Legislature(1999 - 2000)
05/16/1999 09:25 AM CRA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
CSSB 157(FIN) AM - POWER COST EQUALIZATION CO-CHAIRMAN HALCRO announced the next item of business is CS FOR SENATE BILL NO. 157(FIN) am, "An Act relating to power cost equalization; relating to appropriations from the National Petroleum Reserve - Alaska special revenue fund to the power cost equalization and rural electric capitalization fund; relating to the power cost equalization and rural electric capitalization fund and the four dam pool transfer fund; and providing for an effective date." The committee stood at-ease from 9:38 a.m. to 9:46 a.m. in order to distribute the appropriate version of the bill to committee members and staff. CO-CHAIRMAN HALCRO noted that Version 1-LS0835/K.a is before the committee. Number 0862 CO-CHAIRMAN HARRIS made a motion to adopt CSSB 157(FIN) am. There being no objection, it was so adopted. MARY JACKSON, Legislative Assistant to Senator John Torgerson, Alaska State Legislature, came before the committee to present the sponsor statement. She explained that an amendment on the Senate floor deleted language that would have provided a future funding source from the four dam pool. It was deleted because it is an uncertain funding source. However, the amendment does not have a substantive effect on the funding mechanism. The proposed House committee substitute appropriately reflects that amendment as well. She said: Mr. Chairman to continue: The current funding for the PCE [Power Cost Equalization] program for FY [fiscal year] 99 is approximately $18 million. The Senate version was $12 [million]. The CS [committee substitute] that you have in front of you is $16.4 [million]. The known dollars, right now, including what the Senate has done with its version of the bill, which adds another $2.2 [million] approximately, is somewhere between $7 and $8 million. So, we're $4 million short from the Senate target numbers of $12 million, and obviously we can all add and subtract and see how much short you would be from your CS that's in front of you. The program is obviously critical to the state and the Senate recognized it. In fact, the Senate Finance Committee put the bill before them. There's only one member of the committee that's affected by the PCE program and that's the minority member. Despite that, they felt it was important and went forward with it. The CS for--from the Senate Finance [Committee] is a $2.7 million reduction for commercial users. It's a $3.7 million reduction to lower - what we're calling the ceiling - 700 kilowatts is the ceiling to lower it to 350 [kilowatts]. It is essentially the recommendation of the Governor's Blue Ribbon Commission as is the $2.7 million deduction for the commercial [users]. And, then the Senate version increases the floor to 13.5 cents ... The current statutes are 9.5 cents plus an adjustment based on an Anchorage, Juneau and a Fairbanks rate. That doesn't accommodate the Kenai Peninsula, the Mat-Su or anyplace in the state. It's just Kenai, Anchorage and Fairbanks, and as a practical matter all three of those are lower than the Kenai Peninsula, which is where I hail--from which I hail, I should say. So, one of the concerns was to try to accommodate that statewide average and make sure that that base rate was within a statewide average. The most recent numbers that were available in 1995 in the statewide was, I believe, it was 1.3 cents. So, the floor of 9.5 right now plus this adjustment is a point zero point four factor raises that floor to 9.9 cents. That's important to realize when you look at the bill. The bill says 9.5 [cents]. With the adjustment it's 9.9 [cents] right now. So, we've approached it from two ways - the ceiling and the floor. The floor being the 9.5 [cents] plus the adjustment factor and then the ceiling being the 700 kilowatt hour. What was not discussed or changed were the community facilities. That wasn't involved at all with any of the discussion. The rate again from 700 down to 350 is actually not a monthly 350; it's an averaged 350. So, that the department would be giving the authority by regulation to make a determination on what is an appropriate kilowatt rate for the month of April or the month of May or June or December. That too was a part of the Governor's Blue Ribbon Commission's recommendations. I'm not sure what other information I can give you. Perhaps it would be best at this point to just answer questions. Number 1108 CO-CHAIRMAN HALCRO asked Ms. Jackson whether the amendment deleting funding from the four dam pool is coming from the power project loan program. MS. JACKSON replied: "No, actually the, Mr. Chairman, the four dam pool fund is comprised of three things. One is the 40 percent for the PCE program. One is a 20 percent for capital projects program, and the other is 40 percent for the Southeast energy program. The 40 percent for the Southeast energy program is the one that was removed on the [Senate] floor. The 20 percent for the capital is still in, and that also was a Blue Ribbon Commission recommendation, and