ALASKA STATE LEGISLATURE  HOUSE SPECIAL COMMITTEE ON ENERGY  March 21, 2023 10:16 a.m. DRAFT MEMBERS PRESENT Representative George Rauscher, Chair Representative Tom McKay Representative Stanley Wright Representative Mike Prax Representative Calvin Schrage Representative Ashley Carrick MEMBERS ABSENT  Representative Josiah Patkotak COMMITTEE CALENDAR  PRESENTATION(S): ALASKA ENERGY AUTHORITY - HEARD PREVIOUS COMMITTEE ACTION  No previous action to record WITNESS REGISTER CURTIS THAYER, Executive Director Alaska Energy Authority Juneau, Alaska POSITION STATEMENT: Gave a PowerPoint presentation titled: "AEA Overview Presentation" [hard copy included in committee packet]. ACTION NARRATIVE 10:16:52 AM CHAIR GEORGE RAUSCHER called the House Special Committee on Energy meeting to order at [10:16 a.m.] Representatives Carrick, Wright, Prax, McKay, and Rauscher were present at the call to order. Representative Schrage arrived as the meeting was in progress. ^PRESENTATION(S): ALASKA ENERGY AUTHORITY PRESENTATION(S): ALASKA ENERGY AUTHORITY    10:18:25 AM CHAIR RAUSCHER announced that the only order of business would be the ALASKA ENERGY AUHTORITY presentation. 10:18:44 AM CURTIS THAYER, Executive Director, Alaska Energy Authority, offered a PowerPoint presentation [hard copy included in the committee packet]. He began on slides 2 and 3 and stated that the Alaska Energy Authority (AEA) was created in 1976 by the Alaska State Legislature with the mission of reducing energy costs in Alaska. He said AEA administers power cost equalization (PCE), provides grants and loans, works on energy planning, and works with the Railbelt and rural utilities on their energy generation facilities. MR. THAYER moved to slide 4 and showed a map of active projects overseen by AEA, spanning across all different forms of energy generation. 10:20:41 AM The committee took an at-ease from 10:20 a.m. to 10:22 a.m. 10:22:42 AM REPRESENTATIVE PRAX asked how many projects the map covers. MR. THAYER answered that it covers over 500 projects, including renewable energy generation and PCE communities. 10:24:01 AM MR. THAYER moved to slides 5 through 7 and gave an overview of the Bradley Lake hydroelectric project. He stated that Bradley Lake provides approximately 10 percent of the energy used by the Railbelt utilities and is the largest source of renewable energy in the state. Energy generated by Bradley Lake costs 4 cents per kilowatt-hour (kWh). He showed a chart with the percentage of power received by each of the Railbelt utilities from Bradley Lake. 10:25:41 AM REPRESENTATIVE PRAX asked how the percentages are determined. MR. THAYER answered that they were determined during the original discussion of the project and reflect the percentages of the bonds paid by each utility. In response to a follow-up question, he agreed that it was fair to characterize the percentages of power received as a purchase. 10:26:54 AM MR. THAYER continued to slides 8 through 10 and gave an overview of transmission line upgrades. He said that AEA and the Railbelt utilities have raised $166 million in financing to build transmission lines from Bradley Lake to improve its efficiency and the amount of power it can deliver. There will be no additional costs to ratepayers or the State of Alaska. He showed a map displaying transmission lines and coverage areas of the Railbelt utilities. He said that the Alaska intertie is owned by AEA from Willow to Healy, and it allows Golden Valley Electric Association to benefit from lower cost power, saving its ratepayers an average of $37 million annually. 10:30:07 AM REPRESENTATIVE SCHRAGE asked how it is possible to upgrade transmission lines without additional costs to the state or ratepayers. MR. THAYER answered that additional payments made for the bonds were eligible to go towards the Bradley Lake project. In response to a follow-up question, he said that the excess bond funds were redirected to the Bradley Lake project. 10:34:44 AM CHAIR RAUSCHER asked why additional payments were necessary when the bonds had already been paid. MR. THAYER answered that it was a provision in the original conception of the project. 10:35:44 AM MR. THAYER continued to slides 11 and 12 and reiterated that AEA administers the PCE program. He said 193 communities, 91 utilities, and 82,000 Alaskans are covered by the program. He said that residential users are eligible to receive PCE credits up to 750 kWh per month. Public facilities can receive PCE credit up to 70 kWh per month multiplied by the number of residents in the community. 