Legislature(2019 - 2020)CAPITOL 17
03/19/2019 11:00 AM House ENERGY
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| Audio | Topic |
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| Start | |
| Presentation: Alaska Energy Authority - Overview & Updates | |
| 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
March 19, 2019
11:02 a.m.
MEMBERS PRESENT
Representative Grier Hopkins, Chair
Representative John Lincoln
Representative Ivy Spohnholz
Representative Tiffany Zulkosky
MEMBERS ABSENT
Representative Zack Fields, Vice Chair
Representative Lance Pruitt
Representative George Rauscher
COMMITTEE CALENDAR
PRESENTATION: ALASKA ENERGY AUTHORITY - OVERVIEW & UPDATES
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
CURTIS THAYER, Executive Director
Alaska Energy Authority (AEA)
Anchorage, Alaska
POSITION STATEMENT: Presented a PowerPoint titled "AEA
Overview."
ACTION NARRATIVE
11:02:29 AM
CHAIR GRIER HOPKINS called the House Special Committee on Energy
meeting to order at 11:02 a.m. Representatives Hopkins,
Zulkosky, Spohnholz, and Lincoln were present at the call to
order.
^PRESENTATION: ALASKA ENERGY AUTHORITY - OVERVIEW & UPDATES
PRESENTATION: ALASKA ENERGY AUTHORITY - OVERVIEW & UPDATES
11:02:53 AM
CHAIR HOPKINS announced that the only order of business would be
a PowerPoint presentation titled "AEA Overview."
11:03:30 AM
CURTIS THAYER, Executive Director, Alaska Energy Authority
(AEA), presented a PowerPoint titled "AEA Overview" and
introduced slide 2, "AEA's mission is to reduce the cost of
energy in Alaska." He explained that AEA was created in 1976
and was an independent agency as well as a public corporation
governed by a board of seven directors, which they shared with
Alaska Industrial Development and Export Authority (AIDEA). He
reported that AEA developed finance, as well as operating and
maintaining energy systems, loan programs, the PCE (power cost
equalization) endowment distribution, Railbelt utilities and
intertie, and the Bradley Lake dam. He moved on to slide 3,
titled "AEA works with communities to provide safe, reliable and
affordable energy solutions." He pointed to the map on the
slide, stating that this was a snapshot for where AEA projects
were located.
11:05:19 AM
MR. THAYER introduced slide 4, "AEA Programs and Projects" and
paraphrased from the slide, which read:
Bradley Lake Hydro ? Alaska Intertie ? Bulk Fuel
Upgrades ? Rural Power System Upgrades ? Rural Utility
Assistance ? Power Cost Equalization ? Renewable
Energy Fund grants ? Power Project Fund Loans ?
Alternative Energy & Energy Efficiency ? Energy
Project Development & Finance
MR. THAYER moved on to slide 5, "Bradley Lake Hydroelectric
Project," stating that this project was AEA's largest asset and
was currently valued at $450 million. He shared that it was
constructed with $328 million, half of which was raised through
bonding and the other half was through appropriations from the
State of Alaska. He paraphrased from the slide, which read:
Produces ~ 10% of Railbelt electricity, 4.5 cents/kWh
? Benefits members of ? Golden Valley Electric ?
Matanuska Electric ? Municipal Light & Power ? Chugach
Electric ? Homer Electric ? City of Seward ? Battle
Creek Diversion Project: $47M, will add ~10% energy
CHAIR HOPKINS asked about the funding mechanism.
MR. THAYER replied that it was currently being bonded.
CHAIR HOPKINS asked if this was through AEA or the utilities.
MR. THAYER replied that this was through both AEA and the
utilities, as the utilities paid into some of the bonding. He
reported that the Bradley Lake bonding would be due in two
years.
CHAIR HOPKINS asked if the percentage breakdown to the utilities
would remain the same.
MR. THAYER replied that the percentage would remain the same and
he referenced the Bradley Lake hydro agreement between the
aforementioned six utilities.
11:07:52 AM
MR. THAYER paraphrased from slide 6, "Alaska Intertie," which
read:
170 miles from Willow to Healy ? Allows Golden Valley
Electric Assoc. (GVEA) to connect to and benefit from
lower cost power ? Improves reliability within
Railbelt system ? Operated by AEA and Railbelt
utilities ? $27.4M savings for GVEA in FY2018
MR. THAYER pointed out that neither Seward or Homer were
included as they were not on the Railbelt.
CHAIR HOPKINS asked whether Golden Valley Electric Association
(GVEA) also bought power from Chugach Electric.
