Legislature(2019 - 2020)BELTZ 105 (TSBldg)
03/26/2019 03:30 PM Senate COMMUNITY & REGIONAL AFFAIRS
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| Audio | Topic |
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| Start | |
| Presentation: Power Cost Equalization | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
SENATE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE
March 26, 2019
3:31 p.m.
MEMBERS PRESENT
Senator Click Bishop, Chair
Senator Chris Birch, Vice Chair
Senator Mia Costello
Senator Lyman Hoffman
MEMBERS ABSENT
Senator Elvi Gray-Jackson
COMMITTEE CALENDAR
PRESENTATION: POWER COST EQUALIZATION
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
MERRA KOHLER, President and CEO
Alaska Village Electric Cooperative, Inc.
Anchorage, Alaska
POSITION STATEMENT: Provided an overview of the cooperative and
the Power Cost Equalization Program.
ACTION NARRATIVE
3:31:26 PM
CHAIR CLICK BISHOP called the Senate Community and Regional
Affairs Standing Committee meeting to order at 3:31 p.m. Present
at the call to order were Senators Costello, Birch, Hoffman, and
Chair Bishop.
^PRESENTATION: Power Cost Equalization
PRESENTATION: Power Cost Equalization
3:32:06 PM
CHAIR BISHOP announced that the committee will hear a
presentation on the Power Cost Equalization (PCE) Program by
Merra Kohler from the Alaska Village Electric Cooperative
(AVEC).
3:32:53 PM
MERRA KOHLER, President and CEO, Alaska Village Electric
Cooperative, Inc., Anchorage, said she has been involved with
the PCE Program since before its inception. She began a
PowerPoint, "Power Cost Equalization, A Primer and Look Back
dated March 26, 2019."
MS. KOHLER reviewed slide 2, Looking back to 1977, which read:
Almost no transmission in Alaska
o Chugach electric owned a line (built in 1968)
from the Beluga gas field to Anchorage
o Fairbanks relied on local heavy oil and coal
o Diesel fuel was the primary energy source
elsewhere
Very little hydropower
o Eklutna- 30 mw, serving ML&P, MEA, CEA
o Cooper Lake -20 mw serving CEA
o Snettisham, 52 mw, serving Juneau
o ~20 MW of small projects scattered throughout SE
Alaska
She noted that 1977 was the year the oil in the Trans-Alaska
Pipeline System (TAPS) started flowing. She said that 1977 was
also the year when Alaska struggled to emerge from a very vast,
underserved state.
MS. KOHLER reviewed slide 3, Oil started flowing down the
Pipeline, which read
The State began to spend its newfound wealth
o A transmission line to Fairbanks was started
o The Susitna mega-project design was started
o A Bradley Lake project was started
o Kodiak, Valdez, Ketchikan, Wrangell, and
Petersburg began work on four hydro-projects
o Studies were commissioned to identify projects to
reduce the cost of electricity throughout Alaska
MS. KOHLER explained that once oil started flowing through TAPS,
wealth started flowing into state coffers and the state started
considering the primary priority of affordable energy. Without
affordable energy economic development or prosperity cannot
happen since everything hinges on the availability of energy.
Energy studies included a Stone & Webster report that was
produced in 1983, a five-volume report that continues to be a
good resource for future projects that might be possible in
Alaska.
3:36:38 PM
MS. KOHLER reviewed slide 4, The First Power Cost Assistance
Program, which read:
• Oil prices peaked in 1979
• Diesel-fueled utilities were hit hard
• Legislature established the Power Production Cost
Assistance Program in 1980 - a one year stop-gap
• In 1981, the program was amended into the Power Cost
Assistance Program, which was designed to self-
extinguish in five years
MS. KOHLER reviewed slide 5, And finally - PCE, which read:
• In 1984, consultants admitted defeat
o There was no "silver bullet" for rural Alaska's
electric needs
o Small loads and small communities spread across
thousands of miles could not be interconnected
• Legislature established Power Cost Equalization
o PCA was rewritten as PCE - effective October 1984
o Utilities using diesel to generate at least 75 %
of power in calendar year 1983 were eligible
o Cost of power was to be equalized to the average
of Anchorage, Fairbanks, and Juneau $0.0850 per
kwh
o Costs above $0.5250 per kwh were not covered
o All users were eligible for the first 750kwh used
o Community facilities received PCE on 100% of their
usage
MS. KOHLER specified communities that were served by the
Railbelt, the Four Dam Pool, and the Copper Valley were not
eligible for PCE. Any utility that was not 75 percent or more
served with diesel in 1983 was not eligible, she said.