that nets the program approximately an added $2 million per year." CO-CHAIRMAN HALCRO clarified as to whether the capital improvement project is the power project fund. MS. JACKSON confirmed that it is. Number 1159 CO-CHAIRMAN HARRIS asked Ms. Jackson to go over again how much money the Senate's version justifies for the PCE program. MS. JACKSON replied: "Through the chair, Mr. Harris--Representative Harris, at this point the numbers are in--the conference committee number are $4.6 million in the Senate side, identified fund sources. The House is a unidentified fund source, so this is part of the dilemma with the program. This bill would add $2.2 million, which is the approximate value of the 20 percent from the four dam pool. This bill would add a potential for gift receipts from the Alaska Association of Housing Authorities. They have on record said they felt they would be able to commit between $1 and $1.5 million. That won't be known for some time whether or not that would be available. This bill also provides for receipt of funds through NPR-A. As we all know that sale just went through. The dilemma with that program is that those funds would not be available until September. We don't know yet exactly the dollar value that would be available through that. What the Senate Finance Committee was trying to do was identify fund sources that --that would be out there." Number 1232 CO-CHAIRMAN HARRIS asked Ms. Jackson what the total amount is again, according to the Senate version. MS. JACKSON replied the total amount is between $6 and $8 million that is known. The dollar value of the NPR-A is not know. The dollar value of the sale is known, but how much would come down to the PCE program is not known. The sale money goes into a community impact fund, then the permanent fund, and then an amount is deposited into the public schools trust. Number 1269 CO-CHAIRMAN HALCRO asked Ms. Jackson whether the legislature is taking a program that costs $18 million a year of which only $6 to $8 million in funds have been identified. MS. JACKSON replied in the affirmative. CO-CHAIRMAN HALCRO stated it looks like a heavy burden is being placed on the four dam pool revenue stream. He asked Ms. Jackson whether there was any discussion on the Senate side in regards to the self-help clause. MS. JACKSON replied yes. The Senate committee substitute, as written, would not disrupt the self-help clause, which is why she said it would be "around" $2 million for the additional funding. Number 1315 CO-CHAIRMAN HALCRO stated therein lies the problem. That could throw a real curve into the potential revenue stream for PCEs. Under the self-help provision, if the utilities want to claim more for capital improvements they can do so. In addition, just four days ago the House of Representatives passed a resolution that promotes the purchase of the four dam pool by the four communities involved. If he was one of those four communities and he had the ability to take more revenue to upgrade his facility before buying it, he's going to do it. It seems like a huge concern. He asked Ms. Jackson whether that was addressed in the Senate Finance Committee. MS. JACKSON replied yes it was discussed. The difficulty is because the funding for the program is through the PCE fund, which only has $2.1 million in it - the dilemma this year. Number 1382 CO-CHAIRMAN HARRIS asked Ms. Jackson whether the bill addresses businesses or schools that are affected by PCE. MS. JACKSON replied yes. The bill deletes commercial users [businesses], and right now schools are defined as businesses, so it would delete them as well. The program value to schools is approximately $200,000 per year, which equates to about $1,000 per month per school. It sounds like that wouldn't be appropriate, but the maximum that can be received is 700 kilowatts and a school clearly consumes more than 700 kilowatts a month. CO-CHAIRMAN HARRIS asked Ms. Jackson whether right now it's about $200,000 for all the schools in the state. MS. JACKSON replied yes. Number 1425 REPRESENTATIVE MURKOWSKI asked Ms. Jackson whether the commercial users that are directly related to public health and safety are also out in the Senate committee substitute. MS. JACKSON replied no. Those are considered community facilities. REPRESENTATIVE MURKOWSKI asked Ms. Jackson to define the term "community facilities." MS. JACKSON replied the definition of community facility includes city halls, public recreation facilities, government facilities, etc. The Blue Ribbon Commission discussed this and recommended removing all facilities except those required for public safety, which was about a $1 million reduction. The Senate decided not to do that, however. Number 1472 REPRESENTATIVE KOOKESH said: "If we're going to short-fund this and we don't know where all the money is gonna come from, we might as well fully fund it because we're gonna short-fund it anyway." Number 1493 CO-CHAIRMAN HALCRO asked Ms. Jackson whether there has been any estimates in relation to the money appropriated from NPR-A; could it be $1 million, $10 million? MR. JACKSON replied