Legislature(2025 - 2026)ADAMS 519
03/20/2025 09:00 AM House FINANCE
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| Presentation: Alaska Energy Authority | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
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HOUSE FINANCE COMMITTEE
March 20, 2025
9:03 a.m.
9:03:11 AM
CALL TO ORDER
Co-Chair Schrage called the House Finance Committee meeting
to order at 9:03 a.m.
MEMBERS PRESENT
Representative Andy Josephson, Co-Chair
Representative Calvin Schrage, Co-Chair
Representative Jamie Allard
Representative Jeremy Bynum
Representative Alyse Galvin
Representative Sara Hannan
Representative Nellie Jimmie
Representative Neal Foster, Co-Chair
Representative Will Stapp
Representative Frank Tomaszewski
MEMBERS ABSENT
Representative DeLena Johnson
ALSO PRESENT
Curtis Thayer, Executive Director, Alaska Energy Authority;
Tim Sandstrom, Chief Operating Officer, Alaska Energy
Authority.
SUMMARY
PRESENTATION: ALASKA ENERGY AUTHORITY
Co-Chair Schrage reviewed the meeting agenda.
^PRESENTATION: ALASKA ENERGY AUTHORITY
9:04:12 AM
CURTIS THAYER, EXECUTIVE DIRECTOR, ALASKA ENERGY AUTHORITY,
introduced himself and the PowerPoint presentation "AEA
Update" dated March 20, 2025 (copy on file). He began on
slide 2 and reviewed the board of directors at the Alaska
Energy Authority (AEA). He noted that only two members
lived in Anchorage, and all other members lived across the
state.
Mr. Thayer showed slide 3 and relayed that AEA's mission
was to reduce the cost of energy in the state. He
considered owned assets, and mentioned Bradley Lake Hydro
Project, which was the "crown jewel." He mentioned the
Alaska Intertie, which connected Willow and Healy and saved
the Fairbanks community over $30 million per year. He
mentioned the Sterling to Quartz Creek Transmission Line
and mentioned the Swan Lake fire. He discussed starting $90
million worth of upgrades to the line, which had not been
touched in 60 years.
Mr. Thayer continued to address slide 3 and highlighted the
High-Voltage Direct Current Transmission Line (HVDC), also
known as Grid Resilience and Innovation Partnerships
(GRIP), for which the federal funding was no longer frozen
or paused. He relayed that AEA was also responsible for the
Power Cost Equalization (PCE) Program in rural Alaska,
which was a $48 million program that served 192 rural
communities and over 80,0000 Alaskans. He discussed rural
energy activities, including rural power system upgrades
and the Circuit Rider Program. He discussed AEA's
activities in renewable energy and energy efficiency,
including projects in biomass, electric vehicles, hydro-
electric, solar, or wind. The team was also responsible for
federal programs including the National Electric Vehicle
Infrastructure (NEVI) Program, Solar for All, and Home
Energy and High Efficiency Rebate Allocations.
Mr. Thayer discussed AEA's grants and loans dealing with
the Renewable Energy Fund and the Power Project Fund. He
mentioned that the largest loan in the portfolio was a
hydro-project on Prince of Wales Island. He discussed
energy planning and AEA's support for the Alaska Energy
Security Task Force, update of the state energy security
profile, creation of an electronic library (with up to
14,000 documents), Energy Data Resources, and work with the
federal 40101(d) Grid Resilience Program. He added that AEA
was also responsible for the Railbelt Transmission
Organization (RTO) after the passage of HB 307 the previous
year.
9:09:39 AM
Representative Galvin asked about Mr. Thayer's use of the
term "unfrozen" in relation to federal funds. She asked if
AEA was receiving funds.
Mr. Thayer responded that funding had been paused, and AEA
had $404 million in federal funds. Of all the programs, one
had been suspended (National Electric Vehicle
Infrastructure) and was awaiting further guidance.
Additionally, AEA had a $497,000 grant that it had not
heard about from the project manager. He shared that
federal project managers were starting to reach out. All
the money owed to AEA had been paid, and everything was
moving forward.
Representative Galvin asked if money was flowing to
renewable energy from the federal government with the
exception of the paused program he mentioned.
Mr. Thayer answered affirmatively with the caveat that AEA
had asked for things in writing and the federal government
had provided verbal but not written confirmation. He noted
that AEA had followed up with letters outlining the verbal
discussions to check for understanding and had not received
any pushback.
