Legislature(2017 - 2018)BARNES 124
01/25/2017 01:00 PM House RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| Overview: Update on the Alaska Lng Project | |
| Presentation: Alaska Energy Authority, Department of Commerce, Community & Economic Development | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
January 25, 2017
1:09 p.m.
MEMBERS PRESENT
Representative Andy Josephson, Co-Chair
Representative Geran Tarr, Co-Chair
Representative Dean Westlake, Vice Chair
Representative Harriet Drummond
Representative Justin Parish
Representative Chris Birch
Representative DeLena Johnson
Representative George Rauscher
Representative David Talerico
MEMBERS ABSENT
Representative Chris Tuck (alternate)
COMMITTEE CALENDAR
OVERVIEW: UPDATE ON THE ALASKA LNG PROJECT
- HEARD
PRESENTATION(S): Alaska Energy Authority, Department of
Commerce, Community & Economic Development ALASKA ENERGY
AUTHORITY, DEPARTMENT OF COMMERCE, COMMUNITY & ECONOMIC
DEVELOPMENT
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
GENE THERRIAULT, Government Relations
Alaska Gasline Development Corporation
Department of Commerce, Community & Economic Development
Anchorage, Alaska
POSITION STATEMENT: Prior to the update on the Alaska LNG
Project, offered to provide fiscal notes attached to related
legislation for clarification.
LEIZA WILCOX, Vice President
Commercial and Economics
Alaska Gasline Development Corporation
Department of Commerce, Community & Economic Development
Anchorage, Alaska
POSITION STATEMENT: Continued the PowerPoint presentation begun
at the meeting of 1/23/17, entitled, "Alaska Moving Forward:
Alaska LNG Project Update," dated 1/23/17, and answered
questions.
FRITZ KRUSEN, Vice President
Alaska LNG
Alaska Gasline Development Corporation
Department of Commerce, Community & Economic Development
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the PowerPoint
presentation entitled, "Alaska Moving Forward: Alaska LNG
Project Update," dated 1/23/17.
KATIE CONWAY, Government Relations Manager
Alaska Energy Authority
Department of Commerce, Community & Economic Development
Anchorage, Alaska
POSITION STATEMENT: Provided a PowerPoint presentation
entitled, "Alaska Affordable Energy Strategy" dated 1/25/17, and
answered questions.
CADY LISTER, Chief Economist
Alaska Energy Authority
Department of Commerce, Community & Economic Development
Anchorage, Alaska
POSITION STATEMENT: Participated in the PowerPoint presentation
entitled, "Alaska Affordable Energy Strategy" dated 1/25/17, and
answered questions.
NEIL MCMAHON, Program Manager for Energy Planning
Alaska Energy Authority
Department of Commerce, Community & Economic Development
Anchorage, Alaska
POSITION STATEMENT: Answered a question during the PowerPoint
presentation entitled, "Alaska Affordable Energy Strategy" dated
1/25/17.
ACTION NARRATIVE
1:09:23 PM
CO-CHAIR GERAN TARR called the House Resources Standing
Committee meeting to order at 1:09 p.m. Representatives Tarr,
Birch, Drummond, Johnson, Parish, Rauscher, Talerico, Westlake,
and Josephson were present at the call to order.
CO-CHAIR TARR provided background information on documents that
the committee previously received, and on previous related
legislation.
1:11:34 PM
GENE THERRIAULT, Government Relations, Alaska Gasline
Development Corporation (AGDC), Department of Commerce,
Community & Economic Development (DCCED), offered to provide -
for the committee's clarification - fiscal notes attached to
related legislation.
^OVERVIEW: UPDATE ON THE ALASKA LNG PROJECT
OVERVIEW: UPDATE ON THE ALASKA LNG PROJECT
1:12:16 PM
CO-CHAIR TARR announced that the first order of business would
be the continuation of an overview begun at the meeting of
1/23/17 by the Alaska Gasline Development Corporation on the
status of the Alaska LNG Project.
