HOUSE BILL NO. 336 "An Act directing the Alaska Energy Authority to conduct a study of and to prepare a proposal for an appropriately sized Susitna River hydroelectric power project; and providing for an effective date." Representative Kelly introduced Steve Haagenson, the newly appointed Energy Coordinator for Alaska Energy Authority (AEA). JEAN OSTNES, STAFF, REPRESENTATIVE CRAIG JOHNSON (SPONSOR), explained HB 336, which authorizes AEA to conduct a study of the Susitna River hydroelectric power project. She referred to previous studies done in 1982 and 1983. The current fiscal note for $1 million is intended for the first phase of the current study, Task Force 1. 1:46:39 PM Co-Chair Meyer wanted to know if AEA was already using an $880,000 allocation to study energy issues in the Railbelt region. Ms. Ostnes thought that report would meld with the study proposed by HB 336. There are engineers on contract who can immediately go to work. Co-Chair Meyer asked if AEA would still need $1 million in addition to the nearly $1 million already set aside. He asked if the intent was to also use Railbelt energy fund money for the Susitna study. Ms. Ostnes replied that the Sponsor wanted capital money but the source was not yet identified. Representative Joule supported energy projects for Alaska. His concern about the Railbelt project is that there are other parts of the state that need alternative energy. He does not want the State to postpone looking at other regions and would prefer to have AEA look at energy alternatives that might impact places with higher energy costs. 1:49:27 PM Ms. Ostnes believed that the Sponsor is interested in looking at the issue state-wide and hoped that the project would affect the rest of the state. Representative Gara voiced concerns about building a hydroelectric project only to find out later that online energy was cheaper. He referred to the five-phase study ("Estimate for Susitna Hydro-electric Feasibility Study," Copy on File), anticipated to cost a total of $2,750.000. Ms. Ostnes replied the Sponsor felt $1 million would help the project move forward. Vice-Chair Stoltze wondered how much of the work done through past studies is still relevant. Ms. Ostnes referred to a 1986 report by Gordon Harrison (Copy on File) that addresses the financial plan and why it didn't work. She referred to extensive work that had been done that needs updating. Vice-Chair Stoltze had concerns about costs of the study. 1:54:50 PM STEVE HAAGENSON, ENERGY COORDINATOR, ALASKA ENERGY AUTHORITY, spoke in support of HB 336. He defined hydroelectric projects as stable-priced power. He said sizing is critical and also having the right water resources to run the project. He thought hydroelectric would be cleaner and cheaper. The bill will allow the State to evaluate the project to the next level in order to determine whether to go further. He felt the people of Alaska deserve to evaluate hydroelectric and compare it with other available technologies. Vice-Chair Stoltze asked what percentage of the population would be affected by the project. Mr. Hagensom said a significant portion of the population. Representative Joule asserted the need to look at all alternatives for energy in order to strategically develop Alaska's resources. He wondered if there were alternatives outside the Railbelt. Mr. Haagenson anticipated that his general approach would be to meet with all Alaskans and ask them what they think the solutions are for technology and fuel source. He would try to quantify the demand for power that would be used for electricity, transportation and heating, and then determine the best options for each area of the state. REPRESENTATIVE CRAIG JOHNSON, SPONSOR, added that Susitna is not the final answer, but one of the pieces of the puzzle. He has been in contact with developers of mining projects whose most glaring need is electricity. He cited examples of plans the Susitna project would affect. There was a discussion about energy rates and funding options. 2:08:08 PM Representative Gara suggested that the study include a comparison of the price of power under the Susitna project with the price of power under a gas line project. He asked about the difference between the $1 million on the fiscal note and the $2,750,000 cost for the total study. Representative Johnson clarified that the study was meant to be done in phases. The first phase, which would cost approximately $1 million, would determine the feasibility of continuing the project. 2:12:03 PM SARA FISHER-GOAD, DEPUTY DIRECTOR OF OPERATIONS, ALASKA ENERGY AUTHORITY, viewed HB 336 as a specific study of Susitna and explained the costs of the phases of the study. She referred to Co-Chair Meyer question about the earlier $800,000 study. She mentioned alternative energy projects in rural Alaska. 