9:12:01 AM
Mr. Thayer continued on slide 4 and discussed HB 307, which
had incentivized new energy development by extending tax-
exempt statutes to independent power producers. The bill
was a result of the task force and AEA had seen positive
results. It had established a distinct board of directors
appointed by the governor. Also the previous year, the
legislature authorized AEA to have its own direct hire
employees. Prior to that, AIDEA employees were "leased" to
AEA. He described that AIDEA and AEA were going through an
"uncoupling." He clarified that the books and balance
sheets had always been separate, but some employees and
internal organization had been combined. So far, the
process had been amicable.
Mr. Thayer discussed the creation of the Railbelt
Transmission Organization (RTO), which was to establish and
administer a non-discriminatory open access transmission
line. The idea was for all parties to work together to get
one stamp and file by July 1. He noted that there had been
a two-day meeting going at AEA that brought together all
the utilities in a working group to determine the outcome.
He noted that the parties had been separated for 50 years,
and it was an interesting conversation. He addressed the
last bullet on the slide related to reduced interest rates
for Power Project Fund loans that were $5 million or more.
He noted that AEA was working on getting the regulations
set.
Mr. Thayer showed slide 5, "Owned Assets." He continued to
slide 6, which addressed the Bradley Lake Hydroelectric
Project. He explained that the project was the state's
largest renewable energy source, located 27 air-miles
northeast of Homer and providing low-cost energy to over
550,000 people on the Railbelt. He furthered that different
utilities from an agreement 30 years ago had different
percentages of the power. Chugach Electric had 56 percent
of the power, Golden Valley had 17 percent; and it was the
cheapest on any party's portfolio. Bradley Lake was 4 cents
per kilowatt hour (KWH) while other sources could be as
high as 17 cents. He explained that AEA was studying the
Dixon Diversion Project, which would increase the annual
energy production of Bradley Lake by 50 percent.
9:15:44 AM
Mr. Thayer continued to slide 7, "Dixon Diversion Project,"
and showed a three-minute video that iterated what was on
the slide:
AEA is studying the Dixon Diversion Project to
optimize the Bradley Lake Hydroelectric Project's
energy potential. Like the West Fork Upper Battle
Creek Diversion Project, the Dixon Diversion Project
would divert water from Dixon Glacier to increase
Bradley Lake's annual energy production by 50 percent.
? Located five miles from Bradley Lake and would
utilize existing powerhouse at Bradley Lake.
? Estimated annual energy 100,000-200,000 MWh
(the equivalent of up to 30,000 homes).
? Estimated to offset 1.5 billion cubic feet of
natural gas per year in Railbelt power generation
(equal to 7.5 percent of Alaska's unmet natural gas
demand projected for 2030).
? Estimated completion is 2030.
The film cited that during the licensing and construction
phase from 2024 to 2030, the project was expected to create
3,250 jobs, generate $260 million in labor income, and
produce a total economic output of $584 million. In the
operations phase, the annual operations and maintenance
cost would be approximately $500,000 per year, which would
generate additional jobs and economic output. The total
cost of the project was $342 million. Benefits included
substantial emissions reductions and natural gas
displacement, job creation and economic stimulation during
construction and operations, and potential for federal tax
incentives to help support the project.
9:18:44 AM
Representative Galvin thought that presently Bradley Lake
comprised about 10 percent of Railbelt energy.
Mr. Thayer agreed.
Representative Galvin pondered that after the Dixon
Diversion Project, Bradley Lake would supply about 15
percent of Railbelt energy.
Mr. Thayer agreed.
Representative Galvin thought the video indicated a 50-year
lifespan but understood that most hydro projects had about
a 100-year lifespan.
Mr. Thayer responded that 50 years represented what AEA
could finance.
Representative Galvin asked if Bradley Lake would likely
meet the norm and last 100 years.
Mr. Thayer relayed that Bradley Lake was about 30 years old
and was a fairly young hydro project.
Representative Stapp asked about Eklutna's hydroelectric
power, which he understood was very inexpensive at 1.3
cents per KWH. He thought there had been talk about
shutting it down. He referenced the establishment of the
RTO and thought taking down Eklutna's hydroelectric would
result in people paying more. He considered the structure
of HB 307 and the mechanics of the Regulatory Commission of
Alaska (RCA) and surmised that the costs could not be
passed down to other people up and down the Railbelt.