1:12:37 PM
LEIZA WILCOX, Vice President, Commercial and Economics, AGDC,
DCCED, continued her presentation from the meeting of 1/23/17.
She informed the committee that the objectives of AGDC are as
follows (slide 22):
• operate as a public corporation of the state that is
responsible to its board which sets policy for its
shareholders who are the residents of Alaska
• make decisions, based upon business principles, for a
public corporation operating in the world of private
enterprise and guided by expertise in this regard
• ensure transparency with the legislature, the public, and
in the market so that all parties receive balanced
information about the project for the future
• maintain a cooperative relationship with producers, in that
the producers are prospective customers and possible
partners in the project
• engage major vendors more strategically, recognizing that
the project is potentially risky, but that vendors in the
emerging LNG market have opportunities for success
• structure for third party finance, as part of the
commercial management of the corporation, by securing long-
term commitments and low-cost financing that will result in
lower costs to construct the project
• maintain the 2023-2025 project in-service window because it
is important for vendors and potential customers to be
aware of the project's target date
• expand the availability of natural gas to instate customers
1:19:17 PM
REPRESENTATIVE TALERICO recalled previous discussion about how
state ownership of the pipeline would allow the avoidance of
certain tax liabilities - which would result in cost savings -
and also about third-party financing of the project. He
remarked:
... I would consider it ownership when I would invest
in one of these [projects] and until my promissory
note, so to speak, was, was fully paid back, ... part
of my risk would be to always have ownership in that
line. ... Is there any of that line that will get
skewed with third-party financing, and the ability to
relieve that tax liability, if we have an enormous
amount of partners that have the investment in this?
... [It] probably depends on the structure of how
that financing is put together. ... If there's risk
that we do an enormous amount of third party
financing, [and] couple all these people together, and
... we actually don't have the opportunity, until we
have full ownership of that line, to be relieved of
that liability ....
REPRESENTATIVE TALERICO was unsure that the state can move
forward when bringing in third-party financing.
MS. WILCOX advised there is a tradeoff between arms-length
financing and AGDC will be working on the financing structure to
show how risk affects the project; the engineering of the
project has progressed so that there is a good definition of the
project, but the financial structuring work is critical and
requires specialized knowledge.
REPRESENTATIVE PARISH understood that AGDC will take out
approximately $45 billion in loans, and asked whether AGDC or
the state carries the liability in the case of default.
MS. WILCOX responded that AGDC does not intend to assign
liability for the project to the state. She opined that under
the previous project structure, the state was a participant and
"the state essentially carried the risk for it in some form. ...
Our goal is to create a, a structure where there's no more
exposure than, than existed under, under the previous {project]
and hopefully less ... through the making of these capacity
contracts, but I don't have a full answer to your question at
the moment."
1:25:08 PM
MS. WILCOX stated that in 2017, AGDC will focus on the
commercial area of engaging potential LNG and infrastructure
customers. Infrastructure customers are those who could take
capacity on the project and sign agreements upon which financing
can be based. The first step is a marketing exercise to engage
interest from a broader market than did the previous structure.
The exercise would require building relationships and educating
parties on the project as it stands today. Satellite offices in
Houston and Tokyo were opened to consolidate work and facilitate
meetings with AGDC's part-time expert help. Furthermore, AGDC
will continue to work on transition agreements for access to the
site, which is owned by ExxonMobil Corporation, BP, and
ConocoPhillips Alaska, Inc. She advised that the previous
project did not focus on contact with the broader market thus
there is a need to augment contract staff in the commercial and
finance areas. In early March, potential interested parties
whom she characterized as "more serious prospects from the
customer and investor community," will be invited to see Alaska,
Prudhoe Bay sites, and existing facilities during the Alaska LNG
Summit event. Also in 2017, AGDC - working with BP - is on
track to secure a financial advisor that will scrutinize
contracts, risk, the costs of capital and debt, and a financing
plan. The focus on "regulatory" is to establish a project web
site and prepare to file a Federal Energy Regulatory Commission
(FERC) Section 3 application (slide 23).
