Legislature(2015 - 2016)SENATE FINANCE 532

03/16/2016 09:00 AM Senate FINANCE

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SENATE BILL NO. 196                                                                                                           
     "An  Act  relating to  the  use  of certain  unexpended                                                                    
     earnings  from the  power  cost equalization  endowment                                                                    
10:01:06 AM                                                                                                                   
Senator  Hoffman related  that the  Power Cost  Equalization                                                                    
program (PCE)  had been in  existence for 36 years  with the                                                                    
primary  purpose   of  assisting  with  the   high  cost  of                                                                    
electrical  energy throughout  rural  Alaska.  He said  that                                                                    
many  communities  participate  and   that  there  had  been                                                                    
discussion related  to the program's high  earnings that had                                                                    
transpired  in FY  13 and  FY 14.  He stated  that the  bill                                                                    
would  ensure that  during  the high  earning  years of  the                                                                    
fund, the fund should only  pay for its intended purpose and                                                                    
any  excess  earnings  would be  distributed  to  two  other                                                                    
10:02:18 AM                                                                                                                   
TIM GRUSSENDORF,  STAFF, SENATOR LYMAN HOFFMAN,  pointed out                                                                    
to  the  committee that  the  bill  was available  in  their                                                                    
packets,  as  well  as  a   document  that  illustrated  the                                                                    
earnings  of the  program at  4.3 percent,  and a  sectional                                                                    
analysis.  He  discussed  the sectional  analysis  (copy  on                                                                    
     Section  1  adds  a new  sentence  to  AS  54.4.0820(c)                                                                  
     requiring  that the  commissioner of  revenue determine                                                                    
     the earnings  on the power cost  equalization endowment                                                                    
     fund (PCE  fund) for  the fiscal year  on June  30 each                                                                    
     Section 2  adds a new  subsection to AS  42.45.085 that                                                                  
     allows the  legislature to appropriate the  part of the                                                                    
     annual fiscal year  earnings of the PCE  fund in excess                                                                    
     of the  expenditures necessary to achieve  the purposes                                                                    
     under  AS  42.45.085(a) to  the  general  fund and  the                                                                    
     renewable energy  grant fund,  and to  appropriate some                                                                    
     funds back to the PCE fund.                                                                                                
10:04:37 AM                                                                                                                   
SARAH   FISHER-GOAD,  EXECUTIVE   DIRECTOR,  ALASKA   ENERGY                                                                    
AUTHORITY,  DEPARTMENT OF  COMMERCE, COMMUNITY  AND ECONOMIC                                                                    
DEVELOPMENT, testified  in support  of the  legislation. She                                                                    
stated  that the  authority supported  the concept  of being                                                                    
able  to  use  the  excess  earnings  for  the  general  and                                                                    
renewable energy  funds listed in the  legislation. She said                                                                    
that the  earnings in FY  16 were difficult to  predict, and                                                                    
that she would  work with the bill sponsor  to clarify which                                                                    
fiscal year  to use  and how much  funds would  be available                                                                    
for extra purposes.                                                                                                             
10:05:38 AM                                                                                                                   
Senator Hoffman  announced there was  a section in  the bill                                                                    
that would require  an amendment that would  create a single                                                                    
mechanism for dispensing excess earnings.                                                                                       
10:06:06 AM                                                                                                                   
Co-Chair MacKinnon stated that  she had researched the issue                                                                    
and  had proposed  that projects  that were  currently being                                                                    
funded  at  the Alaska  Energy  Authority  should have  some                                                                    
nexus with the PCE fund.                                                                                                        
10:06:54 AM                                                                                                                   
Co-Chair  MacKinnon remarked  that as  revenue opportunities                                                                    
in the state  shrank, rural Alaska remained in  need of many                                                                    
dollars for investment in energy  to keep families warm. She                                                                    
contended that it  the state had an energy  project that had                                                                    
cost  millions from  in communities,  she  wondered why  PCE                                                                    
would need to continue.                                                                                                         
Ms.  Fisher-Goad appreciated  the conversation.  She assured                                                                    
that  committee  that  AEA  was   eager  to  participate  in                                                                    
discussions  concerning  to  how programs  related  to  each                                                                    
other. She  mentioned that the  PCE program,  for electrical                                                                    
projects,  hit  approximately  30 percent  of  the  kilowatt                                                                    