3:38:40 PM
MS. KOHLER reviewed slide 6, Enter the PCE Endowment Fund, which
read:
• Established in FY00 via HB 446
o 15 years of underfunding (FY92-FY07)
• Invested to achieve 7% return
• $100 M from CBR in FY01
• $84 M from sale of the Four Dam Pool hydros in FY02
• $182.7 M in FY07
• $400 Min FY12
• Revised target of 5% return in FY16
• After PCE, returns fund Municipal Assistance,
Renewable Energy Grants
MS. KOHLER explained that the PCE Endowment Fund was formed out
of a quid pro quo for programs that already existed. PCE was
funded with 60 percent of the receipts from the Four Dam Pool
Project when the state decided to divest those projects back to
the communities that were served by them, which was in 2000 and
2001. She said that the total investment for the Four Dam
Project was $450 million. However, the hydroelectric projects
were sold to the communities for $74 million for less than 20
cents on the dollar, which is why a $100 million Constitutional
Budget Reserve (CBR) match was used as the first deposit into
the PCE Endowment Fund.
She noted that there were two additional deposits into the PCE
Endowment Fund, adding that Senator Hoffman can explain the
reasoning to what the quid pro quo was for the two deposits. The
deposits were based on a rural-urban consensus priority for
rural communities, a total of $740 million was deposited into
the endowment fund.
MS. KOHLER explained the way the PCE Endowment Fund works is
that the average value of the preceding three fiscal years will
determine the amount that can be spun off for PCE. The initial
amount was 7 percent of earnings, but it changed to 5 percent in
2015. She said clever language was included in the change for
the endowment fund that benefited the entire state:
70 % of the remaining balance can then be appropriated
to pay for, first, municipal assistance of up to $30
million, and then if there is anything left over it
goes to the Renewable Energy Grant Fund, which also
benefits the entire state.
She summarized that in FY 2017, $30 million was spun off for
municipal assistance [;is another $15 million into the Renewable
Energy Grant Fund. In FY 2018 there will be enough funds to pay
for municipal assistance, but a pittance for the Renewable
Energy Fund.
3:42:17 PM
MS. KOHLER reviewed slide 7, The Situation from 1985-2017, which
read:
• The floor has been raised 124% to $0.1902
• The ceiling was raised from $0.5250 to $1.00
• Eligible electricity has been reduced 1/3 to 500
kwh
• 6,000+ commercial customers no longer get PCE
• Fuel cost up 127% but efficiency is also up32%
o Fuel cost per kwh went from $0.1033 to $0.1875
• Non-fuel costs per kwh are up 31%
o $.141 in '85 to $.184 in '17
• Current funding ($28 million) is at 100% level
• PCE cost in FY86 $17.8 million
• PCE cost in FY17 $26.1 million
MS. KOHLER provided additional details on the PCE Program as
follows:
• The floor is the minimum that every utility or the consumer
must pay.
• The ceiling is the cost to operate a utility. The first
$1.00 is covered.
• Only the first meter is eligible for consumer assistance.
Specifically, only one home is eligible if an individual
owns multiple homes.
• All commercial users were taken off the PCE program in
1999.
• Schools, federal buildings, and state operated buildings
are not eligible for PCE.
• The number of eligible PCE users has gone down
dramatically.
• Fuel cost is up.
o In 1985 the average cost of a gallon of fuel was
$1.17.
o The most recent average cost of a gallon of fuel year
is $2.56, a 127 % increase.