the same question was posed several weeks ago and she has yet to receive an answer. She noted the Lamar Cotten [Deputy Commissioner, Department of Community and Regional Affairs] is here and could brief the committee on what the department does with the funds. It's a fairly extensive process. Number 1524 REPRESENTATIVE MURKOWSKI asked Ms. Jackson to explain the language, "gifts, bequests, and contributions from other sources..." [Section 3(3)]. MS. JACKSON replied that subsection was added to provide for the Alaska Association of Housing Authorities. In conversations with the association they said, "You know we need to look at this program. Clearly, when they build a house they need to try to make sure that the electricity can stay on reasonably enough. They have supplemental funds that they, as a body, will be talking about putting aside into a fund so that it would draw interest--it would gain interest and then that interest would in turn be turned in toward the PCE fund. That's kind a one of the future fund sources that the Senate has worked on. At this point, they felt that they could probably commit $1 to $1.5 million. That's the other fund I talked about earlier. The dilemma is that they need to have it approved by their executive board, which in fact they have done. But then they also need to go back into the communities and make sure that they are supportive of this concept. And, that will obviously take some time. So, it's tough to count that as a source either. But it's a future." Number 1592 CO-CHAIRMAN HALCRO stated he heard that the [Association of] Alaska Housing Authorities cannot use their federal funds for PCE. He asked Ms. Jackson whether she has heard that as well. MS. JACKSON replied she spoke with Bruce Kavarick (ph) a week ago at which point their executive committee had approved the same type of concept. She can't imagine that an executive committee would support something that is not acceptable. Number 1627 CO-CHAIRMAN HALCRO asked Ms. Jackson whether there has to be approval by the North Slope Borough before NPR-A funds can be used. MS. JACKSON deferred the question to Mr. Lamar Cotten. It has only been done a few times, so it is relatively new. Number 1651 REPRESENTATIVE KOOKESH stated the people are going to wonder why the schools are not being funded when it's only $200,000 in a budget of $16 to $18 million, especially since it seems like the state ends up paying for it one way or another. He asked Ms. Jackson to inform the committee of the discussion in regards to schools on the Senate side. MS. JACKSON replied that, practically speaking, $200,000 would come out of a state source. But beyond that, the Senate considered whether or not it would pose a hardship because it might put them to the limit of 70 percent instructional [cap], which was passed in SB 36. She noted that Senator Torgerson sent a letter to the department [Department of Education] two months ago asking that specific question. The response was, if it put a school to the limit, it would be a justification for a waiver. Number 1733 REPRESENTATIVE KOOKESH noted that not all of the recommendations by the Blue Ribbon Commission were taken and indicated it would be interesting to see the rationale. MS. JACKSON said: "Mr. Chairman, there were some of the things that were discussed. Certainly, the raising of the floor was one of the things that the Blue Ribbon [Commission] recommended. And in fact, the first CS that [came] before the Senate was effectively that. It was a 7 cent floor increase, which was the 150 percent lifeline. That did not set well with the committee. The committee did then, however, go back and pull bits and pieces of things out of the Blue Ribbon Commission and also raised the floor somewhat with what you have in front of you there, and I think you have the spreadsheet 13 (indisc.) 13, so they did a little of this, a little of that, a little of this." Number 1774 REPRESENTATIVE DYSON asked Ms. Jackson whether some of the regional and village corporations are helping the local residents with their utility rates. MS. JACKSON replied she doesn't know. CO-CHAIRMAN HALCRO called on Mr. Lamar Cotten and asked him whether there is any estimate of the dollar amount for NPR-A. LAMAR COTTEN, Deputy Commissioner, Department of Community and Regional Affairs, replied the lease has provided roughly $104 million. The state receives half, and according to federal statute, the funds are to be used by subdivisions of the state most directly or severely impacted by the development of oil and gas. He noted, in the early 1980s, the state retained that money without going through that process until it was sued by the North Slope Borough. Now, the funds are subject to a review or a grant process for eligible recipients - those impacted by the sale of a lease. The process within the department will include a notice asking communities to explain how they want to use the money to respond to impact of the lease. A decision will be made in the fall of 1999, at which point the findings and recommendations will be presented to the legislature. The department