hours generated  in rural Alaska  communities; approximately                                                                    
193  communities  benefitted  from   the  PCE  program.  She                                                                    
furthered  that the  remaining 70  percent  of the  kilowatt                                                                    
hours  were not  eligible for  cost under  the program.  She                                                                    
said that the Renewable Energy  Fund complimented the PCE by                                                                    
participating in reducing costs  for communities, across all                                                                    
kilowatt  hours.  She  pointed  out to  the  committee  that                                                                    
schools benefitted  greatly from the partnership;  they were                                                                    
not  eligible for  PCE, but  if  a utility  that serviced  a                                                                    
school  had a  renewable energy  project that  reduce costs,                                                                    
the school would receive the  benefit. She stressed that the                                                                    
issue was  not limited to electricity,  but included heating                                                                    
projects  that  benefitted  community facilities  and  other                                                                    
programs.  She  assured  the committee  that  the  authority                                                                    
would work  with committee on their  continued investment in                                                                    
the PCE and renewable energy programs.                                                                                          
10:10:35 AM                                                                                                                   
Co-Chair  MacKinnon   remarked  that  Senator   Hoffman  had                                                                    
advocated  for  heating  projects  under  the  statute.  She                                                                    
remarked that  electricity consumption was a  big issue, but                                                                    
that heating  homes was the  top priority. She said  that as                                                                    
the  state moved  into an  uncertain  fiscal climate,  there                                                                    
would be tension between electricity versus heating.                                                                            
10:13:13 AM                                                                                                                   
Co-Chair  Kelly noted  that there  was a  letter of  support                                                                    
that made  reference to the  2000 capitalization of  the PCE                                                                    
fund  (copy   on  file).  He   said  that  when   the  state                                                                    
capitalized the  fund, the $100 million  had counted against                                                                    
the state. He stated  that Fairbanks would receive subsidies                                                                    
on the gas project thorough loans.                                                                                              
10:14:41 AM                                                                                                                   
Senator  Hoffman  commented  that  the  state  formerly  had                                                                    
appropriations to  fund the  PCE with the  intent to  set up                                                                    
the  endowment. He  stated that  the  anticipation had  been                                                                    
that  the  program  would require  additional  General  Fund                                                                    
appropriations for  several years,  but because  of earnings                                                                    
on the fund those appropriations  were reduced; in 2015, the                                                                    
fund  was self-functioning  and  did not  require a  general                                                                    
fund appropriation. He believed  that energy continued to be                                                                    
a  major  issue throughout  the  state  and the  legislature                                                                    
should  strive to  make Alaska  a more  affordable place  to                                                                    
live for all Alaskans.                                                                                                          
10:16:26 AM                                                                                                                   
CRYSTAL   ENKVIST,   EXECUTIVE    DIRECTOR,   ALASKA   POWER                                                                    
ASSOCIATION,  ANCHORAGE   (via  teleconference),   spoke  in                                                                    
support  of   the  legislation.   She  read   from  prepared                                                                    
testimony (copy on file):                                                                                                       
     Alaska Power Association  (APA), the statewide electric                                                                    
     utility  trade association,  supports Senate  Bill 196,                                                                    
     which  would   protect  funding  for  the   Power  Cost                                                                    
     Equalization     Program    (PCE)     while    allowing                                                                    
     appropriation  of  funds  from the  PCE  Endowment  for                                                                    
     other valuable purposes.                                                                                                   
     APA  members believe  this legislation  will allow  the                                                                    
     PCE program  to continue  providing a vital  measure of                                                                    
     relief  to  ratepayers  in communities  throughout  our                                                                    
     State  where  electric  rates are  the  highest,  while                                                                    
     sharing benefits  with the General Fund,  the Renewable                                                                    
     Energy  Grant   Fund  and   the  PCE   Endowment.  This                                                                    
     distribution  of benefits  is  especially important  in                                                                    
     these difficult financial times.                                                                                           
     Many APA  members throughout the state  have integrated                                                                    
     wind  and   hydroelectric  power  into   their  systems                                                                    
     through funding  from the Renewable Energy  Grant Fund,                                                                    