Mr. Thayer responded that AEA did not have a role or
ownership in Eklutna Hydroelectric, which was owned by
Chugach Electric and the Matanuska Electric Association.
There had been a fish and wildlife study required to be
done 30 years after the transfer to the two companies. He
relayed that AEA had a seat at the table, and the governor
would make the ultimate decision. The governor made the
recommendation to move forward as-is, with the exception of
having a study of pumped hydro, which was ongoing. The
decision had been made not to tear the dam down, and he
thought there were ways of making it more efficient and
looking at fish issues. The parties also included the City
of Anchorage.
9:22:21 AM
Representative Stapp asked if, irrespective of ownership,
if something was removed, did the establishment of the RTO
or Regulatory Commission of Alaska regulations have more of
a say of how a change would impact the Railbelt.
Mr. Thayer responded that the answer was no. The RTO was
concerned with transmission lines. As power was brought on,
the source did not matter. He affirmed that Eklutna and
others were governed by the RCA.
Representative Stapp asked about rates shifting because of
a loss or change in utilities.
Mr. Thayer thought Representative Stapp's question could be
better directed at the RCA. He thought there were upcoming
confirmations for three RCA members.
Representative Hannan asked if the Dixon Diversion Project
was already under construction.
Mr. Thayer relayed that project process had started in 2022
with public consultation. He shared that AEA had been doing
the environmental and geological pre-engineering for the
project and would be filing in January with the Federal
Energy Regulatory Commission (FERC). He highlighted that
the amendment to the FERC license would take 12 to 18
months, and drilling five miles through a mountain would
take 6 to 8 months. He assumed the project would have the
FERC license by 2028, with completion by 2030. He shared
that AEA would like to have the project completed sooner.
He noted that it was almost 3 years into the public process
and there was yet no opposition to the project. The FERC
chairman had been to the site the previous fall.
Representative Hannan considered the scale of the project
and asked about supply chain issues. She asked if Mr.
Thayer anticipated concern over tariffs of Build
America/Buy America (BA/BA) restrictions.
Mr. Thayer responded that it was not a federally funded
project so BA/BA restrictions did not apply. He relayed
that supply chain logistics and workforce were always an
issue. He relayed that the project involved boring through
a mountain, which involved a different skillset/trade. He
relayed that the project had changed to a 14-foot diameter
to utilize the most common equipment available. The project
time frame and construction were based on what had been
available, which was for the most part there. The project
was still working on the size of the dam raise. All the
factors had been taken into account for the schedule of the
project.
Representative Bynum asked about the cost per kilowatt hour
differential for the bypass project being added.
Mr. Thayer agreed to follow up with the information. He
thought the additional cost could be more than 4 cents but
would be less than the price of natural gas in Cook Inlet.
He continued that AEA's cost estimate was $342 million. He
considered the cost of the funds to borrow, including
revenue bonds or low-cost loans.
9:28:50 AM
Representative Bynum asked if the additional kilowatt hour
cost would be in addition to the additional megawatt hours
the diversion would create, or an overall additional cost
for megawatt hours created by the facility.
Mr. Thayer responded that the power would be separated from
Bradley Lake. He mentioned tax credits, which were
available and would offset the cost. There was an
accounting firm looking at the matter and researching tax
credits, which could affect the project cost up to $100
million.
Representative Bynum did not think the project took
renewable energy credits into account.
Mr. Thayer responded in the affirmative.
9:30:12 AM
Mr. Thayer continued on slide 8 and GRIP, also known as the
HVDC Line. He explained that AEA had secured $206.5 million
with its utility partners through the U.S. Department of
Energy's Grid Deployment Office. There had been 700
applications for 58 awards in the country for the
competitive grant, and AEA had received the fifth highest
amount in the country. The project would build a submarine
cable from Nikiski to Beluga across the inlet to provide
redundancy. He referenced the Swan Lake fire, which had cut
off northern utilities from Bradley power for four months.
The GRIP project would provide a second line. He played a
video on slide 8, which addressed the project.
9:35:10 AM
Representative Galvin asked if a bridge had been considered
rather than an underwater line. She had heard many people
dream of a bridge across Cook Inlet.
Mr. Thayer responded that a bridge was not considered. The
40-mile segment would be from Nikiski, an industrial area,
to Beluga. He estimated a bridge would be billions of
dollars. He mentioned that AEA had used its data library to
find twenty-year-old reports related to Beluga whales,
which had saved hundreds of thousands of dollars. He noted
that AEA had looked at alternatives but not at a bridge.