will note and make a recommendation if there isn't enough money to respond to the impacts. MR. COTTEN gave an example using hypothetical figures. "Let's say we use all but $30 million, so then half of the $30 [million] goes into the permanent fund, and .5 goes into the school foundation, and then - the way the bill is set up - then the PCE would be in-line, subject to legislative approval and appropriation, to draw some money out of that pot for PCE. And once that event's occurred, then the remainder goes into the general fund for general governmental purposes. So, it really puts--the way the bill is written it does still put that discretion in your hands." Number 1947 CO-CHAIRMAN HALCRO asked Mr. Cotten whether the North Slope Borough has to approve that because they are impacted. MR. COTTEN replied he's not sure that the correct term is "approve." The borough would have to come before the department and make their case, given the likelihood that its their communities that would be impacted by NPR-A. The borough could certainly object and sue the department. Another way to say it is, yes, when they make their case and the department makes its recommendation, there would be a response from the borough in one way or another. Number 1990 CO-CHAIRMAN HALCRO stated, in an overview of the Department of Community and Regional Affairs, prior examples of how lease money was spent included community centers and roads. He is concerned that if some community has a great need for a road, a community center, or improvements to a health and safety facility, that would be a higher priority than funding PCE, and the state would be in the same position of finding money for it. MR. COTTEN replied the past approach was a limited guide. The process set up does require a community to demonstrate impact. Number 2048 REPRESENTATIVE DYSON asked Mr. Cotten whether some of the regional corporations are helping their members with PCE. MR. COTTEN replied, according to his understanding, the North Slope Regional Corporation is the only regional corporation that assists its members with utilities. Number 2069 REPRESENTATIVE DYSON asked Mr. Cotten whether the Department of Community and Regional Affairs interacts with the state's waste-heat recovery program. MR. COTTEN replied yes. He noted that Mr. Percy Frisby and Mr. Richard Emerman are here from the Division of Energy [Department of Community and Regional Affairs]. A variety of alternatives for energy is one of the department's chief components. Number 2106 MR. COTTEN further stated, in response to an earlier discussion with the Association of Alaska Housing Authorities, they indicated that federal funds could be put into a pot and the interest derived from it could be used for a variety of housing associated investments. The department believes that PCE is one of those associated investments. Number 2166 ERIC YOULD, Executive Director, Alaska Rural Electric Co-Op Association (ARECA), came before the committee to testify in favor of SB 157. He also represents the electric utility industry in the state. The Senate has worked hard to come up with a long-term funding source and a formula to fit it. Unfortunately, CSSB 157(FIN) am doesn't go far enough. The House committee substitute before the committee would provide a funding source that is more reliable. As a member of the utility industry and as a member of the Blue Ribbon Task Force [Commission], he noted that the figure of $16 million comports with what is needed for rural Alaska. It would eliminate commercial [users], schools, and raise the floor a little bit, but the upshot is that it would provide for a healthy Alaska. MR. YOULD further stated that, if this bill does not pass, and if there isn't any funding for PCE, the legislature will find that the economies in rural Alaska will be greatly impaired. TAPE 99-34, SIDE B Number 0001 MR. YOULD continued. He strongly supports the proposed committee substitute as offered by Representative Morgan. It raises the level of the program up to $16 million and attempts to identify a more stable funding source. He further stated that he is in favor of funding from NPR-A, but there are certain perturbations in being able to utilize those funds. In summary, the cost of electricity in rural Alaska is roughly four times and in many cases six-to-seven-times the cost of what it is in Anchorage, Juneau and Fairbanks, yet the disposable income is significantly less - one-fourth to one-fifth the urban areas. Hence, they are not only paying more for electricity, but they have less ability to pay for it in the first place. He reiterated, ARECA strongly supports the adoption of the proposed House committee substitute. Number 9943 CO-CHAIRMAN HARRIS asked Mr. Yould whether there will ever be monies put toward a real strong effort to get communities off of PCE or at least less dependent on it. MR. YOULD replied the state has the largest resources for wind, untapped hydro potentials, coal reserves, and tidal. But the problem is one of an economy of scale and the ability to develop them economically for the small villages and