• Efficiency has grown at a very dramatic pace.
o In 1985, 10kwh was sold per gallon in the PCE
communities.
o Today, 13kwh is sold per gallon.
• Non-fuel costs have gone up 31 % on average per kwh.
• Current funding is $28 million.
o The highest was $41 million in 2009, the year after
very high fuel costs when PCE funding was a much
higher need.
• Total spent on PCE was just under $18 million in FY1986 and
$26 million in FY2017.
3:45:35 PM
MS. KOHLER reviewed slide 8, Program changes since FY86, which
showed a table with the following information:
• Population served:
o 1986: 62,042
o 2000: 77,625
o 2017: 83,850
• Total sales (gigawatt hours (GWh)
o 1986: 225 GWh
o 2000: 391 GWh
o 2017: 463 GWh
• Eligible sales
o 1986: 108
o 2000: 116
o 2017: 133
• Percentage eligible
o 1986: 48%
o 2000: 30%
o 2017: 29%
• Average fuel cost (per gallon)
o 1986: $1.17
o 2000: $1.10
o 2017: $2.66
• Fuel consumed
o 1986: 21 million gallons
o 2000: 28 million gallons
o 2017: 29 million gallons
• Fuel cost
o 1986: $23 million
o 2000: $30 million
o 2017: $77 million
• Non-fuel cost
• 1986: $32 million
• 2000: $42 million
• 2017: $85 million
• Total utility cost
o 1986: $55 million
o 2000: $72 million
o 2017: $162 million
• Total PC
o 1986: $17.8 million
o 2000: $14.4 million
o 2017: $26.1 million
• Percentage of total costs
o 1986: 32%
o 2000: 20%
o 2017: 16%
MS. KOHLER referred to the percentage of total costs and noted
that 32 percent of total costs were covered by PCE in 1986, but
only 16 percent in 2017. Sixteen percent PCE coverage in 2017
means 84 percent of the cost of generating electricity in PCE
communities is borne by the local communities, she said.
3:46:17 PM
MS. KOHLER reviewed slide 9, About AVEC, which read:
• 58 villages (recently added Yakutat, Bethel)
• 32,000 population
o 38 % of PCE population served
o 41 % of total PCE disbursed
o Shageluk (smallest) 77
o Bethel (largest) 6,224
o Anchorage 294,356
• 92 % Alaska native.
She provided additional details on AVEC as follows:
• Cooperative was incorporated in 1967.
• 2019 is the 50th anniversary for the cooperative's first
annual meeting.
• Smaller AVEC communities are typically higher PCE per
capita recipients due to poor economies of scale.
• Half a dozen AVEC communities have populations that are
less than 100 residents.
• Bethel and Yakutat are recent additions to AVEC:
o Bethel was acquired in 2014.
o Yakutat was acquired in 2017.
• In addition to Yakutat, AVEC has Southeast Alaska presence:
o Angoon was an early member:
square4 Inside Passage Electric Cooperative was turned
over to Angoon that also helped energize four
additional communities.
• AVEC is almost entirely Alaska native population.
3:48:22 PM
MS. KOHLER reviewed slide 10, which showed a map of the AVEC
villages, noting that communities are located from: Kivalina,
the farthest north village, to Old Harbor on Kodiak Island, 824
miles to the south; and Gambell, farthest west, to Yakutat, over
1,000 miles to the east.
MS. KOHLER reviewed slide 11, AVEC System Statistics, which
read:
• 50 power plants
• 13 wind systems serving 20 villages
• 170+diesel generators
• 500+ fuel tanks
• 8.5 million gallons fuel burned
She said AVEC recently installed two wind systems, 900 kilowatt
(kW) machines, in Bethel and St. Mary's. The two wind systems
added five communities to the number of villages that are
receiving electricity from wind. She noted that AVEC also owns
two tugs and barges, the only utility in the world that owns its
own water borne vessels to deliver fuel to its communities.
