HOUSE BILL NO. 103 "An Act relating to the procurement of supplies, services, professional services, and construction for the Alaska Energy Authority; establishing the Alaska Railbelt energy fund and relating to the fund; relating to and repealing the Railbelt energy fund; relating to the quorum of the board of the Alaska Energy Authority; relating to the powers of the Alaska Energy Authority regarding employees and the transfer of certain employees of the Alaska Industrial Development Export Authority to the Alaska Energy Authority; relating to acquiring or constructing certain projects by the Alaska Energy Authority; relating to the definition of 'feasibility study' in the Alaska Energy Authority Act; and providing for an effective date." 2:38:34 PM SARA FISHER-GOAD, EXECUTIVE DIRECTOR, ALASKA ENERGY AUTHORITY, introduced HB 103 and offered an explanation of the legislation: On January 18, 2011, House Bill 103 (Companion Bill SH 42) was introduced by request of the Governor. Alaska's Energy Policy target is to reach 50 percent if its electricity generation through renewable energy by 2015. A new large hydroelectric project is needed to achieve this goal. This legislation would authorize the Alaska Energy Authority (AEA to move forward on pursuing such a project to supply electricity to the railbelt region of the state. In November 2010, AEA released its "Preliminary Decision Document" identifying the Susitna Hydroelectric project as the recommended project to pursue. CS HB 103 (ENE) requires passage this session in order for AEA to file preliminary permit application for the Susitna (Wantana location) project with the Federal Energy Regulatory Commission this year. The House Energy committee amended HB 103 by removing AEA's ability to adopt its own procurement regulations and amending the new Alaska Railbelt Energy Fund by requiring legislative appropriation from the fund. Minor technical corrections and edits by Legislative Legal Division were also made to the bill. AEA has no objection to the changes. CS HB 103 (ENE) authorizes AEA to 1) acquire, construct and own new power projects 2) hire staff in exempt service 3) create subsidiary corporations for the purpose of acquiring, construction, owning, maintaining and operating power projects 4) creates a new Alaska Railbelt Energy Fund in AEA and 4) defines the Board of Director's quorum as four of seven members. Ms. Fisher-Goad explained that developing an Alaska Railbelt Energy Fund in AEA statutes had been a challenge. She added that restructuring of the Alaska Industrial Development and Export Authority (AIDEA) had resulted in the restructuring of the AEA board; 5 public members and 2 commissioners. There had been a specific AEA statute that defined the quorum as 3 and there was a provision to correct the number. Ms. Fisher-Goad provided history of the AEA. She shared that the mission of the authority was to reduce the cost of energy in Alaska. In the 1980s the AEA developed and owned several energy projects: the Bradley Lake Hydroelectric Project, the Alaska Intertie and the Larson Bay Hydroelectric Project. At that time the first attempt to develop the Susitna Hydroelectric Project had been considered. In 1993 a reorganization effort removed the power of constructing and owning new projects form the AEA. The AIDEA board members became the AEA board and AIDEA staff provided support and management of AEA programs. In 1999 the Department of Community and Regional Affairs had been repealed in statute and former AEA programs were reestablished into AEA. In the early 2000's most of AEA's work was in rural energy construction projects which received funding primarily from the Denali Commission. In 2008 the AIDEA and AEA boards made bylaw changes to allow an AEA executive to be hired that was different from the AIDEA executive director. In 2008 the Renewable Energy Fund was established and in 2010 the Emerging Energy Technology Fund was established. The AEA had been identified by the governor as playing a key role in planning energy infrastructure and financing projects. The legislation had been introduced to further reestablish and recognized in statute AEA's role in energy project and program development. 2:44:33 PM Ms. Fisher-Goad reiterated that the legislation allowed AEA to construct and own new projects. She relayed that there were approximately 40 people that were AIDEA employees that would be transferred to AEA. She pointed out to the committee that the provision to allow AEA to adopt its own procurement regulations had been dropped. The ideas had been that there were several ways for AEA to procure services and that one consolidated regulatory process would do. She said that there had been confusion as to how the consolidation would be done which was deflecting time from the Susitna project. The amended legislation also required a legislative appropriation from the Alaska Railbelt Energy Fund. 2:48:25 PM BRIAN BJORKQUIST, SENIOR ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW, provided a sectional analysis (copy on file): · Section 1: Would expressly authorize the legislature to appropriate amounts in the Railbelt energy fund to capitalize the new Railbelt energy fund, called the Alaska Railbelt energy fund, created by Section 3 of the bill. This would allow amounts to be appropriated and transferred from the existing Railbelt Energy fund into the new fund. Representative Wilson MOVED to ADOPT CSHB 103(ENE), 27- GH1822\B as a working document before the committee. Representative Doogan OBJECTED for purpose of discussion. Mr. Bjorkquist continued: · Section 2: Would place in the exempt service the executive director and other staff of AEA. · Section 3: Would establish the new Railbelt energy fund, called the Alaska Railbelt energy fund of AEA. The legislature may appropriate money from the fund for feasibility studies, license, permit, acquire or construct, or to make grants for power projects and electric transmission lines and interties that serve the Railbelt region. · Section 4: Would increase from 3 to 4 the quorum requirement for meetings of the AEA board of directors in reaction to statutory amendments made in 2010. Those amendments increased the size of the AIDEA board from 5 to 7. The AIDEA board serves as the board of AEA. The proposed amendment would correct the quorum for meetings of AEA's board of directors. · Section 5: Would empower AEA to hire employees and advisors in the exempt service. This power to hire employees would be equivalent to powers the Alaska Industrial Development and Export Authority (AIDEA) currently possesses. Representative Gara understood that the "exempt" status carried equal weight in both organizations. Mr. Bjorkquist replied that the employees maintained equal status as exempt employees. 