JOINT MEETING HOUSE SPECIAL COMMITTEE ON UTILITY RESTRUCTURING HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE March 29, 2000 8:40 a.m. COMMITTEE CALENDAR ROUND TABLE DISCUSSION: Power Cost Equalization (PCE) TAPE 00-7, SIDE A [URS TAPE NUMBER] [Note: This joint meeting begins about halfway into Side A of URS TAPE 00-7, following a meeting of the House Special Committee on Utility Restructuring (URS) that began at 8:02 a.m. Side B of that tape was not recorded, and there are no further tapes available for this meeting because of a technical recording difficulty.] CALL TO ORDER REPRESENTATIVE BILL HUDSON, Chair, convened the joint meeting of the House Special Committee on Utility Restructuring and the House Community and Regional Affairs Standing Committee at 8:40 a.m. PRESENT House Special Committee on Utility Restructuring members present were Representatives Hudson, Cowdery, Porter, Davies, Berkowitz and Green. House Community and Regional Affairs Standing Committee members present were Representatives Harris, Morgan, Halcro, Murkowski, Dyson, Joule and Kookesh. SUMMARY OF INFORMATION CHAIRMAN HUDSON set the stage for the round table discussion on Power Cost Equalization (PCE), explaining that his committee has been looking from the alternative energy perspective at what might be done over time that would preclude the need for subsidization of power costs in rural Alaska. He said the legislature supports providing electricity to rural Alaska and wants to find a person in the Administration who can work with the legislature on reducing the need for and finding a stable source of funding for PCE. He passed the gavel to Chairman Morgan to preside over the joint committee round table. JEFFREY W. BUSH, Deputy Commissioner, Department of Community and Economic Development, represented the Administration in the discussion. His department (DCED) oversees the Alaska Industrial Development and Export Authority (AIDEA). He said Randy Simmons, Executive Director, AIDEA, has been designated as the spokesperson for the Administration on PCE, and that AIDEA is the agency primarily involved. MR. BUSH said the Administration agrees that a long-term solution is needed for funding PCE. Options being explored include: Selling the Four Dam Pool to create a pool of funds to use for a long-term solution. Talking with Alaska's Congressional delegation to try to enlarge the pool for long-term funding. Working with the Denali Commission to create efficiencies and more effective delivery of power in rural areas, thereby reducing the need for PCE funding. REPRESENTATIVE HARRIS noted that for years the legislature has been providing PCE. He said his goal is to try to develop economically reliable systems to try to reduce or eliminate the need for a subsidy and try to get the rural communities "on their own feet to the extent possible." He said that in his home district, there is a proposed hydropower project that could eliminate the Cordova area's reliance on PCE, of which it is the single largest recipient. He also mentioned plans for an intertie in Southeast that could reduce another PCE subsidy of up to $300,000 a year. MR. BUSH noted that the energy program was transferred to AIDEA just five months ago. Since then, the division has identified the specific needs and problems and has begun work on the Alaska Energy Plan, a long-term strategy for the whole state. They estimate it will take 12-18 months more to complete. REPRESENTATIVE KOOKESH said he is glad to hear there is an energy plan being developed for all Alaska. "But we're not ever going to get away from PCE as a problem unless we follow up on Representative Harris's comment that we need to do something drastically different in rural Alaska to get people off PCE," he said. In his district, "There is more than $20 million sitting in Ketchikan for an intertie that is supposed to be happening in Southeast Alaska, and that nobody is doing anything about. About $8 million of the original amount has been spent for studies. We're studying the heck out of that intertie and not building it," he emphasized. "We could get all of Southeast Alaska off PCE because this is the part of the state that has the water for hydropower." REPRESENTATIVE KOOKESH said the solution is to "spend some big money up front to get some of these areas off the PCE." He wants the Administration to "either get off the dime or give the money to somebody else to build the intertie." REPRESENTATIVE KOOKESH asked if anyone is scrutinizing what the power companies are charging to supply power to rural Alaska and how those companies justify their costs. ERIC YOULD, Executive Director, Alaska Rural Electric Cooperative Association, was invited to come forward to speak to that question. He explained that before any payment is made from PCE funds, the RCA must verify that the costs are legitimate, thereby providing oversight. The RCA sets efficiency requirements, and if a utility does not meet those, the utility does not get the full PCE payment. REPRESENTATIVE BERKOWITZ said he sees HB 396, of which he is prime sponsor, as a potential piece of the long-term solution. That bill would create one Alaska financing entity, starting by combining the assets and functions of the Alaska Housing Finance Corporation with those of the Alaska Municipal Bond Bank Authority and the Alaska Student Loan Corporation. REPRESENTATIVE JOULE cited the need to provide bulk storage for fuel along the coast and for runways to bring that fuel into villages. KEVIN RITCHIE, Executive Director, Alaska Municipal League, was invited to testify. He agreed that the Denali Commission has great potential for achieving energy economies in rural Alaska. He also presented the Municipal League's "magic bullet," the concept of an annual dividend to all municipalities, in effect, a Permanent Fund Dividend to communities in addition to the one now given to individual citizens. REPRESENTATIVE DAVIES emphasized the need to develop resources to provide new sources of power, not just for rural communities but for the state's economic development. CHAIRMAN HUDSON drew the round table discussion to a close on a note of optimism, noting that there are many potential, complementary pieces to the solution, and saying that he was looking forward to the Administration's bringing forward "some sort of vision" the legislature could work toward fulfilling. ADJOURNMENT CHAIRMAN MORGAN handed the gavel back to Chairman Hudson, who adjourned the meeting at 9:32 a.m. NOTE: The meeting was partially recorded and handwritten log notes were taken. A copy of the tape(s) and log notes may be obtained by contacting the House Records Office at 129 6th Street, Suite 229, Juneau, Alaska 99801-2197, (907) 465-2214, and after adjournment of the second session of the Twenty-first Alaska State Legislature this information may be obtained by contacting the Legislative Reference Library at 129 6th Street, Suite 102, (907) 465-3808.