1:31:23 PM
REPRESENTATIVE JOHNSON requested an updated organization chart
and more information on operating costs at the Houston office.
MS. WILCOX offered to provide the requested information.
REPRESENTATIVE BIRCH asked to review a spreadsheet on staffing
and monthly payroll costs in the Houston and Tokyo offices.
REPRESENTATIVE RAUSCHER asked whether the legislature will be
invited to the Alaska LNG Summit event.
MS. WILCOX said, "I would say not the entire legislature." She
explained the event is for the benefit of customers and is in
response to the business culture that seeks substantive project
focus information, rather than a promotional event. However,
there will be representation from the "federal delegation,"
Native corporations, and key leadership.
MS. WILCOX returned to the presentation, noting AGDC's primary
objective is to establish a commercial structure that will
ultimately secure capacity reservations to underpin the
financing of the construction and operation of the project. She
pointed out that although an equity alignment structure was the
previous choice for advancing the project, that is not the only
option, and AGDC has made an adjustment [to the tolling
structure] for the market and for the participants (slide 24).
She directed attention to a chart which illustrated three
options as to who could be holding capacity contracts that will
underpin the financing (slide 25). Capacity contracts can be
held by:
• a producer that will sell its own LNG
• a third party buyer of LNG that reserves capacity
• a [merchant] party that is buying gas upstream and selling
it in the market
MS. WILCOX explained that the third option requires contracts
"that match on both ends, in order to make them financeable, so
that will take some careful orchestration."
1:37:41 PM
CO-CHAIR JOSEPHSON surmised the first model is Senate Bill 138
[passed in the 28th Alaska State Legislature].
MS. WILCOX said not exactly, because in Senate Bill 138, the
producer was not the toller, but the owner of capacity; a toller
does not bring capital to the project, unless it is also an
investor, but it reserves a block of capacity - for a period of
time - that it will take or pay.
CO-CHAIR JOSEPHSON understood that with equal shares, there
would be no payments on tolling on tariff. However, the state
in the first model is a producer, or acting as a producer, and
held one-quarter share.
MS. WILCOX said correct.
CO-CHAIR JOSEPHSON remarked:
In the second model, the merchant you called the buyer
... would be the ultimate purchaser serving to also
act as a toller to own part of the carrying capacity.
MS. WILCOX stated the merchant may not be the ultimate buyer,
and may sell to buyers in the market, but would hold ownership
of "the gas between wellhead and the jetty." She then turned to
investment and stated that in order to bring investment into the
project, there must be interest in the tolling model from
customers and tollers. However, said interest does not need to
be final or unconditional in order to advance the project
through the next stage-gate (slide 26).
REPRESENTATIVE BIRCH observed that the project will provide "a
stable infrastructure investment" and pointed out that a level
of taxation is a component of stability. He asked whether AGDC
has a mechanism for providing a stable infrastructure investment
that includes property and state tax structure.
MS. WILCOX advised that AGDC is not a taxing entity, thus must
work with the Department of Revenue and the legislature. In a
tolling structure as related to taxes, AGDC will serve as a
pass-through entity; however, AGDC recognizes that there will be
impacts on communities, and communities and the state will need
to be fairly compensated.
REPRESENTATIVE BIRCH questioned how AGDC will provide stability,
in light of the recent unstable taxing environment, that will be
sufficient to attract capital.
MS. WILCOX acknowledged that a tolling model does not solve all
the problems of tax stability; a tolling model can bring stable
investment, cheaper capital, and parties from outside the
market. In fact, the question of tax stability is a separate
issue for those who will pay tolls. In conclusion, she informed
the committee that the Houston-based LNG team consists of
experts with broad connections and experience in the LNG market
who are serving as part-time consulting contractors to AGDC, and
who are managed by Mr. Mitchell. In Tokyo, AGDC is represented
by Mr. Shiratori (slide 27).
