Legislature(2017 - 2018)CAPITOL 17
03/09/2017 10:15 AM House ENERGY
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| Audio | Topic |
|---|---|
| Start | |
| Presentation: Inside Passage Electric Cooperative | |
| Presentation: Alaska Village Electric Cooperative | |
| Presentation: Copper Valley Electric Association | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ENERGY
March 9, 2017
10:17 a.m.
MEMBERS PRESENT
Representative Adam Wool, Chair
Representative Ivy Spohnholz, Vice Chair
Representative Matt Claman
Representative Dean Westlake
Representative DeLena Johnson
Representative Jennifer Johnston
Representative George Rauscher
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
PRESENTATION: INSIDE PASSAGE ELECTRIC COOPERATIVE
- HEARD
PRESENTATION: ALASKA VILLAGE ELECTRIC COOPERATIVE
- HEARD
PRESENTATION: COPPER VALLEY ELECTRIC ASSOCIATION
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
JODI MITCHELL, CEO & General Manager
Inside Passage Electric Cooperative (IPEC)
Juneau, Alaska
POSITION STATEMENT: Presented a PowerPoint of IPEC.
MEERA KOHLER, President/CEO
Alaska Village Electric Cooperative, Inc. (AVEC)
Anchorage, Alaska
POSITION STATEMENT: Presented a PowerPoint via teleconference
titled "The Thrills and Perils of Providing Electricity in Rural
Alaska."
BILL STAMM, Manager of Engineering
Alaska Village Electric Cooperative, Inc. (AVEC)
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the PowerPoint
presentation.
TRAVIS MILLION, Chief Operating Officer
Copper Valley Electric Association (CVEA)
Glennallen, Alaska
POSITION STATEMENT: Presented a PowerPoint on the Copper Valley
Electric Association.
ACTION NARRATIVE
10:17:56 AM
CHAIR ADAM WOOL called the House Special Committee on Energy
meeting to order at 10:17 a.m. Representatives Wool, Johnston,
Johnson, Westlake, Rauscher, and Spohnholz were present at the
call to order. Representative Claman arrived as the meeting was
in progress.
^Presentation: Inside Passage Electric Cooperative
Presentation: Inside Passage Electric Cooperative
10:18:19 AM
CHAIR WOOL announced that the first order of business would be a
presentation by the Inside Passage Electric Cooperative (IPEC).
10:18:48 AM
JODI MITCHELL, CEO & General Manager, Inside Passage Electric
Cooperative (IPEC), said that she had been with IPEC since 1993,
and she directed attention to slide 2, "Introduction to IPEC."
She reported that IPEC had 1,368 members in the villages of
Angoon, Hoonah, Kake, Klukwan, and the Chilkat Valley, and that
the IPEC headquarters were at Auke Bay. She noted that
logistics were one of the biggest challenges, as the only means
of access to these communities was by boat or airplane. She
relayed that IPEC was 72 percent dependent on diesel, although
they owned two hydro projects with the potential for two more
projects in the next decade if funding becomes available. She
shared slide 3, "Outline," which included the challenges for
providing electricity in Rural Southeast Alaska, recognition
that small local hydro was the best solution for IPEC
communities, and a review of regulatory considerations.
CHAIR WOOL asked if the villages were interconnected with
transmission lines.
MS. MITCHELL replied that IPEC had four micro grids, and she
proudly stated that all the maintenance, regulation, and
administration were performed by only 11 full time employees.
REPRESENTATIVE RAUSCHER asked if the hydro power supplied the
remaining 28 percent of power.
MS. MITCHELL expressed her agreement, although the percentage of
use did vary during the calendar year. She returned to slide 4,
"Challenges of Providing Electricity in Rural Southeast Alaska,"
and explained that the volatility of the price of diesel lead to
volatile rates as the small consumer base did not allow for any
economies of scale. She declared that these high rates also
made it difficult to attract large power consumers, as there
were high transportation costs, even with good use of the ferry
system, and many logistical challenges. She reported that the
village economies were weakening due to this lack of industry
and jobs. She added that there was a high cost of compliance
with regulatory and environmental policies, as well as high
costs of alternative energy technologies. She expressed concern
for the costs of compliance with any new policies. She moved on
to slide 5, "2016 Aver Cost per kWh Sold," and pointed out that
the largest component of the graph was the fuel and purchase
power, even as the fuel costs were lower in 2016 than in
previous years. She talked about the percentages of cost for
non-fuel production, distribution, customer expense, regulatory
cost, and depreciation. She noted that IPEC did not make any
money from selling power.
