HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE January 18, 1994 1:00 p.m. MEMBERS PRESENT Representative Harley Olberg, Chairman Representative Jerry Sanders, Vice-Chair Representative Con Bunde Representative John Davies Representative Cynthia Toohey Representative Ed Willis MEMBERS ABSENT Representative Bill Williams COMMITTEE CALENDAR Overview of Division of Energy, Department of Community and Regional Affairs WITNESS REGISTER EDGAR BLATCHFORD, Commissioner Department of Community and Regional Affairs P.O. Box 112100 Juneau, AK 99811 Phone: 465-4700 Position Statement: Testified on behalf of the Department of Community and Regional Affairs BRUCE GERAGHTY, Deputy Commissioner Department of Community and Regional Affairs P.O. Box 112100 Juneau, AK 99811 Phone: 465-4700 Position Statement: Testified on behalf of the Department of Community and Regional Affairs ROBERT E. HARRIS, Director Division of Energy Department of Community and Regional Affairs 3333 W. 4th Street, Suite 220 Anchorage, AK 99501 Phone: 269-4500 Position Statement: Testified on behalf of the Department of Community and Regional Affairs LINDA THOMAS, Deputy Director Division of Energy Department of Community and Regional Affairs 3333 W. 4th Street, Suite 220 Anchorage, AK 99501 Phone: 269-4500 Position Statement: Testified on behalf of the Department of Community and Regional Affairs ACTION NARRATIVE TAPE 94-1, SIDE A Number 001 CHAIRMAN HARLEY OLBERG called the meeting to order at 1:05 p.m. He noted for the record Representatives Willis, Toohey, Sanders, Bunde and Davies were present and noted for the record a quorum was present. Number 027 EDGAR BLATCHFORD, Commissioner, Department of Community and Regional Affairs (DCRA), introduced the DCRA's employees who were present. He began, "BRUCE GERAGHTY is the Deputy Commissioner. He has headed the transition program since August 12 which is when we took official control over the energy programs, amalgamated the programs into a division within DCRA. ROBERT HARRIS is the Director of the Division. He was appointed about two months ago. LINDA THOMAS is the Deputy Director of the Division. Both of them were brought into DCRA to head a division that we feel must be done in a total professional manner, absolutely ethical." COMMISSIONER BLATCHFORD continued, "Our instructions from the Office of the Governor are very simple, Mr. Chairman, are to develop an energy policy for the State of Alaska, paying particular attention to rural energy needs. We've come close to resolving the energy questions in the railbelt system, Southeast Alaska, now we have the big void out there and that is rural Alaska." Number 105 BRUCE GERAGHTY, Deputy Commissioner, DCRA, said, "You adopted a piece of legislation last year that basically put the what used to be the Alaska Energy Authority (AEA), consolidated it within the DCRA. We went with the independent division approach. We did quite a bit of work with various members of the legislature and the Governor's Office on how to interpret various aspects of the legislation. There's a clause in there that was paramount in our minds about contracting to the greatest extent possible... functions formerly done in-house by the energy authority... we ended up after we took control in August... was moving in the direction of identifying programs that fit that mandate..." MR. GERAGHTY continued, "For one reason or another, there was some very critical decisions that we were having a tough time making. Those basically ended up in the commissioner's office. And as a result of those decisions, we had a change in our initial plan... that all occurred in October. Although it may not seem to be, it is a major reorganization of state government, provision of service... Some of the processes that are in place within state government that have to do with laws on the books, administrative procedures things, procurement, personnel, make this type of reorganization very difficult. It's hard on the employees that are involved and it's very difficult from a management perspective. It seems like at every turn, you have to ask legal advice and that just impedes the decision making process and things start slowing down... In these times of austere revenues or declining revenues, I think as legislators looking at various proposals, that you keep that in the back of your mind..." Number 230 REPRESENTATIVE CYNTHIA TOOHEY said, "When you see something that obviously needs a change, can the commissioner call me and say, "Look, we need a statutory change, this is what will help us... If we can't help you in that field, how else can we do it?" MR. GERAGHTY replied, "Like on personnel issues. DCRA doesn't typically take the lead on that framework, that's the Department of Administration. And quite frankly, we haven't had the time, other than to throw up our hands from time to time, and stick our head out the window and scream. We really haven't had a chance to get into some of the nuts and bolts, details of how it would effect other departments. But, for instance in the case of this legislation, when you pass something as comprehensive as that, a clause in the bill that would identify what we're supposed to do with the employees, how we're supposed to deal with the employees, I think there's some general language that would give us a little more leeway and, basically, limit our liabilities and allow us to make the types of management decisions and then ultimately, be more responsible to you and your intentions in passing that legislation as administrators. We spend a great deal of time explaining how come it doesn't work that quickly. And to avoid some of that, some clarifying language as to what you do with the people, what do you do with the existing contracts, what do you do with the procurement items in the transition period. If those types of things were included in the legislation, then I think it would occur a little smoother." Number 284 REPRESENTATIVE TOOHEY added, "If there's a need, please let us help." ROBERT HARRIS, DIRECTOR, DIVISION OF ENERGY, DCRA, testified and referenced the handout he distributed to the