Representative Galvin understood that the area had what was
considered one of the largest tides in the world and she
was happy that research had been done.
Mr. Thayer relayed that AEA was trying to acquire a sample
of what the cable would look like, which he thought was
more armored than a telecommunications cable. He noted that
there was a great deal of information available on Cook
Inlet.
Co-Chair Schrage understood the video had talked about how
more renewable power could be brought to the system by
reducing some of the capacity constraints. He asked if it
was correct that the undersea cable allowed for more
opportunities for development of tidal power.
Mr. Thayer responded in the affirmative. One of the biggest
challenges on the Railbelt was capacity constraint. He
noted that Bradley Lake was a 120-megawatt power plant that
was served by 70-megawatt transmission lines. The lines
were there first, and for the last 30 years no one had
upgraded the transmission lines to maximize power out of
Bradley. If introducing tidal/wind/solar power, it would
not be possible to move due to capacity. He mentioned the
age of the Sterling to Quartz Creek transmission lines. He
explained that when the cost of power was lowered on the
Railbelt, which helped the PCE and sent more money into
rural Alaska.
9:40:25 AM
Representative Bynum asked about the operation and
maintenance cost and asked if it included capitalization or
long-term components.
Mr. Thayer agreed to follow up at a later time with the
information.
Representative Bynum asked about the replacement cost of
the line. He asked how the state was doing cost-recovery on
the expense.
Mr. Thayer replied that any cost of transmission lines
would be recovered through the RTO through the tariff being
developed.
Representative Bynum asked about the existing transmission
line route and understood it was also being upgraded.
Mr. Thayer answered affirmatively.
Mr. Thayer continued on slide 9 and the Sterling to Quartz
Creek transmission lines. Near Hope, the line picked up the
Chugach system and took it to Eagle River. He noted that
AEA owned about 40 miles of the line. He explained that the
69 kilovolt (kV) line was decommissioned and removed;
engineers were designing and procuring equipment for the
upgrade of the existing 115 kV line to 230 kV. Construction
had started on first section. He directed attention to the
photo on the slide that showed the old and new line. He
noted that Chugach had replaced its old structures that
looked very similar.
Mr. Thayer mentioned the challenge of work in the wetlands
and taking Bradley Lake offline during the upgrade. There
was a four-year project working within workable windows.
The cost for the upgrade was estimated at $90 million and
AEA had $12.5 million in debt service that became excess
payments. The total bond had been $166 million, and the
project was paid for without an increase to ratepayers.
There had been a vote to move $50 million from a different
transmission project to do the match for GRIP.
Additionally, $12.7 million was through the state. He
discussed the combined financing of the project.
9:45:21 AM
Co-Chair Josephson referenced the GRIP award, and asked if
it meant that the state had to pay out $206 million. He
asked if much of it was paid out of AEA's own efforts.
Mr. Thayer responded that there was a $206 million match,
and the grant did not specify the source of the matching
funds. He explained that the state gave $12.7 million the
previous year, and AEA had been able to move $50 million
towards the project. The funds were not defined as a state
match, but rather a match from any non-federal sources.
Co-Chair Josephson understood that the answer was yes. He
thought the state had believed erroneously that the grant
award was a great achievement, but there was a caveat that
AEA find matching funds.
Mr. Thayer relayed that the $206.5 just had to be a match
from non-federal sources, and right now AEA had $63 million
identified as matching funds and was short $143 million.
The funding could come from any source. He responded that
AEA had been approached about a public/private partnership,
which it would look at. He hoped the committee and the AEA
Board would help navigate some of the different funding
opportunities. There had been discussion of a General
Obligation (GO) bond for funding. He affirmed that AEA
needed to secure the funding in the next year or two.
Co-Chair Schrage understood there were two things going on.
He pointed out that rather than needed all the funds up
front AEA would be able to find financing over time as
needed, and AEA had been able to find some of the funds
from other sources than the state. He pondered that there
was still the problem of needing to come up with more funds
in the out years up to the $206 million.
Mr. Thayer responded affirmatively. He noted that AEA's
current year budget was $14.7 million, so it would have to
cover the federal match. In year three or four, the project
would have to order the cable, which would be $60 million
to $80 million. Costs would taper off until the project
went into construction, and the grant stipulated the
project must be completed in eight years. The project was
in year one, and AEA had already identified a quarter of
the matching funds necessary.