1:46:21 PM
FRITZ KRUSEN, Vice President, Alaska LNG, AGDC, DCCED, in
response to an earlier question, said the Houston office in
calendar year 2017 will cost $160,000; Mr. Mitchell will be
working fulltime and others will be working part-time, and the
current estimate of costs is $1 million, which will be updated
when possible. He stated his personal high regard for the
team.
CO-CHAIR TARR and Co-Chair Josephson requested AGDC provide
fiscal notes, additional financial records, and a history of
spending over the last four years.
^PRESENTATION: ALASKA ENERGY AUTHORITY, DEPARTMENT OF COMMERCE,
COMMUNITY & ECONOMIC DEVELOPMENT
PRESENTATION: ALASKA ENERGY AUTHORITY, DEPARTMENT OF COMMERCE,
COMMUNITY & ECONOMIC DEVELOPMENT
1:50:06 PM
CO-CHAIR TARR announced that the final order of business would
be a report from the Alaska Energy Authority. She reminded the
committee that the aforementioned report is mandated in Section
75, Senate Bill 138 [passed in the 28th Alaska State
Legislature].
1:51:20 PM
KATIE CONWAY, Government Relations Manager, Alaska Energy
Authority (AEA), Department of Commerce, Community & Economic
Development (DCCED), reminded the committee AEA is a public
corporation of the state working to reduce the cost of energy in
Alaska. She provided the first section of a PowerPoint
presentation entitled, "Alaska Affordable Energy Strategy," and
also referred to a document entitled, "Alaska Affordable Energy
Strategy: A Framework for Consumer Energy Sustainability
Outside of the Railbelt," found in the committee packet. Ms.
Conway informed the committee that the lights are on in small,
isolated, and remote communities far from the Railbelt. The
energy systems generating power in small communities are
complicated and require maintenance; in fact, unlike the
Railbelt, energy systems that are not connected to a grid have
no backup. Affordable energy is a fundamental need and not a
luxury (slide 2). In much of Alaska, energy infrastructure
consists of bulk fuel tank farms, power generation facilities,
and electrical distribution systems which much be maintained at
a yearly capital cost of over $30 million, not including the
operational costs for personnel or fuel (slides 3 and 4). In
the last 15 years, over $1 billion have been invested in energy
projects throughout non-Railbelt Alaska, three-quarters of which
were federal funds. Although the need to invest continues, the
availability of public funding is decreasing, and communities
still need to provide safe, reliable, and affordable energy
(slide 5). Ms. Conway stated that state government must provide
a framework to maximize federal dollars, encourage private
sector investment, prepare communities to utilize debt
financing, ensure proper project selection, provide technical
assistance, and consumer protection; therefore, the Alaska
Affordable Energy Strategy (AkAES) is a framework for changing
the way the state provides critical energy programs. Through
its recommendations, AkAES is a strategic plan to improve the
methods by which the state works with non-Railbelt communities
and utilities to identify, evaluate, develop, and maintain cost-
effective energy solutions (slide 6).
1:57:15 PM
MS. CONWAY continued, noting that in 2014, AEA was originally
tasked to develop a plan for cost-effective energy outside the
scope of the proposed natural gas pipeline; however, AkAES has
grown to include other areas and is now independent of the gas
pipeline. The agency determined that only the Railbelt would
benefit from the gas pipeline, thus the AkAES study area
includes "everywhere else." Also, AkAES considered existing
energy policies and goals (slide 7). She stressed the following
key points:
• the study area includes everything but the Railbelt
• the study was a research-based project conducted over two
years
• the study did not develop a list of recommended capital
projects, but focused on improving the decision-making
process and expanding options for financing energy projects
• the final recommendations are a web of related factors.