MS. MITCHELL, in response to Chair Wool, explained that A & G
meant administration and general, which included attorney fees,
salaries, supplies, travel, and governance fees.
10:25:21 AM
MS. MITCHELL addressed slide 6, "Average Cost of Fuel per
Gallon," which depicted prices from 1998 through 2016, and
compared this graph with slide 7, "As fuel prices rise, rates
rise." This graph portrayed the average rate per kWh and the
cost of fuel and purchase power per kWh for those same years.
She noted that the cost had gone down in 2016, because of lower
fuel prices and the construction of a hydro project.
CHAIR WOOL asked if the hydro costs figured into this chart and
if these costs were before Power Cost Equalization (PCE).
MS. MITCHELL replied that the hydro was included, and that it
was part of the average cost.
REPRESENTATIVE JOHNSTON asked about the type of hydro project.
MS. MITCHELL explained that these were small diversions in the
river, and that it was possible for two-thirds renewable if
there was $25 million available to invest. She declared that
hydro was almost permanent, sharing the Juneau hydro projects as
examples.
MS. MITCHELL introduced slide 8, "As a non-profit electric
cooperative," which depicted the costs and the years, with the
revenue per kWh, the cost to produce the kWh, and the net profit
per kWh. She noted that the IPEC profit was very small.
REPRESENTATIVE RAUSCHER asked why the net operating margin had
spiked in 2007.
MS. MITCHELL offered her belief that this was upon completion of
a rate case, which temporarily allowed for a higher margin. She
added that subsequently, IPEC had moved to a simplified rate
filing procedure which she declared as much better for IPEC.
MS. MITCHELL introduced slide 9 "What are we doing to help
reduce energy costs for our members?" She reported that, in
2009, IPEC's board had created an energy plan to become diesel
independent by 2015, which, obviously had not yet happened. She
reported that the idea for interties between communities had
proven to be too expensive. She reminded that the rain in
Southeast Alaska was a great resource, and with help from the
Renewable Energy Fund, IPEC had built the Gartina Falls hydro
project in Hoonah, and identified the Gunnuk Creek hydro project
in Kake, as well as another project in Hoonah. She reported
that Kootsnoowoo Village Corporation in Angoon was developing
the Thayer Creek hydro project, which was projected to provide
100 percent of the Angoon power needs.
10:30:42 AM
REPRESENTATIVE RAUSCHER asked for the projected costs for each
of the aforementioned hydro projects.
MS. MITCHELL replied that IPEC would need about $25 million for
all three projects. She said that, while Angoon currently had
$7 million from the Renewable Energy Fund, they were looking for
more grant money to make the project more economically feasible.
REPRESENTATIVE RAUSCHER asked how far along were those projects,
and if there were designs.
MS. MITCHELL stated that the Gunnuk Creek project was shovel
ready. In response to Representative Raushcer, she said that
the preference was for the Gunnuk Creek project to begin
immediately and could be completed by the end of next year with
the funding; the Angoon project was also shovel ready; and the
Hoonah project had not yet been designed. She declared that
there was support for all the projects. She relayed that $6
million was still needed for the Gunnuk Creek project, about $10
million was still needed for the Angoon project, and an
estimated $9 million more for the second Hoonah hydro project,
as, although it had a shared transmission line, it was harder to
build.
MS. MITCHELL continued with slide 9, stating that grants were
necessary to reduce the rates, and that the projects lasted for
at least 50 years.
CHAIR WOOL asked if a low interest loan would allow for economic
feasibility.
MS. MITCHELL replied that the loan would be helpful, but not as
helpful because there was a depreciation expense for a loan
whereas, there was not any depreciation expense for a grant.
She added that the interest expense would vary with the interest
rate.
