SENATE BILL NO. 185 "An Act relating to the basis for determining eligibility for and the amount of power cost equalization payments; and providing for an effective date." This was the third hearing for this bill in the Senate Finance Committee. CS SB 185, 22-LS0465\U, was drafted to incorporate amendments adopted at the previous hearing. AT EASE 11:05 AM / 11:06 AM Amendment #2: This amendment inserts a new bill section on page 1, following line 11 of the committee substitute to read as follows. Sec. 2. AS 42.45.100(a) is amended to read: (a) The power cost equalization and rural electric capitalization fund is established as a separate fund for the purpose of (1) equalizing power cost per kilowatt-hour statewide at a cost close to or equal to the mean of the cost per kilowatt-hour in Anchorage, Fairbanks, and Juneau by paying money from the fund to eligible electric utilities in the state; and (2) making grants to eligible utilities under AS 42.45.180 to improve the performance of the utility. This amendment also inserts a new bill section on page 2, following line 10 of the committee substitute to read as follows. Sec. 4. AS 42.45.110(b) is amended to read: (b) An eligible electric utility is entitled to receive power cost equalization (1) for sales of power to local community facilities, calculated in the aggregate for each community served by the electric utility, for actual consumption of not more than 70 kilowatt-hours per month for each resident of the community; the number of community resident shall be determined under AS 29.60.020; and (2) for actual consumption of not more than 500 kilowatt-hours per month sold to each residential customer [OF NOT MORE THAN (A) 450 KILOWATT-HOURS PER MONTH FOR THE MONTHS OF OCTOBER THROUGH MARCH, AND (B) 350 KILOWATT-HOURS PER MONTH FOR THE MONTHS OF APRIL THROUGH SEPTEMBER]. This amendment also inserts a new bill section on page 3, following line 4 of the committee substitute to read as follows. Sec. 6. AS 42.45.110(c) is amended to read: (c) The amount of power cost equalization provided per kilowatt-hour under (b) of this section may not exceed 95 percent of the power costs, or the average rate per eligible kilowatt-hour sold, whichever is less, as determined by the commission. However, (1) during the state fiscal year that began July 1, 1999, the power cost for which power cost equalization were paid to an electric utility were limited to minimum power costs of more than 12 cents per kilowatt-hour and less than 52.2 cents per kilowatt-hour; (2) during the state fiscal years beginning July 1, 2007, and each following state fiscal year [JULY 1, 2000, AND JULY 1, 2001], the commission shall adjust the power costs for which power cost equalization may be paid to an electric utility based on the weighted average retail residential rate in Anchorage, Fairbanks, and Juneau; however, the commission may not adjust the power costs under this paragraph to reduce the amount below the lower limit set out in (1) of this subsection; and (3) DURING EACH FOLLOWING STATE FISCAL YEAR, THE COMMISSION SHALL ADJUST THE POWER COSTS FOR WHICH POWER COST EQUALIZATION MAY BE PAID TO AND ELECTRIC UTILITY BASED ON THE WEIGHTED AVERAGE RETAIL RESIDENTIAL RATE IN ANCHORAGE, FAIRBANKS, AND JUNEAU, PER KILOWATT-HOUR FOR SALES TO RESIDENTIAL CUSTOMERS OF 400 KILOWATT-HOURS PER MONTH; THE COMMISSION MAY NOT ADJUST THE POWER COSTS UNDER THIS PARAGRAPH TO REDUCE THE AMOUNT BELOW 16.75 CENTS PER KILOWATT-HOUR; AND (4)] the power cost equalization per kilowatt-hour may be determined for a utility without historical kilowatt- hour sales data by using kilowatt-hours generated. This amendment also inserts a new bill section on page 3, following line 16 of the committee substitute to read as follows. Sec. 8. AS 42.45.110(d) is amended to read: (d) An electric utility whose customers receive power cost equalization under AS 42.45.100 - 42.45.150 shall set out in its tariff the rates without the power cost equalization and the amount of power cost equalization per kilowatt-hour sold. The rate charged to the customer shall be the difference between the two amounts. Power cost equalization paid under AS 42.45.100 - 42.45.150 shall be used to reduce the cost of all power sold to local community facilities, in the aggregate, to the extent of 70 kilowatt-hours per month per resident of the community, and to reduce the cost [TO EACH RESIDENTIAL CUSTOMER] of the first 500 [NOT MORE THAN 450] kilowatt-hours per residential customer per month [FOR THE MONTHS OF OCTOBER THROUGH MARCH, AND NOT MORE THAN 350 KILOWATT-HOURS PER MONTH FOR THE MONTHS OF APRIL THROUGH SEPTEMBER]. New Text Underlined [DELETED TEXT BRACKETED] Co-Chair Donley moved for adoption. The amendment was ADOPTED without objection. Co-Chair Donley moved "the Finance Committee version for SB 185 from Committee with accompanying Senate Finance Committee fiscal note." Senator Wilken objected to make a comment regarding discussions held on the matter of funding the Power Cost Equalization (PCE) program in the Committee during the years 1999 and 2000. He referenced Senate Finance Committee minutes from April 13, 2000 [copy on file], whereby former Committee member Senator Al Adams indicated intent that National Petroleum Reserve-Alaska (NPR-A) funds would be divided between the permanent fund, the school public trust fund and the PCE fund. Senator Wilken remembered that Senator Adams promised to convince villages in the North Slope Borough to "relinquish" claim to the NPR-A funds in order to benefit PCE. Senator Wilken reminded that at the previous hearing on this bill, he had asserted that the projects funded with NPR-A funds are "essentially fluff projects". He referenced a list of eight projects funded with $1.79 million of NPR-A funds [copy on file] and surmised they were not necessitated by the impacts of oil development. Senator Wilken noted that in other boroughs in Alaska, similar projects are instead funded with borough funds. He predicted if the communities that currently receive NPR-A funds for these projects were to forgo receiving the funds, that the North Slope Borough would provide funds to undertake the projects. Senator Wilken asserted that the promise made in the year 2000 is still pertinent and the Committee should attempt to convince those villages to authorize use of the NPR-A funds for the PCE program. Senator Hoffman countered that the statements made during the April 2000 meeting related to an amendment containing standard budgetary language. This language, he explained, clarified that the NPR-A funds would be divided to the permanent fund, the public school trust fund and the PCE fund according to a formula. He stressed there is a priority for the allocation of the funds, which has been practiced accordingly. Senator Wilken removed his objection to reporting the bill from Committee. Senator Austerman understood the NPR-A funds are federal funds and that established criteria in federal law provides how they could be spent. He was unsure how state statutes could overrule the federal law on this matter. Senator Wilken described how the federal government collects 50 percent of NPR-A production funds with the remaining 50 percent "for the benefit of the people of Alaska." He continued that of the 50 percent allocated for Alaska, one-half is guaranteed to the North Slope Borough. He detailed the State's ability to appropriate the remaining 25 percent. Co-Chair Kelly ruled the discussion about the impact of NPR-A funds is out of order due to the motion on the table. Without objection CS SB 185 (FIN) with a zero fiscal note for the Department of Community and Economic Development, authored by the Senate Finance Committee 4/2/02, MOVED from Committee. Senator Austerman realized the issue of NPR-A fund appropriation is "a thorn in the side" of some Committee members. He predicted the discussion would continue as to Senator Adam's assertions unless the statute is changed. He listed other issues instituted by past legislatures, including grain elevators in the Matanuska-Susitna Valley and the rocket launch facility in Kodiak. He suggested reaching a resolution on the PCE matter.