Legislature(2013 - 2014)BUTROVICH 205
04/08/2014 07:30 AM Senate SPECIAL COMM ON IN-STATE ENERGY
| Audio | Topic |
|---|---|
| Start | |
| Overview: Alaska Energy Authority | |
| 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 SPECIAL COMMITTEE ON IN-STATE ENERGY
April 8, 2014
7:30 a.m.
MEMBERS PRESENT
Senator Click Bishop, Co-Chair
Senator John Coghill, Co-Chair
Senator Peter Micciche
Senator Dennis Egan
Senator Bill Wielechowski
COMMITTEE CALENDAR
OVERVIEW: ALASKA ENERGY AUTHORITY
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
SARA FISHER-GOAD, Executive Director
Alaska Energy Authority
Anchorage, Alaska
POSITION STATEMENT: Provided an overview of the Alaska Energy
Authority.
EUGENE THERRIAULT, Deputy Director
Energy Policy and Outreach
Alaska Energy Authority
Anchorage, Alaska
POSITION STATEMENT: Provided an overview of the Alaska Energy
Authority.
ACTION NARRATIVE
7:30:49 AM
CO-CHAIR CLICK BISHOP called the Senate Special Committee on In-
State Energy meeting to order at 7:30 a.m. Present at the call
to order were Senators Coghill, Micciche, Egan, and Co-Chair
Bishop.
^OVERVIEW: ALASKA ENERGY AUTHORITY
OVERVIEW: ALASKA ENERGY AUTHORITY
7:31:41 AM
CO-CHAIR BISHOP welcomed the Alaska Energy Authority (AEA) to
the committee meeting. He announced that AEA would present an
overview of Alaska's long term energy plan, the Fairbanks gas
build-out, and the natural gas trucking plan.
7:33:17 AM
SARA FISHER-GOAD, Executive Director, Alaska Energy Authority,
Anchorage, Alaska, set forth that AEA has been viewed as the
state's energy department. She said the AEA overview will allow
legislators to share what they may like to see and in turn what
AEA would like to see for improved program coordination.
She addressed page 2, "Electricity Generation by Region." She
said Alaska is a very large state with a population that is
spread out. She noted that conversely, a significant Railbelt
population concentration exists for energy generation and usage.
She set forth that AEA is a statewide agency that addresses the
high energy costs and does not exclusively focus on the
Railbelt.
7:35:47 AM
She called attention to page 3, "Energy Costs Vary." She pointed
out that Alaska has a very significant regional cost disparity
regarding diesel fuel, natural gas, and hydro-electrical energy
usage.
She noted page 4, "Reducing the Cost of Energy." She set forth
that AEA's primary mission is to reduce the cost of energy
through planning and policy. She said AEA invests in the energy
infrastructure and diversifies the energy portfolio with its
Renewable Energy Grant Fund (REGF), and noted larger projects
such as the Susitna-Watana Hydroelectric Project (SWHP). She
revealed that AEA provides technical and community assistance by
working with communities to diversify their portfolios and take
advantage of REGF.
7:37:27 AM
She addressed page 5, "What Does Energy Include," pointing out
that AEA has a lot of programs that deal with energy issues. She
noted that energy means different things to different people.
She stated that energy includes "efficiency" and
"transportation." She remarked that the Alaska Department of
Health and Social Services has a public assistance energy
program called Low Income Home Energy Assistance Program
(LIHEAP) that address specialized public assistance. She added
that the Alaska Housing Finance Corporation (AHFC) has a mature
energy efficiency program that offers weatherization rebates to
homeowners.
MS. FISHER-GOAD noted page 6, "Energy Planning and Policy." She
explained that AEA statutorily acts as a clearinghouse that
manages the state's energy related functions and programs. She
added that AEA monitors the state's energy goals, coordinates
with other agencies, and provides project analysis.
She introduced Gene Therriault as an AEA associate and board
member for the National Association of State Energy Officials
(NASEO). She explained that Mr. Therriault works with other
state energy officials regarding national energy issues.
7:40:44 AM
EUGENE THERRIAULT, Deputy Director, Energy Policy and Outreach,
Alaska Energy Authority (AEA), Anchorage, Alaska, explained that
his association with NASEO allows him to monitor federal-level
policies that could affect Alaska. He noted that NASEO recently
sent a letter to the U.S. Environmental Protection Agency (EPA)
to address pending carbon dioxide emission regulations to the
Clean Air Act.