CHAIR WOOL questioned whether, as there were many good energy
projects in the state and not as much grant money, the projects
would be affordable with low interest loans.
MS. MITCHELL said that she compared the cost of fuel with the
cost of the new asset.
MS. MITCHELL moved on to slide 10, "IPEC identified Gartina
Falls Hydro as the "best" project for Hoonah," and shared that
this successful project was local, good sized, and affordable,
and it had displaced 32 percent of the fuel consumption, which
was significant. She reported that IPEC was able to attain $8
million in grant funding, and only had to borrow $2 million.
She noted that the project had to be Federal Energy Regulatory
Commission (FERC) licensed, which cost $1.5 million of the total
cost. She added that the hydro and the diesel projects ran very
efficiently together and noted that this was the same plan for
the Gunnuk Creek project in Kake. She shared pictures of the
Hoonah project, slide 11, and the Gunnuk Creek project in Kake,
slide 12. She relayed some history for the projects, pointing
out that the Kake project would include a diversion, which would
allow the fish hatchery back on line.
REPRESENTATIVE RAUSCHER asked about the current power source.
MS. MITCHELL replied that Kake was 100 percent diesel with three
engines, although the power plant was being upgraded. In
response, she said that the hydro and the power plant would be a
design similar to that in Hoonah, which would be more efficient.
She said that the upgrade was fully funded.
10:41:12 AM
REPRESENTATIVE JOHNSTON asked about the small river flow
generation projects.
MS. MITCHELL said that she was not familiar with these projects,
noting that the local rivers were small. She said that they
would look at that technology and not rule it out.
REPRESENTATIVE JOHNSTON reported that these had been tested on a
small creek outside of Anchorage, and she offered to forward the
information.
MS. MITCHELL, in response to Chair Wool, said that the dam in
Kake was originally used for drinking water, and that the pumps
were originally used to pump water to the water tank. She said
that the tank was no longer in use. She stated that the dam had
been designed for hydro power.
REPRESENTATIVE JOHNSON asked about the cost for the retrofit for
the Kake project.
MS. MITCHELL replied that the estimate for a half mile penstock,
a hatchery, and then a powerhouse with the hydro turbines would
be about $6 million. She shared that Alaska Department of Fish
& Game was supportive of the project.
REPRESENTATIVE JOHNSON asked if there was any additional
permitting necessary for an upgrade.
MS. MITCHELL said that a water rights permit and a request to
FERC for a determination to its jurisdiction had been applied
for, as well as another permit through Alaska Department of Fish
& Game. She offered her belief that the project was not in the
FERC jurisdiction. In response to Representative Johnson, she
said the timeline for determinations was in the next few weeks.
Once those were determined, they just needed money. She noted
that there was Renewable Energy Fund money which had been
dedicated for the Kake intertie. She expressed her desire for
that money to be re-appropriated for this project, and the
remainder could be borrowed.
MS. MITCHELL returned attention to slide 13, "Small local hydro
can reduce IPEC's rates," and stated that hydro was a long-term
project. She reiterated that with the project in Angoon and the
two projects in Hoonah, IPEC would have about 66 percent
renewable energy if all three of these projects came on-line.
She declared that Southeast Alaska was fortunate to have hydro
as a renewable resource, as it could help preserve the pristine
air in Southeast Alaska.
MS. MITCHELL shared slide 14, "A little about IPEC's Regulatory
Concerns:" and said that IPEC was fully regulated by the RCA
(Regulatory Commission of Alaska) although they used the much
simpler Simplified Rate Filing procedure. She stated that there
was also a lot of compliance with PCE, which required an annual
report and monthly billing, as well as audited statements. She
said that IPEC was required by the RCA to commission
depreciation studies, which were time consuming and expensive,
and did not appear to add any value.
CHAIR WOOL asked if this was one of the more onerous RCA
regulations.
MS. MITCHELL expressed her agreement, and said that they were
required every five years, and cost about $100,000, a lot for a
small utility. She pointed out that the customers had to pay
for the study, and that the businesses noticed the difference in
rates when the PCE went up or down.
10:51:33 AM
CHAIR WOOL mused about the PCE increase in rates and that,
although the residential consumers did not notice any increase,
the business consumers did notice. He asked if the PCE
adjustment was separating the consumers from reality and giving
them less of an incentive to conserve or look for alternate
means to lower their costs.
