CS FOR SENATE BILL NO. 243(FIN) "An Act relating to the power cost equalization endowment fund; relating to power cost equalization; and providing for an effective date." 3:19:25 PM Co-Chair Merrick indicated the bill had last been heard on May 9. 3:19:39 PM Representative Thompson MOVED to ADOPT Amendment 1, 32- LS1573\I.1, (Nauman/Klein, 5/7/22)(copy on file): Page 2, following line 6: Insert a new bill section to read: "* Sec. 2. AS 42.45.085(d) is amended to read: (d) If the earnings of the fund for the previous closed fiscal year, as calculated under AS 42.45.080(c)(2), exceed the appropriation under (a) of this section for the current fiscal year, the legislature may appropriate 70 percent of the difference between the earnings of the fund for the previous closed fiscal year, as calculated under AS 42.45.080(c)(2), and the appropriation made under (a) of this section for the current fiscal year as follows: (1) if the amount calculated under this subsection is less than $30,000,000, that amount to a community revenue sharing or community assistance fund; or more, (2) if the amount calculated under this subsection is $30,000,000 or (A) $30,000,000 to a community revenue sharing or community assistance fund; and (B) the remaining amount, not to exceed $25,000,000, to the renewable energy grant fund established under AS 42.45.045, to the bulk fuel revolving loan fund established under AS 42.45.250, [OR] for rural power system upgrades, for bulk fuel upgrades, or to a combination of the funds or purposes listed in this subparagraph." Renumber the following bill sections accordingly. Co-Chair Merrick OBJECTED for discussion. Representative Thompson explained that the amendment added bulk fuel upgrades to a list of types of projects that AS 42.45.085(d) may fund. The list currently included the renewable energy fund, the bulk fuel revolving loan fund, and rural power system upgrades. He stated that adding bulk fuel upgrades to the list allowed the Alaska Energy Authority (AEA) to capture federal funds on a one-to-one basis if it undertook any bulk fuel upgrades. He invited Mr. Thayer to comment. 3:20:30 PM CURTIS THAYER, EXECUTIVE DIRECTOR, ALASKA ENERGY AUTHORITY, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT (via teleconference), elaborated on the amendment. He explained there was a cascading waterfall of funds available depending on when the fund reached a certain level of earnings. He elaborated that the first $30 million or so would go to the Power Cost Equalization (PCE) payments, the next $30 million would go to the community assistance program, and up to $25 million could be used into the three programs mentioned by Representative Thompson (renewable energy fund, the bulk fuel revolving loan fund, and power houses). He explained that the amendment added bulk fuel as one of the choices. For example, power houses had been included for $10 million in the current year, which had received a $10 million match. He expounded that if bulk fuel had been included in the category, AEA could put any available dollar amount into bulk fuel and receive a federal match one for one. Mr. Thayer relayed there was currently $300 million in deferred maintenance on power houses and $800 million deferred maintenance in bulk fuel. He explained the amendment would be another mechanism to help with deferred maintenance if the earnings of the endowments supported the cascades. 3:22:35 PM Co-Chair Foster asked to hear from the bill sponsor or his staff on the amendment. TIM GRUSSENDORF, STAFF, SENATOR LYMAN HOFFMANN, stated that the Senate Finance Committee would prefer no amendments. He relayed there were already three competing entities for the $25 million if the cascades got to that point. The fourth entity would compete with the first three. He noted that the legislature selected where the $25 million would go and could split the funds how they chose. He believed when the renewable energy source had been added, there was an effort to move away from fossil fuels and work towards renewable energy sources. He suggested that the legislature could provide a separate appropriation for bulk fuel. He remarked the match for bulk fuel would not be consistent because of market fluctuations. 