legislators. (A copy of this handout may be found in the House Community and Regional Affairs Committee Room, Capitol Room 126, and after the adjournment of the second session of the 18th Alaska State Legislature, in the Legislative Reference Library). He briefly described the programs in the Division of Energy. MR. HARRIS continued, "We are involved with Rural Utility Training. That's where we work with operators of rural utilities and try to get them to a point which they can operate and maintain the physical plant of their utilities. We see that as a key component of being able to eventually ward of emergencies where a gen-set catches on fire. It saves money down the road." He proceeded to describe the Metering and Data Acquisition, Operation Support, and the Bulk Fuel programs in order throughout the handout. "We're also looking at site specific coal-fired plant to see if we can have a small coal fired plant and then connect a number of villages with an intertie," he said. Number 388 CHAIRMAN OLBERG asked, "Are you looking at any place in particular for this project?" MR. HARRIS said, "Little Tonzona. It's in the Doyon Region, I believe. We've been working with some folks in the Doyon Region. The project right now consists of taking some of the coal out, sending it down for analysis to determine it's heat value, some of the chemical properties of it." REPRESENTATIVE TOOHEY confirmed that they have a local coal source in the Doyon Region and asked if the Denali coal plant, "clean coal," was presently operating. REPRESENTATIVE JOHN DAVIES said, "It's a go. They satisfied the requirements by reducing the pollution levels from the existing plant sufficiently." Number 415 MR. HARRIS continued, "Another area of alternate applied energy is... we're looking at wind powered generation particularly around the coastal areas. I know in the past it was tried with limited success in some areas because the technology that was brought up was perhaps more applicable to some areas of California but I know in recent times a good amount of work has been done in the arctic environment." He continued through the handout with the Biomass program, which he indicated was matched with federal funds. MR. HARRIS added, "Rural Power Systems Upgrades are where we receive information on particular systems that need upgrading to REA (Rural Electric Authority) standards or to improve efficiency or the National Electrical Safety Codes standards need to be met, we will be able to provide the local utility or contractor with money in order to go out and do that. For FY 94 we have 19 proposed projects totaling two million dollars and priority is given to communities that contribute matching funds." Number 440 REPRESENTATIVE CON BUNDE commented, "I appreciate your taking into account local match and all the positives that that does as far as ownership and pride of accomplishment." MR. HARRIS then spoke about the Life, Health and Safety Improvements program. "A good example might be a village where the transformer sits on the ground and the electrical conductors going into it are exposed." He then proceeded with descriptions of the Electrical Service Extension Grant Program and the Alaska Electric Power Statistics program. He concluded with the Rural Utility Regionalization Consolidation and Business Management programs. REPRESENTATIVE TOOHEY asked if the Electrical Service Extension Grant program was federally funded. Number 465 MR. HARRIS indicated it was state funded. CHAIRMAN OLBERG added, "The utility has to be agreeable. We found out if the local utility's not interested in doing the extension, apparently it doesn't happen." Number 475 MR. HARRIS described the waste heat recovery facilities currently operating. He then proceeded with Power Cost Equalization (PCE). "The purpose of Power Cost Equalization is to equalize the cost of power statewide during FY 94. I think the program is funded at approximately 17 and a half, 18 million dollars to 66,000 rural Alaskans. We have programs that have been in place in the past to help fund upgrades to utilities so that they could lower their power cost equalization receipts and those programs we will continue to look at." He then described some loan programs available to communities. Number 494 REPRESENTATIVE DAVIES asked, "Are there programs in place providing incentives within PCE to go to more efficient technologies?" MR. HARRIS replied, "One of the criteria we would be looking at in providing the grant under the Rural Power Systems Upgrade program would be if it's going to impact Power Cost Equalization." REPRESENTATIVE DAVIES added, "I think on the other side of the coin, too, I hope that there is coordination with the folks that are working on conservation on energy. Better insulation, better quality buildings, those kinds of considerations. But also somehow have incentives within the PCE program." CHAIRMAN OLBERG asked, "Is there an off-the-shelf small coal fired generator that one could just go buy? I'm thinking two, three, 500 KW. Is that the range we're looking at?" Number 525 MR. HARRIS said, "The facilities that we've looked at here are in order of a megawatt. And that would serve a number of communities. I don't personally know of any smaller units." MR. GERAGHTY added, "One of the other areas that shows some promise that we're coordinating on with DNR (Department of Natural Resources) is the potential for gas to supply various regions, groups of villages, with power. There is the potential there for that and it may not be what the oil companies term as commercially viable because you don't have enough there to ship it but it might supply 15 or 20 villages with fuel for 200 years. It's a matter of identifying where those potentials are getting some sort of agreement worked out where somebody will put down a couple of wells and find out what's there." CHAIRMAN OLBERG added, "Maybe a tax credit for ARCO or BP or somebody for drilling a well." MR. GERAGHTY said, "Actually, the Governor does have a piece of legislation in on block leasing for exploration that I think would lend itself to the type of exploration