MS. MITCHELL said that she did not believe so, as the residents
were limited to 500 kWh per month, after which it gets very
expensive, often more than $.045 per kWh. She said that the
average residential customer used 320 kWh each month in 2015.
She shared stories of residents in communities who only used one
light at night, because power was so expensive.
CHAIR WOOL mused that the 500 kWh was the more influencing
factor, more than the kWh rate, as there was a price reality
after that 500-kWh use.
MS. MITCHELL shared that most energy companies had noticed a
reduction in consumption because there were more energy
efficient appliances and light bulbs. She said that, even
though there were more customers, there was a 5 percent decline
in sales. She said that made it difficult for setting rates.
CHAIR WOOL mused that more energy efficiency did not bode well
for the utilities.
MS. MITCHELL spoke about the costs for the air quality permits
which IPEC had to file, and then concluded with slide 15, a
picture of the second hydro project in Hoonah. She shared that
this project would be similar in size and output as the Gartina
project, and upon completion, Hoonah would have about 67 percent
renewable energy.
CHAIR WOOL asked who designed the plans for the currently shovel
ready projects.
MS. MITCHELL replied that, for the Kake project, IPEC had hired
Paul Berkshire, and that he had also designed the Hoonah
project.
CHAIR WOOL asked if the Alaska Energy Authority (AEA) had helped
with optimization or review of possibilities, and if they
entered in to the design or decision process.
MS. MITCHELL acknowledged that AEA had been very helpful, noting
that she relied on them for information on new technology. She
added that AEA had also helped with the power supply upgrades to
the powerhouses.
CHAIR WOOL asked if AEA ever brought new technologies.
MS. MITCHELL acknowledged that AEA did make suggestions,
reiterating that AEA was very helpful. In response to
Representative Rauscher, she said that a grant of about $1.5
million had been assigned to design the Kake-Petersburg
intertie. She asked for the reason to design something which
was not going to be built anytime soon, and that she would
prefer to use the money for something that would help Kake now.
CHAIR WOOL asked if the aforementioned 1,368 members were rate
payers.
MS. MITCHELL expressed her agreement and stated that the
population served was about 6,000.
^Presentation: Alaska Village Electric Cooperative
Presentation: Alaska Village Electric Cooperative
10:58:34 AM
CHAIR WOOL announced that the next order of business would be a
presentation by the Alaska Village Electric Cooperative (AVEC).
10:59:47 AM
MEERA KOHLER, President/CEO, Alaska Village Electric
Cooperative, Inc. (AVEC), introduced slide 2, (via
teleconference) and reported that AVEC was in 57 Alaska
communities, had 90 full time employees, with 16 of them based
in Bethel, and the rest based in Anchorage. She noted that
there were two part time power plant operators in each of the 47
power plant communities, and that there were 10,800 meters. She
reported that AVEC had more than 170 diesel generators and
bought about 8.5 million gallons of diesel each year, which was
shipped in by barge. She relayed that AVEC had 34 wind turbines
which served 15 communities, as well as 2 solar projects.
MS. KOHLER moved on to slide 3, which depicted a map of the
United States, with Alaska inset to demonstrate its relative
size. She addressed slide 4, "Cost Components per Kilowatt-hour
Sold," a graphic representation of the average cost of a
kilowatt hour. (indisc.) She relayed that the cost of $0.43 per
kilowatt hour in 2016 was a little deceptive because (indisc.)
was a very big chunk of that. She stated that the AVEC concerns
were similar to those of IPEC.
MS. KOHLER moved on to slide 5, "AVEC's Revenue Sources," which
reflected the various components of customer sales, including
residential, schools, commercial, and community facilities.
(indisc.)
REPRESENTATIVE SPOHNHOLZ asked for the reason the percentage of
revenue from commercial sources almost doubled between 2013 and
2014.
MS. KOHLER said that Bethel [Utility] had brought a "very large
chunk of commercial load," which was not eligible for PCE.