MS. KOHLER reviewed slide 12, 2018 Overview, which read:
• 11,400 Services residential and commercial
• 118 million kWh sales
• $52.4 million revenues
• $28.1 million total fuel cost
• $25.4 million non-fuel cost
• $0.44 - total revenue per kWh
• 397kwh - average residential usage per month
• $0.48 - residential revenue per kWh
• PCE: $10.7 million
o 21% of revenue, 41% of total PCE disbursed
MS. KOHLER explained that to put the 118 million kwh sales for
AVEC in perspective, Chugiak Electric sells 15 times the amount
of power; however, AVEC is proud of what it does for not very
much.
3:50:48 PM
CHAIR BISHOP asked what life would look like if PCE were to go
away.
MS. KOHLER replied that life would be very bleak. She said to
put not having PCE is perspective, in one average AVEC village,
PCE pays 50 percent of the residential users' electric bills.
Running one electric heater for three or four hours translates
into an additional $350 a month on an electrical bill.
She explained that energy represents an enormous component of
the disposable income that an AVEC household has. The average
household income in an AVEC community is about $21,000 with 70
percent living below the poverty line, about a third of what the
average income is in urban Alaska. AVEC communities are not cash
economies and having to come up with extra cash to pay for a
higher electric bill would cripple households and impact
municipal facilities.
3:53:59 PM
SENATOR HOFFMAN asked Ms. Kohler to give committee members a
better idea of what 500 kilowatts pays for.
MS. KOHLER answered that the average residential consumption for
AVEC consumers is 397 kWh. Subsistence harvesting is stored in
freezers and using freezers accounts for 60 percent of
electrical usage. Lighting accounts for 20 percent of electrical
usage, but the use of heat tape for water and sewer pipes
increases electrical consumption. There is not much that can be
done to curb electric usage in residential homes in rural
Alaska, but the 500 kWh ceiling from PCE is a good deterrent.
SENATOR HOFFMAN asked what the average consumption is in
Anchorage, Fairbanks, and Juneau.
MS. KOHLER answered that the average consumption in Anchorage is
650 kWh a month with higher consumption in Fairbanks and lower
in Juneau. Rural households use half to 60 percent as much as an
urban household.
3:57:57 PM
SENATOR COSTELLO asked if there was ever a conservation about
having PCE cover schools.
MS. KOHLER explained that the issue with PCE for schools or any
other facilities that are paid for by the government is that
coverage equates to taking money out of one pocket and putting
it in another. Adding schools to PCE would substantially dive up
the program's cost and the beneficiary in the end would be the
state's funding formula. In AVEC communities, schools typically
represent 30 percent or more of all electricity sales in a
community.
SENATOR COSTELLO explained that she is interested in parsing out
the foundation formula to identify energy and building costs to
provide transparency in what dollars are getting to the
classroom for education.
MS. KOHLER replied that based on her experience, 70 percent of
education appropriations should go into the classroom; however,
in school districts with high operation costs, achieving 70
percent is not possible when keeping the lights on and warming
buildings puts a drain on funds.
4:01:39 PM
SENATOR BIRCH asked what percent of AVEC communities are
supported by renewable energy.
MS. KOHLER answered that wind-diesel projects were tested in
Kotzebue and Wales in the late 1990s and an aggressive wind
program started in 2003. However, renewable energy is capital
intensive and expensive. A typical 100kW wind turbine costs $1
million installed and two 900kW turbines that AVEC installed
last year were $6 million. Installing wind turbines in rural
Alaska is expensive due to challenging geographic conditions,
transportation costs, and moving heavy equipment logistics.
Still, AVEC owns 36 wind turbines, she said.
4:07:18 PM
SENATOR BIRCH asked if AVEC has an opportunity to weigh in on
energy generation and infrastructure.
MS. KOHLER answered that AVEC is part of the discussion every
time something happens. The challenge for AVEC communities is
size since these communities are so small plus their energy
demands are so small that it becomes economically difficult to
put together a capital project.
