Legislature(1999 - 2000)

05/16/1999 09:25 AM CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
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.                                                               
                                                                                                                                

Document Name Date/Time Subjects