CHAIR WOOL offered his belief that, with the acquisition of
Bethel Utility in 2014, although the percentages of all of the
sources except commercial had declined, it did not mean the
consumption or revenue had declined. He asked about the schools
being self-generating.
MS. KOHLER said not exactly (indisc.) She stated that AVEC had
a very good relationship with the schools.
11:09:29 AM
MS. KOHLER addressed slide 6, "Why is Electricity so expensive
in rural Alaska?" She said that this was a function of
(indisc.) because Alaska had a very small population in each
village. She reported that the average village served by AVEC,
not including Bethel, had 400 residents with an average use of
140 kilowatts, pointing out that there was not any economy of
scale. She stated that the average cost of an installed meter
was about $17,000, which was three times the cost of urban
Alaska. She added that remote shipping was very expensive, even
on a barge, and that AVEC budgeted shipping costs for $1.75 per
pound to the communities. She reported that fuel was expensive,
often the delivery and the storage exceeded the cost of the
fuel. She concluded by stating that, as the communities were
remote and required fly-in, the costs for operations and
maintenance were much more expensive. She directed attention to
slide 7, "AVEC strategies to reduce power cost," and shared that
one strategy was to only add cost-effective new communities,
pointing out that AVEC was often approached by communities which
they could not afford to take on. Another strategy was to
interconnect villages to improve the economies of scale, and she
suggested that the state develop a state-wide power grid to take
advantage of low-cost energy sources, adding renewable energies
when economically feasible. She reported that AVEC captured and
sold recovered heat and excess wind energy.
11:13:55 AM
REPRESENTATIVE JOHNSTON asked if there were opportunities for
the micro grids to be places of testing for energy technologies.
MS. KOHLER said that AVEC was open to testing programs, and that
they collaborated with others and were open to experimental
technologies.
REPRESENTATIVE JOHNSTON asked if direct current was a
possibility.
MS. KOHLER replied that AVEC was very interested in the
technology. (indisc.)
MS. KOHLER shared slide 8, "Add cost-effective new communities,"
and said that non-fuel costs rise as kilowatt hour sales in the
community shrink. She compared the non-fuel costs in different
communities, stating that the average AVEC village cost was
$0.25 per kilowatt hour, whereas in Bethel this was about $0.08
cents per kilowatt hour. She reported that this non-fuel cost
in Cordova was $0.19 and in Kotzebue, it was about $0.21. She
reiterated that there was a direct relationship between the non-
fuel cost and the size of the service area.
CHAIR WOOL asked if the non-fuel costs of $0.129 presented by
IPEC were similar. In response to Ms. Kohler, he relayed that
this would include distribution, regulatory depreciation,
everything except fuel and power.
MS. MITCHELL pointed out that the IPEC fiscal year was different
than AVEC.
MS. KOHLER, in response, (indisc.)
MS. KOHLER moved on to slide 9, "How does a community join
AVEC?" (indisc.)
11:23:29 AM
BILL STAMM, Manager of Engineering, Alaska Village Electric
Cooperative, Inc. (AVEC), explaining slide 9, stated that a
community had to petition AVEC and ask for membership. He said
that AVEC would evaluate the existing utility and review the
condition of the power plant and the distribution system,
determine if the kilowatt hour sales were adequate to cover the
incremental costs, and see if this was in the best interest of
the existing cooperative members, as AVEC had a fiduciary
responsibility to its members. He reported that, unfortunately,
many communities asked to join AVEC when their systems were
failing, and the community was not able to maintain the system.
He pointed out that adequate fuel storage was important as the
fuel deliveries arrived during the summer months. He pointed
out that when the rate for kilowatt hour sales had not been
adequate to maintain the systems, it was a shock to the
community when the rates went up. He stated that if all the
pieces appeared adequate, and if membership would be beneficial
to the cooperative as a whole, then the board would consider an
action.
MR. STAMM spoke about slide 10, "Interconnecting Villages," and
said that a positive was for greater diesel efficiencies, as
larger units, when run at optimum load, were more efficient. He
said that shutting down a power plant could save up to $150,000
each year. He noted that upon intertie, a single generator was
left for back-up in the joined village, in case the tie line
went down. He pointed out that renewable energy became more
cost effective when it was distributed with an intertie among
more communities. He said that some of the negatives were for
the loss of the ability to recover heat and electricity and
distribute it to public facilities and schools, and that some
jobs were also lost when a plant was on stand-by.