MR. THAYER expressed his agreement and added that GVEA also
bought power from Bradley Lake. In response to Chair Hopkins,
he explained that the shared transmission with TRANSCO was not a
new concept. This would be an agreement between the utilities,
as AEA was not a party to this agreement because AEA did not
have a distribution system and did not put power into the
transmission system. He added that only four of the six
utilities had signed on, and he opined that there were still
some issues to be worked out.
CHAIR HOPKINS asked if AEA should be a partner in a transco
[transmission company].
MR. THAYER replied that, although AEA already owned 170 miles of
the transmission line, they did not see a need to have a seat
"at the table because a lot of it deals with the distribution of
their power." He pointed out that AEA did not have any rate
payers as customers. He offered his belief that this was "an
area where government's not best to be in."
11:11:22 AM
MR. THAYER paraphrased from slide 7, "Bulk Fuel Tank Farm
Upgrades (BFU)," which read:
Builds code compliant fuel storage facilities ?
Preventing spills and contamination ? Decreasing the
per unit cost of fuel by allowing the community to
purchase bulk quantities ? 118 projects completed
since 2000
MR. THAYER added that State of Alaska funding had contributed
almost $10 million into the project, as well as almost $1
million in matching funds from the Denali Commission. He
pointed out that there were 195 communities, and there was a
life cycle with on-going maintenance.
11:12:27 AM
REPRESENTATIVE LINCOLN asked if there was a list of communities
and how would an interested community become part of this.
MR. THAYER offered that there was a list and that AEA was able
to build four to five each year, with a build schedule already
scheduled for a few years.
REPRESENTATIVE LINCOLN asked if there was any anticipation of
significant changes to the program.
MR. THAYER said there was capital funds money remaining through
the next few years, and there were discussions with the Denali
Commission to continue a partnership. He said that about 30
percent of Denali Commission money went to bulk fuel or the
powerhouses.
11:13:43 AM
REPRESENTATIVE LINCOLN asked if this was capital funding which
AEA already had or was it anticipated.
MR. THAYER replied that this was funding which AEA currently
had. He explained that this funding was included with the PCE
formula, which would first be distributed to PCE, then to
community assistance, and finally 70 percent of the excess
earnings would go into bulk fuel or the powerhouses.
REPRESENTATIVE LINCOLN asked if the currently proposed changes
to the PCE and its endowment would put an end to this AEA
program.
MR. THAYER explained that under the current proposal, the PCE
funding would go into the (Constitutional Budget Reserve) CBR
which would instead create a competitive environment for capital
funding as well as operating funding for AEA.
CHAIR HOPKINS asked if AEA could ensure the program would be
funded in the future.
MR. THAYER said that AEA planned to continue its operation of
the program, regardless of the outcome to the budget situation.
He pointed out that PCE was still fully funded in the current
proposed budget but would receive its funding out of the
operating fund, instead of from its endowment. He acknowledged
that the endowment model was a better guarantee for predictable
revenue.
11:16:36 AM
MR. THAYER directed attention to slide 8, "Rural Power System
Upgrades (RPSU)," which read:
Improving power system efficiency, safety and
reliability ? Builds code compliant facilities
providing stable and reliable power ? ~10% to 20%
efficiency improvement in diesel generation ? 86
projects completed since 2000
MR. THAYER added that there were 195 communities, with
powerhouse upgrades only completed for those 86 communities. He
reported that, as about 80 small villages in Rural Alaska were
not tied to a utility, the community ran the powerhouses and
without the expertise, there was a higher need for maintenance
and a shorter life expectancy. He reported that there was
greater success when there was staff training. He noted that
there were three to four new projects each year in Rural Alaska.
He pointed out that the federal Diesel Emissions Reduction Act
(DERA) also contributed funding.
11:19:24 AM
MR. THAYER moved on to slide 9, "Rural Utility Assistance," and
reported that in FY2018 there had been 103 circuit riders with
rural utility worker assistance in Rural Alaska; 38 community
trainings; and 6 communities assisted with electrical
emergencies.
CHAIR HOPKINS asked if there was work to lower the diesel fuel
needs of community buildings and homes so there was less demand.
MR. THAYER replied that primarily the work to lower the cost in
partnership with the communities was for work on the
powerhouses. He referenced the Energy Efficiency program from
years past.
REPRESENTATIVE ZULKOSKY discussed her earlier work with
renewable energy for a non-profit and stated that the "low
hanging fruit" was energy efficiency. She pointed out that
significant investment into inefficient systems did not afford
much opportunity for cost savings.
