Legislature(2023 - 2024)ADAMS 519
04/21/2023 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Presentation: Village Safe Water and Wastewater | |
| Presentation: Alaska Energy Authority Projects | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 40 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
April 21, 2023
1:37 p.m.
1:37:06 PM
CALL TO ORDER
Co-Chair Edgmon called the House Finance Committee meeting
to order at 1:37 p.m.
MEMBERS PRESENT
Representative Bryce Edgmon, Co-Chair
Representative DeLena Johnson, Co-Chair
Representative Julie Coulombe
Representative Mike Cronk
Representative Sara Hannan
Representative Andy Josephson
Representative Dan Ortiz (via teleconference)
MEMBERS ABSENT
Representative Neal Foster, Co-Chair
Representative Alyse Galvin
Representative Will Stapp
Representative Frank Tomaszewski
ALSO PRESENT
Randy Bates, Director, Division of Water, Department of
Environmental Conservation; Carrie Bohan, Facilities
Services Program Manager, Division of Water, Department of
Environmental Conservation; Sandra Moller, Director,
Division of Community and Regional Affairs, Department of
Commerce, Community and Economic Development;
Representative C.J. McCormick.
PRESENT VIA TELECONFERENCE
Curtis Thayer, Executive Director, Alaska Energy Authority.
SUMMARY
HB 40 APPROP: CAPITAL/SUPPLEMENTAL
HB 40 was HEARD and HELD in committee for further
consideration.
PRESENTATION: ALASKA ENERGY AUTHORITY PROJECTS
PRESENTATION: VILLAGE SAFE WATER and WASTEWATER
Co-Chair Edgmon reviewed the meeting agenda.
HOUSE BILL NO. 40
"An Act making appropriations, including capital
appropriations and other appropriations; making
supplemental appropriations; making appropriations to
capitalize funds; and providing for an effective
date."
^PRESENTATION: VILLAGE SAFE WATER and WASTEWATER
1:38:54 PM
RANDY BATES, DIRECTOR, DIVISION OF WATER, DEPARTMENT OF
ENVIRONMENTAL CONSERVATION, introduced the PowerPoint
presentation "Department of Environmental Conservation;
House Finance Committee," dated April 21, 2023 (copy on
file). He began on slide 1 and relayed that there was a
planned investment of about $25 million annually in the
Village Safe Water (VSW) program. The mission of VSW was to
support rural communities by developing sustainable
sanitation facilities.
Co-Chair Edgmon commented that it was an older tradition in
the legislature to ask any legislators present during a
committee meeting to join the committee table if there was
an available seat. He noted that Representative C.J.
McCormick was in the audience and asked the representative
to sit at the committee table. The subject matter pertained
to Representative McCormick's district.
1:41:03 PM
Mr. Bates clarified that $25 million in general funds was
allocated to VSW on an annual basis, which leveraged about
$100 million in funds for the program from federal sources.
In 2023 and over the next several years, there would be an
additional influx of Infrastructure Investment and Jobs Act
(IIJA) funds. The combination of funding sources amounted
to a significant addition of dollars for the program. The
funds were particularly important to allow the state to
provide water and sewer services to rural communities. The
goal of the Department of Environmental Conservation (DEC)
and the Division Community and Regional Affairs (DCRA) was
to spend every available VSW and IIJA dollar. He wanted to
ensure that the legislature knew that the department was
fully committed to spending the available monies.
Co-Chair Edgmon asked if it was fair to say that broadband
was comparable to water and sewer in that many rural
communities lacked access and were underserved or unserved.
Mr. Bates responded in the affirmative. The Indian Health
Service (IHS) was set to receive $3.5 billion in IIJA funds
and $2.1 billion of the total would be allocated directly
to Alaska. The money was predicted to be sufficient to
address all known needs in Alaska. The wealth of
information and influx of funding brought about additional
projects that would greatly exceed the $2.1 billion in
funding. The money would be transformative in addressing
rural sanitation needs; however, it would not solve all of
the state's problems and the money would all be spent in
five years. There would still be facilities and maintenance
needs after the funds had been spent. Once the water and
sewer facilities were built and operating and the money was
spent, it was the responsibility of the rural communities
to maintain the facilities and community residents would
need to pay the rates. He recognized that it was a
challenge and there were multiple scoring rubrics in place
to ensure that communities were prepared to operate the
facilities safely and sustainably.
1:45:54 PM
Co-Chair Johnson noted that an issue in the past had been
finding enough employees to maintain the wastewater and
water facilities. She understood that the job training
center in Palmer, Alaska focused heavily on training local
individuals to work at the facilities. There had been some
discussion on hiring traveling facilities maintenance
workers and she was curious if there had been success. She
asked Mr. Bates to expand upon the idea of hiring traveling
workers.
Mr. Bates noted that his colleagues would go through some
of the details of the remote maintenance worker programs
later on in the presentation. He suggested that his
colleague continue the presentation.
Co-Chair Edgmon relayed that members could ask questions
during the presentation.
1:48:04 PM
CARRIE BOHAN, FACILITIES SERVICES PROGRAM MANAGER, DIVISION
OF WATER, DEPARTMENT OF ENVIRONMENTAL CONSERVATION,
continued the presentation on slide 2. She emphasized that
the goal of VSW was to support rural communities in the
communities' efforts to develop sustainable sanitation
facilities. The department achieved the goal by providing
funding and providing assistance to communities by
implementing projects once the projects had been funded.