9:48:44 AM
Mr. Thayer continued to slide 10 and discussed Battery
Energy Storage Systems (BESS) for grid stabilization of the
Railbelt. Through bonding funds, AEA put $28 million in
services to dampen oscillation issues related to Bradley
Lake. The service was purchased from the utilities over the
next 15 years. He continued that AEA had signed an
agreement with Chugach Electric and the Matanuska Electric
Association and was working with Kenai and Fairbanks. By
doing the oscillation agreement, it lowered the cost of the
batteries, which was a direct benefit to rate payers along
the Railbelt.
Mr. Thayer moved to slide 11 and 12 and discussed federally
funded programs. He highlighted the Grid Resilience Formula
Grant Program known as 40101(d). There was $60 million
available that required a $1.8 million match that was in
AEA's current budget request. The program was moving ahead,
and AEA was in the process of making awards of $20 million.
There would be a second round that would be taking
applications like the Renewable Energy Fund, and there
would be $17 million awarded at the end of the year. The
first award was going to Golden Valley Electric (GVA).
Mr. Thayer continued to slide 13 and the NEVI program. The
program funding had been suspended pending a review by the
Department of Energy. He understood the rationale for
suspension of the $5 billion national program, which thus
far had only been able to approve 52 charging stations. He
noted that AEA's project had received approval and had been
waiting two years for funding for nine communities to have
charging stations. He thought there would be more clarity
in the fall.
Representative Galvin asked to go back to slide 12 and the
award to GVA. She asked if the award would be just for grid
resilience and not for rural Alaska, grid expansion, or
other opportunities.
Mr. Thayer responded that the grant was not for new
construction of transmission but was for resilience of the
existing grid. The program was for 69kV and above, which
was larger transmission lines. He continued that there was
separate funding for rural Alaska that was up to $70
million, which was a larger program administered to rural
Alaska directly from the Department of Energy (DOE).
9:52:55 AM
Co-Chair Schrage asked if the rural program had seen less
of the money flowing because of the funding freezes that
had been seen.
Mr. Thayer responded that AEA had only just had DOE start
returning phone calls in the previous two weeks and had not
had time to compare notes with colleagues in other areas.
He noted that there was a period of time when the
department was not returning communication via phone or
email and was not paying its bills. The situation had
changed, and DOE was now communicating. He did not know how
fast the change was happening across all the funding
sources. He qualified that AEA had been aggressive in
reaching out, and the Congressional delegation had been
helpful.
Co-Chair Schrage asked if there was any formal effort
undertaken by AEA to monitor funding to other entities. He
mentioned crossover impact within the state.
Mr. Thayer responded that the short answer was no, and that
AEA had worked to identify crossover for projects it was
managing. He qualified that AEA did not know all the
federal funding that had been received, especially in rural
Alaska. He commented that there had been a lot of money
being handed out quickly by DOE for four years.
Mr. Thayer continued on slide 14, and the Solar for All
competitive award that AEA was partnering on with the
Alaska Housing Finance Corporation (AHFC). He described
that AEA was developing solar in disadvantaged communities
(primarily in rural Alaska), while AHFC was developing
residential rooftop solar for low-income households. The
grant did not require state matching funds. The program was
proceeding. He noted that the photo on the slide was of the
Houston Solar Farm, the largest solar farm in the state
that AEA had helped fund through its renewable energy
program.
Mr. Thayer moved to slide 15, and addressed Home Energy and
High Efficiency Rebate Allocations, which involved $74
million and a partnership with AHFC. The funds flowed
through AEA, but AHFC had the programs, and the two
agencies had a Memorandum of Understanding (MOU). The two
programs (Home Efficiency Rebates and Home Electrification
and Appliance Rebates) were each $37.4 million with no
state match required. He relayed that he had a meeting with
Chief Executive Officer and Executive Director of AHFC
Bryan Butcher in ten days' time. He noted that the program
was going forward after being frozen, and he hoped to have
funding by fall or winter of the following year.
Mr. Thayer advanced to slide 16 and the Black Rapids
Training Site (BRTS) in Fairbanks, where AEA partnered with
GVE to extend the transmission line to Black Rapids. The
line was under construction, and the funding was moving
forward with no state match required.
