Legislature(1999 - 2000)

05/18/1999 03:05 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
= SB 157
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."                                                                            
Co-Chair Mulder MOVED to adopt proposed committee                                                                               
substitute, work draft #1-LS0835\V, Cramer dated 5/18/99.                                                                       
Representative Grussendorf OBJECTED. He observed that the                                                                       
proposed substitute removes section 4(d).                                                                                       
(d) In recognition of the significant contribution that                                                                         
rural Alaska projects have made to the income of the                                                                            
Alaska Industrial Development and Export Authority and                                                                          
subject to appropriation by the legislature, 40 percent                                                                         
of the amount made available by the Alaska Industrial                                                                           
Development and Export Authority under AS 44.88.088 or                                                                          
$8,000,000 of the amount made available, whichever is                                                                           
greater, shall be transferred to the fund when made                                                                             
Representative Grussendorf argued that without section 4 (d)                                                                    
every legislative body would need to appropriate an                                                                             
additional $5 - $6 million dollars to make the fund whole.                                                                      
He noted that the Alaska Industrial Development and Export                                                                      
Authority (AIDEA) suggested the language in section 4(d).                                                                       
Section 4(d) would be used by AIDEA to stimulate economic                                                                       
development in rural areas. He maintained that stability                                                                        
would be lost if the subsection were deleted.                                                                                   
In response to a question by Representative G. Davis, Co-                                                                       
Chair Mulder explained that there would not be a guaranteed                                                                     
revenue stream if section 4(d) were removed. He pointed out                                                                     
that the AIDEA dividend is not going to be used in the                                                                          
current year. He stressed that the AIDEA dividend remains as                                                                    
a possible funding mechanism and that nothing would be taken                                                                    
off the table. He acknowledged that the legislation would                                                                       
not provide a long-term use of the AIDEA dividend for Power                                                                     
Cost Equalization (PCE). Representative Grussendorf WITHDREW                                                                    
his objection.                                                                                                                  
Vice-Chair Bunde acknowledged the goal for stability, but                                                                       
pointed out that future legislatures cannot be bound.                                                                           
Representative Grussendorf stressed that the intent is to                                                                       
create something that will work for Power Cost Equalization                                                                     
(PCE). He estimated that there would be pressure to reduce                                                                      
the funding amount. He emphasized that the work of the                                                                          
legislation is to leave a good thread for future                                                                                
Representative Williams noted the difficulty of providing a                                                                     
good economic base in order to provide stability in rural                                                                       
communities. He gave examples in Ketchikan and stressed the                                                                     
importance of creating a stable base.                                                                                           
Representative Grussendorf stressed that the House Community                                                                    
and Regional Affairs version of the legislation seeks parity                                                                    
between those that can pay more and those that cannot.                                                                          
Representative Williams OBJECTED to the adoption of the                                                                         
proposed committee substitute.                                                                                                  
MIKE TIBBLES, STAFF, REPRESET THERRRIUALT provided                                                                              
information on the legislation. He reviewed the proposed                                                                        
committee substitute.                                                                                                           
Section 1 ties PCE to revenue from the National                                                                                 
Petroleum Reserve Alaska (NPRA). "The amounts remaining                                                                         
after the deposits to the Alaska permanent fund and the                                                                         
public school trust fund may be appropriated to the                                                                             
power cost equalization and rural electric                                                                                      
capitalization fund."                                                                                                           
Section 2 changes the amount transferred from the Four                                                                          
Dam Pool Transfer Fund from 40 to 60%.                                                                                          
Section 3(2) is a technical change to conform to                                                                                
section 1. It allows the NPRA funds to be transferred                                                                           
into the fund.  Subsection (3) was added by the Senate                                                                          
and allows gifts to be deposited into the fund.                                                                                 
Section 4 limits the benefit to residential customers                                                                           
and reduces the cap from 700 to 500 kilowatt-hours. The                                                                         
Senate version of the bill had 350 kilowatt-hours and                                                                           
the House Community and Regional Affairs version had                                                                            
700 kilowatt-hours.                                                                                                             
Section 5 raises the floor from 9.5 to 12 cents per                                                                             
kilowatt-hour. The House Community and Regional Affairs                                                                         
version was 12.5 cents. The cap is raised by the floor                                                                          
is reduced.                                                                                                                     
 Section 6 conforms to section 4.                                                                                               