There were collectively about 200 rural communities that
the department considered its "customers." Approximately
two-thirds of the communities received similar support
through the Alaska Native Tribal Health Consortium (ANTHC).
There was a historical divvying up of the communities and a
community was permitted to work with whichever agency it
chose. The funding was available to all communities
regardless of the agency they chose to work with. She
emphasized that eligibility was not dependent upon agency
support and that all eligible communities would receive
funding.
Co-Chair Edgmon added that many underserved and unserved
communities were in Representative Cronk's district,
Representative McCormick's district, and his own district.
Representative Hannan recalled that Ms. Bohan mentioned
that there were 200 communities and some were supported by
DEC and other communities were supported by ANTHC. She
asked how many communities were being served with
sustainable sanitation facilities in total.
Ms. Bohan responded that there were collectively about 200
rural communities and VSW provided support to one-third of
the communities and ANTHC provided support to the remaining
two-thirds.
Ms. Bohan advanced to slide 3 and relayed that
historically, the need had greatly exceeded available
resources. Funding from IHS, VSW, and the Environmental
Protection Agency (EPA) collectively totaled approximately
$100 million per year while the collective need was greater
than $2 billion. Ongoing needs arose every year and little
progress was made due to limited funding. She shared that
the U.S. Congress had examined the IHS database while
crafting IIJA, and VSW worked collectively with ANTHC to
gather all known needs from every community and populate
the database every year. The information in the database
led to the $3.5 billion in total IIJA funding. The agency
had been fortunate to have a longstanding relationship with
other funding agencies such as ANTHC and the Denali
Commission. She thought it was remarkable how well the
agencies worked together.
1:52:56 PM
Ms. Bohan advanced to slide 4 and explained that the VSW
allocation method was called the Capital Improvement
Project (CIP) program. The slide showed the various funding
sources for VSW and for ANTHC. The grants from the Rural
Development agency within the United States Department of
Agriculture (USDA) would be matched by the state and
totaled to about $80 million for 2023. The Sanitation
Deficiency System (SDS) was a separate allocation system
managed by IHS. Funds from EPA also contributed to the
allocation system. She reiterated that communities were
selected for funding and the money would go to the lead
agency that was supporting the community.
Ms. Bohan moved to slide 5 which included a graph that
showed the drastic nature of the increased funding. The two
grants that the department received each year were not
impacted by IIJA and it would be receiving a similar amount
of funding as it had historically received. The department
would be assisting communities that received funding
through IHS, which had increased its funding from $45
million to $281 million over the last year.
Co-Chair Edgmon asked Ms. Bohan for more information about
the scoring approach. He understood that the IIJA funding
would only last for five years, then the communities would
be responsible for independently maintaining the systems.
He had heard regular concerns about the scoring system. He
relayed that he was going to introduce a bill in the near
future that would involve a simple addition to VSW that
would prioritize communities based on need. Currently, 95
out of 196 rural communities would not meet the minimum
requirements for funding through the VSW CIP process. He
thought the communities and the scoring process should be
aligned.
Mr. Bates responded that it was the department's goal to
ensure that all the money coming to the state would be
shared with the communities in order to build
infrastructure. The department recognized that HB 374,
introduced in 2022 by former Representative Tiffany
Zulkosky and Co-Chair Foster, proposed to eliminate scoring
as a consideration of the commissioner of DEC. It was
important to note that the EPA had delegated primacy of the
Safe Drinking Water Act (SDWA) to DEC. He explained that
SDWA required that there be a capacity assessment system in
place in order to evaluate the technical, financial, and
managerial skills of a community. The best practice scoring
tool was utilized to evaluate the capacity and assess a
community's ability to own and operate a facility after
federal funding had elapsed.
Mr. Bates commented that he was well aware of the
challenges and concerns related to the scoring system. He
agreed that 95 of 196 rural committees were not eligible
for funding, however many of the communities were not
seeking funding. There was a concern about the time of year
the scoring took place and the timing had been adjusted. He
shared that Ms. Bohan had led a survey throughout all of
the operating facilities to evaluate successes and areas
that needed improvement. The results of the survey were
being compiled and should be released soon. The department
also planned to open up a public scoping period to ensure
that the public had the opportunity to comment. He relayed
that the department would organize a working group to
discuss the concerns of the public and find a mutually
agreeable path forward to success for communities. He
emphasized the importance that communities understood the
steps that were necessary in order to earn a passing score
and start receiving funding for water and sewer facilities.
The capacity assessment could not be eradicated because it
was a federal requirement, but the department would
evaluate the scoring tool and make any necessary changes.
Co-Chair Edgmon asked Ms. Sandra Moller to address the
issues of capacity.
