SENATE BILL NO. 126: An Act making special appropriations for design and construction of power transmission interties between Anchorage and the Kenai Peninsula, between Healy and Fairbanks, and between the Swan Lake and Tyee Lake hydroelectric projects; and providing for an effective date. Co-chair Pearce announced that CSSB 126(FIN) "B" work draft was before the committee. Senator Sharp MOVED for adoption of the "B" version of CSSB 126(FIN). Hearing no objections, IT WAS SO ORDERED. Senator Sharp MOVED for adoption of amendment 1 deleting Sec. 8 (copy on file). Co-chair Pearce OBJECTED for discussion purposes. Senator Sharp said that the CSSB 126(FIN) assumed an additional $9,300.0 was needed to fund the new revolving fund so that it could accomplish the intent of $1.1 that stated as far as the financing over the twenty year period. That appropriation from the general fund is no longer required. Co-chair Pearce REMOVED her objection. Hearing no other objections, amendment 1 was ADOPTED. Senator Sharp spoke to each of the sections of CSSB 126(FIN). Co-chair Pearce announced that amendment 2 (copy on file) was before the committee and invited Cam Toohey, staff to Senator Sharp, prime sponsor of SB 126 and Brent Petrie, Manager/Planning & Project Development, Alaska Energy Authority to join the committee at the table to speak to amendment 2. Co-chair Pearce spoke to amendment 2 and said that the amount that was in the Governor's request to the legislature had been reduced by about 40 percent. Senator Kelly OBJECTED, and asked for an explanation of the last two sections on page of 2 of amendment 2. BRENT PETRIE said that the requests in the last two sections of amendment 2 were prior requests made under the normal budget process and had been approved by the Governor's office and were to be requested by AEA as program receipt authority. In the case of the first section, AEA has received monies from utilities and other parties over time to blend with other monies that have been appropriated for AEA to complete a project. He explained that sometimes it is necessary to cost-share a project. The way the revolving fund legislation is written if money came into the fund, AEA can receive it but the legislature must authorize AEA to expend it. This section gives the authority to expend such funds. In answer to Co-chair Pearce, Mr. Petrie said that it was standard practice that every couple of years, this authority was requested from the legislature. Senator Rieger asked if the $4.3M was appropriated from the general fund. He also asked if the numbers were in the Governor's capital budget request. Co-chair Pearce answered affirmatively that higher numbers were in the Governor's capital request. Senator Rieger asked if those requests were appropriated to the Alaska Energy Revolving fund in the Governor's request. Mr. Petrie said that the original capital budget requested a significant amount of those funds come from the power development revolving loan fund which was reporting of quote receipts. With CSSB 126, it was felt that about $2.1M could come from the revolving fund and the other amounts although worthy projects, would have to come from the general fund as a supplement to the revolving fund. Senator Rieger said that a lot of money was put into the energy authority and it looked as if even more funds were going into the energy equation. Mr. Petrie agreed that these amounts would be general funds going into the revolving fund. Mr. Petrie said that he and Ron Garzini, Executive Director, AEA, were trying to come up with some kind of transitional effort during the first year if this legislation passes. Senator Rieger said that there had not been enough time to sort through what the AEA has done with their own money. Senator Rieger questioned the wisdom of transferring a funding source to the general fund when the general fund is already under so much pressure for capital. It would seem to put more burden on the general fund. Senator Sharp felt that in future years everyone would be funded out of the new account that is being set up and these amounts requested by AEA was originally $12M. The amount had now been reduced to $4M for the transition. Mr. Petrie said that in an earlier version of SB 126, an estimated $10M from the general fund might be required to make the revolving fund work. This is substantially less than that amount. Discussion followed between Senator Kelly and Co-chair Pearce regarding the additional projects added to SB 126. Senator Kelly asked who was going to do the bulk fuel system upgrade -- the Coast Guard, DEC, or DC&RA. He asked if it was an AEA project. Mr. Petrie said that about two years ago regulations mandated that fuel deliveries could not be made to a number of rural communities and a bulk fuel assessment was initiated through the Energy Authority for many rural communities. Since last year funds were appropriated for AEA to do repairs and upgrades for these systems, a part of small diesel systems in villages. It is not something new that AEA is doing but felt that it should be elevated in importance. DEC is involved in the regulatory because of the statutory arrangement - they regulate the larger tanks. The Coast Guard is involved in regulating any fuel facility where fuel deliveries come by vessel. The AEA has no regulatory authority but they have some technical abilities to make the corrections that are necessary. Senator Rieger asked if the $4.3M would be appropriated into the Alaska Energy Revolving Fund and appropriated back out to the projects as outlined, basically capital appropriations except that the funding source has changed. Mr. Petrie said that the money would be allocated and money would drawn from those funds for those projects up to the maximum limit authorized by the legislation. The Governor's budget there were over $3.5M in general fund requests for capital projects for the AEA. Co-chair Pearce invited Mark Hickey, Contract Lobbyist for the city of King Cove, to join the committee at the table. Mark Hickey said that $250.0 was not adequate to complete the King Cove hydroelectric project, and that $500.0 was needed to complete the budget which would bring the state's contribution to $3M, half of which was funded last year. That amount is being matched by approximately the same amount, $2.7M (a loan of $2M, $250.0 cash contributions from the Aleutians East Borough and $450.0 cash contribution from the city of King Cove). $500,000 is the remaining amount needed. He said that $3M was the amount that the state expected to spend when the study was first done for this facility. Co-chair Pearce announced that CSSB 126(FIN) would be held and brought up again later in the meeting. Note: The following section for CSSB 126(FIN) was moved so that the minutes for CSSB 126(FIN) are in the one place. Senator Sharp MOVED to amend amendment 2 by reducing (1) Rural Power Systems Upgrade to $650,000, (6) Alternative and Applied Energy Technology Development to $350,000, and increase (7) King Cove Hydroelectric Project to $500,000. Senator Kelly withdrew his objection to the amended amendment. No other objections being heard, amendment 2 was ADOPTED. Senator Sharp MOVED for passage of CSSB 126(FIN) as amended from committee with individual recommendations. No objections being heard, CSSB 126(FIN) was REPORTED OUT of committee with a "do pass". Co-chairs Pearce and Frank, Senators Kelly, Sharp, and Jacko signed "do pass." Senator Rieger signed "no recommendation." Senator Kerttula was not present at the meeting and did not sign.