11:21:40 AM
MR. THAYER introduced slide 10, "Power Cost Equalization (PCE)
Program," which read:
195 communities served ? Disbursed $27M in FY2018 ?
Regular communication with rural utilities helps
identify problems early ? Supported by AEA rural
utility assistance ? Online portal will increase
efficiency and accuracy of reporting
11:22:55 AM
MR. THAYER directed attention to slide 11, "PCE is only one
small piece of the community energy cost pie." He reported that
the total PCE reimbursement was about 14 percent; while the non-
PCE rate payers, such as commercial buildings, government
buildings, and schools which receive federal dollars accounted
for 86 percent.
11:23:28 AM
MR. THAYER shared slide 12, "PCE Endowment FY2019
Appropriations," and reported that the earnings from the PCE
Endowment was $112 million. Of that, $32.4 million went to AEA
for power cost equalization and about $381,000 went to
administer the program. He added that $120,000 of this went to
the Regulatory Commission of Alaska (RCA) and an additional
$360,000 went to the Department of Revenue for fund management
cost. He reported that there was a balance of about $79
million, of which, per the formula, 70 percent of these
unobligated earnings equaled $55 million. Of this $55 million,
$30 million went to the Community Assistance Program, $14
million went to the Renewable Energy Grant Fund, and $11 million
went to the Rural Power Systems Upgrades. He offered his belief
that there would be upcoming earnings of about $78 million,
which would lower that amount for Community Assistance Program,
the Renewable Energy Grant Fund, and the Rural Power Systems
Upgrades.
REPRESENTATIVE LINCOLN asked if bulk fuel was included in the
Rural Power Systems Upgrades.
MR. THAYER replied the Rural Power Systems Upgrades needed
additional funding for what was budgeted.
REPRESENTATIVE LINCOLN asked if the PCE fund was within AEA.
MR. THAYER replied, "yes."
REPRESENTATIVE LINCOLN asked if the appropriation for these
programs still went through the Alaska State Legislature for
approval and required the signature of the governor.
MR. THAYER explained that it was now pre-determined in statute.
REPRESENTATIVE LINCOLN asked if it was dispersed directly from
AEA, and not subject to the appropriations process.
MR. THAYER explained that AEA first received funding from the
endowment for the PCE, and then, dependent on the remainder of
the earnings, the formula was used for the Community Assistance
Program, the Renewable Energy Grant Fund, and the Rural Power
Systems Upgrades.
REPRESENTATIVE LINCOLN asked whether the mechanics for the
appropriations were through AEA or through the legislature to go
through the appropriations process.
MR. THAYER said that he would get back to Representative Lincoln
with that answer.
11:26:25 AM
CHAIR HOPKINS asked about the board reaction to maintain the PCE
program without the endowment fund should the governor's
proposal move forward.
MR. THAYER relayed that the board had discussed this, and he
pointed out that AEA was still fully funded, even though this
process created a more competitive environment. He pointed out
that during prior competitive environments, PCE did not ever
receive the full funding requested. In response to Chair
Hopkins, he said this would have happened from the mid to late
1990s to the 2000s.
CHAIR HOPKINS asked if AEA received funding for staff.
MR. THAYER replied that about $250,000 was paid for staff,
travel, and administration of the program. He reported that
there were three people dedicated to the program, a program
manager and two clerks. He added that there were shared
services which dispersed the money to the communities.
11:28:21 AM
MR. THAYER addressed slide 13, "Renewable Energy Fund (REF),"
which read:
$268M invested in REF by the State ? Boosted renewable
energy market in Alaska ? Leveraged hundreds of
millions of federal and private dollars ? 73
operational projects, 56 in development ? Displacing
~30 million diesel equivalent gallons annually ? ~$74M
in fuel savings in 2018
CHAIR HOPKINS asked if the committee could receive a list of the
communities which had received funding for projects through the
REF from 2008 - 2019 per the map on slide 14.
11:29:26 AM
MR. THAYER shared slide 15, "REF Funding by Energy Resource ($
millions)" and listed hydro, wind, biomass, and heat recovery
projects in that order for having received the most funding.
These were followed in funding for heat pumps, some
transmission, a little ocean/river and a little bit of solar.
He noted that the funding had been "across the spectrum."
