Legislature(1999 - 2000)
04/23/1999 08:07 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATE BILL NO. 157 "An Act relating to power cost equalization; and providing for an effective date." MARY JACKSON, Staff, Senator John Torgerson, reviewed the bill. She noted that the working group who addressed concerns of this bill included Senator P. Kelly and Senator Adams. Ms. Jackson spoke to the importance of the Power Cost Equalization (PCE) program to areas of Alaska that are reliant upon diesel generated power. It is recognized and that the bill is intended to extend the life of the program by restructuring some of its components. The bill would: * Reduce the current 700 kWh to 350 kWh per month. * Expand the method of establishing the base rate by including Kenai and Palmer in the weighted average retail residential rate which currently only included Anchorage, Fairbanks and Juneau. ? Restructure the program so that the equalization rate applies only to residential customers, as opposed to the current residential and commercial structure. ? Add new language to the program to ensure that the rate charged by a PCE utility is not lower than a rate charged by a non-PCE utility, so to ensure that a customer who does not receive PCE pays a higher rate than a customer who does receive a PCE. Ms. Jackson provided a sectional analysis of the bill. Section 1 adds Kenai and Palmer into the statewide average, which would expand the base of the statewide average. Section 2 decreases the kilowatt-hours from 700 to 350 for consumptive use. Section 3 adds Kenai and Palmer into the statewide average as does Section 1. Section 4 decreases the kWh from 700 to 350 kWh and restricts it to residential use. Sections 5 & 6 are housekeeping references to the new sub Section (j). Section 7 establishes the effective date of the legislation. Ms. Jackson referenced the April 22, 1999, Power Cost Equalization (PCE) spread sheet contained in members packets. The sheet provides the most recent findings of the working group. [Copy on File]. Co-Chair Torgerson pointed out that the State has been funding the current rate, however, the hoped for is 85% funding. Senator Adams stated that the last supplemental decreased that number to 78%. Co-Chair Torgerson asked if the working group had any recommendations which the full Committee should consider. [Copy on File]. Ms. Jackson replied that the analysis of that group was currently before the Committee. She suggested that it could be approached either from the floor (9.9 to 10.9 cents/kWh) or raising the ceiling. The working group approached the situation from both places and the premise was to have less of an impact on the small Bush Communities. Senator Kelly referenced the handout. He explained how the floor was established including the calculations for Pelican and Skagway. The group is waiting to determine the actual cost to the residential consumer. The formula used to increase the floor and the impact of combining the ceiling from dropping down would establish the impact on the actual consumer. He advised that new spreadsheets would be forthcoming in the following week. Senator Phillips asked the average residential use per month in Alaska. ERIC YOULD, Executive Director, Alaska Rural Electric Cooperative Association (ARECA), Anchorage, replied that the average in rural Alaska was 326 kWh. The average kWh usage in the Railbelt area is 688 kWh. He accessed that rural Alaska is roughly half of the other areas. Senator Phillips asked the basic differences between the rural area and the Railbelt regarding use of electricity. Mr. Yould pointed out that the Blue Ribbon Commission gathered profiles as to what the 326 kWh hours would accomplish. It is very different from urban areas versus rural Alaska, especially the refrigeration needs are higher. Senator Wilken requested further clarification of the spreadsheet. Senator P. Kelly pointed out that the spreadsheet was not accurate. Mr. Yould suggested that it would be beneficial to go to the 500 kWh; the 326 kWh is a monthly average and during the winter months, the usage increases. He stated that there are individual opportunities throughout the State and that some of the other systems being investigated are very costly. The State does have the resources; however, the problem is an economy of scale. He added that diesel generation exists but that there is no natural gas in rural Alaska. Mr. Yould noted that the State is looking for alternatives but that they are generally capital intensive. Senator Wilken inquired about diesel efficiency and working in conjunction with the University. Mr. Yould replied that ARECA was not working with the University at this time. He understood that the University was working with Department of Education with a $2.6 million dollar grant to develop a fuel cell using diesel power. Senator Wilken asked if the bill would exclude schools from PCE participation in the rural areas. Ms. Jackson acknowledged that it would exclude schools. She noted that Senator Torgerson had sent a letter to the Department of Education regarding this concern. Senator Wilken asked if Mr. Yould was aware of work being done on fuel cells. Mr. Yould acknowledged that he was aware of the work which in Anchorage was being funded by Chugiach Electric. He explained that the problem with fuel cells is that they are all natural gas and that it is difficult to distribute natural gas in rural Alaska. CHARLES WALLS, President & CEO, Alaska Village Electric Coop (AVEC), Anchorage, (Testified via Teleconference), pointed out that the statistics being referenced were three years old. He requested