Legislature(2001 - 2002)
09/12/2001 01:00 PM House L&C
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
September 12, 2001
1:00 p.m.
COMMITTEE CALENDAR
UPDATE: FOUR DAM POOL DIVESTITURE
TAPES
01-73, SIDES A & B
CALL TO ORDER
REPRESENTATIVE LISA MURKOWSKI, Chair, convened the House Labor and
Commerce Committee meeting at 1:00 p.m.
PRESENT
Committee members present were Representatives Murkowski, Meyer,
Rokeberg, and Hayes (via teleconference). Also in attendance were
Representatives Lancaster (via teleconference) and Harris and
Senator Austerman (via teleconference).
SUMMARY OF INFORMATION
CHAIR MURKOWSKI stated that the purpose of the day's meeting was to
evaluate the status of the Four Dam Pool divestiture set to be
complete December 31, 2001. She noted that certain consequences
will occur if things do not close as stakeholders intend.
Therefore, this is a good point to review whether the divestiture
is on track and how things can be kept moving.
DAVE CARLSON, Divestiture Project Coordinator for Four Dam Pool,
provided a brief history of the Four Dam Pool project which was
originally started in the late '70s and early '80s and consists of
four different energy facilities: Kodiak, Valdez, Wrangell-
Petersburg, and Ketchikan, collectively known as the Four Dam Pool.
MR. CARLSON reminded the committee that in April 2000, a memorandum
of understanding was signed between the State of Alaska and the
purchasing utilities, which outlined the terms and conditions of
the sale of the Four Dam Pool Power Project. In May 2000, the
legislature passed House Bills 446 and 447 authorizing the sale of
the projects to the local utilities and established the power cost
equalization endowment, which included a $100 million contribution
from the Constitutional Budget Reserve (CBR). This, he noted, was
landmark legislation that benefited 130,000 Alaskans. One
condition of the memorandum of understanding was for the closing of
the sale to occur on or before December 31, 2001.
MR. CARLSON touched on several accomplishments of the Four Dam Pool
Power Agency thus far, including the formation of a joint action
agency, several technical amendments passed by the legislature,
engineering due diligence, and land property transfer issues, which
are currently out for public comment. He noted that land transfer
issues may arise in the future that could delay a timely closing.
The project purchase agreement, which lays out the terms and
conditions of the sale as well as the fine print to the joint
action agency, is in its final stages of completion. This document
will be presented to the governing bodies for ultimate approval.
The financing agreement, which details the terms of financing to
support the Alaska Industrial Development and Export Authority's
(AIDEA) loan to the joint action agency to finance the acquisition
of the project, is in the initial phase of development. The
document, however, will take considerably more work and negotiation
before it is approved by all parties and sent to the governing
bodies for approval.
RON SAXTON, attorney, Four Dam Pool Power Agency, outlined two
lingering concerns that may hold up the pending sale by year's end.
First concerns the Internal Revenue Service (IRS) private letter
ruling request. The agency has applied for a private letter ruling
that it will be treated as a governmental entity for tax purposes,
and thus will not be required to pay federal income tax on its
reserve funding earnings. The IRS has not yet decided how it will
rule on the request. Second, and the most significant issue
threatening timely divestiture of the Four Dam Pool, are the
actions of Ketchikan Electric Company (KEC), a joint venture with
Cape Fox Native Corporation, and Alaska Power and Telephone who are
involved in cases in both the state and federal appeals courts.
Ketchikan Public Utilities(KPU) and the other Four Dam Pool power
purchasers obtained an order from the Federal Energy Regulatory
Agency (FERC) that proscribed any right of KEC to displace KPU's
obligation to purchase Four Dam Pool capacity pursuant to the
Public Utility Regulatory Policy Act (PURPA). In a separate
action, KEC filed a complaint in state superior court demanding
that the court rule that KPU was obligated under PURPA to displace
Four Dam Pool power with power generated by its proposed Mahoney
Lake project. The superior court has granted a summary judgment in
favor of KPU dismissing KEC's complaint. However, KEC has appealed
the FERC order and has asked for reconsideration of the summary
judgment. The continuation of these legal actions continues to be
a major hurdle in meeting the December 31, 2001 target.
ROBERT WILKINSON, Four Dam Pool, registered his enthusiastic
support for the divestiture transaction and assured the committee
that they are committed to closing this deal and providing the
lowest wholesale power cost available from of the Four Dam Pool
consistent with reliable and prudent business practices.
ERIC YOULD, Executive Director, Alaska Rural Electric Cooperative
Association (ARECA), voiced his strong support for the divestiture.
BOB POE, Executive Director, Alaska Industrial Development and
Export Authority (AIDEA), said the transfers of state land went out
to public notice and that comment period ends September 17, 2001.
All is well thus far. The financing conversations are going well
too. The structure has been laid out and things are going fine.
The parties have been wrangling out the purchase and sale agreement
and most issues are getting resolved. If the deal does not go
through by the December 31 deadline, it can still be done, he
reported, but on January 1 utilities will again begin to pay for
power and the money will begin to flow into the power cost
endowment fund. The problem with that is that only 7 percent of
the money that actually goes into the endowment in that single year
will be available under current law to pay for Power Cost
Equalization (PCE). So, in effect, it would leave PCE short.
CHAIR MURKOWSKI thanked the presenters and asked that the they keep
the committee abreast of any new developments and perhaps update
them in another six weeks.
ANNOUNCEMENTS
There were no committee announcements.
COMMITTEE ACTION
The committee took no action.
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee was adjourned at 2:30 p.m.
NOTE: The meeting was recorded and handwritten log notes were
taken. A copy of the tape(s) and log notes may be obtained by
contacting the House Records Office at State Capitol, Room 3,
Juneau, Alaska 99801 (mailing address), (907) 465-2214, and after
adjournment of the second session of the Twenty-Second Alaska State
Legislature this information may be obtained by contacting the
Legislative Reference Library at (907) 465-3808.
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