MS. FISHER-GOAD addressed page 7, "Energy Program Coordination."
She set forth that AEA will strive to enhance program
coordination with the following:
· Legislature,
· Governor's Office,
· AEA Board of Directors,
· Federal Agencies,
· State Agencies,
· AHFC-Office of Management and Budget,
· Independent Power Producers (IPP), and
· Non-government organizations.
She noted that two and a half years ago, the AEA board of
directors held a work session to address opportunities with IPPs
and how they fit in with electric utilities to bring additional
power to the state. She added that AEA's involvement with non-
government organizations includes the Alaska Energy Efficiency
Partnership (AEEP). She explained that AEA is leading the effort
with AEEP to help put forward a coordinated effort on energy
efficiency programs. She added that AEA is working with the
Alaska Regional Development Organization (ARDOR) to develop
regional energy plans and reduce energy costs.
7:43:46 AM
SENATOR WIELECHOWSKI joined the committee meeting.
MS. FISHER-GOAD noted AEA's involvement with federal agencies as
follows:
· Federal Emergency Management Agency (FEMA) regarding the
Galena flooding response,
· Federal Energy Regulatory Commission (FERC) on SWHP, and
· U.S. Department of Agriculture-Rural Development Utilities
Programs (USDA-RDUP) to address potential financing
opportunities.
She said USDA-RDUP is a potential funding source for SWHP and
the Bradley Lake Hydroelectric Project (BLHP). She explained
that the Bradley Project Management Committee, which is a
Railbelt utilities management committee, is pursuing the Battle
Creek Diversion Project (BCDP). She specified that BCDP will
enhance BLHP and provide more energy. She summarized that AEA
acts as a clearinghouse for data, information, and coordination
between various agencies.
She explained page 8, "Alaska Energy Programs." She presented a
flowchart that shows AEA developed with the Alaska Office of
Management and Budget to monitor funding sources, energy
generation programs, and state agency loan programs.
7:46:59 AM
She referred to page 9, "Energy Planning and Policy." She said
AEA is working on various energy plans that include work that is
anticipated for the in-state gas pipeline from SB 138. She
pointed out that possible opportunities exist in Southeast
Alaska for liquefied natural gas (LNG). She noted a recent AEA
presentation at the Southeast Conference that addressed
opportunities for using LNG in Southeast and coastal
communities. She specified that WesPac Midstream LLC has been
looking for opportunities to bring natural gas to some of
Alaska's coastal communities. She said AEA has put together some
analysis on alternative energy opportunities from WesPac.
7:49:24 AM
SENATOR MICCICHE asked if the results of the study are
available.
MS. FISHER-GOAD answered yes. She noted that the Southeast
Conference presentation will be provided to the committee.
SENATOR MICCICHE asked if Southeast's hydroelectric capacity is
somewhat limited and if there is additional capacity on the
drawing board.
MS. FISHER-GOAD replied that additional capacity has been
identified through the Southeast Alaska Integrated Resource Plan
(SEIRP). She added that there are some project viability
challenges due to smaller load areas. She noted that the
Southeast Alaska Power Agency (SEAPA) has received a call for
additional power. She added that SEAPA is looking at raising the
Swan Lake Hydro Facility to provide additional energy. She noted
that Metlakatla is looking at additional projects that include a
possible intertie to the SEAPA region. She added that the
Petersburg Intertie is still being evaluated.
SENATOR MICCICHE pointed out that the Legislature was approached
by someone who is interested in privately investing in
hydroelectric projects. He asked if there is a way to separate a
place to welcome IPPs. He noted that the Railbelt utilities'
arms are not quite as open.
MS. FISHER-GOAD replied that AEA's intent is to continue a
dialog and be open to opportunities. She noted an issue with
transmission limitations and a need for a uniform tariff system
from the Railbelt utilities for IPPs.
7:52:37 AM
MR. THERRIAULT said AEA supported IPPs to answer SEAPA's call
for extra power over the next 10 to 20 years. He explained that
AEA evaluated SEAPA's process to make sure it was fair and truly
open for IPPs to bid and have their power compared against
everybody else.