4:11:47 PM
MS. KOHLER reviewed slide 13, Question 1: Does PCE Reduce Rural
Power Cost to Urban Levels?"
Residential Power Cost per 2017 PCE Report
• Chugach Electric Anchorage; .1991
• Golden Valley Fairbanks; .2411
• AEL&P: Juneau .1189
• Kodiak Electric Kodiak .1530
• Kotzebue Electric Kotzebue .1939*
• AVEC 56 Villages .2300*
• Bettles Bettles .3167*
• MKEC 5 Villages; .4158*
• Napakiak Napakiak .4888*
*after PCE
MS. KOHLER summarized that PCE does not bring power costs down
to Anchorage levels, but PCE gets rural Alaska close.
4:12:40 PM
MS. KOHLER reviewed slide 14, Cost of 700 Residential kwh as
follows:
• Anchorage $139.37
• Fairbanks $168.77
• Juneau $83.23
• Kodiak $107.10
• Kotzebue $173.23*
• AVEC Village $219.00*
• Bettles $296.27*
• MKEC $421.12*
• Napakiak $409.40*
MS. KOHLER reviewed slide 15, "Question 2: Who gets PCE?
• Every residential consumer
o Only one meter per consumer
o Only the first 500 kWh
• Community Facilities
o Up to 70 kWh/resident per month
square4 Streetlights
square4 Washeterias
square4 Water and sewer facilities
square4 Community buildings
She summarized that some communities exceed the PCE cap. Selawik
is a community that exceeds its cap during the winter due to the
use of electric heat tape for water and sewer pipes. She added
that most clinics are eligible for PCE. She said that getting
community facilities certified for PCE is always a battle.
4:15:02 PM
SENATOR HOFFMAN asked if teachers and other professionals who
come into the AVEC villages as renters are eligible for PCE.
MS. KOHLER answered that if the electric bill is under the
teacher's name, the individual is considered a resident and
would be eligible for PCE.
MS. KOHLER reviewed slide 16,Question 3: Who doesn't get PCE?
which read:
• Schools
• State facilities
• Federal facilities
• Commercial consumers
• Consumers with seriously delinquent accounts
She said PCE consumers paying their electric bill is in statute
in order to receive PCE. AVEC does not have customers not
getting PCE due to delinquency because AVEC cuts off customers
that are delinquent. She noted that there are some communities
where only 70 to 80 percent of electricity billables is
collected. AVEC writes off less than 0.0050 percent due to bill
delinquency.
4:17:48 PM
MS. KOHLER reviewed slide 17, Question 4: How does PCE work?
which read:
• Utility applies to the Regulatory Commission of Alaska
(RCA) to participate
• Utility submits detailed cost and operational data
• RCA determines eligible costs and computes PCE by rate
class
• Utility bills customers per normal tariff rates
• Utility applies PCE credit based upon actual
consumption (subject to kWh limit)
• Consumer is responsible to pay bill after PCE credit
• Utility bills State, Alaska Energy Authority (AEA),
for all PCE credited
• Utility provides AEA with detailed billing records
• Utility files annual update of costs with RCA, per
schedule established by RCA
MS. KOHLER reviewed slide 18, Question 5: Doesn't PCE discourage
conservation and innovation?
• Only 29% of all electricity sold in eligible
communities receives PCE
• But the smaller the community, the more kWh that are
eligible (because of minimal commercial usage)
o Akiachak 46%
o Aniak 37%
o AVEC 48%
o Cordova 28%
o Kotzebue 27%
o Napakiak 72% (School is on own generation)
o Tanana 38%
4:20:13 PM
SENATOR BIRCH asked how widespread the PCE communities were
throughout Alaska.
MS. KOHLER answered that the PCE Program is implemented
throughout the state. She reiterated that the communities in the
Railbelt system are not eligible. The North Slope Borough is
technically eligible for PCE, but the borough subsidizes the
electricity and fuel oil for its seven villages. The North Slope
village rate is $0.1500 per kWh, even though their costs are
similar to AVEC communities whose rates run about $0.5000 per
kWh. The North Slope Borough does not get PCE because the rate
is lower than the cost.