MS. CONWAY noted that although the recommendations target non-
Railbelt Alaska, there are statewide benefits to saving state
funds (slide 8). The study found a wide range of power systems,
from small villages reliant upon diesel fuel to larger cities
generating renewable energy. The median community size in the
study is 300 people, and 76 percent of the communities in the
study are not connected by road or by the Alaska Marine Highway
System. The median electric rate is $0.62 per kilowatt hour
before [adjustments to the cost of power in rural areas by the
Power Cost Equalization (PCE) program], and the median heating
oil cost is $4.55 per gallon. She pointed out that a one gallon
equivalent of natural gas in Southcentral costs less than $1
(slide 9). Ms. Conway said AkAES seeks to ensure that energy
funds are spent at their highest value by the following actions
(slide 10):
• improving project selection, ensuring that the most cost-
effective projects are completed first
• diversifying financing options removing certain
difficulties
• strengthening accountability and maximizing the useful life
of assets
MS. CONWAY informed the committee that AEA studied over 150
reports generated within and outside Alaska, and analyzed over
3,000 energy infrastructure projects submitted by Alaska
agencies. The project also incorporated the [Regional Energy
Planning program through AEA] and engaged stakeholders.
Finally, AkAES commissioned studies on end-use efficiency,
liquefied natural gas, fuel delivery and storage, utility
management, and barriers to private investment in rural Alaska
(slide 11). The study information has been incorporated into
the Alaska Affordable Energy Model that compares energy
structure options and that can be used to make informed
decisions. She concluded that "affordable" is interchangeable
with "cost-effective," and although AEA found that it is
difficult to lower costs, there are opportunities for improving
cost-effectiveness, such as energy efficiency for both
residential and non-residential buildings and facilities.
Further, AEA found through AkAES that given the variability of
conditions and circumstances, there are no one-size-fits-all
solutions (slide 13).
2:03:56 PM
CADY LISTER, Chief Economist, AEA, DCCED, continued the
presentation, noting that the recommendations proposed by AkAES
are built on stakeholder engagement, collaboration, and
comprehensive research, and are organized into four pillars:
identification, project financing, accountability and
sustainability, and funding programs, all of which support the
goal of safe, reliable, stable and affordable energy. Further,
the study identified that solutions must include direct
financing from grants and loans, technical assistance, and
requirements such as mandates, standards, and regulations (slide
14). Ms. Lister said that research identified areas where
barriers led to higher cost energy, such as the expectation of
federal and state grants. Informing utilities and communities
how to access debt financing will reduce the need for state
grants. State and federal funding has also led to projects that
were driven by available funding, rather than by the community's
needs. Furthermore, with insufficient maintenance the expected
performance or economic life of a project is compromised, as
would an insufficient level of technical expertise (slides 15
and 16). Ms. Lister said each of the proposed recommendations
may not be applicable in every community but, collectively, the
recommendations offer solutions for the study area.
2:08:07 PM
REPRESENTATIVE WESTLAKE spoke of his experience with AEA and the
challenges of energy systems in rural Alaska. He questioned
what communities have been contacted about AEA specifically
implementing the recommendations. He remarked:
Some places have ... worked with AEA [and] have
decided maybe a better venue is going through
Department of Energy, [or] Tribal energy ... where
they really feel that there's a disconnect between the
state services that they do have, versus just going
one to one with the federal dollars that AEA does
hold.
MS. LISTER expressed her belief that there are few energy
systems in Alaska that have been not been impacted by AEA,
including in Juneau and in the Northwest Arctic Borough. She
said AEA values federal investment and seeks greater
collaboration in the future.
REPRESENTATIVE BIRCH asked what efforts AEA has made to
standardize equipment and to make equipment less complicated in
rural Alaska.
MS. CONWAY said the presentation underway is introducing a new
way for AEA, state agencies, and regional partners to proceed.
She offered to discuss AEA's ongoing programs in detail at a
future point in time.