CHAIR WOOL mused that there was the possibility to lose jobs,
lose heat, and, if the usage was not enough and rates had not
been sufficient to pay for the facilities, pay more for
electricity.
MR. STAMM shared slide 11, "The value of connecting villages,"
and spoke about an experience in Toksook Bay when Tununak and
Nightmute were interconnected and 400 kilowatts of wind power
was installed, about 20 percent of the total fuel use. He
shared that the introduction of wind power did not always allow
the diesel generators to operate at their optimum fuel curve.
MR. STAMM introduced slide 12, "Improve generator/distribution
efficiency," reporting that AVEC had an average of 6.5 kilowatt
hours per gallon of fuel 30 years ago, whereas today, this was
13.5 kilowatt hours per gallon of fuel. He pointed out that the
addition of wind to the systems had brought this up to almost 20
kilowatt hours per gallon of fuel. He shared that the diesel
plants were optimized as much as possible for their size.
REPRESENTATIVE JOHNSON asked if there was any idea for the
amount of power used by public buildings, including schools and
clinics.
MR. STAMM referred back to the earlier pie charts, pointed out
that the community facilities covered these public buildings,
and reported that this was about 15 percent of power sales.
MR. STAMM explained slide 13, "Add renewables where feasible,"
noting that, although many of the AVEC communities did not have
hydro potential and that solar PV had not been as effective,
there were 34 wind turbines in 11 locations. He reported that
900 kilowatt turbines were planned for Bethel and St. Mary's.
He directed attention to slide 14, which depicted a map for the
location of the wind turbines.
CHAIR WOOL asked about the lines on the map joining the
communities.
MR. STAMM opined that the lines were most likely rivers. He
explained slide 15, "A snapshot of Wind Production in 2016,"
which reported on the wind percentages, as those were dependent
on the wind regime and the turbines in place. He noted that
although the Kaltag wind project was small, it was working
flawlessly.
11:34:32 AM
MR. STAMM shared that the picture, slide 16, "Kaltag Solar
Project," was the solar array on Kaltag. He stated that slide
17 was a graph of the solar production on a "Cloudless September
Day" and that slide 18 graphed the effect from clouds, "The
Effect of Partial Clouds." He explained slide 19, "Sell
recovered heat, wind energy," reporting that the efficiency of a
typical diesel generator was 33 percent for electricity, 33
percent to jacket the water-cooling system, and 33 percent in
the exhaust. He stated that heat was captured for the schools
and community facilities in most of the AVEC communities.
MR. STAMM declared that it was the dedicated board and staff
which made all of this possible, slide 20, "What makes it all
possible?" He added that persistence, a commitment to improved
efficiencies, and members' tolerance for higher outage rates was
also necessary. He stated support for the Power Cost
Equalization (PCE) program.
CHAIR WOOL asked about the average cost of a kilowatt hour.
MR. STAMM replied that it was $0.43 per kilowatt hour.
CHAIR WOOL offered his belief that, when PCE was applied, the
cost was about $0.22 per kilowatt hour.
MR. STAMM expressed his agreement that it was similar for AVEC
communities.
CHAIR WOOL asked if this was enough incentive for people to
conserve.
MR. STAMM emphasized that it was an incentive, and he opined
that should anyone in Fairbanks and Anchorage pay $0.22 per
kilowatt hour, they would use less power.
MS. KOHLER reminded that PCE was only available for the first
500 kilowatt hours. She stated that winter required a lot of
electric use. She reported that it was often necessary to fly
fuel into the communities, and she offered an example of a cost
of $0.70 per kilowatt hour over the 500 allowable PCE hours.
She pointed out that communities with piped water and sewer
systems typically had means to keep the pipes flowing which
added to the hourly usage.
^Presentation: Copper Valley Electric Association
Presentation: Copper Valley Electric Association
11:39:43 AM
CHAIR WOOL announced that the final order of business would be a
presentation by the Copper Valley Electric Association.