2:15:05 PM Representative Gara restated his question about comparing the prices of different types of power. Ms. Fisher-Goad agreed those comparisons need to be done. She said the $1 million fiscal note responds to the structure of HB 336. A Senate bill has a different approach. If the Committee chose to amend to include a broader study, the fiscal note would follow. JIM HEMSATH, DEPUTY DIRECTOR, DEVELOPMENT, ALASKA ENERGY AUTHORITY (Testified via teleconference), explained that the $1 million for Task Force 1 would accomplish a review of existing information, including an engineering analysis of what has already been done. This stage of the study would also look for flaws, update the estimates, and update the costs in order to understand what the cost of power would be. Task Force 1 will be able to determine if the Susitna project is feasible. If the project is feasible, then a comparative study of different forms of energy would be done. The goal is to be as focused as possible to minimize capital expenditure. 2:18:50 PM Representative Gara asked if part of the goal of the study is to update past estimates to today's dollars. Mr. Hemsath answered in the affirmative, but added that the study would also explore changes in technology and code over the last twenty years, and take a critical look at the engineering assumptions of the first studies. Representative Hawker referred to the fiscal note and asked for a budget analysis of who will be used in the study and how much they would be paid. 2:22:18 PM Mr. Hemsath responded that the million dollar figure is a cap. His experience leads him to believe a lot can be accomplished for that amount of money. At AEA there are a number of term contracts put in place specifically for analysis of energy needs, so they have the capacity to efficiently develop the engineering estimate in-house. The million dollars would evaluate what has been done and review it for changes in technology and code that were not known in 1983, including seismic activity. Ms. Fisher-Goad assured the Committee that in the past, AEA has used appropriations appropriately and with fiscal responsibility. 2:26:29 PM Co-Chair Meyer also wanted a better breakdown of the expenses and costs of the proposed project. ERIC YOULD, ENERGY CONSULTANT, WOOD CANYON GROUP (Testified via teleconference), spoke in support of HB 336. He had worked on the Susitna project in the 1980s. He thought a new cost estimate is important. In addition, the State needs to look at other energy projects that could provide energy to the Railbelt, specifically coal, natural gas, other hydropower projects, geothermal, wind and tidal options. In his opinion, the alternative assessment is critical to the success of the Susitna project. He pointed out that the Federal Energy Regulatory Commission will require a study of alternatives in order to get a license. The National Environmental Protection Act also requires a study of alternatives. Susitna was withdrawn by the governor in 1985 because of the costs of oil, which undermined the economics of Susitna and dried up excess revenue that could have come to the State. 2:32:38 PM Representative Gara wanted information on the fisheries impact of the project. Mr. Yould replied that extensive fisheries studies had been done. 2:34:00 PM MIKE WRIGHT, GOLDEN VALLEY ELECTRIC ASSOCIATION (Testified via teleconference), spoke in support of HB 336. Railbelt utilities rely heavily on fossil fuels for electric generation. The volatile price of oil has a significant 2 impact on the cost of electricity. COemissions from burning fossil fuels are also a consideration. TOM STAUDENMAIER, EAGLE RIVER (Testified via teleconference), advised consolidating all the management systems, tying the grid together, and eliminating debt. 2:39:24 PM JERRY MCCUTCHEON, ANCHORAGE (Testified via teleconference), spoke in opposition of HB 336. He listed some of the problems with past projects. He thought the re-study should be done by the Army Corps of Engineers. 2:45:10 PM BRADLEY EVANS, ACTING CHIEF EXECUTIVE OFFICER, CHUGACH ELECTRIC ASSOCIATION, INC. (Testified via teleconference), testified in support of HB 336. He was concerned about dependence on natural gas and thought the current system could not continue to handle energy needs in the Railbelt. He supported doing a study to find the right answers for diverse energy sources. Chugach has conducted many studies regarding alternative energy that they would be glad to share with AEA. 2:49:13 PM UWE KALENKA, CHUGACH ELECTRIC ASSOCIATION, INC. (Testified via teleconference), testified in support of the bill. He was concerned about heavy dependence on natural gas for energy. He wanted the range of energy alternatives studied, including the Susitna hydroelectric project. He maintained that the project is overdue. 2:52:50 PM PAUL D. KENDALL, ANCHORAGE (Testified via teleconference), spoke in favor of the Susitna hydroelectric project. He suggested holding a hearing to educate the public on energy issues. Energy is a vitally important issue. Leadership sets the tone. He recommended an incremental expansion design for Susitna. 3:01:16 PM PUBLIC TESTIMONY CLOSED. HB 336 was HEARD and HELD for further consideration.