REPRESENTATIVE RAUSCHER would also like to hear further details
on ongoing programs.
2:13:16 PM
MS. LISTER, in response to Representative Westlake, said AEA's
mission is to reduce the cost of energy in Alaska. She returned
to the presentation, stating that current state energy goals
include energy efficiency, renewable energy targets, the use of
instate gas, the use of the [Power Project Loan Fund program
through AEA], and leadership in renewable and alternative
energy; AEA recommends that the state energy policy be amended
to include a goal to ensure safety, stability, reliability, and
affordability in all communities by 2030. Of the aforementioned
four pillars, the first pillar is the identification of cost-
effective projects by improving access to community-level data
that will inform good decision-making. Data is currently
available on community goals and consumer, utility, and
environmental needs. The collection and sharing of data is
facilitated by the [Alaska Energy Data Gateway, Institute of
Social and Economic Research, University of Alaska Anchorage]
and the [Alaska Retrofit Information System, Department of
Transportation & Public Facilities], reporting to PCE and the
Renewable Energy Fund, and the Alaska Affordable Energy Model
developed by AkAES. Further, the recommendation urges the
collection and updating of related data by codifying existing
agencies' work. In addition, for communities seeking
assistance, the state will help identify, plan, and finance
energy projects and program, beginning with high-cost PCE
communities. Ms. Lister advised that the forgoing
recommendation aligns with House Bill 306 [passed in the 26th
Alaska State Legislature] (slides 17-20). Recommendation A-3 is
to establish a building energy code for residential and non-
residential new construction and major renovation; building to
an efficient energy standard is cost-effective, saves energy,
and saves money (slide 21). Moving to the second pillar, she
said financing cost-effective projects includes five
recommendations working toward improved access to financing
tools for communities. Recommendation B-1 relates to the Bulk
Fuel Revolving Loan program, DCCED, which offers communities
financing to purchase large quantities of fuel; it is
recommended that the same mechanism should be available to
purchase non-petroleum fuels, such as cordwood or pellets
(slides 22 and 23). As AkAES found that many communities are in
a position to assume more debt for projects, Recommendation B-2
is to create easier ways for utilities and communities to access
financing. She cited a successful renewable energy project that
was financed by a combination of grants, loans, bonds, and local
matching funds, although the financing arrangements were very
complex. To make securing existing financing options easier for
utilities and communities, Recommendation B-2 creates a
financing "one-stop-shop": the Community Energy Fund for Alaska
(CEFA)(slide 24).
2:20:26 PM
MS. LISTER informed the committee that CEFA would organize
financing that is available to utilities, municipalities,
boroughs, cities, Tribes, and non-residential facilities to be
used for generation, distribution, transmission, and demand-side
energy efficiency projects. She stressed how access to
financing saves money. Recommendation B-3 creates a loan
program with refund provisions that reward project performance;
for example, portions of a loan would be refunded if the project
lasts for a long time and is maintained throughout its economic
life (slide 25). Recommendation B-4 is to statutorily allow
voluntary on-bill financing and Commercial Property Assessed
Clean Energy (C-PACE), which is a financing mechanism described
by forthcoming proposed legislation. She further explained the
benefits of C-PACE and on-bill financing (slide 26).
Recommendation B-5 is to stabilize state funding for the low-
income residential weatherization program, and to modify home
energy rebate rules to expand access to residential efficiency
services. The recommendation seeks $10 million per year for the
weatherization program because residential weatherization
maintains the best return on investment for energy savings to
consumers. Further, she explained the benefits of expanding the
dormant home energy rebate program (slide 27). The third pillar
is accountability and sustainability, and has six
recommendations focused on a system that encourages the
operational life of energy systems, and that improves the
ability of entities to access debt financing (slide 28).