Mr. Thayer moved to slide 17 and some smaller awards that
were pending. He listed programs that were proceeding,
including: the Energy Efficiency Revolving Loan
Capitalization, State Energy Program Funding, High Energy
Cost Grants (Manokatok) USDA Rural Utilities Service,
Vehicle Technology Office Competition Federal Fiscal Year
2022 (ARED), the Energy Efficiency and Conservation Block
Grant, and Training for Residential Energy Contractors
(TREC). He mentioned the Energy Future Grant, which was the
only unknown. He qualified that AEA had been unable to get
ahold of the project officer for the program but noted that
the officer probably had many programs over many states.
9:57:51 AM
Representative Galvin asked about number 4, the Vehicle
Technology Office, which she assumed was not related to the
national electric vehicle program.
Mr. Thayer responded that it was a separate program that
required a state match the legislature had previously
approved. The program primarily looked at electric charging
in rural Alaska, not necessarily for vehicles but for snow
machines and perhaps outboards and the conversion needed.
The grant was not large and was $2 million in total.
Mr. Thayer played another video on slide 19, which
summarized AEA's activity in rural Alaska. It mentioned
AEA's activities assessing power houses, tank farms, and
distribution systems in order to guide resources. The video
addressed rural power system upgrades. It highlighted the
Circuit Rider Program, which provided on site technical
assistance and training.
10:01:41 AM
Mr. Thayer continued on slide 20 and the Power Cost
Equalization (PCE) Program in 192 communities. He noted
that AEA also did public facilities in rural Alaska. He
mentioned being severely behind but now caught up with
paying for PCE techs. He mentioned the circuit riders.
Co-Chair Schrage asked how many circuit riders there were
currently as compared to 15 to 20 years previously.
Mr. Thayer relayed that there were currently four circuit
rider positions, three of which were filled. He described
challenging conditions. The state paid for the program,
then reduced the funding. The federal government had
increased funding at the time but had reduced the amount.
He noted that AEA had a budget request of $710,000 for the
PCE to pay the cost of the circuit riders, which all worked
in PCE communities.
Co-Chair Schrage understood that there were considerably
more circuit riders in the past.
10:04:05 AM
TIM SANDSTROM, CHIEF OPERATING OFFICER, ALASKA ENERGY
AUTHORITY, responded that the numbers had stayed the same
for the previous 12 years.
Co-Chair Schrage had heard of a lot of need for technical
assistance and thought more circuit riders could be
helpful. He understood the budget climate was tough.
Representative Hannan asked if school districts were
excluded from PCE support.
Mr. Sandstrom responded that the reason schools and school
districts were not eligible was due to statutes indicating
that facilities getting PCE assistance could not be
supported by other state funds.
Representative Hannan asked if it would make schools
eligible if federal dollars coming to school districts fell
away through the closure of United States Department of
Education.
Mr. Sandstrom responded that the decision would be made by
the RCA.
Co-Chair Foster asked if the $700,000 request for circuit
rider training was a request from the governor in the
capital or operating budget.
Mr. Thayer responded that the funding request was in the
governor's budget and in the operating budget.
Co-Chair Foster asked about the circuit rider positions,
one of which was vacant. He asked if there were situations
where all four positions were required, or if most of the
time three positions were sufficient.
Mr. Sandstrom responded that more circuit riders would be
beneficial, and that three to four were at capacity just
kept ahead of emergencies. He opined that there were cost
savings in funding the positions because any emergency that
was forestalled could equate to many times the cost of a
circuit rider's annual salary.
Mr. Thayer responded that the circuit riders traveled in
pairs in rural Alaska for safety and for assessing
emergencies. With full staffing, the program could handle
only two emergencies at one time.
Co-Chair Schrage asked how many emergencies there normally
were at one time.
Mr. Sandstrom replied that the record was three electrical
emergencies at once.
Co-Chair Schrage surmised that to handle three electrical
emergencies there would need to be a minimum of six circuit
riders to provide assistance.
Mr. Sandstrom explained that the program augmented the work
of the circuit riders with private contractors, and there
were several that were used on a regular basis. He noted
that it was not as cost effective but was the only option.
Co-Chair Schrage asked to what extent were the private
contractors being used.
Mr. Sandstrom relayed that the contractors were used about
30 percent of the time.