He revealed that AEA has tried to develop open-access language
and reliability standards for Railbelt IPPs. He said AEA's
intent has been to establish fair and open rules that the RCA
has reviewed and sort-of-blessed. He noted that the state owns
170 miles of the Railbelt transmission system, and pointed out
that the challenge stems from the Railbelt utilities owning the
transmission system's remaining percentage.
7:55:03 AM
SENATOR MICCICHE asked if there is value in separating the IPP
legislation between areas that do not have state-owned
transmission so that it opens up Southeast Alaska for earlier
consideration where less friction exists.
MR. THERRIAULT replied that the challenge for IPPs in Southeast
pertains to figuring out the avoided cost. He explained that
ascertaining the avoided cost is complicated and the Regulatory
Commission of Alaska's (RCA) cost scrutiny has value. He
referred to the Railbelt and noted that IPPs support a better
governance system where a tariff is established.
SENATOR COGHILL pointed out that IPPs have approached him
regarding the RCA rule making language that makes it difficult
to ascertain the avoided cost. He noted that he is drafting
legislation to address RCA's rule making language.
MR. THERRIAULT surmised that the RCA would be open to addressing
their current rules interpretation and assist in future
legislation.
SENATOR COGHILL explained that his intent is to address the
RCA's rule making ambiguity. He noted that he has reached out to
Alaska Power Association's members for comments. He explained
that the current law recognizes Alaska's unique circumstance,
but the law is protective of closed markets and does not work
well in competing markets. He summarized that a successful
system requires government structure, operating structure, and
open access.
7:59:20 AM
SENATOR MICCICHE set forth that the key to Alaska's energy
success is going to be a framework mix of private sector, public
sector, and traditional utilities. He offered to participate in
the process.
MR. THERRIAULT noted the issue with the current transmission
policy and the intent for the system to be open to private
sector investment in transmission as well.
SENATOR EGAN addressed issues in Southeast where IPPs are trying
to form various hydroelectric projects, but there is no
transmission. He explained that the IPPs are asking for the
state to be a partner in constructing transmission lines. He
asked if AEA has addressed state participation in transmission.
MR. THERRIAULT answered no. He addressed the need to evaluate
transmission investment needs across the state
MS. FISHER GOAD added that AEA had done a transmission cost-
benefit analysis for Southeast. She said cost is an issue due to
long distances and small loads. She noted that additional
processing or mining development would be a game-changer for
added energy infrastructure in Southeast.
8:02:44 AM
MR. THERRIAULT addressed the need to establish open access rules
for present and future transmission.
SENATOR EGAN asked how a government participates in energy needs
for a mine. He noted that a Southeast mine has access to a
private utility's excess power and a second mine cannot afford a
transmission line to receive power at their location.
CO-CHAIR BISHOP pointed out the similar challenges with
incremental versus rolled-in rates for gas.
MR. THERRIAULT agreed that there are similarities. He pointed
out the challenge in addressing a mine's rights versus open
access when a mine underpins a 50 mile extension. He noted that
a mine's economic activity brings a line into existence, but a
transmission line is a very long term asset. He said if a state
has granted a right-of-way across state land, transmission line
operation should be the same as a pipeline where access, rates,
and costs are specified.
8:05:10 AM
CO-CHAIR BISHOP asked him to confirm that AEA's goal is to get
power, whatever source it is, to Alaskans at an affordable
price. He noted a conundrum where a Southeast community embraced
an energy efficiency program that resulted in higher utility
rates.
MR. THERRIAULT conceded that fixed costs do not go away and the
end result requires the costs to be spread over fewer kilowatts.
He stated that the RCA must take into account the scenario Co-
chair Bishop cited. He pointed out the intricacies that the RCA
must consider between consumer pricing and system reliability.
8:08:13 AM
MS. FISHER-GOAD called attention to page 10, "Investing in
Energy Infrastructure." She remarked that one of the ways to
reduce the cost of energy is to invest in Alaska's energy
infrastructure. She pointed out AEA's generation assets: BLHP,
BCDP into BLHP, and SWHP.
MS. FISHER-GOAD reiterated that AEA's intent is to reduce energy
costs and pointed out a conundrum that is created for IPPs that
is difficult for AEA to work around. She explained that IPPs are
looking to sell their power at the avoided cost which is below
what a utility purchases power for. She called attention to
AEA's REF that statutorily requires eligible IPPs and entities
to sell power at cost, not at a profit or avoided cost. She
specified that grant-funds used to support projects must be used
to directly benefit rate payers to reduce the cost of energy.