Section 7 is pro rate language. Previously deleted                                                                              
language deleted from the Senate version was added: "In                                                                         
making the pro rata reductions required by this                                                                                 
subsection, the department may not consider any                                                                                 
potential supplemental appropriation until the                                                                                  
appropriation has been enacted." This clarifies that                                                                            
there will be pro rata without the inclusion of the                                                                             
supplemental amount.                                                                                                            
 Sections 8 and 9 were not changed.                                                                                             
Representative Grussendorf referred to section 2. He noted                                                                      
that the Four Dam Pool Transfer Fund is not a guaranteed or                                                                     
reliable fund source.  He discussed the pro rata section. He                                                                    
estimated that the fund would not remain healthy.                                                                               
Co-Chair Therriault observed that there is pro rata language                                                                    
in current statute. The language on page 3 clarifies that                                                                       
the department should pro rate PCE until the legislature                                                                        
makes an additional appropriation.                                                                                              
Representative J. Davies spoke in support of a stable-                                                                          
funding source, such as the AIDEA dividend. Co-Chair                                                                            
Therriault and Representative J. Davies discussed the use of                                                                    
AIDEA funds as a funding source. Co-Chair Therriault                                                                            
stressed that AIDE funds could be diverted. Representative                                                                      
J. Davies argued that legislatures would honor the intent of                                                                    
statutory designated program funds.                                                                                             
Co-Chair Mulder emphasized that most of the long-range plans                                                                    
to close the fiscal gap utilize AIDEA dividends. He                                                                             
maintained that the long-term solution is to find a new                                                                         
revenue stream.                                                                                                                 
Representative Williams argued that infrastructure is needed                                                                    
in rural communities if PCE is not going to be continued as                                                                     
part of a long-term plan.                                                                                                       
Representative J. Davies suggested that $2 million dollars                                                                      
could be appropriated from Constitutional Budget Reserve                                                                        
into a fund to generate income to support PCE.                                                                                  
Representative G. Davis spoke in support the proposed                                                                           
committee substitute. Vice-Chair Bunde observed that his                                                                        
constituents believe that PCE should be discontinued.                                                                           
A roll call vote was taken on the motion.                                                                                       
IN FAVOR: Bunde, G. Davis, Foster, Kohring, Therriault,                                                                         
OPPOSED: Moses, Williams, Austerman, J. Davies, Grussendorf                                                                     
The MOTION PASSED (6-5).                                                                                                        
In response to a question by Co-Chair Therriault, Mr.                                                                           
Tibbles estimated that the cost to the state for PCE would                                                                      
be $16 million dollars.  The operating and capital budgets                                                                      
contain $15.7 million dollars for PCE.                                                                                          
LAMAR COTTEN, DEPUTY COMMISSIONER, DEPARTMENT OF COMMUNITY                                                                      
AND REGIONAL AFFAIRS spoke in support of the House Community                                                                    
and Regional Affairs version of the bill. He acknowledged                                                                       
that the increase from 40 to 60 percent of the Four Dam Pool                                                                    
Transfer Fund would be a good step. He noted that the self-                                                                     
help clause in the Four Dam Pool Fund could drive down the                                                                      
funds. The funds would go away if the assets were sold.  He                                                                     
spoke in favor of the addition of gifts, but added that a                                                                       
long-term program is needed. He noted that there would be a                                                                     
6% reduction in the actual amount of assistance to                                                                              
residential users in rural Alaska. There are 175 communities                                                                    
and 75,000 people that benefit from PCE.                                                                                        
Mr. Cotten acknowledged that the change to a .12 cent floor                                                                     
is a way to affect people equally. He noted that some rural                                                                     
users consume over 700 kilowatt-hours in a month. Lowering                                                                      
the ceiling to 500 kilowatt-hours would have an impact on                                                                       
the benefit in winter months.                                                                                                   
Mr. Cotten emphasized the desire of the Governor for long-                                                                      
term financing. He stressed that PCE is an Alaskan issue and                                                                    
federal help is unlikely.                                                                                                       
Co-Chair Therriault observed that the Governor's Blue Ribbon                                                                    
Commission on Power Cost Equalization suggested a surcharge.                                                                    
Mr. Cotten replied about the Blue Ribbon Commission                                                                             
recognized that the suggestion was not politically viable.                                                                      
There is a similar program for telephones in Alaska. Some                                                                       
districts receive telephone subsidies from other districts.                                                                     
Representative Grussendorf asked the impact of reducing the                                                                     
kilowatt-hours per month from 700 to 500.  Mr. Cotten stated                                                                    
that the program is roughly 1.5 million dollars. He noted                                                                       