10:08:22 AM
Mr. Thayer continued on slide 21 and discussed rural power
system upgrades. There were 170 communities affected. He
referenced the before/after photos of a Tuluksak powerhouse
shown on the slide. He referenced $300 million in deferred
maintenance. He noted that the average powerhouse cost $6
million, and the average lifespan was 20 years. He
mentioned the importance of training and the presence of
circuit riders. He referenced a $2.5 million capital
request as well as a request for $2.5 million in federal
receipt authority. He noted that the Denali Commission had
been generous in previous years with matching state funds.
Co-Chair Josephson asked if Tuluksak was served by the
Alaska Village Electric Cooperative (AVEC).
Mr. Thayer responded that AVEC did not do power houses,
which still fell to the responsibility of the state. He
relayed that the statue put forth that AEA "may" but AEA
had assumed the responsibility of "shall" to provide
powerhouse upgrades to rural Alaska. He noted that AVEC
provided some technical assistance, but there were 40
communities not served by the cooperative and were the
smallest and most at risk.
Representative Bynum asked if the $300 million was unfunded
deferred maintenance.
Mr. Thayer responded that it was $300 million and unfunded.
Representative Bynum asked if the deferred maintenance
included fuel storage.
Mr. Thayer noted that bulk fuel was another $1 billion in
deferred maintenance, which was a conservative number.
Representative Bynum asked if there was a reason the costs
were not included in the rate of delivering power.
Mr. Sandstrom responded that AEA managed grant programs
that built the facilities, which became the utilities. He
continued that AEA did not have any input into setting
rates. He thought Representative Bynum correctly observed
that rates were most often not set at a level that allowed
repair and replacement.
Representative Bynum asked if there was anything that
prevented them from putting language in grants that would
ensure covering repair and maintenance.
Mr. Thayer responded that it was a policy call. He noted
that the work was in some of the highest cost energy areas
of the state. He noted that PCE would cover from the floor
up to $.75/kw, but many communities were higher. The
highest community in the state was $1.75/kw. He thought
additional costs were a policy call for the RCA or the
legislature to decide how it wanted to recover the costs.
Representative Bynum asked for clarification that when Mr.
Thayer referenced a policy call he was not talking about
AEA, but rather the legislature.
Mr. Thayer responded in the affirmative, and relayed that
AEA administered the program as it was set out, but
conditions on funding would have to be set by the funders
or RCA. He understood Representative Bynum's concerns.
Representative Bynum understood the need for reliable power
for the state's communities but thought there was a trend
of the state funding initial capital investment without a
plan to take care of the investment into the future. He was
interested in preventing the problem in the future.
Mr. Sandstrom shared that AEA provided a complete
operations and maintenance plan and manual, including a
business case study for rates.
10:14:20 AM
Representative Stapp asked if AEA had explored Jenbacher
gas engines to create power. He asked what was the system
that was maintenance-friendly with the most longevity.
Mr. Sandstrom responded that AEA did look at new
technologies but generally found that the longer-lasting
technologies cost much higher and often had exacerbated
operations and maintenance with the complexity of the
system.
Mr. Thayer continued on slide 22 and discussed a capital
request of $2 million for bulk fuel upgrades with federal
receipt authority of $2 million. He asked the committee to
keep in mind that a bulk fuel tank upgrade the average was
$11 million. For AEA, it often took multiple legislative
sessions for a complete replacement. He directed attention
to the before/after picture on the slide. He mentioned 3D
modelling and having better real time information on the
generators and bulk fuel capacities of the communities. By
regulation, AEA kept a list of the 25 of the most critical
need communities. He mentioned changes every year and that
communities could get funding from other sources. He
mentioned that all federal dollars from Infrastructure
Investment and Jobs Act (IIJA) and other similar
disbursements over the previous four years had allowed
nothing in rural Alaska (for powerhouses or bulk fuel)
because of dealing with fossil fuel. He commented that AEA
had been able to supplement with wind or solar.
Co-Chair Schrage highlighted that there was $1 billion in
deferred maintenance yet only a $2 million capital request,
which he thought spoke to the inadequacy of what the state
was doing.
Representative Galvin noted that as the committee had been
looking at other deferred maintenance issues, she wondered
how many issues were deferred maintenance or just needed
replacement. She pondered concerns around maintenance
issues because of new technology and thought if the state
did not move forward it would be left behind. She mentioned
education and building the necessary workforce to move the
state.
Representative Bynum thought the slide and reference to
deferred maintenance and equipment failures was concerning.