communities. In many respects, some of the technologies are coming along. He cited fuel cells as an example, which will be a significant contributor once the research can figure out how diesel power can be used as a feed stock. Nevertheless, the utilities have done a marvelous job in becoming more efficient. He cited in 1978 the state was getting roughly 6 kilowatt-hours per gallon of diesel fuel for electricity in rural Alaska, while today it's over 12 kilowatt-hours per gallon. Number 9836 CO-CHAIRMAN HARRIS asked Mr. Yould whether any of that money is coming out of the PCE fund, or is other money being directed toward that from the utilities themselves. MR. YOULD replied the utilities themselves are using internal funds to pursue those types projects. He cited AVEC [Alaska Village Electric Co-Op] is entering into a joint venture with Chugach Electric [Association, Inc.] to put in place a demonstration project for micro-turbines to run the AVEC facility in Anchorage. If it's found to be a good feasible technology, it will be moved out to rural Alaska as long as the feed power is diesel. At the same time, however, AVEC is a PCE community so, in effect PCE contributes to that technology as well. Number 9793 REPRESENTATIVE KOOKESH said that he is from rural Alaska and he feels bad sometimes about asking for a handout, but part of that issue needs to be couched in relation to how much money has been spent in urban Alaska for projects such as the four dam pool. That needs to be part of the discussion as well, so that rural Alaskans feel less guilty about taking some of that money. REPRESENTATIVE KOOKESH further stated that he would like to get help from the Majority members in considering a fund to help the communities get off of PCE. He said that Angoon, under ANILCA [Alaska National Interest Lands Conservation Act], received a land exchange which allowed the community to develop a hydro project called Thayer Lake, but it doesn't have the money or the wherewithal to proceed with the project. If state and federal money were directed to that project, four communities could get off of PCE - Kake, Tenakee, Angoon and Hoonah. He also cited Kotzebue wind generation and gas turbine developments that are being looked at. As a long-range vision, he suggested taking the money that would go to Angoon for PCE for the next 20 years and matching it with a federal program to get money to work on the hydro project. Number 9669 MR. YOULD stated the concept of the state putting money towards a project that would reduce dependancy on PCE is a good way to go. He noted that Cordova came to the legislature last year looking for money for the Power Creek project. Part of the deal was forgoing any future PCE. Certainly, Thayer Creek and other projects would be eligible for that sort of philosophical consideration by the legislature. Number 9628 REPRESENTATIVE KOOKESH stated he is just trying to think in the long term. He doesn't want to be here with his hand out for the next twenty years. He wants to do something for his communities to help them get off of PCE. Number 9604 REPRESENTATIVE MURKOWSKI said, in response to comments from Representative Kookesh, she has to deal with a constituency who has no help with their [utility] bills. It is important to have these types of discussions so that people in the urban areas don't feel resentful and those in the rural areas don't feel guilty. Number 9558 REPRESENTATIVE DYSON said he was told that the state has enough coal to fuel all of North America's energy requirements for 600 years. In addition to the [economy of] scale factors, there is also a distribution problem of the energy sources being far away from the customers. There is also a problem with wind and tidal sources because they are inconsistent and there needs to be a way to store that energy, which is difficult and requires high maintenance. Hydro-electric and tidal projects are marvelous, but have some environmental and huge political problems to make them ... He encouraged the committee members to not think that technology is going to rescue the state from these problems in the near term because the best of them won't make an impact for at least ten years. That is the reality that the state needs to deal with. REPRESENTATIVE DYSON further stated that he has been encouraging this legislature to look at the bigger picture and decide upon adopting affordable, reliable and safe electric power as a universal service, and to put together a statewide program that allows for cross-subsidization instead of in a piecemeal fashion. He asked Mr. Yould whether other jurisdictions have treated electric power as a universal service. Number 9461 MR. YOULD replied, yes, the entire philosophy of the utility industry is to spread the cost amongst "all" to get a standard rate throughout an entire service territory. REPRESENTATIVE DYSON said, given the state's distribution problem and the lack of a grid, it has never really dealt with that. MR. YOULD said: "We have not had to, but you're suggesting a financial inter-tie, and it's the same thing. You don't need to have