MS. KOHLER reviewed slide 19, Question 6, Doesn't Most of PCE go
to Overheads?
FY17 Program Statistics
Fuel Costs $76,759,457
Non-Fuel Costs $85,141,895
Total Electricity Cost $161,901,352
Total PCE Disbursed $26,099,807
Percent of Fuel Costs 34%
Percent of Total Costs 16%
MS. KOHLER specified that PCE communities have costs for
operation, but not for overhead because the costs are separated
into fuel costs and non-fuel costs. She added that a large gap
exists between the total costs and the percentage that PCE
applies to.
4:22:40 PM
MS. KOHLER reviewed slide 20, Question 7, What are Overheads?
Overheads are all non-fuel costs
• Operating and maintaining power plants
• Operating and maintaining tank farms
• Operating and maintaining distribution lines
• Connecting customers, billing, collections
• Administration, accounting, engineering, warehouse
• Insurance, depreciation, cost of long-term debt
• Taxes and miscellaneous
She said overhead costs represent a very large part of non-fuel
costs.
MS. KOHLER reviewed slide 21, AVEC's Non-fuel Costs - 2017:
Generation operation and maintenance 11.5
Distribution operations and maintenance 1.5
Customer accounts 1.7
Administration, insurance 3.7
Depreciation 3.7
Interest on long term debt 1.3
All other 0.6
Total 24.0 cents per kWh
Fuel 21.9 cents per kWh
4:23:49 PM
MS. KOHLER reviewed slide 22, Question 8: Do PCE Villages have
any Plant Investment? The slide consisted of a table with the
following information:
o Generally speaking, investment per customer served is
higher in rural Alaska (2007)
AEL&P
Total plant:$101,728,884
Per customer: $6,635
Chugach Electric
Total plant: $773,762,915
Per customer: $9,981
Golden Valley
Total plant: $434,881,925
Per customer: $10,563
Kodiak
Total plant: $84,698,822
Per customer: $14,839
Kotzebue
Total plant: $16,203,807
Per customer: $13,526
AVEC
Total plant: $108,496,970
Per customer: $14,404
Per village: $2,047,113
She said the data shows the actual investment per customer, non-
grant-funded dollars per customer invested by the utility. In
the Lower 48, the average investment is $2,600 per customer, she
said. This data provides a perspective of how much more
expensive it is to serve customers in Alaska, primarily due to
population.
MS. KOHLER reviewed slide 23, Question 9: Isn't PCE Abused?
There are strict requirements of RCA and AEA
• Line Loss standards 12%
• Only one eligible account per customer
• Various expenses (like lobbying) disallowed
• Monthly reports must be submitted to AEA
• Community facilities are scrutinized by AEA
• Revenues billed must be collected
o AVEC writes off less than .005% annually in
bad debts
MS. KOHLER explained that if line loss is more than 12 percent
of power sold, a penalty factor would kick in and the PCE rate
will go down as a result. She emphasized that mechanisms in
place deter line loss from being too high.
She emphasized the PCE is scrutinized to such an extent that the
program is simply not abused. In fact, PCE is actually
underutilized. In reviewing some communities in the PCE reports,
she has noticed that their non-fuel costs are $0.0600 and
$0.0700. She said she would like to work with utilities to
figure out what their costs should be to appropriately calculate
their PCE rate.
4:26:32 PM
MS. KOHLER reviewed slide 24, Question 10: Would PCE Money be
better spent on Alternative Energy?
Wind generation is six times the cost of diesel
generation
• Utility-turbines as in Lower 48 cannot be used
• Average village load is approximately 150 kW
• There are only one or two manufacturers of 50-
100kW units
• To accommodate sophisticated integration needs,
the existing generation and distribution must be
upgraded
• Typical cost of a 300kW integrated project is $4+
million
• Diesel generation and fuel tankage still needed
for the 70+ percent energy that wind cannot
provide
• AVEC has recently installed two 900kW turbines
She offered her belief that $26 million a year does not buy a
lot of alternative energy. She emphasized that base load
generation must be available when alternative energy is
unavailable.