Recommendation C-1 is to strengthen business and financial
management assistance for PCE-eligible utilities; for example,
reducing non-fuel costs through more efficient business
operations. Studies have shown that some PCE communities are
paying almost one-half of their total cost per kilowatt hour for
administration (slide 29). Recommendation C-2, [draw on the
state's partnerships with regional and statewide entities to
more cost effectively provide needed assistance] builds off of
the successes of existing regional activity. Ms. Lister pointed
out that regional entities are more aware of a community's needs
and are quicker to respond than is the state. The Tanana Chiefs
Conference and the Alaska Native Tribal Health Consortium are
examples of regional organizations that could provide services
such as the management of utility financing, accounting, utility
cooperatives, maintenance, and emergency response (slide 30).
Recommendation C-3, [develop a cost-effective regulatory system
to ensure PCE-eligible electric utilities continue to meet
standards to be fit, willing, and able], would ensure that the
standards a community once met to obtain a Certificate of Public
Convenience and Necessity (CPCN) are maintained. A community
that continues to meet these standards would ensure that its
assets are maintained, minimize its fuel cost, and retain its
access to financing (slide 31).
2:29:37 PM
MS. LISTER continued to Recommendation C-4, [require large non-
residential buildings that receive PCE to have an energy audit
and perform cost-effective retrofits] that would help ensure
that assets are maintained and ensure the financial and
managerial health of utilities by having an energy audit and
performing retrofits within ten years (slide 32). She advised
that currently the Regulatory Commission of Alaska (RCA)
determines the eligibility of new infrastructure after it is
built, which is a barrier to private investment. Recommendation
C-5 [empower RCA to have siting authority over generation and
transmission facilities for regulated utilities in study area]
would reduce uncertainty and provide consumer protection (slide
33). Recommendation C-6, to enact a 1 percent per year fuel
reduction target for electric utilities until cost-effective
gains have been realized, is designed to provide a requirement
for utilities to perform continuous quality improvements such as
reducing fuel consumption, lowering line loss, and improving
efficiency. She pointed out that the recommendation is not that
utilities proceed with projects that would increase costs to
consumers (slide 34). The fourth pillar of funding programs was
specified by the AkAES enabling legislation, and requires both a
plan for potential revenue sources for programs recommended by
the study, and a means for directly underwriting energy costs
(slide 35). Thus, Recommendation D-1 is to use the Affordable
Energy Fund - funded by 20 percent of royalties from a future
gas pipeline - and used for areas of the state not served by
said pipeline (slide 36). As this fund will not be available
for at least one decade, alternative funding sources are needed,
and Recommendation D-2 is to pay for PCE administrative expenses
and fund-specific energy programs with PCE funds. She
acknowledged the importance of maintaining the Power Cost
Equalization Endowment Fund and said the recommendation is to
increase the allocation from earnings to administer the PCE
program, which is currently subsidized with general funds (slide
38). Ms. Lister referred to energy policy reports that
identified per-unit energy surcharges as a means to fund cost-
effective projects [reports not provided]. Based on these
reports and methods commonly used in the Lower 48,
Recommendation D-3 is [to support community energy projects and
programs, establish a universal service charge] (slide 39).
Recommendation D-4 is to continue the Power Cost Equalization
program and to revive the Alaska Heating Assistance Program.
The PCE program is the largest and most broad-based source of
energy funding in the study area. Further, the need for PCE
will not be eliminated by AkAES, and the benefits from the PCE
endowment fund are extremely important to rural Alaska (slide
40). Finally, for the committee's consideration, Ms. Lister
stated that a state entity with the authority to consolidate and
manage consumer energy to the extent that is reasonable, would
increase the efficiency of delivering state energy programs to
communities (slide 41). She cautioned against spreading
implementation of the foregoing recommendations throughout
departments and agencies, with the exception of tasks directed
to RCA.