2:03:15 PM
SANDRA MOLLER, DIRECTOR, DIVISION OF COMMUNITY AND REGIONAL
AFFAIRS, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC
DEVELOPMENT, responded that operation and maintenance were
key concerns as well as building capacity. She relayed that
DCRA provided training such as QuickBooks, financial
management, and other personnel training for communities,
municipalities, and villages. The process was working but
there were ways that it could be tweaked and adjusted. She
thought the solution was for the people in the communities
to operate and maintain the facilities. A conversation
should be had to discuss what could be done in
collaboration with federal partners, regional entities, and
state entities. She was pleased to hear ANTHC report during
a recent presentation that the council would be expanding
the Alaska Rural Utility Collaborative (ARUC) program to
include 30 more participants. The program provided training
to utility workers including bill collecting and
bookkeeping.
2:06:00 PM
Representative Coulombe asked Ms. Bohan if maintenance
costs were included in the total cost of a project.
Ms. Bohan responded that operations and maintenance were
not fundable through IIJA. She understood that IHS had
federal language that permitted it to fund operations and
maintenance, but there had never been an appropriation for
it. Similarly, VSW statute had provisions for the state to
provide operations and maintenance funding, but it had not
received the appropriations. A project would be funded
until it was fully constructed, then the responsibility of
operations and maintenance would fall to the community.
Most communities struggled to collect sufficient revenue to
cover basic operations and maintenance costs and none of
the rural communities she was aware of were in a position
to collect enough revenue and the communities were
dependent upon ongoing grants.
2:07:44 PM
Representative Hannan asked if the state had ever supported
VSW operation and maintenance funds. She was stunned that
nothing had been done to help communities operate and
maintain programs.
Co-Chair Edgmon responded that he could not recall such a
situation in which the state had allocated funds for VSW
operation and maintenance costs. He thought building a
water and sewer system in rural communities came with
similar issues as implementing a broadband system. There
were many moving parts and it was a challenge to implement
systems in remote areas in the state and ensure that the
communities could independently maintain the systems. He
could not recall a situation in which operations and
maintenance funds were made available for VSW purposes but
asked Ms. Bohan if she could confirm the information.
Ms. Bohan responded that she was also not aware of a
situation in which maintenance and operations for VSW were
funded by the state. She noted that there were some slides
in the presentation on the remote maintenance worker
program that would provide more information. The department
partnered with five regional health consortiums in five
different regions. There were also DEC staff based in
Anchorage who were each assigned to 10 to 15 communities in
order to provide support. In some cases, the same employees
had been supporting the same communities for over 25 years.
The Rural Utility Business Advisor (RUBA) program was based
off the program for remote maintenance workers in that each
community was assigned a government worker in order to have
a stable and reliable point of contact. She reiterated that
she was not aware of any direct operations and maintenance
funding.
Representative Hannan commented that she had heard similar
stories in which rural schools had the only safe water in a
community and there were maintenance issues with the water
system. She thought that the state had an obligation to
build adequate and safe drinking water in order for schools
to operate properly. The critical nature of having safe
water in every community was especially apparent after the
COVID-19 pandemic. She applauded the efforts of the
department to solve the problem and noted that it was
challenging.
2:13:27 PM
Co-Chair Johnson commented that the chart on slide 5 was
"breathtaking." She thought that an entity funding a system
did not necessarily mean it was responsible for the system.
She was hopeful that the purpose of the scoring system was
to ensure that there was a mechanism for management. All
systems should be well thought out and sustainable for
years to come and the state had responsibilities to upkeep
the system in addition to the communities. She thought
there needed to be follow through otherwise the system
would not work.
Mr. Bates commented that about three years ago, there was a
trend of declining scores. The department began working
with its sister agency, the Department of Commerce,
Community and Economic Development (DCCED), to find a way
to stop the trend. The department was particularly focused
on finding a way to assist the communities once it learned
of the IIJA funds. He emphasized that DEC was fully engaged
in the effort and it accepted the criticisms on the
process. It was a "watershed" moment for there to be
federal and state money available to change the landscape
in a rural community. It was incumbent upon the department
to help the communities stand up the systems, but the
ownership of the system would go to the communities once
the systems were established. The community would be
responsible for operating and maintaining the systems and
collecting revenue for the safe delivery of water and
sanitation. The scores were designed to evaluate a
community's ability to operate the system. The economy of
rural communities was challenging because many citizens
could not afford to pay the rate for the system. Some
communities had the ability to subsidize the rate payers
through regional partners and some did not. There was a
heavy push to spend the money, but there also needed to be
a way for the communities to accept ownership and operate
the facilities.
2:19:34 PM
Representative Josephson shared that when he lived in the
mid-Kuskokwim region, there were 400 people and around 40
jobs. He asked how people could be expected to afford the
rate when there was not enough opportunity for employment.
He wondered if there should be a capitalized program
similar to Power Cost Equalization (PCE).
Mr. Bates responded that DEC had raised the issue with
Alaska Senator Lisa Murkowski and Senator Dan Sullivan. He
agreed that the success of operations and maintenance was
critical for the success and delivery of services. He
offered a hypothetical wherein there were 200 communities
with $50,000 as a base salary for a certified operator in a
community, there would be $10 million to provide for the
communities as a subsidy for maintaining a certified
system. There were other programs that could provide
subsidy programs and not all communities had subsidies.
There was also the possibility that a few rate payers could
drop out and the maintenance and operations costs would
start to "snowball" and jeopardize the health of the
system. The department had discussed utilizing PCE and
other similar concepts.