that families that go over 500 kilowatt-hours will be                                                                           
affected. Representative Grussendorf questioned if 700                                                                          
kilowatt-hours are a reasonable amount. Mr. Cotten felt that                                                                    
700 kilowatt-hours would be a reasonable amount. He                                                                             
emphasized that a raised floor is a more equitable way to                                                                       
cut the program.                                                                                                                
Co-Chair Therriault observed that 700 kilowatt-hours would                                                                      
mean another $1.5 million dollars. Mr. Cotten observed that                                                                     
the floor could be raised by another cent. This would save                                                                      
$1.3 million dollars. Not every community would be affected                                                                     
the same. Everyone receives one less cent for every cent                                                                        
that the floor is raised.  Co-Chair Therriault questioned                                                                       
how many communities would drop out of participation if the                                                                     
floor is raised by one-cent.  Mr. Cotten noted that                                                                             
Kaktovik, Point Hope, Wainwright, Pelican, Thorne Bay, and                                                                      
Skagway would not receive PCE if the floor were raised by a                                                                     
cent. He acknowledged that there would be affected                                                                              
communities but argued that smaller rural communities are                                                                       
hit harder by reductions.                                                                                                       
Co-Chair Therriault questioned if the Blue Ribbon Commission                                                                    
discussed which communities should be self-supporting. Mr.                                                                      
Cotten noted that the Commission concluded that in order to                                                                     
convince the legislature to fund the program over the long-                                                                     
term that there would have to be commitments and sacrifices.                                                                    
(Tape Change, HFC 99 - 149, Side 2)                                                                                             
Representative Grussendorf observed that there is                                                                               
authorization for $15.7 million dollars.  He questioned if                                                                      
this amount would fund the program under the proposed                                                                           
committee substitute.  Mr. Cotten observed that between                                                                         
$15.7 and $15.9 million dollars would be needed.                                                                                
Co-Chair Therriault referred to the Senate version. The                                                                         
Senate version set the floor at 350 kilowatt-hours, but                                                                         
allowed higher months that did not exceed 500 kilowatt-                                                                         
hours. Mr. Cotten observed that the intent was to lower the                                                                     
use to 350 kilowatt-hours, but accommodate the winter                                                                           
Representative Grussendorf reiterated that six comminutes                                                                       
would be dropped out if the floor were raised to .13 cents.                                                                     
Mr. Cotten added that the House Community and Regional                                                                          
Affairs version provided that if there were a sale of the                                                                       
Four Dam Pool assets, that 60 percent of the sales would go                                                                     
toward the PCE program. He recommended that this provision                                                                      
be reinstated.                                                                                                                  
ERIC YOULE, EXECUTIVE DIRECTOR, ALASKA RURAL ELECTRIC                                                                           
COOPERATIVE ASSOCIATION, ARECA, spoke in of the House                                                                           
Community and Regional Affairs version of the bill. He                                                                          
emphasized the need for a stable funding source. He spoke in                                                                    
support of a program that would fund PCE at $15.5 to $16                                                                        
million dollars. He expressed concern that there be a long-                                                                     
term funding source and pointed out the affect of a stable                                                                      
funding source on future economic development.  He stressed                                                                     
that before PCE was created in 1980, rural electric                                                                             
utilities were in dismal shape because they had no financial                                                                    
solvency. Power Cost Equalization gave rural electric                                                                           
utilities solvency. He maintained that the Governor's                                                                           
recommendation that PCE receive 40% of the AIDEA dividend is                                                                    
the best plan.                                                                                                                  
Co-Chair Therriault observed that AIDEA funding was used to                                                                     
pay municipal matching grants this year.  He questioned if                                                                      
the AIDEA dividend would be a stable funding source.                                                                            
Representative Grussendorf MOVED to ADOPT an amendment to                                                                       
insert section 4(d) of the House Community and Regional                                                                         
Affairs version into the work draft. He spoke in support of                                                                     
the amendment. Co-Chair Mulder OBJECTED. Co-Chair Mulder                                                                        
spoke against the use of AIDEA funds at this time.                                                                              
Representative Austerman agreed that AIDEA funding is not a                                                                     
stable funding source.  He emphasized the need to have an                                                                       
endowment that spins off the interest.                                                                                          
Representative Grussendorf WITHDREW the amendment.                                                                              
Representative Grussendorf MOVED to raise the kilowatt-hours                                                                    
per month to 650. In response to a question by Co-Chair                                                                         
Therriault, Mr. Tibbles stated that the difference in the                                                                       
funding level between 500 and 700-kilowatt hours per month                                                                      
would be $1.5 million dollars.  Co-Chair Mulder estimated                                                                       