2:38:13 PM
MS. LISTER presented the following conclusions (slide 42):
• lights and heat must remain on which requires investment in
energy infrastructure
• the state's budgetary challenges require more affordable
community energy systems strengthened through policy,
regulatory, and statutory change
• AkAES provides guidance for said change
CO-CHAIR JOSEPHSON referred to Recommendation C-4 - enhancing
existing buildings with energy audits - and asked whether the
recommendation includes new construction.
MS. LISTER responded that there is a recommendation to establish
a building energy code for residential and non-residential
buildings.
REPRESENTATIVE BIRCH requested a summary of the total cost of
the PCE program, including how many communities benefit, the
cost per resident, and an aggregated cost of the program by
community.
MS. CONWAY stated she will provide the requested information.
CO-CHAIR TARR questioned whether the annual report on PCE is
available online.
MS. LISTER said historic information is posted online.
MS. CONWAY added that the current fiscal year annual report is
due to be posted online the second week in February.
MS. LISTER, in response to Representative Rauscher, said the
report would be on PCE-eligible communities.
CO-CHAIR TARR asked for a glossary of AEA programs.
MS. LISTER offered to provide relevant information.
REPRESENTATIVE PARISH asked the presenters to provide a copy of
their script. He then asked whether pellets and firewood would
be subject to the aforementioned [Recommendation D-3] universal
service charge.
2:43:22 PM
NEIL MCMAHON, Program Manager for Energy Planning, AEA, said
there has been no policy decision on whether firewood would be
included, and asked the legislators for guidance.
REPRESENTATIVE PARISH said he would prefer not.
CO-CHAIR TARR pointed out that some of the recommendations are
items of interest to legislators who may wish to provide
guidance on specific recommendations.
REPRESENTATIVE TALERICO advised that his constituents would not
support Recommendation A-3, which is to establish residential
and non-residential building energy codes. He also expressed
his interest in expanding the ability to purchase non-diesel
fuels through the Bulk Fuel Revolving Loan program, such as
coal, peat, and biomass; in fact, there is a need to define non-
diesel fuels. In regards to Recommendation B-3, he opined that
a successful project is its own reward, and cautioned about only
rewarding good behavior.
MS. LISTER, in response to Representative Westlake, explained
that Recommendation D-2 is specifically addressed to the funding
of the Circuit Rider program, which enables communities to
contact AEA when problems with a diesel powerhouse arise. The
program can also provide onsite operator training. Another
program brings rural powerhouse operators to Seward for
training.
MS. CONWAY added that the related programs are Circuit Rider,
[Power Plant] Operator Training, and Community Assistance.
MS. LISTER addressed the payment of direct PCE administrative
expenses, explaining that general funds have been subsidizing
the costs of administering the PCE program along with the
portion that is taken from earnings to pay AEA and RCA for their
administrative costs. However, general funds are becoming less
available, and the full cost of administering the program is
approximately $600,000.
2:50:12 PM
REPRESENTATIVE WESTLAKE questioned why AEA "sees this as a
subsidy." He asked whether AEA works with the Alaska Housing
Finance Corporation and the Alaska Industrial Development and
Export Authority in order to streamline processes.
MS. CONWAY responded that there was an administrative order to
explore [related] options that has not been finalized, thus she
could not comment at this time.
2:53:58 PM
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at 2:53 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| AkAES_Revised1.23.17.pdf |
HRES 1/25/2017 1:00:00 PM |
Alaska Energy Authority Alaska Affordable Energy Strategy Report |
| AkAES for HRES 1-25-17 REVISED.pdf |
HRES 1/25/2017 1:00:00 PM |
Alaska Energy Authority Alaska Affordable Energy Strategy Report |
| 012317_ House Resc. AGDC presentation.pdf |
HRES 1/25/2017 1:00:00 PM |
Alaska Gasline Development Corporation |
| SB 138 Fiscal Note Summary.PDF |
HRES 1/25/2017 1:00:00 PM |
SB 138 |
| HB 4 Fiscal Note Summary.pdf |
HRES 1/25/2017 1:00:00 PM |