2:22:42 PM
Ms. Bohan continued to a chart on slide 5 depicting VSW
funding sources. The blue line across the top row
represented the IHS funding. She shared that IHS was not
permitting to consider capacity when allocating its
funding. The Best Practice Score (BPS) was not used in
allocating the IHS funding. A common misconception was that
BPS was impacting IIJA funds, which it was not.
Historically, IHS had only been able to fund projects with
a per capita cost that fit within a certain boundary. The
IIJA relieved a portion of the $3.5 billion from
restrictions, which would allow IHS to provide funding to
unserved and underserved communities. There would still be
projects that would not meet the IHS funding eligibility
and would need a co-funder. The EPA funding increased in FY
23 through IIJA as well. The increased funds in other areas
were substantial enough to cover the portion of projects
that were ineligible for IHS funding. There was a
significant concern that inability to access VSW funding
would prevent IHS from funding projects, but she did not
think that there was reason for concern.
Ms. Bohan advanced to a map on slide 6 showing the
locations of the underserved and unserved communities in
the state. She explained that flush tank and haul systems
involved hauling water to the home and hauling sewage out
of the home. The system did not provide the same level of
health protection as a fully piped system. She relayed that
the department considered a community with individual wells
and septic systems to be a served community. Although it
was an option for some, individual wells and septic systems
were not compatible with all of the unique environments in
the state.
Co-Chair Edgmon commented that communities had
significantly different needs: some communities were not
incorporated, some had active tribal governments, and some
had little structural leadership.
2:26:57 PM
Representative Cronk asked Ms. Bohan to provide a
definition of underserved.
Ms. Bohan explained that underserved meant that less than
55 percent of the homes had piped water and sewer.
Representative Cronk understood that a served home meant
that it had a robust water system and pipe hookups. He grew
up in Northway, Alaska and ANTHC came to the community in
the late 1990s to implement infrastructure. He stated that
amount of money wasted was unbelievable, such as installing
$75,000 outhouses which quickly fell down. He highlighted
that ANTHC determined the areas in which a well and sewer
systems were feasible, and one of the locations was his old
house. He explained that because there were not enough
workers to build the system he had installed the plumbing
himself. He noted it took a number of times to plumb the
system correctly because he had no plumbing experience.
Representative Cronk thought it was important to note
whether a community had the ability to run a water and
sewer system. The systems in Northway stayed functioning
because there was a single individual who had taken on the
responsibility of running the system. He thought it was a
huge investment to provide water and sewer systems to all
of the unserved and underserved communities. In some
communities where sewer was available, hauling water was
optimal because it kept costs down. He asked if Ms. Bohan
had considered his comments.
Ms. Bohan responded that she had previously misspoke and
corrected herself that an unserved community was less than
55 percent and an underserved community was between 55 and
80 percent piped or using a flush tank and haul system. A
planning project was required to be funded before any
project would be funded. The planning project examined a
community's desires, engineering alternatives, and would
propose an alternative including cost estimates. Some
communities had the opportunity to consider pipes but chose
to build a haul system or decentralized well and septic
system.
2:31:15 PM
Representative Cronk commented that he had 13 unserved
communities in his district. The costs were significant and
surprising when the systems were first implemented in
Northway. He looked forward to seeing what was best for the
communities and appreciated the efforts.
Ms. Bohan responded that presently, IHS was able to provide
funds to ANTHC for planning efforts to determine which type
of system would be best for a community. Some communities
had already stated that they could not support a pipe
system and were therefore uninterested in the
implementation of a system. Communities' opinions were a
vital component of the process and were consulted during
every step of the planning effort.
Co-Chair Edgmon suggested that the presenters go through
the remaining slides quickly for the sake of timeliness.
Ms. Bohan advanced to slide 7. She noted the estimated cost
to provide water and sewer to individual homes in a village
for the first time was estimated to be between $750,000 and
$1 million per home. The community of Wales, Alaska
recently booked its planning documents and with a total of
42 households and 142 people, the initial cost was
projected to be $47 million and would be well into the $50
million range once construction began. The estimated
monthly rate was $300 and the community of Wales was
unwilling or unable to pay the rate; however, IHS would
still move forward and fund the project.
Ms. Bohan advanced to slide 8 and relayed that there had
been an assessment tool in place since at least the 1990s.
Prior to the current BPS system, the RUBA assessment was
used. She explained that RUBA involved 27 indicators.
Project funding was allocated to a community for a project
and then the community was required to collaborate with
RUBA and submit to the 27-indicator assessment, which could
take several years. All of the indicators were limited to a
"yes or no" answer and the community had to receive a yes
on all 27 indicators in order to pass the assessment. The
department thought that reducing the number of indicators
and offering different levels of success in each category
would better indicate the capabilities of a community. The
change would also better provide information to a community
on the ways in which it could incrementally improve its
score. She relayed that the department did not expect most
rural communities to receive a perfect score; therefore, 60
points was a passing score even though there were 100
points possible. All of the criteria on the rubric were
actions the communities were already required to take.