10:37:33 AM REPRESENTATIVE WRIGHT asked how much money is in the PCE endowment fund. MR. THAYER answered approximately $1 billion. He added that the fund is overseen by the Department of Revenue. 10:37:56 AM REPRESENTATIVE SCHRAGE asked how the fund is structured. MR. THAYER answered that a court case the previous year resulted in a ruling stating that the fund is not sweepable. He added that it was mostly an accounting issue. In response to a follow-up question, he said that depending on the amount of funds generated by investment, a certain amount of those funds can be allocated to certain other appropriations. He added that such a scenario is uncommon. 10:40:54 AM CHAIR RAUSCHER commented that a full presentation on the PCE would be held in the future to give a more in-depth overview of the fund. 10:42:02 AM MR. THAYER continued with slide 13 and gave an overview of PCE eligibility. He stated that residential and community customers are eligible, and state and federal facilities are not eligible for PCE funds. Additionally, communities with rates lower than the urban average are not eligible. 10:42:36 AM REPRESENTATIVE CARRICK asked whether state or federal facilities in rural communities benefitted from PCE in any capacity. MR. THAYER answered that they do not benefit directly. 10:45:35 AM The committee took an at-ease from 10:45 a.m. to 10:46 a.m. 10:46:31 AM REPRESENTATIVE CARRICK asked whether the rural utilities benefitted from PCE regardless of whether an individual is a direct customer. MR. THAYER answered that Representative Carricks statement is correct. 10:46:56 AM MR. THAYER continued to slide 14 and stated that AEA has been involved in system upgrades for rural communities. He said that 197 communities are eligible for the program, and its goal is to improve safety, efficiency, and reliability of energy systems in rural communities. 10:48:25 AM REPRESENTATIVE PRAX asked whether it is correct to say that AEA is 10 years behind on deferred maintenance. MR. THAYER answered that it is. In response to a follow-up question, he said that AEA tries to prevent replacement from becoming necessary. 10:49:53 AM REPRESENTATIVE WRIGHT asked what AEA does in order to extend the lifespan of those systems. MR. THAYER answered that AEA sends out technicians to do as much maintenance as possible. He added that a recent survey was done for all equipment maintained by AEA. 10:51:18 AM REPRESENTATIVE PRAX asked whether the state capital match is separate from the PCE fund. MR. THAYER answered that the PCE fund has only been used twice for systems upgrades, due to an excess of funds generated. 10:53:19 AM MR. THAYER moved to slides 15 through 19 and gave a brief overview of bulk fuel upgrades and the power project fund (PFF) loan program, which provides loans to build renewable energy projects. He said that AEA has done work on 400 bulk fuel upgrades in rural areas of Alaska. The deferred maintenance of those facilities is $800 million. He said that AEA has $27.2 million in outstanding loans and $6.7 million available for new loans. The current interest rate is 4.86 percent. He mentioned the Hiilangaay and South Fork hydroelectric projects as examples of successful projects brought about because of the availability of those loans. 10:56:28 AM CHAIR RAUSCHER asked how the South Fork hydroelectric project provides power to other homes. MR. THAYER answered that the owners sell the power generated to Matanuska Electric Association (MEA). 10:56:59 AM REPRESENTATIVE SCHRAGE asked whether Hydaburg, Alaska, is a PCE eligible community. MR. THAYER answered that it is. In response to a follow-up question, he said that King Cove, Alaska, has not applied for PCE. He added that the state invested money into the community's hydroelectric project to help it become energy self- sufficient, which makes up for the PCE funds that the community is not receiving. 11:00:20 AM MR. THAYER continued to slides 20 through 24 and presented more examples of projects that had benefited from the loan program and the renewable energy fund (REF) grant program. He said that the Willow Solar Farm expansion project provides 1.2 MWh of energy and offsets 2 million pounds of carbon dioxide annually. He said AEA has awarded 271 grants totaling $300 million for building renewable energy projects and has 31 new applicants requesting a total of $33 million. He mentioned the Banner Peak Wind Farm expansion, Whitman Lake hydroelectric project, and Terror Lake hydroelectric expansion project as examples of projects receiving those grants. 