SENATE BILL NO. 243 "An Act relating to power cost equalization; and providing for an effective date." 10:29:29 AM Co-Chair Bishop relayed that it was the first hearing of SB 243. It was the committee's intention to hear a bill introduction, consider public testimony, and set the bill aside. 10:29:52 AM ERIN SHINE, STAFF, SENATOR CLICK BISHOP, read a bill introduction: SB 243 proposes to raise the maximum kilowatt-hours available to residential customers for Power Cost Equalization relief?from 500 kilowatt-hours a month to 700 kilowatt-hours. In your bill file you will find an analysis provided by the Alaska Energy Authority assumes that all residential customers can utilize?the additional 250 kilowatt-hours, SB 243?will add approximately $16 million?to the yearly PCE payment. Alaska's PCE program was established in 1984 and provides?economic?assistance?to communities?and residents of rural electric utilities where the cost of electricity?can be three to five times higher than for customers in more urban areas of the state. The PCE program was further established?to assist rural residents at the same time state funds were used to construct major energy projects to assist more urban areas.? As most urban and road connected communities benefit from major state-subsidized energy projects. Rural communities? not on the road system that are dependent on diesel fuel do not benefit from the large, subsidized energy projects, and PCE is a cost- effective alternative to provide comparable rate relief to rural residents. ?The program reimburses the utility for credits it extends to its customers. The PCE program?is funded by earnings of the PCE Endowment Fund, which the last Market Value as of March 31st, 2022, was $1.1B, provides that five percent of the fund's three-year monthly average market value may be appropriated to the PCE Program. As you may be aware the percent of market value draw on the PCE Endowment Fund not only funds PCE but also Community revenue sharing or community assistance, the renewable energy grant fund, the bulk fuel revolving loan fund or the rural power system upgrades. Ms. Shine noted that bill packets contained a document from the Alaska Energy Authority (copy on file), which was an analysis that assumed if adding $16 million to the yearly PCE payment if all residential customers could utilize the additional 250 kilowatt hours. She reminded that the POMV draw on the Power Cost Equalization (PCE) Endowment Fund not only funded PCE but also the Community Assistance Program and the Rural Energy Grant Fund. According to the calculations done by LFD, it would take approximately a $320 million appropriation to capitalize the PCE Endowment Fund to continue funding the waterfall programs from the draw. 10:32:14 AM Senator von Imhof asked if more money went towards the PCE program, less funding would go towards Community Assistance. Ms. Shine stated there was still a statutory formula that would be followed that was outlined in AS 42.45.085. There were certain triggers in the fund. She stated that the money that would go to the PCE Fund would fund the residential program first, after which the waterfall programs would be funded. The fund would need to be capitalized with some additional funds for the payments. Senator von Imhof understood that the residential program would be the first item paid from the fund. She thought there was a consequence in that the trigger and other items mentioned in statute might not have adequate funding. Ms. Shine noted that the executive director of the Alaska Energy Authority (AEA) was available for questions. She believed that the fund would be fine for the next couple of years. Senator Hoffman stated that he had asked the LFD director to come up with a number to keep the fund intact. The number that Ms. Shine had mentioned in her presentation to achieve no changes in the programs would be $320 million. Senator von Imhof asked if the funding would be an additional $320 million in a grant to the PCE Fund. Senator Hoffman stated that the funds would be directed to the endowment. Co-Chair Bishop relayed that the fund had a current balance of $1.1 billion, and the $320 million would be added to the endowment for a rough total of $1.4 billion. Senator von Imhof understood that others were looking at adding funds to other endowments like the Higher Education Trust Fund. She mentioned a homeless trust fund and a deferred maintenance fund. She thought there were many competing priorities. 