He asked if AEA had done any evaluation that had been
paired with negative environmental impacts and costs
associated with fuel farms failing.
Mr. Thayer responded that the Denali Commission had tackled
the topic with a study. He noted that the top 25 power
system replacements would cost $175 million, and the top 25
bulk fuel replacements would cost $300 million. He
commented that even the smaller pieces were large. He
relayed that AEA had worked with the United States Coast
Guard on bulk fuel. He recounted getting a call the
previous summer that the river was eroding. The bulk fuel
was within five feet of the river and had to be pulled
back.
Representative Bynum commented that all of the new
technologies were pointless if the backbone of the state's
utility systems was not healthy. He hoped that the state
could come up with some different approaches to get the
system healthy.
10:20:28 AM
Representative Jimmie was glad Representative Bynum brought
up the point. She saw in District 38 that the tank farms
were in danger from the eroding rivers, which continued to
erode every year. Some tank farms were as close to the
river as 20 feet. Community members had indicated there was
a loss of 10 feet in one year. She asked if AEA had plans
to bring the grid to Southwest Alaska or rural areas in the
future.
Mr. Thayer thought one of the challenges in rural Alaska
was the distance. He cited that to do transmissions lines
cost was $1.5 million to 2 million per mile. He mentioned
linkages between communities including a tie-line that AEA
owned from Bethel to Oscarville. He relayed that there had
been a look into what a grid would cost, but the amount was
in the billions. In Southeast, communities were able to be
linked, but the distance and operation/maintenance were
challenging in rural Alaska.
Representative Jimmie mentioned tank farms and thought AEA
would want to avoid costliness in the future.
Mr. Thayer responded that it was something AEA had to look
at. He pondered that with the cost of the transmission
lines to communities that were remote, there would be other
considerations.
Co-Chair Schrage asked if it was fair to say that AEA
wanted Alaskan communities to have more reliable and lower
cost energy in whatever way possible, it was just a matter
of cost and ability to invest.
Mr. Thayer agreed and pondered what would fit best for each
community.
10:24:09 AM
Mr. Thayer continued to slide 23 and the Circuit Rider
Program and PCE Endowment. The slide reviewed electrical
emergencies in the past year. The slide showed the number
of incidents per community. He noted that Venetie had 9
occasions of an electrical emergency.
MR. Thayer advanced to slide 24 and 25 and the Renewable
Energy Fund (REF) Grant Program established by the
legislature in 2008. He cited that 80 percent of the funds
went to projects in rural Alaska. The state awarded 294
grants totaling $327 Million. There were over 100 projects
in operation and 56 projects in development. The governor
had restarted the program about four years previously. The
legislature and the governor had awarded $17 million in
round 15, and $10.5 million in round 16. This year's
request was $21 million by the Renewable Energy Advisory
Committee. The governor's budget had $6.2 million in it.
The previous year the governor had $5.2 million, which the
legislature added to before it was dropped.
Mr. Thayer continued to the 18 projects on slide 26, which
were in ranked order by the economics of the project,
energy savings, regional basis, type of technology. There
was a line that indicated projects that could be funded,
and if more funding became available, the line could drop
to include more projects.
Mr. Thayer moved to slide 27 and addressed REF Annual
Diesel and Natural Gas Displacement. The life of the
program saved roughly 13 million gallons of diesel per
year. An independent third party had looked at the program
and confirmed that it offset over 100 million gallons of
fuel across the state over the life of the program.
Mr. Thayer continued to slide 28 and discussed successful
REF projects. There were over 100 active projects. He
mentioned several projects around the state and offered to
provide a list of projects in every legislative district
around the state that the program had funded. He noted that
AEA maintained the list to achieve regional balance. Of the
programs that AEA had been able to fund and get off the
ground, the federal infrastructure funds over the past four
years had been able to do $125 million into communities. He
mentioned federal funds going to Old Harbor and Thayer
Creek.
Mr. Thayer concluded on slide 29. He discussed AEA's team
of roughly 50 people that would probably grow up to 70
people to address IIJA and GRIP funding.
Co-Chair Josephson commented on Mr. Thayer's good work.
Co-Chair Schrage thanked the presenters.
ADJOURNMENT
10:29:18 AM
The meeting was adjourned at 10:29 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 2025.03.19 AEA Update Presentation to House Finance Committee (Final).pdf |
HFIN 3/20/2025 9:00:00 AM |