the hard wire so long as you have everybody tied together financially, which is in some respects what PCE is attempting to do, but not quite--not as cohesively as what you're suggesting." CO-CHAIRMAN HALCRO asked Mr. Frisby whether PCE was funded at $18 million for FY 99. PERCY FRISBY, Director, Division of Energy, Department of Community and Regional Affairs, came before the committee to answer questions. He replied yes, it was funded at $17 million and the department asked for a supplemental [appropriation] of $1.5 million. CO-CHAIRMAN HALCRO asked Mr. Frisby what will be left in the PCE fund at the end of the fiscal year. MR. FRISBY replied the carry forward will be $2.2 million. CO-CHAIRMAN HALCRO asked Mr. Frisby to share with the committee members his thought on the revenue stream for the PCE fund. MR. FRISBY replied he has the same concerns as everybody else in regards to NPR-A. That being, is the money really there. In his opinion, the AIDEA [Alaska Industrial Development and Export Authority] is more of a solid funding source. He doesn't have a problem with 60 percent of the balance of the four dam pool being transferred to the PCE fund. He doesn't have a problem with 20 percent for the power project fund. He noted that the power project fund is self-sustaining; it's a revolving loan fund. CO-CHAIRMAN HALCRO asked Mr. Frisby what is left in the power project fund. MR. FRISBY replied about $14 million, of which, $7 to $8 million is available for new loans. CO-CHAIRMAN HALCRO asked Mr. Frisby whether there is $7 to $8 million in cash. MR. FRISBY replied yes. Number 9303 REPRESENTATIVE KOOKESH asked Mr. Frisby whether the 18.5 percent [$18.5 million] funded the program at one hundred percent. MR. FRISBY replied no. Funding at one hundred percent is about $22.5 to $23 million. REPRESENTATIVE KOOKESH asked Mr. Frisby whether it was funded at about 85 percent. MR. FRISBY replied yes. Number 9291 CO-CHAIRMAN HALCRO stated, even if the funding is raised to about $15.5 to $15.7 [million], the program is still taking almost a $3 million hit from the previous year. Number 9260 CO-CHAIRMAN HALCRO asked Ms. Jackson to share with the committee the arguments against using the AIDEA dividend in the Senate. MS. JACKSON replied the AIDEA dividend is $18 million, and it has already been spent. It's not there. "The Governor certainly a month ago now, May 4th, I believe it was went out with a public discussion about putting you know the AIDEA as a potential funding source, but you needed to look at the Governor's handouts, which showed that beginning in fiscal year 2001. We are in fiscal year 2000." CO-CHAIRMAN HALCRO asked Mr. Jackson what the AIDEA is being spent on this year. MS. JACKSON replied she doesn't recall exactly, but noted it is part of the capital and supplemental budgets. CO-CHAIRMAN HALCRO stated that the budget for FY 00 has not been approved yet, so even if it is allocated it could be reallocated. This is done all the time. Number 9191 REPRESENTATIVE MORGAN stated, a funding level of $12.1 [million] and capping the floor at 350 [kilowatts], is affecting his constituents big time. He cited a refrigerator, a 60 watt light bulb, a radio and a television would easily consume 350 kilowatts. He has a real big problem with the original committee substitute. If the PCE program is broken or underfunded to a great deal, life, safety and health are being affected. That's how important it is in rural Alaska. He further stated that the PCE program is not a subsidy; it's a power cost "equalization" program. A solution in how to fix the problem should have been looked at in the 1980s when the state had the money, instead of continuing to fund it at the same level. As a result, the legislature is reacting and it's starting to affect individuals emotionally. He noted a temporary fix is not a solution. He agrees with Representative Kookesh in looking at other ways to fix it, even though it would cost money in the beginning, but in the long run it will save money. REPRESENTATIVE MORGAN said, "We need to get people off PCE." All the alternative resources need to be reviewed. He noted that all Alaska's resources are in Bush Alaska. He emphasized the need to develop the mines, gold mines, which takes energy and electricity. Representative Morgan pointed out that there is a lot of potential in his area for gold, but one of the things that's been inhibiting them is the cost of energy. He further informed the committee that his district has the highest unemployment. Representative Morgan stressed that Bush Alaska has really been hit this session which is of great concern. "Just because we're not seen and not heard from, please don't take our kindness for weakness." Number 9008 REPRESENTATIVE MORGAN made a motion to adopt HCS CSSB 157(CRA) [1-LS0835\S, Cramer/Utermohle, 5/15/99]. CO-CHAIRMAN HARRIS objected for discussional purposes. REPRESENTATIVE MORGAN read the following sectional analysis into the record: Sec. 1 Revises current statute (AS 37.05.530(g)) regarding the National Petroleum Reserve-Alaska (NPRA) fund so that amounts which remain