11:30:12 AM
MR. THAYER moved on to slide 16, "Power Project Fund Loan
Program," which read:
$27.5 committed or disbursed for 18 loans ? $10.7
million uncommitted ? Flexible loan program ? Covers
all aspects of supply side system ? Relies on unique,
in-house technical expertise for evaluation of loan
viability and regulatory compliance ? Loan
applications are also vetted for economic and finance
viability ? Critical resource in shift from grant
funded to debt financed energy projects ?
Participation continues to increase
REPRESENTATIVE ZULKOSKY referenced slide 15 and asked what
projects were included in the $14.6 million spent on
transmission. She asked if any of this specific funding could
be used to help communities prepare to bring projects on line by
addressing energy efficiency issues as a foundational step.
MR. THAYER asked if she was referring to the planning and design
phase for projects.
REPRESENTATIVE ZULKOSKY asked if energy efficiency projects
qualified under this fund as a precursor to renewable energy
projects.
MR. THAYER replied, "yes, they do."
REPRESENTATIVE ZULKOSKY asked for any additional information
related to this.
11:32:33 AM
REPRESENTATIVE SPOHNHOLZ, also referring to slide 15, asked what
qualified as heat recovery.
MR. THAYER said that he would "get back to you on that." He
added that part of the heat recovery was from the diesel
generation by the power houses. He noted that there was an
issue with the generators, as EPA did not care for the marine
generators used in Rural Alaska.
REPRESENTATIVE SPOHNHOLZ asked if the EPA concerns were for
emissions.
MR. THAYER expressed his agreement. He pointed out that the
marine generators were more robust, while generators with all
the emissions [controls] had a greater rate of failure and were
costly to repair or replace.
REPRESENTATIVE SPOHNHOLZ asked if these additional emissions
capacities made the generator more complicated.
MR. THAYER expressed his agreement.
11:34:11 AM
MR. THAYER discussed slide 17, "$29.5 million approved for 18
active projects." He reported that eight loans were disbursed
for diesel powerhouse, six loans were disbursed for hydro, two
loans for wind, and one each for biomass and distribution
systems.
11:34:42 AM
MR. THAYER shared slide 18, "Alternative Energy & Energy
Efficiency." He said that there were programs which focused on
commercial buildings, rural public buildings and facilities, and
statewide outreach and education. He mentioned the Remote
Alaska Energy Efficiency program and the 64 megawatts of
installed wind capacity throughout the state. He noted that
there were 20 operating biomass systems, and that AEA had
assisted with 70 hydro projects. He noted that Alaska was now
30 percent hydro, with Kodiak Island being the champion with
wind and hydro projects.
REPRESENTATIVE SPOHNHOLZ asked where was the most opportunity
for wind power which was not currently being taken advantage.
MR. THAYER reported that AEA had done an analysis of energy
opportunities in Alaska in 2000 and was currently updating that
analysis as technology for renewables had changed. He added
that battery [technology] had also advanced during this time.
He said that AEA hoped to have that report completed by the end
of the year.
CHAIR HOPKINS reflected that often the implementation and the
cost for many of these energy projects was not feasible. He
asked about the 64 megawatts of wind power in Alaska, with half
of that being produced on Fire Island. He asked about Eva Creek
wind production, noting that he thought it was larger than Fire
Island with a planned expansion of generation.
MR. THAYER said that this was a private project and not an AEA
project. He added that the State of Alaska had invested $25
million in the transmission line.
CHAIR HOPKINS offered his understanding that there was a plan to
build an additional transmission line to expand Fire Island. He
asked if AEA had any part in this.
MR. THAYER said that AEA had not been approached about any
future intentions for Fire Island.
CHAIR HOPKINS asked if AEA would offer any assistance with
funding that project.
MR. THAYER offered his belief that this would be a conversation
with the governor and the legislature.
11:39:05 AM
MR. THAYER shared slide 19, "Energy Project Development &
Financing," which read:
Planning, evaluation and project development
assistance ? Data collection & reporting ? Utility
business assistance ? Financing (e.g. Power Project
Fund loans) ? Critical federal partnerships (e.g.
Denali Commission)
MR. THAYER reported that, as Alaska Village Electric
Cooperative, Incorporated (AVEC) owned and operated about 80
healthy utilities, he was in discussion regarding the future
AVEC takeover of ownership in many of these other communities.
He pointed out that AVEC had a very good track record.
REPRESENTATIVE ZULKOSKY pointed out that AVEC always indicated
that it was up to the local community to opt in for working with
AVEC. She asked if AEA was adequately funded to provide the
capacity for building and planning throughout Rural Alaska.
