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. [RECORDING EQUIPMENT FAILURE MUCH OF RECORDING IS INAUDIBLE] REPRESENTATIVE CRAIG JOHNSON, SPONSOR, introduced his staff, Debbie Higgins. He pointed out the letter contained in the member's packet itemizing the breakdown of the $1 million dollar expenditure. (Copy on File). Representative Johnson requested questions be directed to the Alaska Energy Authority (AEA) & urged quick passage of the bill. 2:43:57 PM Co-Chair Meyer asked AEA's position on the study for moving the project forward. 2:45:26 PM JIM HEMSATH, DEPUTY DIRECTOR FOR DEVELOPMENT, ALASKA ENERGY AUTHORITY (AEA), ANCHORAGE (Testified via teleconference), responded that the Susitna Dam study is one component of the long range State plan. The plan has some history in people's minds and could be a significant player in determining alternative energy statewide costs. There is no way to determine if it will be successful until it is complete and defines the engineering information and update cost determinations. 2:46:14 PM Representative Hawker thanked AEA for flushing out the cost proposal, indicating his support; however, pointed out that the fiscal note requests a selection from AEA's approved contractors. He reminded member's that these are public funds and there are procurement concerns. He worried the wording would preclude some Alaska bidders from the process & he urged that AEA provide every possible opportunity for Alaska hire. Representative Gara requested a review of the studies already done. He wanted to make sure that past reviews compare the costs of power to the costs of other potential projects such as the gas or bullet line. He recommended comparisons be made and asked if the sponsor would support that. Representative Johnson was concerned with increased costs when comparing studies. The bill provides for a cornerstone of an alternative energy plan for the State. He was already hesitant to ask the Committee for $1 million dollars, adding that when the review is complete, the costs will clearly be known. He did not think HB 336 was the vehicle to begin studying all energy projects. Representative Gara submitted that the study and proposal should not be undertaken unless it is definitely viable. He advised that the study would not be useful unless other projects had also been considered. Representative Johnson responded that it was not his intention to determine a broad based energy component. The bill is only a first step in the process. He hoped that the Legislature could scrutinize other alternatives not included in HB 336. 2:51:48 PM Representative Gara referenced Line 8, with regard to conducting a study and preparing a proposal. He wondered if this project made more sense than other statewide proposals and encouraged that all be considered. Representative Johnson referenced number six on the accompanying explanation, stating "developing a final report"; he did not oppose amending proposal to report. He knew that the $1 million dollars would provide a finished product. Representative Gara agreed that the change would help. 2:53:49 PM Representative Hawker warned Representative Johnson about adopting the change too quickly. He did not see how it could flush anything out, and possibly affecting the fiscal note. He supported keeping "proposal". 2:54:32 PM Representative Gara believed the legislation could impact the fisheries. He requested a summary of the power aspects & the affect on the fisheries. From the update of old reports, there is indication that there could be a minimal impact to fisheries. Representative Johnson did not think that was necessary, adding that a beneficial sideline could result in a recreational fishing lake. Representative Gara suggested adding a Letter of Intent and offered to speak with the sponsor at a later date. He maintained that he was not comfortable with a study submitted from a few years ago. [Inaudible] Representative Johnson acknowledged if they had been comfortable with the Susitna report, they would have already started building. He believed that making the report would either raise or decrease the necessary "flags" of potential. 2:57:16 PM Co-Chair Chenault commented on other alternative energy projects. He recommended using those funds used to determine if the projects are viable. He asked if the study would look at the statewide dip-net fishery areas. Representative Johnson laughed, it could possibly be a hatchery for dip-netting. Co-Chair Chenault referenced the side by side comparison, looking at the cubic watt hour output. He inquired the current kilowatt usage in the Railbelt area. Representative Johnson did not know. He hoped that one of the responsibilities of the new Energy Coordinator position would be to outline current consumption. Co-Chair Chenault asked about the State's estimated future use of electricity. 3:01:16 PM Representative Kelly agreed with Representative Gara about using the "report language, which he believed could make the consultants reach higher and that most of the results would be borrowing information from AEA. He suggested that #2 could cover environmental concerns. He commented on hiring from outside the State for consultants, especially when the need for specialized project understanding sometimes does not exist within State; he supported those hires. He encouraged the use of milestones in the legislative determination. Representative Johnson agreed, pointing out that the 2010 date was included. The first million dollars does not address all necessary costs for st the project. HB 336 provides only the 1 step. He wanted to see accountability. 3:04:44 PM Representative Kelly appreciated that. He pointed out that other utilities are required to provide periodic studies. He recommended consulting those utilities before making a comparison. 3:05:34 PM Representative Gara [inaudible]. He asked if it was a wise use of funds, pointing out that AEA is capable of providing information on existing studies. The amount [$1 million dollars] is not enough to provide a full comprehensive study and he asked if Alaskan's really wanted to run that risk. Representative Johnson replied yes. The State should run the risk of spending the $1 million dollars in order to determine if it could be a viable project. He said if it was a less than 50% chance, he would not be presenting it. He maintained that there is good information available and the proposed funding elevates it to a higher level, realizing it is a risk and that the outcome is not known. He concluded that the upside is that it will provide a comparison to other projects on the table. 3:08:27 PM Representative Gara understood the need for the assessment request and asked for testimony from the AEA contracting staff. Mr. Hemsath replied that there should be significant engineering and review necessary to determine the real numbers. The study will attempt to provide a number with good definition. By taking time, upgrading the information and providing the engineering as it relates to the building size, determining a cost in power & compared to existing costs of power. He noted the staff at AEA is competent, but does not have the detailed engineering background needed for the expert study. The $1 million dollars will cover the costs of about 20 senior professional engineers that can look at the power aspects, reviewing what has been done in the past and validate the design envisioned for the next 20-years. 3:10:53 PM Representative Gara agreed. [Inaudible] Representative Kelly supported the comments made by Mr. Hemsath. He noted that AEA is a small group and that they need to take the requested resources and hire professional consultants. He indicated his support for the bill. 3:11:52 PM Co-Chair Meyer pointed out that the Co-Chairs had taken the liberty of changing the funding source for the fiscal note, removing the funds now from the Railbelt Energy Fund. Representative Hawker voiced support for the fund source change. He asked about the out years, recommending they be zeroed out. Co-Chair Meyer agreed. Representative Johnson also agreed. 3:14:28 PM Representative Hawker commented on a previous recommendation for replacing "proposal" with "report". He was uncomfortable with using the report and suggested replacing it with "an assessment of the viability". Representative Johnson acknowledged that was the goal, being more concise. Representative Hawker offered another suggestion, adding language "a report, assessing the viability of a project". Co-Chair Meyer recommended the change be given more thought and then made on the House floor. Representative Kelly agreed that either phrase would work. He thought that the options of consideration were in regard to the implication of a proposal assessing the viability of the project. He wanted to examine multiple options. Representative Johnson hoped that the bill proposes a good project. He anticipated specific combinations worth it, for the State to invest and move forward. 3:19:16 PM Co-Chair Meyer encouraged that further discussion occurs on the House floor. 3:19:30 PM Vice-Chair Stoltze MOVED to REPORT CS HB 336 (RES) out of Committee with individual recommendations and with the new accompanying fiscal note. There being NO OBJECTION, it was so ordered. CS HB 336 (RES) was reported out of Committee with a "do pass" recommendation and with a new fiscal note by the House Finance Committee for Department of Commerce, Community and Economic Development. 3:20:19 PM