why.
MR. DYOK explained that small dams on the East Coast and the
West Coast were removed because they no longer serve their
function, and one larger dam was located in a national park. He
added that the National Hydropower Association is working with
the environmental community and Congress to possibly add hydro
to some of the 70,000 to 80,000 existing dams. In response to
Representative Nageak, he said the projects that are under
consideration for retrofits are U.S. Army Corps of Engineers
dams, U.S. Bureau of Reclamation dams, and independent dams,
most of which were built for water supply.
CO-CHAIR MILLETT asked how technology has reduced the impact of
dams on the environment.
MR. DYOK advised that there have been advancements in the
construction of dams in the past 25-30 years, for example,
roller-compacted concrete construction of dams is more efficient
and allows for more cost-efficient construction. In further
response to Co-Chair Millett, he said information from the 1980s
geotechnical exploration and additional work has provided for
the design of the dam to withstand the appropriate ground
motion. Similar dams in China have withstood major earthquakes
with minor damage. In addition, FERC and AEA's board have
agreed to bring in experts in seismicity to ensure the proper
design of the dam.
9:52:09 AM
CO-CHAIR ISAACSON surmised the project could be a catalyst for
the development of an employment base and resources in Alaska.
He asked whether concrete and other supplies can be sourced in
Alaska in support of the private sector.
MR. DYOK said the current cost estimates are based on importing
cement and fly ash; however, an associated study is looking at
whether the raw materials are here to establish a concrete
industry or any other procurement and resource opportunities.
CO-CHAIR ISAACSON cautioned about the amount of time needed to
expand the Alaska Railroad Corporation or to get permits for new
industry. In addition to an energy project, this project is an
opportunity to fulfill Alaska's constitutional mandate.
REPRESENTATIVE JOSEPHSON pointed out that severance tax rates on
large mines generate almost no revenue, unlike [oil production
at] Prudhoe Bay. He expressed his interest in getting power to
people - wherever they are - rather than providing power as an
inducement to large scale mines. He also viewed a focus on
existing impacts to the river as a diversion. Representative
Josephson opined the Susitna River is a suffering river system
and questioned whether the science is sufficient to make
improvements to the river.
CO-CHAIR ISAACSON observed that putting 10 percent of the known
resources within the state into production would generate $18
billion and surpass the current rate of oil revenue. He urged
for a broad look at what is needed so that communities can lower
costs and provide employment in rural areas.
CO-CHAIR MILLETT said the intent of the committee is to hear all
viewpoints and to represent all constituencies in further
discussion of the Susitna-Watana Hydro project.
9:59:44 AM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Energy meeting was adjourned at [9:59
a.m.].
| Document Name | Date/Time | Subjects |
|---|---|---|
| Agenda (H) ENE 02202013.docx |
HENE 2/20/2013 8:00:00 AM |
(H) ENE Agenda Feb. 20, 2012 |
| AEA PCE Overview House Energy 02.20.12.pdf |
HENE 2/20/2013 8:00:00 AM |
(H) ENE AEA PCE Overview 02202013 |
| AEA Susitna Watana Hydro House Energy 02.20.13 .pdf |
HENE 2/20/2013 8:00:00 AM |
(H) ENE Susitna-Watana Hydro 02202013 |