2:37:02 PM
Ms. Bohan moved to slide 9 and explained that there was a
tiered structure for the minimum score. If an unserved or
underserved community needed to improve its washeteria, the
threshold for eligibility would be lower because it was the
only operating facility in the community and many were in
need of significant repair. The planning efforts were
required to follow an established United States Department
of Agriculture (USDA) rural development model. One of the
components of the model was sustainability and many of the
communities' planning documents were falling short in the
sustainability discussion. The department wanted to
decouple the engineering discussion and the socioeconomic
discussion within the planning documents in order to
approve engineering concepts and help a community develop a
sustainability plan. There were a number of subsidized
programs that helped support the operations and maintenance
of communities. A community sustainability plan could
simply require that it join a collaborative organization
that had the resources to help the community be
sustainable.
Ms. Bohan relayed that the department also acknowledged
that sustainability would look drastically different for
each community. She relayed that VSW had developed an
affordability indicator in collaboration with an economist
in order to develop greater insight in decision making. The
tool looked at the two lowest income brackets in a
community and determined what the residents would be giving
up in order to afford water and sewer. The tool looked at
other economic indicators such as food stamps and
employment and it was intended to determine the maximum
amount of money a community could afford.
Ms. Bohan continued quickly through slides 10 and 11. The
department used BPS to consider eligibility and it was also
a small part of the overall project prioritization. The
biggest focus was on the overall health impact to the
community. She advanced to slide 12 detailing the capital
request of $247 million. She moved to slide 13 and
explained that about $2.5 million was allocated from EPA
funding to the remote maintenance worker program. She
greatly appreciated the work done by remote maintenance
workers.
2:42:40 PM
Mr. Bates noted that the individuals were working with
water and sewer lines at 40 below temperatures. There were
no situations in which systems would break down in
favorable weather. The workers were dedicated to
maintaining the systems and ensuring that the systems were
operational in all types of weather and environments.
Ms. Bohan highlighted a photo on slide 13 of a worker
smiling on the job in sub-zero temperatures. She advanced
to slide 14 and shared that the department had a project
going on for nearly ten years that looked at better ways to
provide increased health benefits to unserved and
underserved communities without going the piped route. The
department had been working with the University of Alaska
Anchorage (UAA) on a pilot system that incorporated in-home
water reuse to reduce the amount of water residents had to
haul to their homes. The model was currently in a garage in
Anchorage, Alaska and being pilot tested.
Ms. Bohan advanced to slide 15 which offered current
challenges faced by the department. A significant challenge
was that IHS funding was awarded without consideration of
local capacity.
2:45:11 PM
Co-Chair Johnson asked how long the funding would be
available.
Ms. Bohan responded that the IHS money did not have a
limit. The department expected the effort to complete all
of the infrastructure to span 10 to 12 years. There had
been challenges such as material shortages, delays due to
the COVID-19 pandemic, and increased costs. The constantly
increasing timelines were frustrating to the department and
to communities. There was a lack of federal guidance and it
was difficult to move forward without knowing the rules.
Ms. Bohan advanced to slide 16, which related to other
infrastructure funding included in IIJA. The State
Revolving Loan Funds (SRLF) [AS 46.03.032 and AS 46.03.036]
involved two loan funds: annual capitalization grants from
the EPA and low interest loans for eligible clean water and
drinking water projects. The state loaned money out,
collected repayments with a low interest, and was permitted
to keep the return dollars on the interest and make new
loans. The department collected letters of interest
throughout the year and was constantly able to acknowledge
new project needs and accommodate communities seeking
funding. In 2023, the federal earmarks for water and
sanitation projects were funded through the base amount of
money that would normally be allocated to SRLF. The
department received about $4.9 million for drinking water
and $4.5 million for clean water for FY 24, which was about
half of what it had received in years prior. The department
was currently developing its grant applications and after
receiving funds, it would be making new loans around July
of 2023.
Ms. Bohan continued to slide 17. The table on the slide
showed year one IIJA funding for drinking water SRLF and
clean water SRLF and the department was currently in the
process of applying for the year one funds. The department
was also focusing on emerging contaminants such as Per- and
Polyfluorinated Substances (PFAS) and led service line
funding. It was important to note that much of the funding
came with the requirement to provide loan forgiveness and
the majority of the funds would be forgivable for
communities.
2:49:47 PM
Co-Chair Edgmon asked if committee members had additional
questions.
Representative Cronk noted that one of the selling points
of the new system was the ability to recruit young people
to apply for new jobs. He asked how much of the cost of
running a new system was due to high electric costs
required for operations. He wondered if a PCE plan for
water systems might reduce costs.
Ms. Bohan responded that she did not have the exact
numbers, but energy costs in northern and western areas of
the state made up about 40 percent of the overall
operational cost.
Co-Chair Edgmon commented that he had a family member who
was a remote maintenance worker and could "fix anything."
He emphasized the importance of having qualified people out
in communities available to help operate and maintain the
systems. Many qualified workers were getting older and
younger people were leaving the communities, which made for
a challenging situation when recruiting workers. He relayed
that the bill would be revised in the near future and he
appreciated the testifiers' time.
Representative Josephson asked if the 40 percent figure
spoke to a PCE reform issue.
Co-Chair Edgmon commented that Representative Josephson
made a thought-provoking remark.
2:53:11 PM
AT-EASE
2:55:13 PM
RECONVENED
Co-Chair Edgmon relayed that the next presentation would be
from the Alaska Energy Authority (AEA).