She stated that she welcomes an opportunity to have a discussion
with the senators to address the previously explained issue.
She called attention to SWHP and explained that AEA has acquired
SWHP's land access agreements with the Cook Inlet region village
corporations and the Cook Inlet Region, Incorporated (CIRI) to
finish environmental work that is required to support a license
application. She disclosed that SWHP had a successful 2013 field
season. She pointed out that SWHP's 50 year average power cost
at $0.07 per kilowatt hour (kWh) has been confirmed by a
financial consultant. She explained that the $0.07 cost per kWh
confirmation matches the initial projection when SWHP was first
approved in 2011. She said AEA is in the middle of the FERC
licensing process with completion expected after the 2015 field
season.
8:12:16 AM
She presented a video on SWHP's design.
CO-CHAIR BISHOP asked if SWHP's land access is totally complete
with the Native corporations.
MS. FISHER-GOAD replied that access to finish SWHP's
environmental work is complete. She said the initial agreement
starts a long term partnership with CIRI and the village
corporations for SWHP.
She revealed that SWHP's road access has not been determined.
She added that SWHP's roller-compacted concrete design will
allow for water to be drawn at different temperatures, a
valuable attribute for habitat mitigation. She pointed out that
an additional SWHP design version includes an additional
spillway trail. She noted that SWHP design will include 3-200
megawatt turbines.
8:16:50 AM
CO-CHAIR BISHOP asked to meet with SWHP's engineer for an update
on the roller-compacted concrete process. He noted that Moose
Creek, Hoover, and Grand Coulee dams were all formed-and-poured
concrete designs.
MR. THERRIAULT commented that the roller-compacted process
allows for a special mix concrete to be placed more quickly with
a shorter curing time. He noted the challenge with concrete heat
dissipation with dam construction.
CO-CHAIR BISHOP added that the Hoover dam is still cooling.
MS. FISHER-GOAD addressed SWHP's present design rendition and
noted that the state's current design and licensing investment
would ultimately be paid back.
She addressed page 11, "Investing in Energy Infrastructure." She
pointed out that AEA owns the Alaska Intertie. She added that
AEA commissioned a transmission study that identified the
additional transmission that would need to be done.
8:20:23 AM
MR. THERRIAULT detailed that the Alaska Intertie upgrade would
require $900 million in priority transmission projects:
· Un-constraining BLHP: $402.2 million,
· Southcentral substations: $20.5 million, and
· Northern Intertie projects: $480.7 million.
He summarized that annual projected savings would be $140 to
$240 million.
CO-CHAIR BISHOP asked how much electricity would be used for the
proposed LNG plant for the Alaska natural gas pipeline project.
MR. THERRIAULT answered that he did not know.
SENATOR MICCICHE commented that a lot of electricity would be
used at the proposed LNG plant.
CO-CHAIR BISHOP commented that the Alaska Intertie upgrades will
be required even if the Railbelt loses two mines.
MR. THERRIAULT answered yes. He surmised that the Railbelt
utilities would want to look at a huge industrial load hookup so
that they are not just serving their own needs. He explained
that the fixed costs for the overall system could be spread over
the increased power being sold. He summarized that the end
result would lower the Railbelt's electrical rates.
8:23:43 AM
MS. FISHER-GOAD called attention to page 12, "Investing in
Energy Infrastructure." She noted that in addition to AEA's
assets and Railbelt development, AEA has a very robust rural
energy program to help develop energy infrastructure in rural
Alaska. She pointed out that AEA has built fuel tank farms and
powerhouses in rural Alaska. She said AEA continues to receive
rural energy funding from the state as well as the Denali
Commission.
She addressed page 13, "Investing in Energy Infrastructure." She
explained that outside of larger projects, the Power Project
Fund (PPF) is used for small-scale rural electric power
facilities. She detailed that PPF loans are used to buy a new
engine or enhance power systems. She noted that AEA is pleased
with the current interest and future possibilities for the PPF
loan program. She added that the energy policy that was passed
in 2010 also included that the PPF be used as the primary
funding source for additional projects.