2:52:53 PM Mr. Bjorkquist continued with sectional analysis: · Section 6: Would expand AEA's powers to allow AEA to acquire and construct new projects, and to conduct feasibility studies of new power projects. · Sections 7: Would empower AEA to establish subsidiary corporations to support the acquisition, construction, ownership, and operation of power projects, and thereby potentially limit potential liability of AEA or strengthen the financial viability of a project. · Section 8: Would enable an AEA subsidiary to exercise powers currently granted to AEA under AS 44.83.090. For example, an AEA subsidiary would be exempt from regulation by the Regulatory Commission of Alaska (RCA) to the same extent as AEA is exempt (but utilities contracting with the AEA subsidiary would not be exempted, and RCA would still need to approve power sales agreements between the AEA subsidiary and the Railbelt utilities). 2:57:18 PM Mr. Bjorkquist continued to discuss the sequential sectional analysis: · Section 9: Would provide that AEA must exercise for new power projects, existing statutory authority managing power projects. This obligation is currently limited to power projects from the pre-1993, "former energy program for Alaska." · Section 10: Would make AS 44.83.396 apply to AEA subsidiaries that own power projects. AS 44.83.393 addresses how AEA administers the power project and contracts for operators, and includes provisions providing for AEA to contract with qualified utilities for the operation of the project. The amendment in Section 10 will impose these same duties on a subsidiary of AEA formed for a power project. · Section 11: Would amend the definition of "feasibility study" under AS 44.83.990(3) so that the term is not limited to only pre-1993 power projects. Mr. Bjorkquist noted that previous public testimony had suggested that the statutory definition for feasibility study should go back to the language that existed before 1993 and have very detailed provisions dealing with what needed to be included within a feasibility study. In reviewing the regulations that existed in 1993, it was apparent that the provisions dealing with all aspects of developing a power project had been aimed at the FERC licensing process (traditional licensing process). He explained that the new process was considered to be better because of the coordination between the licensing applicant, stakeholders and interested parties, resource agencies and FERC. He stated that reverting to earlier process would not be appropriate with the new licensing process. In addition, AEA was evaluating projects differently than in the past. 3:01:56 PM Mr. Bjorkquist continued: · Section 12: Would repeal the existing Railbelt energy fund, AS 37.05.520. This repeal would become effective under Section 15 when the balance of the fund is appropriated to AEA for deposit into the new Alaska Railbelt energy fund (created by Section 3), or appropriated and expended on projects. · Section 13: Would provide transitional provisions to address the status of existing employees who perform AEA functions with the Alaska Industrial Development Export Authority. AEA has not possessed the statutory authority to hire its own staff since the reorganization of AEA affected by 1993 legislation (ch. 18, SLA 1993). Since the 1993 legislation, AEA programs have been implemented by AIDEA employees. AEA's executive director, for example, is an employee of AIDEA, but is independent from the executive director of AIDEA. Sections 2 and 5 would authorize AEA to hire its own employees, and thereby assume greater control over the implementation of AEA programs. Section 13 provides for the transition of these employees from AIDEA to AEA. · Section 14: Would instruct the revisor of statutes to amend the statutory heading of AS 44.83.040 to reflect that the section would also address AEA employees. · Section 15: Would make the repeal of the existing Railbelt energy fund, AS 37.05.520, contingently effective when the balance of the fund is appropriated to AEA for deposit into the new Alaska Railbelt energy fund (created by Section 3), or appropriated and expended on projects. · Section 16: Would provide for an immediate effective date, excepting the contingent effective date for repeal of the existing Railbelt energy fund. Vice-chair Fairclough opened public testimony. Representative Gara recalled a comprehensive energy bill passed in 2010 which created a revolving loan fund to help businesses upgrade energy efficiency. At that time many thought the bill should be inside AEA since AEA already had the staff to address building energy efficiency. He asked whether AEA would be supportive of amendment to move the function to AEA. Ms. Fisher-Goad replied that AEA would willingly work with the legislature to address the commercial energy efficiency loan issue. She clarified that SB 220 was a repeal and reenactment of an existing loan program within the Department of Commerce, Community and Economic Development (DCCED). The fund remained with DCCED and was not capitalized. Changes to the program with respect as to where the loan program should exist were still being considered. She did not believe that HB 103 was the appropriate vehicle for the issue. 