^PRESENTATION: ALASKA ENERGY AUTHORITY PROJECTS
2:55:55 PM
CURTIS THAYER, EXECUTIVE DIRECTOR, ALASKA ENERGY AUTHORITY,
ANCHORAGE (via teleconference), introduced the PowerPoint
presentation "AEA Fiscal Year 2024 Capital Budget" dated
April 21, 2023 (copy on file). He advanced to slide 2 and
offered information on AEA's mission and responsibilities.
The organization was broken into six different segments:
Railbelt Energy, PCE, Rural Energy, Renewable Energy and
Energy Efficiency, Grants and Loans, and Energy Planning.
The highlighted that the PCE program was for residential
customers and community facilities such as water and sewer.
Mr. Thayer moved to an overview of AEA on slide 3. The
regular duties of AEA were on the left side of the slide
and the map areas in teal and black were mostly circuit and
utility training areas.
Mr. Thayer continued to slide 4 and slide 5 and detailed
AEA's FY 24 capital request.
Co-Chair Edgmon interjected and asked Mr. Thayer to confirm
which slide he was discussing.
Mr. Thayer responded that he was on slide 5. The IIJA
Statewide Grid Resilience and Reliability Formula included
an availability of $12.1 million in federal funds and $1.8
million in state unrestricted general funds (UGF) for a
total of $13.9 million per year for a total of five years.
The total would be around $70 million at the end of five
years. The next item was the New Energy Efficiency
Revolving Loan Fund Capitalization, which was a formula
fund totaling $3.7 million in federal funds per year. The
next IIJA item was the State Energy Program which totaled
$2.9 million per year. The Electric Vehicle (EV) Charging
Equipment grant focused on rural Alaska and was a
competitive grant for which the federal government provided
$1.6 million.
Mr. Thayer continued that the Energy Auditor Training
program received $63,000 in federal funds. The largest
program was the Home Energy and High Efficiency Rebate
allocations for a total of $74 million in federal funds and
AEA would collaborate on the program with the Alaska
Housing Authority (AHA) as it was similar to programs
already operated by AHA. The next item was the Department
of Defense (DOD) Black Rapids Training Site which housed
the Defense Community Infrastructure Pilot Program. The
program would receive $12.7 million in federal funds in
order to retire the site's diesel generators and connect to
the existing transmission system. The Rural Power System
Upgrades would receive $25 million in federal funds and
$7.5 million in state UGF for a total of $32.5 million.
There was a list of the top 25 communities by need that was
updated each year and AEA consulted the list to determine
the order by which to update rural power systems.
3:01:50 PM
Mr. Thayer continued on the Renewable Energy Fund Round 15
program, which had been successfully funded by the
legislature for the past two years. The legislature had
funded over 300 projects which had saved approximately 300
gallons of diesel fuel per year. There was a $7.5 million
UGF placeholder on the chart, but the Renewable Energy
Advisory Committee reviewed the information and suggested
that the legislature fund 27 current projects for a total
of $25.5 million. The Bulk Fuel Upgrades would receive $5.5
million in UGF and $7.5 million in federal funds for a
total of $13 million. The Hydroelectric Development request
for Dixon and Godwin Creek Studies was a new item that
would receive $5 million in state UGF. He relayed that AEA
currently owned Bradley Lake, which was the largest
hydroelectric project in the state and electrified about
54,000 homes on the Railbelt. He shared that Fairbanks,
Alaska received 17 percent of its power from Bradley Lake
and AEA was proposing diverting water from Martin River
into Bradley Lake in order to provide additional power. The
project could increase electrical coverage by about 24,000
for an increase of almost 50 percent.
Mr. Thayer explained that the next item was Renewable
Energy and Efficiency Programs and would receive $5 million
in state UGF. The programs were fully funded about eight
years prior but AEA needed to look for new funding options.
The programs would provide technical assistance for rural
and urban communities and also provide a state match for
incoming federal dollars. The following item was the Delta
Phase 3 Power project, which would expand power into Delta
Junction, Alaska. The project would receive $3 million in
state UGF. The final item was $200,000 in state UGF for
electrical emergencies. Many communities in rural Alaska
had dependable utilities, but there were about 40
communities for which AEA acted as the "911 call." The
total federal ask for all items was about $140 million and
state UGF was about $35 million for a total of nearly $176
million. The total did not include an $8 million match that
went through the Department of Transportation and Public
Facilities (DOT).
3:06:09 PM
Mr. Thayer advanced to slide 6 which was a highlight of
request for relocating and reconductoring powerlines. The
capital request was for a $1.8 million state match and
would be available to any community that had an
appropriately sized power line. The funding could not
address all needs across the state, but it was a good place
to start.
Mr. Thayer continued to slide 7, which was a highlight of
the new Energy Efficiency Revolving Loan Fund (EERLF)
program which would be funded through IIJA and required no
state match. He moved to slide 8 and explained that the
State Energy Program (SEP) would also be funded through
IIJA and required no state match. The program focused on
developing a statewide energy plan and an energy security
plan. He advanced to slide 9, which was a recap of the
competitive grant for EV charging equipment that would be
primarily focused on rural communities. There would be a 20
percent match, but the requirement was for the participants
and was not a state match. The requirement was set by the
federal government.