10:35:52 AM CURTIS THAYER, EXECUTIVE DIRECTOR, ALASKA ENERGY AUTHORITY (via teleconference), noted that the information provided by Ms. Shine was correct. It was estimated that the program would cost an additional $15.7 million per year by going from 500 to 700 kilowatts. There would be no additional administrative costs on the part of AEA. He offered that the last five years, the Endowment Fund earnings had ranged from $48 million to $155 million. The first bucket of money was the PCE Program, which was budgeted at roughly $32 million, but there was budget language that allowed for the amount to increase based on the true cost. Mr. Thayer mentioned community assistance at a cost of $30 million. The only year that the Community Assistance program was not fully funded was in FY 20, when the earnings from the PCE Endowment Fund were only $48 million. There was a cascading waterfall of funding for one of three items: rural power houses, the Rural Energy Fund, and capitalization of the Revolving Loan Fund. He discussed AEAs recommendation to the legislature about using $25 million in funds. He could not comment on the $320 million identified by LFD. Co-Chair Bishop asked if bumping up the kilowatts to 750 was a new idea. Senator Hoffman stated that the 750 kilowatts was the original amount that was utilized when the program was initially contemplated. 10:38:23 AM AT EASE 10:38:29 AM RECONVENED Co-Chair Bishop OPENED public testimony. Mr. Thayer stated he was available for questions. He stated that it would be easy for AEA to enact the change proposed in the bill. He noted that the fiscal note assumed that everyone in the program would use the 750 kilowatts, which meant the fiscal note was a very conservative estimate of what the additional cost would be. Co-Chair Stedman asked for Mr. Thayer to discuss the community portion for non-residential homes and whether the amount was capped. Mr. Thayer explained that the PCE Program was for residential customers only in the PCE-eligible community, and for community buildings up to a certain kilowatt. The program was not for commercial buildings or for commercial enterprises. Co-Chair Stedman had heard a concern that one of the choke points was the community buildings, which seemed to consume more power and need more relief versus homes. He asked if Mr. Thayer could shed light on the issue. Mr. Thayer stated that the issue had been of concern to AEA. He continued that AEA was currently undertaking an audit of all 193 communities in order to better understand what community buildings had been built since the last audit. Co-Chair Stedman asked if the topic of community buildings should be a component of the legislation. He wondered if the legislature was ignoring part of the problem in rural Alaska by not accounting for rural buildings. Mr. Thayer noted that the program did account for community buildings. He emphasized that AEA needed to work with communities to identify new or additional community buildings that were not currently in the PCE program system. He acknowledged that some community buildings were missing, and emphasized that AEA was reaching out to every community for the information, which would take most of the summer. 10:42:35 AM BERT HOUGHTALING, SELF, BIG LAKE (via teleconference), spoke in opposition to the bill. He did not agree with adding funds to the PCE program. He thought the state was catering to certain individuals. He wished that legislature would address those that had suffered during the pandemic. He was against increasing any funding for the PCE Program. He mentioned federal funds. 10:44:22 AM Co-Chair Bishop CLOSED public testimony. Senator Wilson asked for more information regarding the five-year plan of increase to the PCE Program and how it would affect the endowment. He asked how the increase would be funded. Co-Chair Stedman thought that the committee could consider building the endowment up over time if the bill were to become law. He mentioned the option of having a trigger based on the price of oil. He thought there could be flexibility in funding the proposed increase to the program. He acknowledged that $300 million was a significant amount of money. Senator Wilson wondered how the other waterfall programs would be affected if there was not an increase. Senator Hoffman preferred to fully fund the endowment so that the Community Assistance Program and other programs were fully funded. He thought there was merit to Co-Chair Stedman's comments but considered that delaying the fund increase would cause a loss of focus. He reminded that the 33rd legislature and the future governor was unknown. He thought the committee should give serious consideration to fully funding the endowment to at least $300 million. 10:48:04 AM AT EASE 10:50:34 AM RECONVENED Co-Chair Bishop set an amendment deadline for Friday, April 22, at five oclock. SB 243 was HEARD and HELD in committee for further consideration.