AFTER; (1) the community impact grants; (2) the deposits to the Permanent Fund; and (3) the deposits to the public school trust fund can be appropriated to the power cost equalization and rural electric capitalization fund (PCE) Prior to the balance lapsing to the general fund. Sec. 2 Revises current statute (AS 42.45.050(b)) to increase the transfers into the power cost equalization and rural electric capitalization fund from 40 to 60 percent. The added 20 percent is 20 percent of the existing balance in the four dam pool fund for the power project fund, which is now deleted. Sec. 3 Revises current statute (AS 42.45.100(b)) to include new potential fund sources for the PCE program; NPRA and "gifts". Sec. 4 Revises current statute (AS 42.45.100) and adds a new subsection (d) to allow for future appropriations beginning after FY 2000 from AIDEA, and adds a new subsection (e) that, subject to appropriation, allows 60 percent of the net proceeds from the sale of the four dam pool, as described in AS 44.83.398(a). Sec. 5 Revises current statute (AS 42.45.110(b)) by deleting commercial customers. Sec. 6 Revises current statute (AS 42.45.110(c)) by (1) changing the initiation date from July 1, 1993 to July 1, 1999; increasing the minimum power costs amounts from 9.5 to 12.5 cents. (Current is 9.5 plus 0.4 adjust to total 9.9 cents.) Sec. 7 Revises current statute (AS 42.45.110(d)) by deleting commercial customers. Sec. 8 Revises current statute (AS 42.45.110(i)) by inserting language to clarify that pro rata deductions must be based on the amount provided in a fiscal year. Sec. 9 Revises current statute (AS 42.45.120) by inserting new language for the existing "notice to customer" requirement. The new language requires the utility to indicate the fuel efficiency of the utility. Sec. 10 AS 42.45.100(d), enacted by sec. 4 of this Act, applies to the amount made available for appropriation by AIDEA under AS 44.88.088 for each fiscal year after fiscal year 2000. Sec. 11 The effective date of this bill, which is July 1, 1999. Number 8749 MR. COTTEN came before the committee again to express the department's support of HCS CSSB 157(CRA). It reaches a number of goals mentioned by the Governor, the Blue Ribbon Task Force [Commission], and many members of the rural caucus. He said: I guess the way I would envision this to occur is that for FY 00 is that, because of the last clause in this bill about AIDEA funding, that for FY 00 there would be a combination of $2.2 million, which is the carry-over from FY 99. It would be roughly $5.5 million from the four dam pool revenues, which is 60 percent of those revenues. That's 5.5. That equals 7.7 and then the remaining funds would come out of gifts, which I don't think we have banked on frankly. Although, perhaps it could come by, but funds that would be derived from the NPR-A account that would then go into the PCE account. For the long-term, and I think this is what we've all been striving for and certainly again I think we appreciate the hard work by the committee and its staff and that is up to 40 percent of AIDEA dividends starting year 2001. That still requires legislative approval. You can't dedicate funds, so I believe the language is such that it does ... Subject to appropriation by the legislature shall be transferred when the funds made available. So, there is some ambiguity or there's always going to be some uncertainty, but I think we're very comfortable with that, and I think clearly it would part of the budget every year that would be submitted to the legislature that would reflect that amount. MR. COTTEN further stated in relation to the floor and ceiling discussion earlier, the effect of raising the floor means one less cent per kilowatt that is subsidized or equalized. Therefore, whether a person lives in Unalaska - a fairly wealthy community - or Holy Cross, everybody is treated equally. While pushing the ceiling back to 700 [kilowatts] seems to hurt those with the least ability to pay more. Number 8561 REPRESENTATIVE MURKOWSKI asked Mr. Cotten what is the possibility of the department getting snarled in lawsuits from the community impact grants that could tie up these monies for the immediate short-term. MR. COTTEN replied that is a risk. Two comments - one way is to have the effective date of the AIDEA provision to go into the year 2000 as a backstop, which the department would not object to. The other comment is that it requires cooperation between the communities, that are truly impacted by the NPR-A, the Administration, and the legislature. Number 8444 REPRESENTATIVE MURKOWSKI stated, in recognizing that the affected communities will obviously benefit from this piece of legislation, she asked Mr. Cotten whether they have been brought into the conversation yet, or will this piece of legislation come as a complete surprise to them. MR. COTTEN replied no he has not had conversations with them, but he doesn't think it will come as a complete surprise. He wants to make sure that his testimony today does not reflect any bias towards any decision making that he may be involved in with those