that the cap cut be reconsidered. Mr. Walls recommended that the Committee carefully scrutinize Section 7, the new section being added. That section could result in a village utility in not receiving the Power Cost Equalization (PCE) which would establish a new floor for all others. At the present time, the average revenue per kilowatt-hour for a non-PCE utility is regulated by the Alaska Public Utility Commission (APUC). He urged that the bill be reconsidered. Co-Chair Torgerson asked Mr. Walls to verify that used in the bill were dated from 1996. Mr. Walls replied that the handout referred to was the last published statistics available and was complied in 1996. Co-Chair Torgerson requested that Mr. Walls fax pertinent information to the Committee dealing with the proposed bill. BRUCE KOVARIK, Executive Director, Association of Alaska Housing Authority (AAHA), Anchorage, (Testified via Teleconference), testified that the Association supports the PCE program for residential and community customers. The State's regional housing authority has developed and operated home ownership of housing programs for over 7,000 families. He emphasized that the worse case scenario would be the loss of that program. TAPE SFC-99 #109 Side A Mr. Kovarik continued his testimony. Co-Chair John Torgerson commented that it would take time to consolidate the State's commitment and that of AAHA. Mr. Kovarik noted that a certain amount of funding could be taken from the Native Self-Determination Act and placed into a PCE fund. That fund would be invested and the interest generated from the fund would go to PCE. Co-Chair John Torgerson questioned how to get all parties to agree. Mr. Kovarik reiterated that the participation in the plan would have to be voluntary and flexible. The Housing Authority has investment strategies and cash flow considerations based upon work to be developed. It would need to be a plan which allows for the investment of funds. There are federal requirements and regulations. The hope is for assistance from the Department of Community and Regional Affairs. Co-Chair John Torgerson stressed his intention to move the bill through the Legislature this session. He commented that if the Housing Authority was to be used as a potential funding source, it is important to finalize that commitment. He was not sure about the possibility of using Alaska Industrial Development Export Authority (AIDEA) funds. Senator Randy Phillips questioned if there had been consideration by the Office of the Governor to use AIDEA funding. Mr. Kovarik replied that the only comments he had heard were at press conference regarding the consolidation of the Department of Commerce and Economic Development and the Department of Community and Regional Affairs. DICK ENERMAN, Planner, Division of Energy, Anchorage, (Testified via Teleconference) offered to answer any technical questions of the Committee. Senator Pete Kelly noted that Mr. Enerman would be preparing a spreadsheet for the Committee's review for the following week and recommended any suggestions be given to him. Mr. Enerman detailed the information he had been requested to present on the spreadsheet. The spreadsheet would indicate for each of the PCE utilities, an impact of various changes to the PCE would affect the financial impact. Co-Chair John Torgerson asked if the average use by month would be included. Mr. Enerman responded that information was not available and would not be included. The total residential kWh under PCE and for each utility and the number residential customers would be included. The calculated average annual use per customer could be made with that information, otherwise, only estimates can be made. Co-Chair John Torgerson asked about the data. Mr. Enerman replied he would be using data from FY96. Data from FY97 and FY98 had not been compiled and examined at present time, however, if possible, he would use more current information. Co-Chair Torgerson asked if the data would be more current than 1986. Mr. Enerman did not believe that it would be because at this time, that is all which has been published. Senator Adams asked Mr. Enerman's spreadsheet could indicate the effect of changing the floor from 9.9 to 10.9. Mr. Enerman acknowledged that was his intent. BRAD REEVE, General Manager, Kotzebue Electric Association (KEA), Kotzebue, (Testified via Teleconference), testified that having power is an important aspect of the future. He stated that a flat 350 kWh per month rate would not adequately recognize the actual use patterns in Alaska. Mr. Reeve added that KEA has raised two other utility grade wind turpins in Kotzebue. He suggested that would be the technology that will benefit rural Alaska. The goal is to reduce annual diesel consumption by about 300 thousand gallons annually. The program allowed communities to maintain power plants while they investigated alternate power sources that were less expensive. Mr. Reeve anticipated that diesel would continue to play a large part of power for communities in the future. WALTER SAMPSON, NANA Corporation, Kotzebue, (Testified via Teleconference), voiced his appreciation of the Committee's effort to address the rural power situation. He restated the high cost of fuel in rural Alaska and the difficulty in getting it those remote areas. He pointed out that there are fears in many communities that power systems will be shut down. Mr. Sampson urged the Committee to give communities an opportunity to look at alternative fuel sources. Co-Chair John Torgerson noted that the bill would be held in Committee. SB 157 was HEARD and HELD in Committee for further consideration.