3:06:28 PM Ms. Fisher-Goad shared that AEA had an energy efficiency audit pilot program that had been started with ARRA funds and had proven successful. She believed that AEA could build upon it with respect to addressing commercial energy efficiency needs. Representative Gara asked if AEA was willing to move the fund through different legislation, or had the authority not yet decided how to move forward with the issue. Ms. Fisher-Goad replied AEA was working to address the issue and were exploring the options of how the fund should be structured. She said that there had been concerns about the existing language passed in SB 220. Representative Gara asked whether AEA wanted to house the program. Ms. Fisher-Goad answered that it was not that AEA did not want to house the project. She stressed that AEA needed to do more work on the appropriate structure and owner of the program. She felt that the agency had not had enough time to address the issue. Representative Wilson asked if the Railbelt Energy Fund was currently used by most of the cooperatives in the state. Ms. Fisher-Goad responded that the fund had a long history that included more than just energy projects. She understood that the original capitalization of the fund was remaining money from the original efforts with the Susitna project. The fund had been used for a variety of projects, not always necessarily energy projects. 3:10:35 PM Representative Wilson requested a listing of specific funds that were being paid out to specific projects and what AEA hoped to accomplish into the future. Ms. Fisher-Goad stated that a history of the fund, as requested by Co-Chair Stoltze, was available. She clarified that the capital appropriation in capital budget was the unencumbered balance of the existing Railbelt Energy Fund. Representative Edgmon referred to the passage of HB 119, which expanded AIDEA's authority relating to economic development. He highlighted that AIDEA had the ability to bond up to $400 million. He wondered why the power project was not housed under AIDEA. Ms. Fisher-Goad replied that in 2008 the intent was to further distinguish AEA's mission as a corporation. She relayed that AIDEA was a sister corporations to AEA and should remain separate and distinct. The mission of AIDEA was one of jobs and economic development. The two executive directors were created with the intention that AIDEA and AEA would pursue their missions separately. Representative Edgmon hoped that the AEA could grow into a recognized government department. 3:14:33 PM Representative Guttenberg asked for a list of opportunities for public comment on the project throughout the process. Ms. Fisher-Goad said that the development of the preliminary decision document had included a public hearing process through the Railbelt. She assured the committee that the legislation allowed for the public hearing process. Representative Doogan WITHDREW his OBJECTION. There being no further OBJECTION CSHB 103(ENE), 27-GH1822\B was ADOPTED as a working document before the committee. Vice-chair Fairclough opened public testimony. BOB PENNEY, SOLDOTNA (via teleconference), testified in support for HB 103. He provided a brief history of the project. He believed that the project should be funded in full with state dollars. 3:23:51 PM BECKY LONG, TALKEETNA (via teleconference), spoke in opposition to HB 103. She opined that there had been a lack of public hearing by AEA in the affected communities. She stressed that there needed to be a meaningful, public review on the state level, for the project. She expressed concern that the state was committing significant financial resources to one project. She felt that the AEA should be required to conduct a state public process regarding the Susitna project, and that an independent financial review of the cost benefits of the proposal that reflected the true overall cost of the project. She added that the Talkeetna area would be the first area that would feel the economic ramifications. She shared that studies had shown that a 50 percent improvement in railbelt electrical efficiencies could generate up to a $947 million increase in economic output, $290 million in wages, $53 million in business income and 9350 new jobs. She testified that she was opposed to the Susitna project. She said that public testimony for HB 103 had been the only means for the public to express their opposition to the Susitna project. 3:29:51 PM Representative Edgmon commented that talks with the AEA had revealed that there would be further public involvement in the process. Representative Gara shared his frustration that there would be significant impact to fisheries because of the Susitna project. He stated that he had written AEA and the Department of Fish and Game and they had replied that the fisheries impacts had not been fully assessed at the time. He wondered how an impact report could be determined without a thorough assessment. Vice-chair Fairclough closed public testimony. Representative Gara pointed out that the bill did not mention the Susitna project specifically but did allude to it. He wondered whether the committee would have the opportunity to delve into the economics of the Susitna project before passing the bill. Vice-chair Fairclough responded that it would be up to the discretion of the chair. Representative Gara pointed out to the committee that the bill would move $67 million to AEA and that the governor had announced he would use the money to start up work on the Susitna Hydro project. He surmised that the legislation was directly linked to the Susitna project. He felt that debates surrounding HB 103 would be the only tome the committee would have the opportunity to discuss the economics of the project. 3:34:21 PM Representative Doogan requested the official name of the project at Susitna. Ms. Fisher-Goad replied that the AEA referred to the project as both the Susitna and Wantana projects; the two were interchangeable in some respects. The site for the project was at Wantana. She added that the bill did not appropriate $67 million to the AEA; the capital appropriation would AEA to move forward with the preliminary permit application and the licensing and design process. She offered that the FERC process could be further discussed at the convenience of the committee. Representative Doogan understood that the $67 million was going to be used exclusively for work on Susitna/Wantana project. Ms. Fisher-Goad clarified that there were two items that would allow AEA to move forward on the project: the legislation and capital appropriation. She stressed that HB 103 would not move the funds. The governor's capital budget proposed $65.7 million to AEA, as capital appropriation, to move forward with the project. Vice-chair Fairclough closed public testimony. HB 103 was HEARD and HELD in committee for further consideration.