grants. He wants to make the record clear that he has an open mind to any kind of grants or decisions that would come across his desk as a deputy commissioner. Number 8320 REPRESENTATIVE MURKOWSKI commented it seems that the department needs a backup plan. MR. COTTEN replied yes. He further noted that the department is grappling with this because it is not using general funds, which has limited its ability to address the bigger fiscal picture. However, given the options available, both NPR-A and AIDEA seem to be reasonable places to go. Number 8291 REPRESENTATIVE MORGAN stated, in relation to the NPR-A discussion, he has been working very closely with the senator who represents that district. In fact, it was his recommendation to include NPR-A. Number 8255 CO-CHAIRMAN HALCRO asked Mr. Frisby whether there have been any discussions regarding capital improvements to the utilities to make them more efficient and to bring them into compliance. MR. FRISBY replied he has been working with the Denali Commission and other federal agencies in terms of trying to secure funding for distribution upgrades and alternative energy. The Division of Energy [Department of Community and Regional Affairs] is involved in alternative energy projects including fuel cell development. The division is trying to determine whether or not these systems can be scaled down enough so that they are feasible and practical for rural Alaska. The division is looking at close to $3 million in upgrades for next year from federal sources, but there is no state matching [funds] right now. The communities, however, use the power project loan fund to borrow the necessary money for system upgrades. CO-CHAIRMAN HALCRO commented it seems it would go a long way in promoting efficiency. Number 8040 CO-CHAIRMAN HARRIS withdrew his objection to adopting the House proposed committee substitute. CO-CHAIRMAN HALCRO asked whether there is any further objection. There being none, it was so adopted. Number 7998 REPRESENTATIVE MURKOWSKI said she is concerned that the legislature may be faced with difficulties from the communities impacted by NPR-A. She is also concerned that the money won't be there to fund the program. REPRESENTATIVE MORGAN reiterated the Senator from "that district" has been working with the communities that would be impacted. He trusts him. Number 7894 REPRESENTATIVE DYSON stated he sees the charge for this committee as looking after community affairs and making policy decisions related to community life, problems, and developments. The financial arguments might be better handled in the House Finance Standing Committee. CO-CHAIRMAN HALCRO asked Mr. Cotten to give the committee a best guess scenario for the fiscal note and where the revenues would come from. There is nothing in writing. MR. COTTEN replied the bill would require $16.4 million. A balance of $2.2 million would be carried forward from FY 99, $5.5 million would come from the four dam pool, and the remainder would come out of NPR-A (roughly $8.7 million). Number 7704 CO-CHAIRMAN HARRIS said he will support the House proposed committee substitute, but he's not happy with it. The Majority caucus asked for $17 million, a reduction of $1.5 million from last year. But, having sat through almost one session now, he realizes that sometimes an "initial will" doesn't always carry through. The committee is charged with representing the will of the communities... TAPE 99-35, SIDE A Number 0001 CO-CHAIRMAN HARRIS continued. He thinks that the legislature needs to look at a means to provide communities a way to reduce their subsidy. Although the testimony today has indicated that is ongoing, it seems like the state has been in this situation for many, many years. Number 0069 CO-CHAIRMAN HALCRO stated that this is - beyond a doubt - the most important piece of legislation the House Community and Regional Affairs Standing Committee has dealt with this year. A great deal of appreciation needs to be expressed to Representative Morgan and his staff for their work on the proposed committee substitute. They have been working with House Finance Standing Committee members in asking for their support and consideration in finding funding sources. He noted that this is a short-term solution to a long-term problem. The upgrades, that Mr. Frisby mentioned, and the technology, that Representative Dyson mentioned, all need to be considered in a long-term solution. Number 0199 REPRESENTATIVE KOOKESH said, as a member of the minority, he is ready to criticize the Majority, but there are times when a "thank you" is necessary. He is comfortable with the fact that the five members of the Majority on the House Community and Regional Affairs Standing Committee have always appeared to be fair and willing to work towards a solution for all of Alaskans - both urban and rural. Number 0267 REPRESENTATIVE DYSON made a motion to move the proposed HCS CSSB 157(CRA) from the committee with individual recommendations and the attached fiscal note(s). There being no objection, it was so moved from the House Community and Regional Affairs Standing Committee.