Mr. Thayer moved to slide 10 detailing the Energy Auditor
Training Grant program. The request was $63,600 for two
years of the planned five-year annual funding allocation.
There was no state match requirement. He relayed that slide
11 detailed the Home Energy and High Efficiency Rebate
Allocations in which AEA collaborated with Alaska Housing
Finance Corporation (AHFC) to distribute Alaska's $74
million federal allocation. The receipt authority came to
AEA through federal legislation, but AEA worked in equal
partnership with AHFC. There was no state match required.
He advanced through slide 12 which was a brief recap of the
Black Rapids Training Site (BRTS) and no state match was
required. The military was anxious to begin the project
which was why the funding was in the supplemental. He
indicated that slide 13 included a recap of the rural power
system upgrades and included a photo of a current rural
power system and a photo of the updated version. He shared
that AEA had 3D modeling done of all power houses in rural
Alaska in order to zoom in and assess the power houses in
real time and eliminate the need to fly to a location
whenever there was a problem.
3:10:30 PM
Mr. Thayer continued on slide 14 and detailed bulk fuel
upgrades (BFU). The program repaired or upgraded fuel
storage in communities with less than 2,000 people. He
emphasized that bulk fuel tanks were located near the mouth
of rivers or waterways and it was important to ensure that
the tanks could easily be replaced and were code compliant.
He relayed that AEA was working with the U.S. Coast Guard
to ensure that the tanks were code compliant and easily
accessible. Additionally, AEA was conducting an inventory
and assessment for all bulk fuel facilities in rural
Alaska.
Co-Chair Johnson asked about the $800 million cost for
deferred maintenance on slide 14. She asked if PCE paid for
maintenance costs.
Mr. Thayer responded that PCE was a subsidization for rural
Alaska that examined the cost of power between Anchorage,
Fairbanks, and Juneau, and required that rural residents
pay the same price for the first 750 kilowatts of power as
the state's three largest cities. He clarified that PCE
would not pay for power houses or for bulk fuel which were
typically funded by UGF. There was a provision within PCE
stating if the earnings of the program after PCE and
community assistance grants had contributed, there could be
up to $25 million in a "waterfall affect" that could be
used for power houses, a renewable energy fund, or bulk
fuel loans for communities; however, money was not strictly
set aside for these purposes.
Co-Chair Johnson appreciated the response.
Mr. Thayer continued to slide 15, which gave an overview of
the Renewable Energy Fund (REF). He shared that there were
over 100 operational projects and 44 in development. The
Renewable Energy Advisory Committee, consisting of five
public members and four legislators, unanimously approved
27 Round 15 projects earlier in the month. The projects
would cost a total of $25.5 million. He advanced to slide
16, which detailed active REF projects from Round 13 and
Round 14. The state had appropriated nearly $20 million in
support of 38 REF projects from Rounds 13 and 14 and the
slide showed how the money for projects had been
distributed throughout the state. He turned to slide 17
which detailed the REF Round 15 recommendations. He relayed
that hydropower was the most popular recommendation,
followed by wind and solar. The left side of the slide
showed the communities that would receive the recommended
funding. The communities at the top of the list would
receive funding first and the following communities would
receive funding as it was available.
3:15:14 PM
Mr. Thayer continued to slide 18 and detailed the $5
million request for hydroelectric development, specifically
the Dixon Project and the Godwin Project. He explained that
AEA was studying the Dixon and Godwin Creeks to optimize
the hydro energy potential on the Railbelt. The funds would
be used for engineering studies including feasibility,
hydrological, geological, and environmental studies,
including fisheries, water quality, and geomorphology. The
water that would be diverted to Bradley Lake would increase
hydro energy potential and could be utilized for a longer
period of time.
Mr. Thayer continued to slide 19 and explained that the
Renewable Energy and Efficiency Programs provided critical
technical support for communities interested in developing
renewable energy programs. The $5 million request would be
used for staffing, technical assistance and support for
utilities and communities, as well as leveraging federal
funds from federal partners. The state employed experts in
many renewable energy fields but it was still learning
about nuclear energy.
Mr. Thayer moved to slide 20, which was a recap of the
Delta Phase 3 Power project. The capital request was for a
$3 million grant to the Golden Valley Electric Association
for the purpose of expanding three-phase power throughout
the Delta region. The project aimed to improve food
security objectives in Alaska.
Mr. Thayer advanced to slide 21, which was an overview of
the $200,000 request for electric emergencies. He clarified
that AEA provided support when an electric utility loses
the ability to generate or transmit power to its customers
and the condition was a threat to life, health, or
property. Funding provided the current level of technical
support through the Electrical Emergencies Program.
Mr. Thayer explained that the next few slides were projects
for which AEA was not asking for funding, but were simply
active projects and programs that AEA would like to share
with the legislature. He relayed that slide 23 detailed the
State of Alaska EV Infrastructure Implementation Plan,
which was approved in 2022 by the federal government. The
approval unlocked $19 million for the purpose of EV
charging infrastructure expansion, and AEA anticipated
receiving $52 million for the project over the next five
years. The funds would be received by DOT and administered
by AEA. The plan would develop additional EV charging
stations around the state, but would not include rural
Alaska. He explained that the lack of development in rural
Alaska was the reason why AEA had sought out competitive
funding in order to dedicate the funds specifically to
rural Alaska.