     and  their  customers  see  the  results  in  lower  or                                                                    
     stabilized bills.  Through SB 196, work  could continue                                                                    
     on  renewable  energy   systems  that  will  positively                                                                    
     impact Alaskans for generations to come.                                                                                   
     APA member  utilities serve communities from  Barrow to                                                                    
     Unalaska,  through the  Interior  and Southcentral  and                                                                    
     down the  Inside Passage.  We appreciate  your decades-                                                                    
     long leadership  in assisting  our home  grown industry                                                                    
     in   striving  to   provide  affordable   and  reliable                                                                    
     electric power to Alaskans. Your  sponsorship of SB 196                                                                    
     continues  these  collaborative  efforts, and  we  urge                                                                    
     passage of this legislation.                                                                                               
10:18:43 AM                                                                                                                   
INGEMAR   MATHIASSON,  ENERGY   MANAGER,  NORTHWEST   ARCTIC                                                                    
BOROUGH, KOTZEBUE (via teleconference),  spoke in support of                                                                    
the  legislation. He  stated that  the borough  had recently                                                                    
complete  a large  wind/diesel  project  that would  benefit                                                                    
several communities.  He said that  funding for  the project                                                                    
had been  granted through the Alaska  Renewable Energy Fund,                                                                    
and  had hedged  against  the rising  cost  of diesel  fuel,                                                                    
which had  threatened the  existence of  remote communities.                                                                    
He  stressed  the importance  that  the  PCE fund  had  been                                                                    
established  to assist  rural  Alaska  communities with  the                                                                    
rising cost of diesel fuel  for their electric utilities. He                                                                    
said   that  communities   had  embraced   energy  efficient                                                                    
alternatives, which would  lessen the need for  the PCE fund                                                                    
in  the future.  He stressed  that allowing  as much  of the                                                                    
excess  PCE funds  as possible  to be  transferred into  the                                                                    
renewable  energy  fund  would  provide  the  state  a  path                                                                    
forward to eventually build itself  out of the need for PCE.                                                                    
He  concluded  that the  future  for  rural Alaska's  energy                                                                    
structure  was to  utilize  locally  available resources  as                                                                    
much as possible.                                                                                                               
10:20:31 AM                                                                                                                   
PETER   CRIMP,   SELF,   ANCHORAGE   (via   teleconference),                                                                    
testified  in support  of the  legislation.  He stated  that                                                                    
reliable  and   reasonable  priced   energy  needed   to  be                                                                    
maintained on  order to support the  state's investments and                                                                    
to provide fairness  in the funding for  rural and non-rural                                                                    
energy projects.  He noted  that the  rural energy  fund had                                                                    
proven   to  be   a  successful   vehicle  for   stimulation                                                                    
technically and  economically viable  projects since  it was                                                                    
established by the  legislature in 2008. He  noted that AEAs                                                                    
annual report indicated that 54  projects were in operation,                                                                    
and that every dollar invested  in the projects would have a                                                                    
$2.50  return. He  believed that  the state  should maintain                                                                    
its investment in maintaining clean, renewable energy.                                                                          
10:22:32 AM                                                                                                                   
DAVID  MESSIER,  RURAL  ENERGY  COORDINATOR,  TANANA  CHIEFS                                                                    
CONFERENCE, FAIRBANKS (via  teleconference), spoke in strong                                                                    
support of  the legislation.  He lamented that  rural Alaska                                                                    
experience electricity  costs that  ranged upward of  $1 per                                                                    
kilowatt hour,  due not only  to the  cost of oil,  but also                                                                    
the  administrative   costs  of  managing  a   small,  rural                                                                    
electric utility.  He said that the  PCE endowment supported                                                                    
the PCE  program, which  reduced the  cost per  kilowatt for                                                                    
80,000  rural  Alaskans  across the  state.  He  lauded  the                                                                    
benefits of  the PCE  program. He  noted that  the renewable                                                                    
energy  fund had  a proven  track record  of bringing  money                                                                    
into the  state and reducing  the long-term cost to  the PCE                                                                    
program. He  asked legislators  to consider  adding language                                                                    
to the bill that would allow  some portion of the 30 percent                                                                    
allocated  to  the Alaska  Renewable  Energy  Grant fund  to                                                                    
