SENATE BILL NO. 246 "An Act establishing a working group to analyze the potential of a hydroelectric power project on the Susitna River; and providing for an effective date." Co-Chair Stedman reported that the bill deals with an issue the committee has been struggling with for several years. Senator Joe Thomas, sponsor, explained the purpose of the bill. SB 246 will direct the Governor to have the Alaska Energy Authority (AEA) analyze the hydroelectric potential of the Susitna River. The AEA will review and update studies done in the past, evaluate cost analysis, financing options, current and future demand, and other critical issues to determine the feasibility of the project. The Governor will submit a final report to the legislature not later than July 1, 2010. In recent years, Alaskans have seen their energy costs skyrocket. These ever-rising costs and uncertain supplies not only make it difficult for Alaskans across the state to make ends meet, but also have an adverse impact on economic growth. The energy produced by a hydroelectric facility is predictable, stable, clean and low cost. Currently, the Bradley Lake hydroelectric dam produces energy for the Railbelt at just $.05 per kWh, far below the $.176 per kWh that the Interior is currently paying. In addition to these factors, the majority of our combustion turbine power plants along the Railbelt are over 30 years old and all will need retrofitting and replacement that will cost between $1 billion and $2.5 billion over the next ten years. Once these replacements begin, we will continue with the same rising energy costs, fluctuating operating expenses, and high polluting facilities that the citizens of the state have experienced in the past. Twenty-five years ago, when a dam along the Susitna River was last looked at, Cook Inlet Gas cost $.21 per million cubic feet, the population and energy demand along the Railbelt was substantially less than today, and energy costs were nowhere near what they are today. He said he believes all these factors, along with environmental and long-term energy considerations, merit a reopening of the Susitna discussion. Nothing is as comprehensive of an approach to reducing costs, emissions and dependence on finite, non-renewable energy production for the Railbelt and adjacent areas as a Susitna Dam project. Senator Thomas referenced the high price of oil and gas. He noted that the fiscal note is broken down according to tasks with the objectives clearly laid out. He encouraged the committee to support the passage of SB 246. 4:52:25 PM Co-Chair Stedman asked if this is a broader reaching energy analysis scope, farther reaching than just the Susitna project. Senator Thomas agreed that it was not limited to a Susitna study. Co-Chair Stedman asked what the comparative energy supplies are: a bullet line, imported LNG, gas line strikes in Cook Inlet, coal, etc. Senator Thomas added other potential hydro in the Railbelt. 4:53:44 PM Senator Elton wondered if the Railbelt Energy Fund was more appropriate as the funding source. Senator Thomas agreed that the fund would be appropriate. Co-Chair Stedman noted that it also includes a look at the transmission lines. Senator Thomas agreed that it did look at updating bottlenecks. Co-Chair Stedman thought the committee should look further into the Railbelt Energy Fund. Co-Chair Stedman noted the fiscal note contains $2.7 million in FY 09 followed up by $1.5 million in FY 2010. 4:55:17 PM STEVE HAAGENSON, EXECUTIVE DIRECTOR, ALASKA ENERGY AUTHORITY, spoke of the benefits of hydroelectric energy projects. He suggested identifying the potential savings and benefits from using hydroelectric energy. He testified in favor of SB 246. Co-Chair Stedman offered the numbers of $10 billion to $15 billion for cost of the Susitna hydroelectric project. JERRY MCCUTCHEON, ANCHORAGE, testified against SB 120. 5:03:52 PM PHIL STEYER, DIRECTOR, CHUGACH ELECTRIC ASSOCIATION, testified in support of SB 246. The Railbelt is heavily dependent on natural gas from the Cook Inlet Basin to generate electricity. Electricity from the three current hydro projects is the least expensive, but it is at its limit. As the price of natural gas has risen, so has the cost to the public. Chugach is looking for a Susitna hydroelectric project for the Railbelt. Senator Thomas concluded by saying that this was a much- needed project. He thought that future gas should not be used to solve energy needs, but rather should be sold and exported. He suggested that there is a strong need to go forward with this bill. SB 246 was heard and HELD in Committee for further consideration.