we're looking for here." Number 561 CHAIRMAN OLBERG asked, "Does Barrow use gas off the naval petroleum reserves?" MR. GERAGHTY replied, "Yes, they're totally powered by gas." CHAIRMAN OLBERG continued, "Then we'd be looking at tapping off a gas line if it were to be built." MR. GERAGHTY said, "Typically, Mr. Chairman, what we'd need is a well and a gas turbine and then intertie lines. For example, in the Bethel area you have somewhere in the neighborhood of 15 villages which are all within a 20 or 30 mile radius." CHAIRMAN OLBERG clarified, "I wasn't suggesting we would only use the pipeline if it were to be built but it would be a natural source of power for some villages I'm sure." REPRESENTATIVE ED WILLIS asked if any hydro installations were used in Alaska. Number 589 MR. HARRIS said, "I've talked to some people. I know that there's some interest. But as of right now we don't have any programs looking at small hydro. We do continue to gather geological data, hydrological data on some streams." CHAIRMAN OLBERG said, "A good local example is at Eaglecrest. Eaglecrest actually generates its own summer electricity off a little hydro plant." MR. HARRIS described some Division of Energy loan programs. MR. GERAGHTY added, "Some of these loan programs actually were in existence in AEA but the names were changed, some of the criteria was changed or modified somewhat, but typically these were already in existence. The Bulk Fuel Revolving Loan Fund, I don't believe has changed at all. The Power Project Fund, I cannot remember what it's original name was." LINDA THOMAS, DEPUTY DIRECTOR, DIVISION OF ENERGY, DCRA, said, "PDRL. Power and Development Revolving Loan." MR. HARRIS said, "The Rural Electrification Revolving Loan Fund. Currently we don't have any requests for money from that loan fund and in fact, there's no money to loan." He summed up his presentation with, "The last legislative session where money was appropriated for the Sutton- Glennallen Intertie, the Division of Energy took over the function from the Alaska Energy Authority of performing a feasibility study of that intertie so that's one other activity that we're presently engaged with and it's suspected that the draft feasibility study would be released sometime near the end of the month. Followed by a public comment period thirty days after release of the draft." Number 633 REPRESENTATIVE JERRY SANDERS asked for clarification of the financial status of the Rural Electrical Revolving Loan Fund. He asked, "Are you phasing it out then?" MR. HARRIS replied, "Essentially the function has been replaced by the Electric Service Extension Grant program, Rural Power Systems Upgrades, so some of the functions that were done in that earlier program are now being done in other programs we have." REPRESENTATIVE SANDERS asked, "As this money is repaid, the original fund, what happens to it?" MR. GERAGHTY indicated any funds would go into the general fund. REPRESENTATIVE DAVIES asked regarding the Alternate and Applied Energy program, "How much money's involved in this? Is it your expectation? Then you might free up money to take on the examination of other possibilities under Alternate Energy?" Number 672 MR. GERAGHTY said, "Right now we have two development specialists. But, I think what we've talked about here today, the potential for gas, coal, wind, hydro, those types of things are going to be paramount to their daily activities. I know one of the things that Robert (has) been working on with the engineering staff is determining how many projects can we deal with in-house, which types, levels of projects does it make economic sense to do in-house, which ones contract out. To some extent, we're doing the same thing with all the other positions including the development specialists. Where does it make sense to target our limited resources for potential for gas; where does it make sense to do a pilot project for coal?." REPRESENTATIVE DAVIES said, "There are a number of opportunities in the State of Alaska to encourage those kinds of things. What I would hope is that one of the major things that these development specialists would do is to highlight those things." MR. GERAGHTY acknowledged saying, "We are working with Alaska Science and Technology Foundation. Our director of Community and Rural Development, where our economic development specialists are, he is from the university system. We utilized him to make some inroads in." TAPE 94-1, SIDE B Number 001 MR. GERAGHTY continued, "There's a wealth of knowledge up there and the university system for one reason or another hasn't, in my mind, how would I say, applied its expertise as fully as I think it could to assist the state in the development of its resources. Whatever we can do from the administrative side of things, as a department, to kind of draw this out of them because there is interest." Number 030 REPRESENTATIVE DAVIES said, "Oftentimes, it's not a question of not being willing to do, it's just simply not being aware that there's a need out there in the state. That's why I'm encouraging your new division to jawbone these folks because I'm sure they would be more than willing to do that, and there's many opportunities with the support that your division could give them to go for federal engineering funds to support the initial research." Number 072 REPRESENTATIVE TOOHEY pointed out that Mr. Harris probably had "a conduit" with Massachusetts Institute of Technology where he attended school. MR. HARRIS offered some financial figures on the scale of the projects they oversee and explained the division's working relationship with the Alaska Council on Science and Technology. CHAIRMAN OLBERG said, "Fires are definitely a problem. Is there any typical generator fire, anything you can do on a broad scale to limit these fires or is it something that happens with diesel fuels and electricity?" MR. HARRIS said, "The village has to as a first step, clean that unit up, that's the biggest single preventer of a fire." ADJOURNMENT REPRESENTATIVE OLBERG thanked DCRA's staff for their attendance and adjourned the meeting at 2:15 p.m.