support the Village Energy  Efficiency Program (VEEP), which                                                                    
had an even stronger track  record of reducing the long-term                                                                    
costs  of  the  PCE  program.  He  said  that  he  would  be                                                                    
submitting a  letter with over  100 signatures,  from across                                                                    
the Interior, showing individual support for SB 196.                                                                            
10:25:01 AM                                                                                                                   
PIPER  FOSTER-WILDER,  DEPUTY   DIRECTOR,  RENEWABLE  ENERGY                                                                    
ALASKA  PROJECT, ANCHORAGE  (via  teleconference), spoke  in                                                                    
support of the  legislation. She asserted that  SB 196 would                                                                    
provide  an opportunity  to  provide  secure and  predicable                                                                    
funding for renewable energy projects  across the state. She                                                                    
recounted a brief history of  the successes of the PCE fund.                                                                    
She  stressed  that  the   renewable  energy  fund  provided                                                                    
significant   savings,  which   would   continue  to   occur                                                                    
regardless of the  price of oil. She relayed  that the funds                                                                    
that  SB  196 would  provide  to  renewable energy  projects                                                                    
across  the  state was  significant  enough  to continue  to                                                                    
leverage private  capital to  build projects.  She furthered                                                                    
that  such  public/private   partnerships  were  crucial  to                                                                    
Alaska's future.  She urges  the committee  to pass  SB 196,                                                                    
with  the  provision to  use  excess  earnings to  fund  the                                                                    
renewable energy fund beginning 2016.                                                                                           
Co-Chair MacKinnon CLOSED public testimony.                                                                                     
10:28:19 AM                                                                                                                   
AT EASE                                                                                                                         
10:28:56 AM                                                                                                                   
10:29:00 AM                                                                                                                   
Co-Chair  MacKinnon   looked  at  the  fiscal   note,  which                                                                    
reflected  a   loss  in  2015.  She   thought  that  further                                                                    
discussion of  the fiscal note  should occur after  the bill                                                                    
was amended.                                                                                                                    
10:29:48 AM                                                                                                                   
Vice-Chair  Micciche  asked  whether  the  bill  would  take                                                                    
affect after the return reached 7 percent.                                                                                      
Senator  Hoffman  replied  that  for several  years  he  had                                                                    
advocated  that  the  7  percent   was  too  high,  and  had                                                                    
recommended that  the rate of  return for  investment should                                                                    
be 4.5  percent because  investment decisions would  have to                                                                    
be  riskier at  a 7  percent  return. He  believed that  the                                                                    
prudent  investment  rule  needed  to  be  addressed  as  it                                                                    
related to the 7 percent investment.                                                                                            
10:31:21 AM                                                                                                                   
Co-Chair MacKinnon  said that the  7 percent was a  cap that                                                                    
would ensure that no more than that was withdrawn.                                                                              
Senator  Hoffman   agreed,  but  felt  that   it  should  be                                                                    
clarified further that  the number was not  a "hard" number.                                                                    
He reiterated  that it was  important to be clear  about the                                                                    
bill's intent, as well as what funds would be available.                                                                        
SB  196  was  HEARD  and   HELD  in  committee  for  further                                                                    
Co-Chair MacKinnon discussed housekeeping.                                                                                      

Document Name Date/Time Subjects
CSSB 69 (L&C) Letter of Support - Logan University.pdf SFIN 3/16/2016 9:00:00 AM
SB 69
CSSB 69 (L&C) Letter of Support - Dr. Campbell.pdf SFIN 3/16/2016 9:00:00 AM
SB 69
CSSB 69 (L&C) Letter of Support - Palmer College.pdf SFIN 3/16/2016 9:00:00 AM
SB 69
CSSB 69 (L&C) Letter of Support - UWS.pdf SFIN 3/16/2016 9:00:00 AM
SB 69
CSSB 69 (L&C) Sectional Analysis.pdf SFIN 3/16/2016 9:00:00 AM
SB 69
CSSB 69 (L&C) Sponsor Statement.pdf SFIN 3/16/2016 9:00:00 AM
SB 69
SB 124 AK Senior Resource Guide 2016.pdf SFIN 3/16/2016 9:00:00 AM
SB 124
SB 124 - Sponsor Statement (SFIN).pdf SFIN 3/16/2016 9:00:00 AM
SB 124
SB 124 Backup Document - ACoA Fact Sheet.pdf SFIN 3/16/2016 9:00:00 AM
SB 124
SB 124 Backup Document - ACoA Roster of Members.pdf SFIN 3/16/2016 9:00:00 AM
SB 124
SB 124 Backup Document - ACoA State Plan FY16-FY19.pdf SFIN 3/16/2016 9:00:00 AM
SB 124
SB 124 Backup Document - Sunset Review of the Alaska Commission on Aging Report #06-20090-15.pdf SFIN 3/16/2016 9:00:00 AM
SB 124
SB 124 Letter of Support - DOLWD 2 24 2016.pdf SFIN 3/16/2016 9:00:00 AM
SB 124
SB 124 Letters of Support (Consolidated - 16) - 2-8-16.pdf SFIN 3/16/2016 9:00:00 AM
SB 124
SB 124 Support Document - Letter of Support from Mat-Su Health Foundation - 3-4-16.pdf SFIN 3/16/2016 9:00:00 AM
SB 124
SB 196 PCE sponsor statement.pdf SFIN 3/16/2016 9:00:00 AM
SB 196
SB 196 sectional.pdf SFIN 3/16/2016 9:00:00 AM
SB 196
SB 124 Resolution of Support - Fairbanks North Star Borough 2-25-16.pdf SFIN 3/16/2016 9:00:00 AM
SB 124
SB 69 Student Health Review-Exam.pdf SFIN 3/16/2016 9:00:00 AM
SB 69
SB 196 PCE Endowment Fund - percentage pf payput with only program costs funded.pdf SFIN 3/16/2016 9:00:00 AM
SB 196
SB 69 CSSB 69 (LC) - Explanation Changes.pdf SFIN 3/16/2016 9:00:00 AM
SB 69