that the net impact of the amendment would be a raise from                                                                      
$15.7 to $17 million dollars.                                                                                                   
Representative Grussendorf expressed concern with service to                                                                    
rural residents.  Representative J. Davies clarified that                                                                       
the amendment would raise the amount by $1.9 million                                                                            
Representative Austerman asked for information regarding the                                                                    
Senate version.                                                                                                                 
MARY JACKSON, STAFF, SENATOR TORGERSON provided information                                                                     
on the Senate version. She explained that the Senate allowed                                                                    
the department to average the annual kilowatt rate to allow                                                                     
a higher winter rate. The amount was capped at 500-kilowatt                                                                     
hours based on a recommendation by the Governor's Blue                                                                          
Ribbon Commission. Co-Chair Mulder observed that the minimum                                                                    
was raised to 13 cents.                                                                                                         
In response to a question by Co-Chair Therriault, Ms.                                                                           
Jackson observed that the first proposed committee                                                                              
substitute by the Senate only increased the floor.                                                                              
Communities would have been dropped off the table. Smaller                                                                      
communities with a higher rate are helped more than larger                                                                      
comminutes with a lesser rate. The Senate Finance Committee                                                                     
attempted a mix by raising the floor, dropping the ceiling                                                                      
and added a pro rata reduction spread across the board.  The                                                                    
pro rata reduction levels the field.  She observed that                                                                         
there are three ways to approach a reduction.                                                                                   
Mr. Cotten discussed the difficulty of formulating the                                                                          
Representative Kohring stated that he is not opposed to                                                                         
putting money into PCE. He suggested that an endowment be                                                                       
considered and stressed that infrastructure needs to be                                                                         
Representative Austerman spoke against the amendment. Co-                                                                       
Chair Mulder argued against the amendment.                                                                                      
Representative Williams spoke in support of the amendment.                                                                      
A roll call vote was taken on the motion.                                                                                       
IN FAVOR: J. Davies, Foster, Grussendorf, Moses, Williams                                                                       
OPPOSED: Kohring, Austerman, Bunde, G. Davis, Kohring,                                                                          
Mulder, Therriault                                                                                                              
The MOTION FAILED (5-6).                                                                                                        
Representative J. Davies MOVED to ADOPT an amendment on page                                                                    
1, Line 10: change "50" to "25". Co-Chair Therriault                                                                            
Representative J. Davies explained the change would allow                                                                       
more money to be available to PCE.  Co-Chair Therriault                                                                         
WITHDREW the OBJECTION.                                                                                                         
Section 1(g) was amended to read:                                                                                               
Amounts received by the state under 42 U.S.C. 6508 and                                                                          
not appropriated for grants to municipalities under (d)                                                                         
of this section shall be deposited [LAPSE] at the end                                                                           
of each fiscal year as follows: (1) 50 percent to the                                                                           
principal of the Alaska permanent fund; and (2) 5                                                                               
percent to the public school trust fund (AS 37.14.110).                                                                         
The amounts remaining after the deposits to the Alaska                                                                          
permanent fund and the public school trust fund may be                                                                          
appropriated to the power cost equalization and rural                                                                           
electric capitalization fund.                                                                                                   
Ms. Jackson noted that Senator Parnell offered the amendment                                                                    
to the Senate Finance Committee.                                                                                                
Representative Williams MOVED to report HCS CSSB 157 (FIN)                                                                      
out of Committee.                                                                                                               
Representative G. Davis OBJECTED for comment. He maintained                                                                     
that the legislation does not provided a good long term                                                                         
funding source and felt that the program could be simpler.                                                                      
Representative Moses expressed concern with the health of                                                                       
PCE. He felt that a surcharge should have been charged a                                                                        
number of years ago. He stressed that the resource belongs                                                                      
to all the people of the State.                                                                                                 
Representative Grussendorf observed that the legislation                                                                        
removes the commercial aspect of PCE. He felt that the                                                                          
funding level was driven by the amount of available money,                                                                      
not need.                                                                                                                       
Representative Foster observed that only eight districts are                                                                    
effected by PCE. He thanked the Committee for their support.                                                                    
HCS CSSB 157 (FIN) was REPORTED out of Committee with a "do                                                                     
pass" recommendation.                                                                                                           
HCS CSSB 157 (FIN) was REPORTED out of Committee with a "do                                                                     
pass" recommendation.                                                                                                           

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