8:25:54 AM
She noted page 14, "Diversifying Alaska's Energy Portfolio." She
said there is a real desire from the policy that was passed to
diversify Alaska's energy portfolio. She explained that
statewide generation varies for different reasons. She noted
that pending legislation from SB 183 will extend the Emerging
Energy Technology Fund Grant Program (EETFGP). She noted that
grants from EETFGP and the Denali Commission are under
consideration for possibly funding 22 projects.
She addressed page 15, "Diversifying Alaska's Energy Portfolio."
She called attention to a unique project with Altaeros Energies.
She explained that Altaeros' unique wind energy turbine does not
require a tower and could benefit areas where tower construction
would be difficult. She stated that AEA is excited to see
continued development in the Altaeros program.
8:27:37 AM
She pointed out page 16, "Diversifying Alaska's Energy
Portfolio." She said the REGF has been through six project-
rounds with a seventh round under consideration. She explained
that the evaluation and vetting process has been very good for
project development. She noted that 13 million gallons of diesel
fuel or natural gas equivalent was displaced in 2013.
MS. FISHER-GOAD said there have been discussions on what is
required to finish REGF projects that AEA has started. She
recommended that the REGF program be used more upfront for
project with different financing opportunities for a project's
construction. She remarked that further discussions should occur
to either enhance REGF or just finish what has already been
started. She noted that REGF primarily addresses smaller
projects. She remarked that additional heat and or heat with
power projects will continue to be developed for Alaska's
smaller communities.
8:29:52 AM
CO-CHAIR BISHOP noted the 13 million gallon equivalent
replacement and pointed out that approximately $60 million was
saved. He asked if AEA had formulated a cost-benefit ratio. He
remarked that the $60 million in savings was just for one year
and over time the savings added up to "real money."
MS. FISHER-GOAD replied that there is a three-to-one benefit-to-
cost savings when using the diesel equivalent price.
MR. THERRIAULT remarked that analyzing savings over time was an
important aspect. He asserted that renewable energy benefits may
not show immediate results, but benefits will grow larger over
time.
CO-CHAIR BISHOP added that the liability for storing an
additional 13 million gallons in rural Alaska was taken out of
the equation.
8:31:45 AM
SENATOR MICCICHE noted that Alaska was meeting half of the goal
for renewable energy by 2025. He asked if meeting the renewables
goal by 2025 was realistic.
MS. FISHER-GOAD answered that a significant project will be
required to attain the 2025 goal. She pointed out that 77
percent of Alaska's generation and demand is in the Railbelt.
She said SWHP would have to come into play for the portfolio to
meet its goal.
SENATOR MICCICHE addressed connectivity within the context of
Alaska's long term energy plan. He noted that an energy plan
probably includes transmission infrastructure that may not
happen for a very long time due to Alaska's small population and
remote areas. He rhetorically inquired how regions will be
logically grouped. He set forth that a perfect-world energy plan
has connectivity, transmission, and a reasonable mix of
renewables and traditional hydrocarbons. She said the energy
plan should address where the state is and where the state is
going. He added that a lot of little project will have to happen
in the meantime for the plan to ultimately reach its goal. He
conceded that the diesel-default model is almost never the right
choice. He said he is interested to see how AEA's evaluation
gets the state from where it is to where it is going.
8:33:45 AM
MS. FISHER-GOAD replied that Alaska's rural powerhouses amount
to 190 micro-grids. She noted that diesel fuel was addressed at
a recent Rural Energy Conference where the focus was on
developing systems that were efficient and reliable. She
conceded that energy alternatives will be looked at in the long
term, but noted that diesel systems used in the short term must
be appropriately supported in rural Alaska.
CO-CHAIR BISHOP asked if AEA will encourage the use of dual-fuel
compatible engines to allow for using LNG at a lower price.
8:36:55 AM
MS. FISHER-GOAD answered yes. She explained that SB 138's fiscal
note directs AEA to look at conversion costs and make sure
regions are prepared to take advantage of different fuels.
MR. THERRIAULT added that AEA is looking at growing transmission
where it makes economic sense and developing micro-grids in sub-
regions where transmission is not geographically feasible.