4:27:36 PM
MS. KOHLER reviewed slide 25, Question 11: Why are we
subsidizing Rural Alaska?
• This was the compromise reached in 1984, when the Alaska
Legislature recognized that there was no answer to bring
affordable power to rural Alaska
• Billions of dollars were spent or committed to reduce power
costs for urban Alaska and communities fortunate to have
hydropower
• Railbelt communities continue to benefit from heavily
subsidized natural gas since 1968
• In 1985, PCE utilities paid $1.17/gallon of diesel, 25
times the cost of Railbelt gas at $0.35/mcf
She pointed out that Alaska has had a long history of
subsidizing energy. She said she has researched the huge
subsidies that went into providing gas access to Chugiak
Electric for providing gas power in Anchorage. She noted that
greatly reduced royalty rates for Cook Inlet gas have been in
place since the 1960s. These were reductions specifically done
to bring affordable energy into Anchorage and the surrounding
area that continues to be a built-in subsidy, she said.
She emphasized that subsidizing the cost of energy is not a bad
idea because affordable energy underpins all economic
prosperity. The legislature and the administration have agreed
upon compromises every step of the way to provide some degree of
affordable power to rural Alaska. However, PCE still only
impacts less than 30 percent of all the kilowatt hours that are
sold in rural Alaska so much of rural Alaska struggles.
She offered her belief that Alaska is a state of energy poverty
and energy refugees. The PCE program was a wonderful program
that worked well for the first few years, then the bottom fell
out of the oil market and the legislature started cutting back
appropriations for PCE. PCE was underfunded for 15 years from
1992 to 2007 and that was after the program was drastically cut
back to reduce the number of eligible kilowatt hours.
She explained that the endowment fund was created for PCE with a
lot of blood, sweat and tears along the way. She said Senator
Hoffman must be recognized for his undying work to make the
endowment happen and to build the fund to the level where it can
fully support PCE. She expressed hope that it could also support
municipal assistance.
4:31:14 PM
MS. KOHLER summarized that much more could be said about PCE and
how critical it is for not just rural Alaska, but urban Alaska.
She said that urban Alaska would not be happy to have 90,000
rural residents move to town for affordable electricity. PCE is
a balancing act that must be kept in mind each time an effort to
use the endowment fund for other purposes occurs.
CHAIR BISHOP commended Ms. Kohler for her comprehensive
presentation. He asked what she would do if she had a magic wand
for the systems that she runs.
MS. KOHLER replied she would build a two gigawatt power plant on
the North Slope to provide cheap electricity from natural gas
for $0.02 or $0.03 per kWh with a transmission grid to send the
electricity throughout the state. She said Alaska treats itself
like an energy refugee and the state needs to stop doing so.
Alaska's natural resources are harvested and shipped instead of
being processed in-state for creating jobs. Affordable energy
would attract industry from around the world, she said.
4:33:50 PM
CHAIR BISHOP noted that he recently toured Iceland and observed
their thriving economy. Iceland was a poor country until it
finally got off diesel fuel and coal. Today, Iceland can bring
in raw bauxite from South America for smelting, he said.
MS. KOHLER agreed with Chair Bishop and noted that Iceland has
$0.02 per kWh power.
CHAIR BISHOP said if the legislature and administration can pull
in the same direction, Alaska could be in the same position as
Iceland. He said investing in big infrastructure projects is
what governments do to lower operating costs for everybody and
to grow the economy.
4:35:35 PM
There being no further business to come before the committee,
Chair Bishop adjourned the Senate Community and Regional Affairs
Standing Committee meeting at 4:35 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| PCE Overview_ Meera Kohler.pdf |
SCRA 3/26/2019 3:30:00 PM |
PCE |
| Brief Legislative History of the PCE Program.pdf |
SCRA 3/26/2019 3:30:00 PM |
PCE |