3:24:32 PM Representative Josephson asked what a bulk fuel upgrade looked like. Mr. Thayer deferred the question to a colleague. TIM SANDSTROM, CHIEF OPERATING OFFICER, ALASKA ENERGY AUTHORITY (via teleconference), responded that a typical rural bulk fuel system consisted of vertical or horizontal tanks with secondary containment built into the tank system and sometimes as a dike around the system. There were approximately 400 rural facilities, several in each community that were owned by school districts, Native corporations, or other entities. He explained the facilities were in a continued state of disrepair with approximately $800 million in deferred maintenance. The tanks often had a great deal of corrosion and sometimes the secondary containment was compromised, which was the type of project the possible funding would meet. Representative Josephson asked for verification there was currently $800 million in need for the tanks. Mr. Sandstrom responded affirmatively. Representative Josephson saw the environmental benefit; however, he would be concerned that when a legislator offered an undesignated general fund (UGF) amendment on bulk fuel that a counter argument would be the amendment was unnecessary because bulk fuel could participate in specific program (as proposed in Amendment 1). He remarked that the funds were merely incremental whereas an $800 million problem existed. He did not see the amendment as a great way to get there. 3:27:05 PM Representative Wool remarked that he believed the proposed addition would be competing with renewable energy fund dollars. He thought the goal should be to replace diesel fuel demand with other energy sources sooner rather than later. He thought $800 million [in deferred maintenance] was a significant amount of money. He would be opposing the amendment. He thought UGF may be a better approach. Vice-Chair Ortiz asked for the name of the three entities currently competing for the funding. Mr. Grussendorf responded that the three entities included the bulk fuel revolving loan fund, the rural power systems upgrade, and the renewable energy fund. 3:28:45 PM Representative Carpenter asked how many individual tanks the $800 million price tag represented. Mr. Sandstorm responded that there were 400 facilities, which typically had between two and ten bulk fuel tanks comprising a system. Representative Carpenter asked if any of the tanks had regulatory inspection requirements that resulted in required system upgrades. Mr. Sandstrom answered affirmatively. He detailed there were two primary regulatory bodies responsible for tank inspections including the U.S. Coast Guard and the Department of Environmental Conservation. He highlighted the concern that the regulatory agencies had not been very active in enforcing and doing monetary finds in the past; however, they were beginning to do so as of the current year. One of AEA's primary efforts was to mitigate the effects and keep the facilities co-compliant and safe. Representative Carpenter asked how many facilities were currently known to be out of compliance. Mr. Sandstrom responded that AEA was currently undertaking an inventory assessment that was anticipated to be complete by the end of the year. Anecdotally about 75 percent of the facilities had some regulatory violations of varying significance. Representative Carpenter asked if there were any facilities with leaks needing immediate repairs. Mr. Sandstrom replied there were none at the current time. 3:31:05 PM Representative Thompson noted that earlier in the year there had been an effort to remove the $25 million cap related to available funds; however, the effort had not been successful. He commented that many of the small communities had old degrading tanks. He stated it had been the purpose of the proposed amendment. He could see the amendment was taking up a significant amount of the committee's time. Representative Thompson WITHDREW Amendment 1. Representative Wool stated he had an amendment that he did not offer which was to lower the amount from 750kWh to 650kWh. He wanted to have a discussion about the topic. He believed there was scarcity of data in terms of what people were using. He was amenable to the increase. He had written to a couple of utilities including one in Fairbanks and Mat-Su Electric. The monthly consumption average by a home in Fairbanks was 568kWh per month and the average in Mat-Su was around 604kWh. He had not seen any data on PCE communities. He spoke about increased costs. He considered whether some homes would even need the increase. He believed some people could expand their consumption through space heaters, especially if diesel costs were high. He spoke about the desire for energy efficiency to heat homes. He suggested heat pumps could be used in some areas. He would like to see more data on consumption and need from AEA. 3:35:28 PM Co-Chair Foster MOVED to report CSSB 243(FIN) out of Committee with individual recommendations and the accompanying fiscal note There being NO OBJECTION, it was so ordered. CSSB 243(FIN) was REPORTED out of committee with five "do pass" recommendations and five "no recommendation" recommendations and with one previously published fiscal impact note: FN1 (CED). Co-Chair Merrick reviewed the meeting schedule for the following day.