Legislature(1999 - 2000)
05/18/1999 03:05 PM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
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 available. 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 legislatures. 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, Mulder 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 months. 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 dollars. 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 reduction. 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 built. 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 OBJECTED. 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.