11:03:57 AM MR. THAYER continued to slides 25 through 28 and gave an overview of some federal funding made available by the Infrastructure Investment and Jobs Act. He said that $60 million would be made available to Alaska over five years to increase grid resiliency. The grants from the federal government would require a 15 percent match from the state and a 33 percent small utility match. He stated that a plan to increase electric vehicle infrastructure was approved, which will unlock $19 million for electric vehicle charging infrastructure; AEA expects that Alaska may receive $52 million over the course of the next five years. The charging stations will be required to be built no more than 50 miles apart, with an exception in Glitter Gulch. 11:06:05 AM CHAIR RAUSCHER asked what the requirement for an alternative fuel corridor (AFC) is. MR. THAYER answered that it is a term referring to the possibility of building charging stations in those corridors. In response to a follow-up question, he stated that AEA has not received any requests other than Anchorage, Alaska to Fairbanks, Alaska. 11:07:20 AM REPRESENTATIVE SCHRAGE asked whether more federal funding could be received after building charging stations on the AFCs. MR. THAYER answered that more could be built after work along the AFCs was completed. In response to a follow-up question, he said that Glitter Gulch is not operational during the winter, and the rest of the plan including the exception was approved. REPRESENTATIVE SCHRAGE asked whether an estimated time of completion is available. MR. THAYER answered that it is a long process to work out logistics, and that AEA is still waiting in some respects on the federal government. 11:10:06 AM MR. THAYER continued to slides 29 and 30 and gave an overview of opportunities offered by the Infrastructure, Investment, and Jobs Act. He stated that there is a total of $145 million that will come into the state for energy infrastructure projects. He showed a chart breaking down the amount of money and what it would be for and added that the only state match required is $1.8 million for grid resiliency. 11:13:49 AM MR. THAYER moved to slide 31 and gave an overview of staffing needs for AEA. He said that two project managers, a contracting officer, a senior accountant, and a grant coordinator are needed for administration of the projects being built with federal dollars. An additional PCE technician is also needed, along with some PCE salary adjustments. 11:15:59 AM REPRESENTATIVE SCHRAGE asked how AEA is faring with staffing challenges. MR. THAYER answered that AEA has only three vacancies, not including the new positions that will be added. He added that there are times when AEA is unable to compete with much higher salaries from the private sector. In response to a follow-up question, he said that AEA does have more ability than most state agencies to increase salaries. 11:21:31 AM REPRESENTATIVE PRAX asked if there is a better way to keep track of the different divisions within AEA. MR. THAYER answered that AEA is focused on resilience, redundancy, and reliability. He said that there is not redundancy on the Railbelt, which will potentially cause price issues in the future. REPRESENTATIVE PRAX asked if there is a way to figure out how the benefits of investing in energy compare to state investment in other areas. MR. THAYER answered that he is unsure. He added that energy is a statewide issue that needs investment and work. 11:26:55 AM REPRESENTATIVE SCHRAGE asked what the circuit rider program is. MR. THAYER answered that it is a group of technicians that travel around rural Alaska to provide training and assistance. In response to a follow-up question, he stated that the circuit rider program mostly relies on federal funding. REPRESENTATIVE SCHRAGE asked if there is a need for more circuit riders. MR. THAYER answered that there is still a backlog from the COVID-19 pandemic, and further discussion with his team would provide a better answer. 11:33:30 AM ADJOURNMENT  There being no further business before the committee, the House Special Committee on Energy meeting was adjourned at 11:33 a.m.