11:40:57 AM
TRAVIS MILLION, Chief Operating Officer, Copper Valley Electric
Association (CVEA), offered to move quickly through the overview
in order to allow more time for questions. He directed
attention to slide 2, "CVEA Facts," and explained that CVEA was
a member owned, not for profit, cooperative with 3,750 meters,
with assets of $150 million, and with annual revenues of about
$20 million. He relayed that there was a very large service
area, about the size of the State of West Virginia, with 600
miles of transmission and distribution facilities, staffed by 44
employees. He shared the map on slide 3, "Service Territory,"
noting that the majority of the service area falls on the road
system.
MR. MILLION shared slides 4 through 8, "Generation Plants." He
spoke about Solomon Gulch, the "workhorse of our system" as it
generated 55 percent of its energy needs. He reported that it
began operation in 1982 and was a 12-megawatt dam storage
project. It included a lake at an elevation of about 685 feet
that allowed for the back-up and storage of water. He said that
water was utilized through penstocks, or pipes, which spun two
turbines in the power plant. He explained that these turbines
used a lot of flow, although not much pressure, to generate
electricity. He added that most of the generation capacity was
in the summer, and then the lake was utilized in the winter to
allow for a yearly mix which included a 25 percent mix of hydro.
He reported that this plant was the dispatch center, that most
of the other power plants could be run from this facility, and
that it was manned full time. He spoke about the Allison Creek
Hydroelectric Plant, completed in October 2016, slide 5, and
stated that this was considered a "run of the river project" as
the water was diverted through a penstock to the powerhouse, and
there was not much storage of water. He pointed out that
Allison Creek could only be used when water was available, hence
no operation once there was freeze up. He shared that this
plant used high head pressure, with low flow, similar to a
garden hose. He offered his belief that the 6.5-megawatt
capacity would add about 14 percent to the overall hydro
portfolio. He explained that there was 1.2 miles of penstock,
starting at an elevation of 1300 feet, with the powerhouse at an
elevation of 160 feet. He added that this created about 520 psi
(pounds per square inch) of water pressure at the power house.
He said it was designed to allow for efficient use of the water
flows, from 80 cfs down to about 3 cfs (cubic feet per second).
He stated that the cost of the plant was $55 million, with $23.3
million provided by the state.
CHAIR WOOL asked if the project would have been feasible if the
money had to be borrowed.
MR. MILLION replied that it would not have been cost effective
if 100 percent of the project cost had to be borrowed. He said
it was already commercially operable, first producing on October
5, 2016.
MR. MILLION directed attention to the Cogeneration Project,
slide 6, located in the Petro Star refinery in Valdez, Alaska.
He said it was a 5.2-megawatt gas turbine using a less refined
liquid fuel, light straight run (LSR), and it became operational
in 2000. He acknowledged that the fuel was cheaper but did not
generate as much heat, BTUs, and was bought directly from the
Petro Star refinery. He said the exhaust heat was then sold
back to Petro Star, a good, cost effective process for both
entities.
REPRESENTATIVE SPOHNHOLZ asked for an explanation of
cogeneration.
MR. MILLION explained that cogeneration meant the utilization of
two different sources at the same time, in this case heat and
electricity from a turbine, which meant a much higher
efficiency. He added that this plant was the winter workhouse,
producing about 25 percent of the energy needs.
CHAIR WOOL mused that Petro Star did not want to go into the
electrical generation business.
MR. MILLION spoke about the Valdez Diesel Plant, slide 7,
operational since 1964 after the earthquake. He reported that
there were five diesel reciprocating units ranging from 600
kilowatts to 2.4 megawatts. He added that two of these units
were operated remotely from Solomon Gulch, with another two
units becoming remotely operated at the end of 2017. He shared
that the four oldest units had been replaced with two newer
units which almost doubled the efficiency compared with the
replaced units. He stated that this plant produced between 3 -
5 percent of the energy needs.
MR. MILLION discussed the Glennallen Diesel Plant, slide 8,
which went into commercial operation in 1959, with seven diesel
units ranging from 600 kilowatts to 2.8 megawatts. He added
that four of these units were remotely operated Solomon Gulch.
He stated that this plant produced between 3 - 5 percent of the
energy needs. He moved on to slide 9, "Cost per kWh Hydro vs.