Mr. Thayer moved to slide 24, which contained Alaska's
National Electric Vehicle Infrastructure (NEVI)
requirements. Funding was required to be used to build out
Alternative Fuel Corridors (AFC) first. Alaska currently
had one pending AFC, depicted on the map on the slide in
green and black. After the initial AFC was finalized, the
focus would be on national highways indicated in pink on
the map and then on Southeast Alaska highways in yellow.
3:19:37 PM
Mr. Thayer continued to slide 25 and shared that AEA and
the Railbelt utilities closed on $166 million in bond
financing in order to improve the efficiency and
deliverable capacity of power from Bradley Lake. There was
no additional cost to ratepayers or burden on the treasury.
Due to the acquisition, AEA could begin the process of
upgrading power transmission lines between Bradley Lake and
the Soldotna Substation, from Soldotna to the Sterling
Substation, and from Serling to the Quartz Creek
Substation. He relayed that AEA also wanted to build the
lines taller and were currently doing energy engineering to
identify costs and the best routing for the lines. The
complete buildout would cost closer to $500 million, but
the funding was a good start.
Mr. Thayer moved to slide 26, which detailed the Grid
Resilience and Innovation Partnerships (GRIP) grants. The
grants were IIJA competitive and contained four buckets of
funding: $100 million for the Railbelt Backbone
Reconstruction Project, $16 million for the Battery Energy
Storage and High Voltage Direct Current (HVDC) Coordinated
Control, $299 million for the Railbelt Innovation
Resiliency Project, and $250 million for the Rural Alaska
Microgrid Transformation. All of the projects required AEA
to compose concept papers which had all been approved and
all projects were currently in the application phase. Two
of the applications had been submitted and two more were in
progress. He noted that there was $10.5 billion available
and he doubted that AEA would receive its entire request,
but assumed that AEA would be awarded some of the funding.
He clarified that AEA was not asking for federal receipt
authority because it did not yet know how much funding it
would receive.
Mr. Thayer advanced to slide 27 and concluded that AEA
provided energy solutions to meet the unique needs of
Alaska's rural and urban communities. He quickly went over
the appendix on slide 29 and explained that there was a
slide packet that had been distributed to the legislature
detailing Round 15 of REF. The packet gave a complete
overview of the statutory guidance, the evaluation process,
and application details for REF. He noted that links to
every page of the packet were included on slide 30 of his
presentation.
3:24:00 PM
Co-Chair Edgmon asked if committee members had questions.
Co-Chair Johnson asked Mr. Thayer if there were other
testifiers from AEA available online.
Mr. Thayer responded that AEA's Director of Planning, Mr.
Conner Erickson, and AEA's Chief Operating Officer, Mr. Tim
Sandstrom, were available for questions.
Co-Chair Johnson appreciated the presentation and Mr.
Thayer's work. She asked if there was a state match for any
of the projects in the latter part of the presentation.
Mr. Thayer responded that AEA consisted of about 35
employees and he appreciated the work of the team. He
highlighted slide 22, which noted the active projects and
programs and indicated which required a state match and
which would not. He relayed that AEA was not asking for any
funding related to EV infrastructure, but there was a
competitive IIJA grant for EV infrastructure through GRIP
on slide 28. He clarified that GRIP applications required a
one-to-one match. If AEA was successful in acquiring $250
million through the grant, it would come before the
legislature and ask for a $250 million state match. He
emphasized that AEA was still in the application process
and it would not be known whether AEA was successful until
the fall of 2023. Any state match would be subject to the
legislature and if AEA was successful in receiving any
funding, the conversation would happen next legislative
session.
Representative Cronk asked Mr. Thayer if there were any
funds available for low-carbon electric projects that would
capture carbon.
Mr. Thayer replied that he did not think so, but he could
look into the topic. He noted that the IIJA bill was
thousands of pages and the Department of Energy had not yet
released all of the funding for all programs or all the
guidance for all of the programs. Many things could change
once all of the information was released. He assured
Representative Cronk that AEA would keep apprised of the
situation and inform the legislature of any changes.
Representative Cronk appreciated the response.
Co-Chair Edgmon asked if Representative Ortiz, who was
attending the meeting via teleconference, had any
questions.
Representative Ortiz responded that he did not have any
questions but that he thought the presentation was
interesting and informative.
3:29:40 PM
HB 40 was HEARD and HELD in committee for further
consideration.
Co-Chair Edgmon reviewed the agenda for the following
meeting.
ADJOURNMENT
3:30:16 PM
The meeting was adjourned at 3:30 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 40 HFIN DEC VSW Overview 20230421.pdf |
HFIN 4/21/2023 1:30:00 PM |
HB 40 |
| HB 40 Bush Caucus re VSW OM BP 04.07.23 .pdf |
HFIN 4/21/2023 1:30:00 PM |
HB 40 |
| HB 40 AEA FY24 Capital Bud Presentation HFIN 2023.04.19 .pdf |
HFIN 4/21/2023 1:30:00 PM |
HB 40 |