8:38:44 AM
SENATOR MICCICHE noted that he sympathizes with regions that
depend on traditional energy generation. He pointed out that
countries with similar challenges have moved to distributing
alternative fuels like LNG. He said Alaska is 40 years behind
Japan and Norway. He pointed out that Australia just started 15
years ago. He noted that from a big-picture standpoint,
localized natural gas production exists with no market value,
but certainly has the shallow-well potential to run a village of
200. He said local exploration may take villages off diesel
forever. He asserted that Alaska has had a tendency to wait for
exploration and production by companies that make money off
producing energy. He said his suggestion is a different model
where there may not be any profit other than the actual power
and heat that becomes available.
MR. THERRIAULT agreed that regional planning entails looking at
localized resources.
SENATOR MICCICHE called attention to the danger of the 50
percent renewable goal by 2025. He asked that other projects not
be pushed aside that may significantly improve local energy
economics. He asserted that his goal is to bring down energy
prices that may or may not fit within the 2025 renewable goal.
8:41:30 AM
SENATOR EGAN noted his concern for not reducing energy prices in
rural Alaska. He said smaller communities will not be able to
develop an economy without lower energy costs. He addressed
prior discussions on nuclear power and asked if AEA continued to
pursue nuclear power as an option.
MS. FISHER-GOAD replied that AEA had commissioned a study where
the potential for nuclear power was evaluated. She said AEA
continues to monitor nuclear power as a potential energy source
in the future.
MR. THERRIAULT added that when the energy policy was put into
place in 2010, the Legislature went through the statutes and
removed a lot of roadblocks to nuclear power. He noted that
micro-nuclear technology continues to be developed. He remarked
that current micro-nuclear technology is not quite there for
Alaska applications.
8:43:35 AM
MS. FISHER-GOAD addressed page 17, "Energy Efficiency and
Conservation." She said the other program that AEA manages is
energy efficiency and conservation. She pointed out that another
goal is the 15 percent reduction in energy use by 2020. She
pointed out that the Alaska Housing Finance Corporation (AHFC)
deals with housing and residential uses in addition to managing
a public building loan fund. She explained that AEA focuses on
commercial buildings, rural public buildings, industrial
facilities, and electrical efficiency on the generation side.
She said AEA has a significant amount of statewide outreach and
education with AKEnergyEfficiency.org. She added that AEA has a
significant coordinated effort with many entities that are
interested in energy efficiency.
MS. FISHER-GOAD said there has been significant savings through
energy efficiency measures as follows:
· 1.5 million gallon replacement per year,
· Village Energy Efficiency Program (VEEP) received 85
applications in 2013,
· 7 communities were VEEP funded,
· 30 cent payback for every dollar invested,
· Commercial Energy Audit Program assists commercial building
owners in realizing energy savings, and
· Department of Commerce's small loan program assists
commercial building owners in taking advantage of private
sector financing to make building improvements.
She addressed Senator Micciche's comment concerning the 50
percent renewable goal. She asserted that AEA's primary priority
is looking for affordable energy solutions and reducing energy
costs. She said AEA believes renewable energy fits into Alaska's
future. She countered that the 50 percent renewable goal is not
necessarily the driver. She stated that renewable energy can
serve a dual purpose by diversifying the portfolio while
reducing energy costs.
8:47:26 AM
MR. THERRIAULT noted page 18, "Interior Energy Project (IEP)
Overview" and explained that the IEP's LNG project consisted of
an LNG plant on the North Slope, a trucking component, storage
in the community, and a distribution build-out.
He addressed page 19, "IEP Goals." He highlighted various IEP
Goals as follows:
· Supply natural gas to Interior Alaska at the lowest
possible cost, to as many Alaska customers as possible, and
as soon as possible.
· Keep private sector investment in the build-out's overall
infrastructure.
He explained page 20, "SB 23 Finance Package." He said the
financing package that was passed by the Legislature provides
access to the Sustainable Energy Transmission and Supply (SETS)
loans, a capitol component for Alaska Industrial Development and
Export Authority (AIDEA) to actually take an investment equity
position in the plant. He added that the financing package
includes a $150 million bond bid that could be loaned out for
the natural gas distribution build-out.
MR. THERRIAULT pointed out page 21, "LNG and Propane Sale
Priorities" as follows:
· Residential and commercial space heating,
· Electric utilities,
· Industrial customers,
· Other utilities, and
· Open market sales.
He summarized that most energies are a volume enterprise and
higher volume LNG sales will equate to lower unit-prices for
everybody.