MR. THAYER said, "the short answer is no." He offered his
belief that there were often opportunities to increase the
powerhouses and the bulk fuel, as there was a greater demand
than AEA had time, resources, and personnel. He stated that it
was a policy call for the legislature to determine the balance.
He reported that AEA had 30 staff with an additional 30 people
in services shared with Alaska Industrial Development and Export
Authority (AIDEA). He expressed his concern for knowing the
condition of the 195 communities in Rural Alaska and knowing
what AEA could do to predict the life span with a rotation of
maintenance. He declared that there was always a need for more
money for these projects.
11:43:07 AM
MR. THAYER presented slide 20 "AEA provides energy solutions to
meet the unique needs and opportunities of Alaska's rural and
urban communities."
MR. THAYER addressed the Volkswagen settlement and paraphrased
from slide 23, which read:
Volkswagen violated the Clean Air Act and they were
caught. A lawsuit followed, resulting in the VW
Settlement. 23 ? Alaska is a beneficiary, allocated
$8.125 million ? AEA is the designated Lead Agency for
Alaska ? The State's Beneficiary Mitigation Plan
outlines which of the 10 eligible Environmental
Mitigation Actions (EMAs) Alaska will fund ? 50% on
school buses 10% on public transit ? 10% on
commercial marine vessels ? 15% on rural prime power ?
15% on Electric Vehicle charging infrastructure
11:44:56 AM
REPRESENTATIVE SPOHNHOLZ asked about the process for application
and distribution.
MR. THAYER explained that there was an application process for
communities to apply for the grants, which would be evaluated,
and the money then dispersed based on the grant proposals.
REPRESENTATIVE SPOHNHOLZ asked if the applications would come
from the local governments.
MR. THAYER replied, "yes."
CHAIR HOPKINS asked about the working relationship between AEA
and AIDEA.
MR. THAYER explained that this was a unique relationship as
there were two very distinct and different missions. Alaska
Industrial Development and Export Authority (AIDEA) focused
primarily on finance and opportunity and as a conduit for bonds
and banks for economic development; whereas, AEA focused
primarily on energy in Rural Alaska. He pointed out that AEA
shared with AIDEA the services of about 30 people for
accounting, bookkeeping, procurement, and contracting and that
the two were co-located in the same building. He reported that
the costs of the shared services and the building were split
equally between AEA and AIDEA. In response to Chair Hopkins, he
said that AEA had about 30 staff while AIDEA had about 25 staff,
and with the shared services, there were 82 staff for both
agencies.
11:47:59 AM
REPRESENTATIVE ZULKOSKY asked to clarify that AEA operated under
the AIDEA board structure.
MR. THAYER replied that the two agencies shared the same board,
although there were separate board meetings. He pointed out
that primarily AEA were engineers and AIDEA were bankers.
REPRESENTATIVE ZULKOSKY asked how having a shared board served
to accomplish the AEA mission, if board members were "thinkers
in nature and might not be as familiar with energy issues."
MR. THAYER replied that for the current board structure, this
was not the case, as there were two members who were the
commissioners of the Department of Commerce, Community &
Economic Development and the Department of Revenue, along with
five public board members. He pointed out that the vice chair,
a public member, knew as much as anyone about renewable energy.
He added that this was a very diverse board.
11:49:50 AM
REPRESENTATIVE ZULKOSKY asked if there was any rural
representation to offer a village Alaska perspective.
MR. THAYER replied that, as five members of the current board
were new, he did not know any more of their background other
than their bio. He added that these included the two new
commissioners and three public members.
REPRESENTATIVE ZULKOSKY asked about the selection process for
the board members.
MR. THAYER explained that they were selected and served at the
"pleasure of the governor."
11:51:17 AM
CHAIR HOPKINS asked if Mr. Thayer saw any change in the
structure of AEA under the new administration.
MR. THAYER replied that, to his understanding, there would not
be any changes and that the governor was "dedicated to the
mission of AEA." He shared that there might be some
opportunities to "grow the mission."
MR. THAYER added that there had not been any reduction in budget
or personnel, or any changes in structure, with the new budget.
CHAIR HOPKINS pointed out that a change for funding of AEA into
the general fund "certainly changes the sustainability of all
these important programs." He expressed his concern with this
flexible revenue system and the future of AEA.
MR. THAYER replied that he shared that concern.
11:53:38 AM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Energy meeting was adjourned at 11:53 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 2019-03-19 - Thayer AEA Overview.pdf |
HENE 3/19/2019 11:00:00 AM |
Alaska Energy Authority Overview - Curtis Thayer |