Fuel," which graphed the blended power from June through May and
portrayed the increase in cost per kilowatt hour from summer
into winter, peaking in December as most of the water had
frozen, which dramatically reduced hydro production. As the
water and snow melted, the need for diesel fuel was reduced.
11:51:07 AM
MR. MILLION reported that there were three transmission
substations, and five distribution substations, slide 10,
"System." He said that there was a 106 mile, 138k volt
transmission line and more than 500 miles of overhead and
underground distribution lines. He stated that there were two
offices, the corporate offices in Glennallen with three power
plant operators for the one power plant, four linemen, and the
office staff; the remote office in Valdez with eight power plant
operators for four plants, three linemen and the office staff,
slide 11, "Staffing."
MR. MILLION shared slide 12, "Major Issues/Challenges," and
stated that the aging of the workforce was a major challenge, as
almost 40 percent of the power plant operators and 33 percent of
the linecrew had retired in the past three years. He opined
that 10 - 20 percent of the staff would retire in the next three
to five years; hence, recruitment and the loss of all the
experience was a primary issue. He said the age of some of the
diesel units, and the need for replacement, was an issue. He
reported that there were limitations for the amount of
generation due to air quality out of each diesel plant. He
shared that the Federal Energy Regulatory Commission (FERC)
regulations created some difficulties, as there were necessary
regulations that did not pertain to these operations.
REPRESENTATIVE RAUSCHER asked if these were state regulations.
MR. MILLION replied that most of these were federal regulations,
although there were some Department of Environmental
Conservation and Department of Natural Resources regulations, as
well. In response to Chair Wool, he said it was hard to predict
if any of these regulations would change in the future. In
response to Representative Rauscher, he said there was close
work with the Alaska Power Association for a collective voice
for smaller projects.
MR. MILLION returned to slide 12 and reported that the cost of
liquid fuel increased in the winter months, and consequently the
rates went up. He said that the distribution assets were aging,
and the cost of maintenance increased. He pointed out that
there were always challenges with weather and terrain, the
rising cost of labor and parts, and the isolated grid which was
not connected to any other utility.
MR. MILLION turned to slide 13, "Major Projects," and shared
that there were upgrades on the communications and controls
protection systems to bring them up to date. He reiterated that
the Valdez plant had received upgrades of more efficient units
and there was replacement for a lot of the underground
residential distribution cables. There were more detailed
inspections on the transmission and distribution facilities, and
there was aggressive clearing of the right of ways. He
concluded with slide 14, "What We Need," and said that having
funding available for projects and interconnectivity to the
Railbelt grid was beneficial. He suggested that a reduced
regulatory burden, a reduction in land fees, and streamlined
permitting would all be beneficial.
MR. MILLION, in response to Representative Rauscher, said that
the majority of the regulatory issues were federal, as many
state regulatory issues were driven by the Federal Energy
Regulatory Commission.
MR. MILLION, in response to Representative Westlake, said that
they were an associate member of a Railbelt membership group,
and they all worked closely.
CHAIR WOOL asked about the importance of connection along the
Glenn Highway.
MR. MILLION said that the difficulty was for a very expensive
project for a very short distance.
MR. MILLION returned to slide 14 and said there had been a 700
percent increase of land use fees from FERC in four years. He
asked for any support to bring down energy costs, noting that
they did not receive any PCE. He suggested a debt reimbursement
program for project funding.
CHAIR WOOL asked about the feasibility for barging in LNG, or
other gases.
MR. MILLION replied that they had talked to many LNG shippers
and providers, pointing out that there was only a need for 5-10
percent of diesel generation to offset. He said there was
research into a dual fuel option to increase efficiencies.
12:04:05 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Energy meeting was adjourned at 12:04 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| House Energy - 3.9.17 - Copper Valley Electric Overview.pdf |
HENE 3/9/2017 10:15:00 AM |
|
| House Energy - 3.9.17 - Inside Passage Electric Overview.pdf |
HENE 3/9/2017 10:15:00 AM |
|
| House Energy - 3.9.17 - Alaska Village Electric Overview.pdf |
HENE 3/9/2017 10:15:00 AM |