HB 390: "An Act relating to power projects of the Alaska Energy Authority; and establishing and relating to the power project development fund."

00 HOUSE BILL NO. 390 01 "An Act relating to power projects of the Alaska Energy Authority; and establishing 02 and relating to the power project development fund." 03 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 04 * Section 1. AS 44.83.070 is amended to read: 05 Sec. 44.83.070. Purpose of the authority. The purpose of the authority is to 06 promote, develop, and advance the general prosperity and economic welfare of the 07 people of the state by providing a means of constructing, acquiring, financing, and 08 operating power projects and facilities that recover and use waste energy and by 09 carrying out the powers and duties assigned to it under AS 42.45. 10 * Sec. 2. AS 44.83.080 is amended to read: 11 Sec. 44.83.080. Powers of the authority. In furtherance of its corporate 12 purposes, the authority has the following powers in addition to its other powers: 13 (1) to sue and be sued; 14 (2) to have a seal and alter it at pleasure;

01 (3) to make and alter bylaws for its organization and internal 02 management; 03 (4) to adopt regulations governing the exercise of its corporate powers; 04 (5) to acquire, whether by construction, purchase, gift, or lease, 05 and to improve, equip, operate, and maintain power projects and bulk fuel, waste 06 energy, energy conservation, energy efficiency, and alternative energy facilities and 07 equipment; 08 (6) to issue bonds to carry out any of its corporate purposes and 09 powers, including the acquisition or construction of a project to be owned or 10 leased, as lessor or lessee, by the authority, or by another person or the 11 acquisition of any interest in a project or any right to capacity of a project, the 12 establishment or increase of reserves to secure or to pay the bonds or interest on them, 13 and the payment of all other costs or expenses of the authority incident to and 14 necessary or convenient to carry out its corporate purposes and powers; 15 (7) to sell, lease as lessor or lessee, exchange, donate, convey, or 16 encumber in any manner by mortgage or by creation of any other security interest, real 17 or personal property owned by it, or in which it has an interest, when, in the judgment 18 of the authority, the action is in furtherance of its corporate purposes; 19 (8) to accept gifts, grants, or loans from, and enter into contracts or 20 other transactions regarding them, with any person; 21 (9) to deposit or invest its funds, subject to agreements with 22 bondholders; 23 (10) to enter into contracts with the United States or any person and, 24 subject to the laws of the United States and subject to concurrence of the legislature, 25 with a foreign country or its agencies, for the construction, acquisition, financing, 26 operation, and maintenance of all or any part of a power project or bulk fuel, waste 27 energy, energy conservation, energy efficiency, or alternative energy facilities or 28 equipment, either inside or outside the state, and for the sale or transmission of power 29 from a project or any right to the capacity of it or for the security of any bonds of the 30 authority issued or to be issued for the project; 31 (11) to enter into contracts with any person and with the United States,

01 and, subject to the laws of the United States and subject to the concurrence of the 02 legislature, with a foreign country or its agencies for the purchase, sale, exchange, 03 transmission, or use of power from a project, or any right to the capacity of it; 04 (12) to apply to the appropriate agencies of the state, the United States, 05 and a foreign country and any other proper agency for the permits, licenses, or 06 approvals as may be necessary, to construct, maintain, and operate power projects in 07 accordance with the licenses or permits, and to obtain, hold, and use the licenses and 08 permits in the same manner as any other person or operating unit; 09 (13) to enter into contracts or agreements with respect to the exercise 10 of any of its powers, and do all things necessary or convenient to carry out its 11 corporate purposes and exercise the powers granted in this chapter; 12 (14) to recommend to the legislature 13 (A) the pledge of the credit of the state to guarantee repayment 14 of all or any portion of revenue bonds issued to assist in construction of power 15 projects; 16 (B) an appropriation from the general fund 17 (i) for debt service on bonds or other project purposes; 18 or 19 (ii) to reduce the amount of debt financing for the 20 project; 21 (C) the issuance of general obligation bonds of the state to 22 finance the construction of a power project if the authority first 23 determines that the project cannot be financed by revenue bonds of the 24 authority at reasonable rates of interest; 25 (D) an appropriation to the power project development 26 fund; 27 (E) development of a project under financing arrangements 28 with other entities using leveraged leases or other financing methods; 29 (F) an appropriation for a power project acquired or 30 constructed using a loan from the power project development fund; 31 (15) to carry out the powers and duties assigned to it under AS 42.45;