He addressed page 22, "Completed Project Milestones" for the LNG
project. He pointed out that the AIDEA and AEA boards had just
approved the first SETS loans for the distribution build-out. He
detailed that $15 million was loaned to Fairbanks Natural Gas
(FNG) for a fairly aggressive build-out starting in 2014 and
$8.1 million was loaned to Interior Gas Utility (IGU) for
storage and distribution engineering and design. He noted that
IGU will serve areas outside of FNG's existing service
territory.
8:50:13 AM
CO-CHAIR BISHOP asked to receive details on FNG's build-out plan
on where the $15 million loan is going to be applied.
MR. THERRIAULT explained page 23, "Proposed Project Location:
LNG Plant." He revealed that the plant's site has been
identified and will tie into the existing gas fuel system. He
noted that the plant's site was not very far from one of the
North Slope's flow-stations that allowed for a less expensive
tie-in.
He addressed page 24, "North Slope Facility: Next Steps." He
revealed that the Letter of Intent was executed in February 2014
and the Project Development Agreement was currently in
negotiations with Montgomery Watson Harza (MWH) Global. He noted
that MWH Global was selected by the AIDEA board to be the
private sector partner for the LNG plant's development.
He explained page 25, "Natural Gas Distribution System." He
explained that the Regulatory Commission of Alaska (RCA) decided
last December on FNG's and IGU's distribution territories. He
detailed that IGU would get the expansion territory, but pointed
out IGU's challenge with additional pipeline miles that services
a smaller customer base. He summarized that AEA's intent is to
use the tools provided by the Legislature to serve the largest
customer base at a reasonable and affordable price.
8:52:25 AM
MR. THERRIAULT detailed page 26, "Conversion Analysis Study." He
revealed that AEA has spent time evaluating how to quickly
convert customers to natural gas. He summarized that converting
from fuel oil to natural gas and potentially cutting fuel costs
in half should be a large enough incentive for most residential
home owners to make the conversion. He noted that IGU and AIDEA
surveyed customers and received very good feedback on potential
conversion.
8:54:15 AM
He addressed page 27, "Pipeline Gas Demand by Customer." He said
AEA believes natural gas demand will grow over time. He pointed
out that Golden Valley Electric Association's (GVEA)
participation was included in the demand forecast. He noted that
AIDEA was working with GVEA on signing up as a bulk customer. He
noted that GVEA will have to find fuel sources due to the recent
refinery closing announcement by Flint Hills Resources.
SENATOR MICCICHE called attention the gas pipeline's large
demand increase from 2014 to 2015. He asked if the forecasted
increase was attributed to GVEA purchases to power gas turbines.
MR. THERRIAULT replied that IGU will probably locate their gas
storage tanks near GVEA and build-out their distribution with an
initial volume-customer.
SENATOR MICCICHE asked when the first LNG will be shipped.
MR. THERRIAULT answered that LNG shipments are targeted for the
last quarter of 2015.
8:56:25 AM
He addressed page 28, "Incentive Demand Comparison." He
explained that adding an on-bill financing mechanism that allows
customers to make monthly conversion-cost payments over time
would drive added demand.
He addressed page 29, "Distribution System: Next Steps." He
summarized that the next steps entail negotiating tanker
contracts for IGU, FNG, and GVEA.
CO-CHAIR BISHOP asked Ms. Fisher-Gold for her closing comments.
MS. FISHER-GOAD asked that the Legislature support AEA's funding
requests and current projects. She noted that AEA faces
challenges in balancing short, mid, and long term energy
development. She pointed out that complications exist due to
Alaska's geographical size, small electrical loads, and long
distances between loads that precipitates somewhat inconsistent
legislative policies. She related that AEA appreciates the
dialog with the Legislature to make sure AEA is fulfilling its
expectations as the state's energy office. She asserted that AEA
listens to regional leaders and communities. She summarized that
AEA implements the programs that the Legislature funds.
SENATOR MICCICHE set forth that AEA should prioritize efficiency
first. He expressed hope that AEA has the courage to push back
when policymakers may not be choosing efficient policy and to
analyze energy delivery methods prior to final analysis. He
asserted that just because the Legislature decides something is
the best idea does not mean that is the case. He said the
Legislature counts on AEA's expertise and freedom to push back.
9:00:43 AM
There being no further business to come before the committee,
Co-Chair Bishop adjourned the Senate Special Committee on In-
State Energy hearing at 9:00 a.m.
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