01 (16) to make grants or loans to any person and enter into contracts or 02 other transactions regarding the grants or loans; 03 (17) to perform reconnaissance studies, feasibility studies, and 04 engineering and design with respect to power projects. 05 * Sec. 3. AS 44.83 is amended by adding new sections to read: 06 Article 5A. Power Project Development. 07 Sec. 44.83.700. Power project development fund. (a) The power project 08 development fund is established in the authority as a revolving fund consisting of 09 (1) appropriations to the fund; 10 (2) the proceeds of bonds issued by the authority to finance a project; 11 (3) repayments of loans made from the fund; 12 (4) income from investment of money in the fund. 13 (b) After completion of a final plan of finance and approval of a project under 14 AS 44.83.706, the authority may use money from the fund for the purpose of financing 15 the project, including 16 (1) the cost or a portion of the cost of final design, acquisition, and 17 construction of the project; 18 (2) defeasance or payment of bonds or notes of the authority issued for 19 the project; 20 (3) the establishment of a reserve fund for renewals and replacements 21 for the operation of the completed project; and 22 (4) any other project-related expenses. 23 (c) Repayment of a debt incurred by the authority for acquisition or 24 construction of a project under this section must be made with the proceeds from the 25 sale of power from the project. 26 Sec. 44.83.702. Financing plan. (a) A financing plan for a proposed project 27 must include the terms that the authority's board of directors determines to be 28 appropriate. In establishing the terms, including provision for a return to the state of an 29 amount in excess of the amount needed to construct and operate the project, the board 30 of directors shall consider the revenue that the authority could reasonably derive from 31 the sale of power from the project based on

01 (1) the estimated costs, at the time the power sales agreement is 02 initially negotiated or renegotiated, of alternative sources of energy generation for 03 utilities purchasing power from the project; 04 (2) the effect of the financing terms on the wholesale power costs to all 05 utilities purchasing power from the project; 06 (3) the long-term benefits to consumers and communities of stable 07 wholesale power costs; 08 (4) increasing repayment, not to exceed five years, of debt service 09 payment a kilowatt-hour gradually over the initial periods of a bond repayment 10 schedule to the extent necessary to avoid significant rate increases to the consumer; 11 (5) the existing excess capacity of power projects; and 12 (6) the effects of increased capacity use, inflation, and alternative 13 energy production costs over the life of the project. 14 (b) The repayment schedule for bonds issued by the authority to finance a 15 project may not exceed 50 years. 16 Sec. 44.83.704. Rate reopener. A power sales agreement for the sale of power 17 from a project financed from the fund may include among its provisions an agreed 18 schedule of wholesale power rates, but must include a provision for a rate reopener at 19 least every 15 years. 20 Sec. 44.83.706. Submission to the legislature. (a) The authority shall submit a 21 feasibility study and plan of finance, including a cost estimate from an independent 22 source, for a proposed new project to the legislature. All proposed projects are subject 23 to legislative approval. The legislature may approve a proposed project only by 24 enacting law that authorizes the project and approves a construction cost for that 25 project. For purposes of this subsection, "feasibility study" has the meaning given in 26 AS 42.45.990. 27 (b) The authority may not proceed with work on the engineering or design 28 phase of a proposed project until the legislature approves the proposed project. 29 However, the authority may proceed with the engineering or design work necessary to 30 meet the requirements for submission of a license application for the proposed project 31 to the Federal Energy Regulatory Commission without obtaining legislative approval

01 of the proposed project. 02 Sec. 44.83.708. Project construction. If a project is to be designed, acquired, 03 and constructed by the authority, it is designed, acquired, and constructed as a public 04 work of the state. For the purpose of this section, a project does not include 05 (1) an addition or modification to an existing project unless the total 06 cost of the addition or modification exceeds $10,000,000; 07 (2) repair or reconstruction of a project; or 08 (3) design, acquisition, or construction necessary to complete a project 09 for which bonds have been issued. 10 Sec. 44.83.710. Sale of power from power project. (a) The authority shall 11 sell power produced from projects acquired or constructed by the authority. The 12 authority shall establish a wholesale power rate structure applicable to sales of power 13 to the customers of a project. The authority shall establish and maintain a separate 14 wholesale power rate applicable to each power project that it has acquired or 15 constructed. The authority shall transmit all the money that it receives under this 16 subsection to the commissioner of revenue for deposit in the state general fund except 17 for money it has pledged or otherwise covenanted to secure bonds and except as 18 provided in AS 44.83.700(b). 19 (b) After determining the wholesale power rate for a power project under the 20 provisions of this section, the authority may adjust the rate or change the rate 21 provisions to insure that the revenue derived from that power project and the aggregate 22 revenues of the authority will be adequate to comply with the rate covenants and other 23 agreements contained in any trust indenture or trust agreement entered into by the 24 authority for the security of the holders of bonds issued to finance the power project. 25 The authority may agree with a purchaser of power to limit rate increases caused by 26 debt service payable by the authority on subsequent projects. 27 Sec. 44.83.750. Definitions. For purposes of AS 44.83.700 - 44.83.750, 28 (1) "fund" means the power project development fund; 29 (2) "project" means a power project that generates more than 50 30 megawatts of power for which the authority will issue its revenue bonds for costs of 31 construction under AS 44.83.700 - 44.83.750.